Duration of the Housing Bust

I figure most of you probably occasionally check out calculated risk so I don't post anything on here from that website. However, this underscores so many of my thoughts that I thought I would bring it to everyone's attention just in case you missed it.

It explains why in my mind the equities markets cannot have possibly bottomed.

http://calculatedrisk.blogspot.com/2008/04/housing-bust-duration.html

The Los Angeles bust took 86 months in real terms from peak to trough (about 7 years) using the Case-Shiller index. If the Composite 20 bust takes a similar amount of time, the real price bottom will happen in early 2013 or so. (But prices would be close in 2010).

A couple of potential differences. One was that the Los Angeles bust was regional and so you didn't have the entire national government trying to figure out how to solve the issue. Interest rates weren't dropped by hundred of basis points in mere months to help combat the decline. In general though, I agree there is no reason at all that prices for housing has bottomed. This in my mind means there is no way that financials have bottomed despite getting slaughtered. Even after the huge price drop I don't think they are cheap on a fundamental basis.

This I think is also correct.

During the last few years of the bust, real prices will be flat or decline slowly - and the conventional wisdom will be that homes are a poor investment.

Same thing with financials. When the bottom callers finally stop calling bottoms financials then it will be time to start looking at financials. You saw it in homebuilders. In my personal judgment the bottom callers in housing finally threw in the towel somewhere between November to January. I mentioned that in a post months ago. Though volatile, housing stocks have performed very well since then.

When you stop hearing how it is such a great time to buy a house, it will finally be the time when it is great to time to buy a house.