Ka question

[grapejelly]

Re: Ka question

i find myself asking the same questions. the bear story is based in the housing bust being more serious than most people think, with a real downturn in consumption [because of the end of the housing atm] leading to a recession. the loss of housing equity, the loss of equity withdrawals is something that will have a drawn out effect, as pointed out in ej's recent installment about the fire economy. perhaps that effect will be diluted by time enough for a new bubble to counteract it. surely the housing problem will hit the whole housing market, but the low end will be most effected. meanwhile, i'm beginning to think that the stock market may be part of the new bubble, feeding its wealth effect to the high rollers first. this fits with the growing economic polarization of our society. just some thoughts here.....

You could be right.

Jas Jain has a very interesting and thoughtful analysis of the housing market in Silicon Valley that applies I think all over.

The entire decline in sales volume for the past year, some 20%, is concentrated in the zip codes in the bottom 2/3^rd as ranked by the median sale price. The homes in the top priced areas are selling briskly and in the bottom priced areas they sit on the market for a very long time. How wide is the gap? Let me quote Richard Calhoun, a Realtor in the area: “Currently, largely because of the sub-prime lender issues, the expensive homes are selling much more rapidly (35 DUI) than the low priced homes (300 DUI). Consequently, the number of listings available on the low-end of the price spectrum is high and listings available on the high-end of the price spectrum are low. The bulk of the median List price drop that you are reporting is a result of the change in the market mix and nothing to do with property values.”

Affluent stable neighborhood valuations aren't falling out of bed. The high end continues to do well. It's the lower end that is suffering and I think will get much worse. Of course, the high end would be affected with the credit bubble bursting when/if it ever does...

There seems a lot of juice left in the expansion all over the world though. And sitting it out may be a mistake...

[friendly_jacek]

Re: Ka question

Oh boy, I just saw the news: "Economy Grows by Just 0.6 Percent in the 1st Quarter, Worst Since Final Quarter of 2002" from http://biz.yahoo.com/ap/070531/economy.html?.v=20
Yet markets open higher, I bet the markets discounted the weakness back in 2006 and now are moving in anticipation of 2008 recovery.