Housing Meltdown: 25% Lower by 2010?

Washington policymakers have been struggling to keep the US out of recession, and confusion over the housing market has been making their job tougher. Have American consumers kept shopping or been forced to fall back?

According to Business Week, experts have been suggesting that a bottom has been in sight. Stephen East, analyst for Pali Research, wrote in a research note that to his firm's clients on Jan. 25th "the sun is not shining very brightly, but at least the worst of the storm has likely passed." The S&P index has homebuilder stocks soaring 49% from Jan. 15th to Jan. 29th. On Jan. 30th the government said that the annual economic growth had slowed to about 0.6% in the 4th quarter when home construction fell at a 24% annual rate. The S&P/Case-Shiller 20-city home price index had fallen about 7.7% in November from the year before, which is the biggest decline since 2000. Home prices could sink another 25% over the next two or three years, returning to the levels in inflation-adjusted terms from 2000. That price is even with the Fed's half percent rate cut on Jan. 30th. David Rosenberg of Merrill Lynch said "We now see potential for another 25% to 30% downside over the next two years."