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Credit Suisse Analyst Said
09/03/2008 -- Mr. Frank Blake, CEO of Home Depot said that the recent downturn in the U.S. housing is getting very close to the bottom. However, an economist at Credit Suisse told a Goldman Sachs retail conference that the current and past home price index indexes indicate the bottom is at least a year away.
Blake addressed concerns over the recent decline in private residential investments in GDP; it has fallen to 3.5% of GDP at the end of June 2008 from the 6.25% at the end of 2005. Consumers' mortgage equity withdrawal rate tells us that "a lot of the over-exuberance in the market is getting squeezed out" according to Blake. On an optimistic note, he did mention that the bottom is not here yet, but the bottom can be seen from here, he added.
One of the key comparison indicator was the ratio between the median existing home price to median family income which maintained a narrow range from 1981 to 2000. But the ratio started to show huge jump as the housing price rose to unsustainable level. The significant decline in the housing market will lead the ratio close to the norm some time late next year, the analyst predicted.
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