If you thought the housing market is starting to hit bottom, well, think again.
In this morning’s Breakfast With Dave newsletter, Gluskin Sheff Chief economist David Rosenberg says home prices on average have another 10-15% downside before fully reverting with respect to residential rents and wage income.
“Home prices: There remains a glut of at least two years supply on the market when the ‘shadow’ foreclosed housing inventory data are included in the calculation and home prices on average have 10-15% downside before fully mean reverting with respect to residential rents and wage income. This is the canary in the coalmine when it comes to wealth, confidence, spending — and writedowns (the market is expecting write-ups this year) in the banking sector. The big surprise will be the renewed turndown in the closely-watched Case-Shiller (CS) index of home prices, which in the past two months has slowed to an average gain of +0.25% after 1%+ advances in July-August, which gave beta-hungry investors more reason to add risk to their portfolios. But the CS series is a three-month average and for all we know, the renewed price declines we expect to see may already be occurring now. Note that two home price series are already back in decline for two straight months — LoanPerformance and Radar Logic. This is key for any sector that remotely touches the housing industry from the homebuilders, to the financials, to the consumer discretionary group.”