NEW YORK - In the ongoing debate over if and when the oft-referenced housing bubble will burst, the latest ABS analyst to publicly weigh in expressed his belief that the bubble will experience a "slow hiss" as prices gradually decline. "Most of the time, bubbles end softly...the air hisses out," said Mark Adelson, director and head of structured finance with Nomura Securities, speaking at the Asset-Backed Securities Summit hosted by Financial Markets World last week.
Adelson said that, given the strength of basic economic conditions such as low inflation, low unemployment in the 4.9% to 5.1% range and a Gross National Product solidly above 3.5%, a slow decline in real estate prices is the most likely scenario. In a recent report on the topic, Nomura analysts also noted that, on a nationwide basis, U.S. home prices have appreciated every year since the Great Depression, and home price appreciation has averaged 6% per year since 1976. "Thus, on a nationwide basis," wrote the analysts, "we think mean-reversion (i.e., a period of slow home price appreciation) is somewhat more likely than absolute price declines."