Goldman Sees ‘False Bottom,’ Merrill Sees ‘Treat’

[AllentownJake]

Oct. 27 (Bloomberg) -- The stabilization in U.S. home prices won’t last, according to economists at Goldman Sachs Group Inc. in New York. Their counterparts at BofA Merrill Lynch Global Research see a “treat” rather than a retreat.

“The risk of renewed home price declines remains significant,” Alec Phillips, an economist based in Goldman’s Washington office, said in an Oct. 23 note to clients. “Our working assumption is a further 5 percent to 10 percent decline by mid-2010.”

“We should expect subdued home price appreciation over the next few years,” wrote Merrill Lynch’s Ethan Harris and Drew Matus on the same day.

Both camps agree government stimulus programs, including the $8,000 first-time buyer tax credit, foreclosure moratoria and Federal Reserve purchases of mortgage-backed securities, have helped stem the slump in housing. At the center of the debate is how much influence these initiatives have had, and therefore what happens after they expire or wane.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aVyvAuFInq_Y

[dschis]

1. It's been going on for a long time

You have to give the Fed and their nefarious brothers credit for keeping it afloat since the Dot com bubble. It should have happened then. I'll hold Mr Greenspan accountable for that. We should have let it fall then. I would say at least half of the Y2K scare was to prop things up

[AllentownJake]

2. 9-11

We were heading towards a pretty bad recession before 9-11. The Federal Reserve did everything they could to prevent it. The reasoning was, they didn't want the world to think that the terrorist had any effect on our economy.

[dschis]

3. I remember the first time that the Dow hit 10,000

I told my friends there wasn't a real reason for it. And there still isn't. It's just shell games.
It should be 8500 by rights. The only reason it went up was cheap money, tech and 401Ks