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Morgan Stanley Remains Bearish on Housing

Posted by Larry Doyle on January 13, 2010 1:20 PM |

The equity markets can and will do whatever they want, but when I look at the economy I remain steadfastly fixed on our housing and labor situation. When these cornerstones of our economic landscape not only stabilize but show marked improvements I will become more constructive on our overall outlook. Are we there yet? No way.

Thanks to a loyal Sense on Cents supporter, I am happy to provide Morgan Stanley’s U.S. Housing Outlook for 2010. What are the key points to this report?

1.  Housing transactions have increased and prices have stabilized due to massive government supports.

2.  The bottoming process continues and the trend for housing remains down given the high percentages of homeowners with negative equity, the high rate of unemployment, the lack of a viable Jumbo mortgage market,  and increasing rates of mortgage delinquencies.

3. Delinquent borrowers, already at nearly 8 million, will continue to increase in 2010. The government is forestalling the problems embedded in this reality but has no current solution.

4. Purchasing power remains constrained and consumer demand remains limited due to flat incomes, higher down payments, and a lack of mortgage credit.

5. The housing market remains dominated by the government. This reality will likely grow in 2010.

6. Home prices will likely decline another 10-15% in 2010.

7. We will need to closely monitor all of the above referenced variables throughout 2010 as the situation remains very fluid.

For a comprehensive review, I am happy to provide the entire report. (Click on the image to access the pdf document).


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