The chart above comes from the Irvine Housing Blog via Barry Ritholtz who adds:
Note what they call a bear rally is actually just the result of government programs, mortgage mods, HAMP, etc.
What is the empirical evidence that we are nearing the “capitulation” stage rather than still in, say, the “denial” stage? As counter-evidence I would submit the Case-Shiller composite index for the last twenty years. If you give the composite any credit at all doesn’t the bump over the last few months look more like the “bear rally” whose end marks the start of the denial stage than the fear or capitulation stage?
I suppose it depends on where you think housing prices should actually be.
Bonus questions:
- Were wages and employment boosted by the housing bubble?
- If the answer to the question above is “Yes”, why shouldn’t wages and employment exhibit the same behavior as shown in the graph above?
- Is that being seen?
In other words the government trying to prop up something that can’t be propped up and waste a f*ckton of resources doing so.
Looking at that, we can see that Obama is nothing new, but just the same old thing. He should be given a grade of C as President: passing, but nothing special. More broadly we see that democracy is, as I noted before, really bad at allocating resources. And we are continuing on the path of having more and more resources allocated by the government.
Its really depressing if you think about it long enough.
Employment? Definitely. Wealth effect. As for wages, if we were to look at total compensation I wouldn’t be surprised to find that it too went up.
Ideally in a market economy they would likely have similar patterns. Thing is we don’t live in a market economy, but an economy that is part market and part socialism. Unemployment insurance can delay job finding as people turn down early job offers that are at a lower pay level. This would explain why wages might not follow the pattern in terms of magnitude and why employment is likely to remain low longer than housing prices.
Well if we look at unemployment unemployment has gone from being rather low (the enthusiasm/greed stages) to rising sharply (end of the bubble), to dropping slightly (bear rally). Seems like we are going to see an another rise in unemployment assuming the graph is true.
As for compensation, IDK, haven’t looked.
No, the bear rally period is the denial phase. That is where we say, “Oh, whew…job done, recession over.” Which is what the Obama Administration has done (and anyone else who was President). Problem is, if the end of the bear rally means that we are going to see additional declines in housing prices…substantial declines, then we are in store for another recession in a few months, maybe in time for Christmas or so. Most of our past recessions have seen their start with a down turn in the housing market. The end of the bear rally means we’ll see yet another down turn.
Assuming the above graphic is indeed the dynamic we are going to go through…at least that is how I’d read it.
“Were wages and employment boosted by the housing bubble?”
Wages were stagnant for most people. IIRC, total compensation increased when you ad in health care costs. Also, IIRC, we are still above trend on housing prices. I would expect them to come down more, with the corresponding affects on economic performance.
Given the large rise in productivity, why should current salaries drop? OK, other than the fact that there are lots of other people available to take one’s job.
Steve
The wage distinction is a false one, IMO. From the firms perspective “total compensation” is the wage.
Isn’t that enough? If you find you have excess supply what is the response of the market?
“Isn’t that enough? If you find you have excess supply what is the response of the market?”
History. Wages don’t respond reliably in the expected fashion. I suspect that increased productivity may be part of the reason, but smarter people than I have written on sticky wages and I usually end up feeling like they dont know either.
Steve