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James Galbraith Says Housing Problem to Last `Long Time'

Since we get existing home sales later today:

James Galbraith, an economics professor at the University of Texas, talks with Bloomberg's Matt Miller from Austin, Texas, about the outlook for the U.S. economy and the challenges facing the next president, the impact of Federal Reserve monetary policy on inflation, and the state of the U.S. housing market.

click for video

James Galbraith Says Housing Problem to Last `Long Time'
Bloomberg, May 16 2008
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aT2P76NSBpf4

Friday, May 23, 2008 | 03:30 AM | Permalink | Comments (7) | TrackBack (0)
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Comments

This is a common school of thought that the poor housing crisis will last a while. I agree. With Crude prices this high, travelling to Vacation homes (be it 100 miles away on the NJ shore/Hamptons) or a short flight to the Florida Keys, just became way more expensive.

Posted by: Banker | May 23, 2008 7:35:54 AM

Part of the problem is that people do not remember what 'normal' means for housing. It is not normally a high-profile, high-profit business; normal homebuilders are small time companies that scrape by in local markets and there are no 'hot' markets where people bid prices up. To return to normal means to return to that.

Posted by: wally | May 23, 2008 8:37:49 AM

I am an economic amateur who started following this back in early 2007 due to the housing bubble. I was your average J6P(except I don't drink). I would like to know what percent of probability you think we have for a severe recession, a mild recession, or an in between muddle thru long recession.

I am trying my best to prepare for these uncertain times. I have eliminated all CC debt, almost down to 1 car payment and I bought my home before the bubble so my monthly payment is about 25% below going rental rates for the area.

My fear is a systemic collapse of the economy. This may seem quite gloomy, but so far(2007-current forecasts) the doom and gloomers have been proven right more often then wrong. To me it just looks very bad.

Posted by: David | May 23, 2008 10:07:32 AM

I am an economic amateur who started following this back in early 2007 due to the housing bubble. I was your average J6P(except I don't drink). I would like to know what percent of probability you think we have for a severe recession, a mild recession, or an in between muddle thru long recession.

I am trying my best to prepare for these uncertain times. I have eliminated all CC debt, almost down to 1 car payment and I bought my home before the bubble so my monthly payment is about 25% below going rental rates for the area.

My fear is a systemic collapse of the economy. This may seem quite gloomy, but so far(2007-current forecasts) the doom and gloomers have been proven right more often then wrong. To me it just looks very bad.

Posted by: David | May 23, 2008 10:08:36 AM

David deserves a drink on the house for his fiscal responsibility.

To answer your question, no one KNOWS, no one WILL EVER KNOW. But in hindsight everything is obvious so one year from now all these people will boast about how 'right' there calls were.

As a general rule, the current economic estimates are 'overly optimistic' if you're bearish, 'reasonable' if bullish.

So basically short answer is for you, take everything on CNBC with a grain of salt, try to live as debt-free as possible. And give thanks that you doubt that the debt-sword of Damocles isn't hanging over your head like many, many others.

Posted by: poster | May 23, 2008 11:21:54 AM

I must give credit where credit is due....my father. He grew up on a farm in the northeast and his parents had to weather the Great Depression. One of his sayings was "if you have to use a CC to buy something then you damn well don't need it." Not always true, but a good philosophy on staying out of debt. I have always hated debt, you can easily become a slave to debt.

The wife loves to drop the cheap moniker on me, I prefer frugal. I think people are going to start joining the frugal crowd.

Posted by: David | May 23, 2008 11:50:38 AM

David,

There's a notion I'm fond of that we're doomed to repeat the mistakes not of our parents, but of our grandparents. The living memory of our parents is passed to us, but the memory of our grandparents is more abstract, often little more than what we've read in history books.

My own view is that a depression-like outcome is highly unlikely in the short to medium term. If and when the US is impaired in its ability to borrow in USD though, I would take that as a serious warning sign.

Posted by: Estragon | May 23, 2008 1:00:55 PM