Tom Keene Talks to Daiwa Capital Markets' Michael Moran

Tom talks with Daiwa Capital Markets’ chief economist Michael Moran about the housing market and why the glory days are over

How can we have a housing recovery with real median income back to 1988 levels?
One of the implications of that slow income growth is that you are not going to see very much going on with home prices. One of the other things that I think is going to hold housing back, to a degree, is what I would call the investment demand for housing. In years past owning your home was viewed as a key element in a person’s portfolio, a good way to build wealth over time and prepare for retirement. Now I don’t think individuals see homeownership as good an investment as they have in the past.
Every family has a story of how grandpa came back from the war and put $50 down on a GI home and sold it for Lord knows how much money. Are those stories over with now?
I suspect they are going to be over. Housing prices will move with the rate of inflation. But they are not going to surge. An interesting point, though, is that even with stories like the one you mention, I think a lot of people over-estimated the benefit of the gain in housing prices. If you adjust for inflation and what you paid in interest and taxes, your gain is not that big.
We have this idea that we can make a double-digit return on housing. That is just not true, is it?
Not at all, not at all. In years past it has not been the great investment people make it out to be.

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