Roubini : The housing sector is double dipping

Housing Double Dip

Steve Forbes: Nouriel, good to have you back again. And before we get an update from you, I just want to promote your book on how to cope with the crisis and get a crash course. And while the economy's maybe potentially crashing, your book went up in terms of sales. Congratulations.

Nouriel Roubini: Oh, thank you. It's a pleasure being back with you and having this dialog today.

Forbes: As a writer myself, I envy your success.

Roubini: Thanks.

Forbes: Well, I have to start off--over the holidays you bought a very nice apartment in New York for $5 million or so. People are wondering, is that a sign the market is turning or you just found something you liked and bought it?

Roubini: Well, my view on housing is that actually the housing sector is double dipping. Of course you can find a buy at a price much lower than listed, then it is a buy. But if you're looking at the macro data, where in the spring of last year, a time where prices were going up and demand and supply was increasing, but that was all driven with the fact with these first-time homebuyer tax credit.

So anybody who wanted to by a home, bought it by April. As soon as their tax credit expired, demand collapsed, prices started to fall again. So demand is falling, supply is increasing because there is a shadow inventory of millions of not yet foreclosed homes. Therefore, prices are going to fall even further.

So if there is one sector of the economy I would say that is already double dipping, that certainly is the housing and real estate sector. So unfortunately, what is locally working might not be at a macro, national level still working. (more)