Best Columns: Turning homes, Wachovia exile
The housing market tipping point
Consider this an “all-points bulletin” for prospective homebuyers, says Irwin Kellner in MarketWatch. Housing supply and demand may still be “many months” away from hitting equilibrium, but enough house prices have fallen far enough that the market could “turn more quickly than you expect.” The “protracted decline” in prices has made many houses more affordable than they’ve been in a long time, but that fact hasn’t had a chance to widely “sink in.” When it does, we’ll have a seller’s market. The number that matters is the “ratio of home prices to household incomes,” now at 3.4 for existing homes, down from 4.2 at the housing bubble’s peak. When it hits “a bit over three,” start shopping.
At Wachovia, a deal too far
Wachovia CEO Ken Thompson used to be “a master at carefully hedging his every bet,” says Dean Foust in BusinessWeek.com, and his “shrewd dealmaking,” in a number of small deals, made Wachovia a nationwide “megabank.” But it’s “painfully clear” that Thompson’s “one and only major deal”—buying mortgage lender Golden West for $25 billion at the height of the housing bubble—led to his ouster yesterday. What happened? It’s tempting to blame “executive hubris,” but the real problem was “the law of large numbers.” Once small deals stopped “moving the needle in terms of profits,” Thompson “began hunting bigger game.” The prey, it turns out, was him.
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