Bull Versus Bear? The Debate at Inman Connect NY

As Guy mentioned, the two of us attended a real estate technology conference last week in New York City. One particular session, The Housing Debate: Bull Versus Bear, was by far the absolute standout of the conference. Andrew Ross Sorkin of The New York Times moderated a diverse panel of industry insiders including Dottie Herman, Barry Ritholtz, Noah Rosenblatt, and Professor Nouriel Roubini. Fortunately for us, Inman posted a video of the entire hour online, totally worth watching. For those of you short on time, here’s my guide to the good parts:

4:45 minutes into the video Barry aptly describes what we’re experiencing in the housing market as the death of a thousand cuts.

8:29 minutes in Noah Rosenblatt says he would not buy now because it’s like trying to catch a falling knife. He says we are two years into a housing recession and only seven months into a credit crisis. Sure, there may be some killer opportunities in local markets, but otherwise he advises not to buy. Furthermore, recession is healthy.

11:15 minutes in, Professor Roubini flat out says that we are headed for a severe recession, no question, and that it will be more severe and protracted than the 1990-91 and 2000-01 recessions recently experienced. He says we’re already in a recession that started in December 2006, that it’s two years to bottom, and that this will be the worst recession in 50 years.

13:00 minutes in, David Lehreah and his series of books receive commentary from his colleagues. Pretty funny.

19:04 minutes in, Barry Ritholtz talks about how long he thinks it will take for Wall Street to open the kimono on lending and get through the process of mortgage recovery. If new CEOs come into these companies and flush the junk right way, sure, it will kill the stock, but recovery will happen faster. Old CEOs are already departing. How long for recovery? Depends on how quickly companies act.

22:50 minutes in, Noah makes an excellent point that we’ve only just begun to see the ramifications of the credit crunch. Sure, subprime fallout lead the way, but Alt-A and Prime are queuing up for further consequences. Knowing that we’ve got AAA paper out there created from junk, if housing prices keep falling, this will create greater problems for Wall Street.

24:47 minutes in was the best moment of the entire session. Professor Roubini relentlessly painted a picture, step by step, number by number, of exactly how far our economy has to fall and how it’s going to happen bit by bit. It was Cramer’s Armageddon without all the yelling. Fact, by fact, by fact, Roubini made a compelling case for the worst recession in 50 years. The video didn’t really pick up the reaction of the audience, which was something along the lines of palpable shock, then gasps, followed by twittering, as in, oh my god I guess we should just shoot ourselves now! Roubini pointed out that beyond the two million foreclosures that everyone talks about, 10 million homes will have negative equity as a result of price declines, so as people give back the keys and net worth evaporates, we can expect to see a massive consumption reduction across the board.

26:33 minutes in, Barry very appropriately reviewed the five stages of grief that you might remember from Pysch 101. This is what we experience when someone dies or we receive very bad news, like you have six months to live. This all came back to him as he was looking over the year end Wall Street reports over the holidays. I guess we’ll all be grieving soon if the economy continues to unravel.

The Bull didn’t really have much of a case in my opinion. The whole thing makes me wonder… does the Manhattan housing market always experience record highs after yet another Wall Street pyramid scheme starts to implode?

Real Estate Connect: Bull Versus Bear