“The housing meltdown hasn’t ended yet, and it could ultimately spark another financial crisis, says renowned bond fund manager Jeffrey Gundlach, CEO of DoubleLine Capital.
“The housing market is dropping . . . and about to go to a new low,” he tells CNBC. “I think we’re looking at some type of echo in the credit crisis coming up here. That’s what I’m afraid of.”
He notes that the S&P/Case-Shiller Home Price Index is approaching a new trough. The index measuring prices in 20 major cities dropped 3.3 percent in February from a year earlier, the biggest decline since November 2009.
At 139.27, the index has almost reached its six-year low of 139.26 set in April 2009. And Gundlach isn’t the only one worried about that development.
“There is very little, if any, good news about housing,” David Blitzer, chairman of the Case-Shiller index committee at S&P, said in a statement accompanying the latest report. “The 20-city composite is within a hair’s breadth of a double-dip.”
Another ominous sign: the ABX Index of subprime mortgage securities has slid about 20 percent in the past few months, with most of the drop coming in the last three months, Gundlach says.
In addition to falling prices, the amount of time it takes to sell a foreclosed property has ballooned to 26 months, Gundlach says. That means it will take longer to get out of the mess, he and others point out.
“Housing will continue to lag the recovery until foreclosures abate,” Sal Guatieri, a senior economist at BMO Capital Markets, tells Bloomberg.”
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