In his recent article titled, Is it 2008 All Over Again? Not in the US, Bill Miller explained why this market is not like 2008. Here’s an excerpt from the article:
The media and investors are understandably nervous, as home prices in the United States almost never decline; the last time they did, we all learned that the housing ecosystem and broader financial markets were ill-equipped to handle a drop in home values, given how rare and shallow previous declines had been. However, we believe the US’s set-up today is much more resilient than the one that precipitated the housing crisis fifteen years ago. There are several important differences:
- The US Has Been Producing Less Homes than Needed Since the Crisis
- The Number of People Hitting First-Time Homebuyer Age (35-44) Is Likely to Soon Eclipse Previous Highs
- Vacancies as Share of Housing Stock Near 30-Year Low
- High Level of Equity in Current Housing Stock
- Easier Payment Burden for Homeowners
- Better Underwriting Standards and Banking System Capital
While correlations have spiked and multiple asset classes have lost value as housing prices pull back, the fundamental backdrop does not suggest that another housing collapse is likely, at least in the United States, as the system is strong. None of this means that asset classes will stop losing value or that other factors will keep the global economy from worsening, of course, but prognosticators extrapolating a similar event to what happened in 2008 are probably barking up the wrong tree.
You can find the entire article here:
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