Housing Double Dip in Progress
The Case/Shiller Housing Index was released today, recounting how the US housing market fared through October 2010. The numbers were below expectations and confirmed that housing is dipping again after a brief respite. Month-to-month, the numbers were down 1%, with only Denver and Washington showing sequential gains.
In the video below, Robert Shiller explains what this means for the economy. My view is that the technical recovery can be self-sustaining if weak given the other economic data on jobs, retail sales, and industrial production we have seen of late. If you look at post-Word War II business cycles as a gauge, then the economy is slowly gaining momentum toward a multi-year recovery. However, housing remains a critical concern as do state and local government problems – in a way we have not seen since the Great Depression. This cycle is dominated by a balance sheet recession hitting the developed economies simultaneously and it is the interaction of the real economy with these strained balance sheets which is unique. Will a housing double dip lead to an economic double dip? In my view, this is still an open question.
This particular post is short on commentary and numbers so CW may re-visit the issue soon. The key here is that the technical recovery could morph into a normal recovery if one uses post-World War II cycles as a yard stick. However, the balance sheet problems across a broad swathe of countries makes this cycle a tougher nut to crack.
More is sure to come on this topic. Austerity at the state and local level combined with potential austerity at the federal level, and housing are the big worries for 2011.
I agree with your very valid points, Ed, for 2011.