What Recovery?

Expanding on the post below, Tyler Durden at Zero Hedge has an outright depressing look at the possibility that the housing market will not recover to 2006 levels in some parts of the country until the 2030's.

The reality is that even as the broader economy still suffers under record excess slack, and one could easily disagree with Moody's on their rosy expectations for a broad economic turnaround, even the permabullish rating agency has to acknowledge that there is simply no demand to satisfy the glut of overbuilding seen during the bubble years. Between these two pillars of household net worth: the economy (traditionally manifested in the stock market, although no so much lately) and housing, the US consumer will likely be forced to continue retrenching for decades to come, which makes any talk of a V-shaped recovery, even ignoring for a moment the temporary impact of government stimuli, moot.

Additionally, Moody's analyzes the expected "rebound" by geographic region, with an overall expected return to a "peak" level by 2020.

Hard-hit states such as Florida and California will only regain their pre-bust peak in the early 2030s, well after the nation does. New York will also be a laggard, although its overall decline in prices will be less severe. The main constraint on New York's outlook is Wall Street. In general, the length of the downturn and the length of recovery in a region will depend on the degree of aggressive lending or overinvestment in housing that occurred during the boom. On the recovery side, states with weaker job growth will also take longer to return to peak.

Then again with Moody's unprecedented track record of being wrong on everything, it would not be too surprising to see a compressed housing bubble peaking some time next year, comparable to what has been seen in Hong Kong, where the population has already forgotten about the excesses of two years ago and is bidding up matchbox apartments into the stratosphere. With the US economy now able to sustain only by creating and popping various asset bubbles, perhaps the best thing for America would be to go through one more quick housing ramp, followed by an even quicker crash, which would likely be the last one in the history of this once great country, as it would end with a completely worthless national currency and a decimated middle class.

So, we're basically either looking at 20 years of hurt, or a super-accelerated housing bubble that packs 20 years of hurt into say, the next two years.

Which one's worse? Can we prevent either?

I'm thinking we've still got a lot more downside to slog through, despite the stock market ramping up this year. It is unsustainable and the market will crash again, it's just a question of how soon and how violently.

Should everything crash at the same time, residential real estate, commercial real estate, the stock markets and the dollar, then yes, that's worst-case scenario time. And God help me, but that may actually be better for us in the long run.