The Standard & Poor’s 500 stock index has tumbled 40 percent since the start of February 2007, while home prices in 20 major U.S. cities have fallen 22 percent, according to an S&P-Case Shiller index.
Quite a nugget – and a pretty big differential. The same Bloomberg.com story quotes Joshua Rosner:
“Fixing housing won’t solve the problem … If we’re to actually get out of this, it’s going to come because we correctly diagnose the problem.” The main issue is the packaging of debt into securities, which is creating a credit crunch by leaving lending dependent on capital-constrained bank … “It’s a great cliche that housing is the root of the problem,” Rosner said. “We can seek to stabilize housing but once unemployment worsens housing will de-stabilize.”
More here. Quite a predicament actually. Credit markets are frozen and assets are depreciating, so who can – or will – buy. How to break this cycle? Seems to me attempts to artificially re-inflate these assets only prolongs the inevitable. You?