Why housing prices drop slowly
Real estate, more than any other asset, is “conducive to hopeful overvaluation,” says David Leonhardt in The New York Times. Even though home sales have fallen “a remarkable 33 percent” since 2005, prices are down only 10 percent in the same period. That’s because “houses are almost perfectly engineered to trick owners into overvaluing them.” There’s the obvious “emotional connection” to a home that makes it hard for sellers to “submit to reality.” And it’s even harder when the reality is that your house is worth less than you paid for it. It’s human nature to “go to great lengths to avoid taking a loss,” but in this case “admitting defeat” will end the pain quicker.
Rally or rest stop?
After the “tough winter for the stock market,” says Ben Steverman in BusinessWeek.com, are we finally seeing “some signs of spring”? Maybe. But there is a better than equal chance that the rise in stock indexes is merely a “classic ’bear market rally.’” Like a “sprinter,” the stock market “needs a breather now and then”—even in a bear market “stocks will bounce back. Temporarily.” Investors look for signs of “extreme levels of pessimism” to signal the end of selling, but the problem now is that there are good reasons for pessimism. Until economic signals clear up regarding a recession, stocks can maybe count on only one thing in their favor: investors have a “dearth of viable alternatives.”