Rolf Englund IntCom internetional
"The housing correction - and related credit crunch - appears to be at or near its low point in America"
The housing correction - and related credit crunch - appears to be at or near its low point in America
The consensus view among economists, as opposed to financiers, at present is that the United States is experiencing, at worst, a mild recession and perhaps only a typical mid-cycle slowdown.
I would argue, therefore, that the true contrarians at present are the bankers and headline-writers who keep predicting economic Armageddon.
Last week's sudden reversal in asset prices was mainly attributed to ever-deeper anxieties about the US real estate market, where home sales fell by more than consensus expectations in June. The impact of these disappointing figures was then aggravated by a paper by Bill Gross, the influential chief executive of the world's biggest bond investor, Pimco, which predicted that US banks would lose at least $1 trillion in the credit crunch, rather than the $400 million to $500 million already discounted in the value of bank shares.
Mr Gross maintained that no end was in sight for the housing slump: US housing, he insisted, is the world's “one asset class that all observers can agree is going down”.
The median existing-home sale price surveyed by the National Association of Realtors in June was $215,100.
In fact, US house prices, which almost everyone believes to be in freefall, have actually been going up for the past four months, after reaching a trough of $195,600 in February.
In short, the housing correction - and related credit crunch - appears to be at or near its low point in America, while in Britain and the rest of Europe the trouble has only just started.
The most probable scenario may be that the US economy will manage a soft landing after its housing boom, in the same way as many other countries — for example Britain, Australia, Ireland, Sweden and Denmark — but