by Calculated Risk on 10/26/2006 07:18:00 PM

Rex Nutting at MarketWatch asks: Has housing bottomed? Most economists say no. A few excerpts:

"Housing is going to be very inelastic to falling interest rates on the way down, just as it was very inelastic to rising rates on the way up," McCulley said. "To think otherwise after a bubble is to not understand bubbles. Risk appetite in property markets will not be restored by modest declines in market-determined interest rates."

Real estate is "the ultimate momentum market," McCulley said. "Can't get enough on the way up and can't run away fast enough on the way down."
...
Jan Hatzius, chief economist for Goldman Sachs, figures that selling prices will fall about 3% in 2007 in both the realtors' index of median sales prices and in the more comprehensive price index published by the Office of Federal Housing Enterprise Oversight. The OFHEO index has never fallen in any calendar year.

Such declines "would likely put significant financial pressure on households," Hatzius said.

Pimco's McCulley figures that, based on historic relationships, if house price appreciation is zero in 2007, home sales will fall about 2.5 million from the peak to 6 million by January 2008. By that reckoning, we aren't even half way into the correction.

And on existing home inventory levels from the USA Today: Sellers sing the blues as price drop sets record

... about half of American homeowners who thought of selling their homes in the past year have delayed putting their homes on the market, according to a USA TODAY/Gallup poll conducted this month.

And roughly one-third of those who had considered selling have abandoned the idea.