Yesterday's New York Times reports that “housing prices fell in March to their lowest point since the downturn began.” This new low is indicated by a 0.8% drop between February and March in Standard and Poor’s Case-Shiller Index, an economic indicator which surveys the price of single-family homes in the nation’s largest cities. This is a troubling -- but not altogether surprising – sign for an economy whose recovery continues to sputter. Last summer, in the Bloomberg BusinessWeek article, “Krugman or Paulson: Who You Gonna Bet on?” Hugo Lindgren, asks his readers to compare – and hedge their bets on – the differing economic outlooks of John Paulson, a hedge-fund manager, and Paul Krugman, a Professor in economics and Nobel Laureate.
Krugman, back in July of 2010, “went all in on Keynesian orthodoxy,” claiming that given the lack of federal spending, the economy will slip into a third depression characterized by slow, sporadic growth and high unemployment, resembling the Long Depression of the late 19th Century. Paulson, on the other hand, was bullish on the future. “We’re in the middle of a sustained recovery in the U.S…I think were about to turn a corner,” he claimed during the summer of 2010, “it’s the best time to buy a house in America.” Given the lack of growth over the past year and the downward spiraling housing prices evidenced by today’s Case-Schiller Index, one would have been wise to bet on the wisdom of Krugman over Pauslon.
This news is compounded by the release of a report by the National Association of Realtors which shows an 11.6% decrease in sales – significantly worse than the organizations prediction of a 1% drop. With such disappointing news, the future remains uncertain. Despite this, Douglas Yearley, the CEO of Toll Brothers, has advised us to be cautiously optimistic. In a presciently guarded remark, Yearley muses, “I think – I hope – we’ll be O.K”.
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