Thursday, December 20, 2007

New Merrill Lynch Mascot on Horizon

Looks like Merrill Lynch, represented in advertising by a bull mascot, is now bearish on real estate. Here are portions of the executive summary from their Economic Commentary, released Tuesday, Dec. 19:
Both the near-term and longer-run outlooks for the housing market remain clouded in what is a severe downturn in starts, sales and prices that has become national in scope. As we saw in the November housing starts data, the builders are now frantically cutting production.
But with the sales backdrop still softening, they may have to slice their construction plans by another 30% before we hit bottom on a cyclical basis. And, that bottom could be as long as a year away. Beyond that, weak demographic fundamentals point to years of sluggish real estate activity, particularly in terms of the “price”. The looming dominance of the “move down” buyer suggests that home values will continue to soften long after the building industry mops up the current excess supply. In fact, real estate pricing in general can be expected to be in the doldrums through 2012...

...Here is what we really “do not get”. There are still economists out there talking about how the housing recession is still local and not regionally broad based. We have no idea who their data vendors are. In our view, this clearly goes down as the most national real estate downturn since the 1930s.
Wow! That's nothing here that this architect didn't already know or believe. Just that I never expected anyone from the ERSF (Everything's Rosy Spin Factory) to admit it with quite this level of honesty! Bravo to you, Merrill Lynch author (BTW, how's your resume lookin'?)

Aside: What is a "data vendor" that Merrill Lynch makes reference to? Someone with internet service, a calculator, and an agenda? The real estate industry? Someone within the Bush Administration? Just asking.


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