 Retired Eastern Bank Vice President and Chief Economist John Bittner speaks at the Marblehead Community Center Monday. Item photo / Reba M. SaldanhaRetired Eastern Bank VP speaks to Marblehead seniors
By Jack Butterworth / For The Item
MARBLEHEAD - Do you have a house you're thinking about selling?
Retired Eastern Bank Vice President and Chief Economist John Bittner thinks you may do better to wait a year.
Charting the average home price nationally, Bittner said that figure was just under four times the average household income last spring. That's a $200,000 house for a family earning $50,000.
"It will probably bottom out at 3.4 ($175,000)," he told a sold-out luncheon crowd of 80 retirees at the Council on Aging Monday afternoon. "That means that house prices probably need to come down another 13 percent."
When his audience groaned, Bittner was quick to point out that living in Massachusetts seems to give homeowners an advantage.
"We've been spared the real brunt of this," he said. "Maybe we'll fall another 5 percent."
Bittner condensed the history of "the greatest economic crisis of my 38 years," starting in 2000 with the bursting of the dot-com business bubble and the devastation of Sept. 11, when national panic left the Federal Reserve Bank "terrified that the U.S. would slip into deflation," the kind of credit crisis that exists today.
The Fed's response was to lower interest rates, making credit so cheap that some banks began to lower their standards for loans. "They became blind to risk," he said.
"When I asked how this was all going to unravel they said it would be a soft landing. Well, it didn't happen. It came unglued very quickly and we're seeing a lot of pain over a very short time."
Bittner was predicting "a bumpy nine months" as the shaky economy moves toward stability, aided by banking bailouts, and likely a loan to the automotive industry, tax rebates and a stimulus package. New regulations for leverage loans and conditions on the car manufacturer loans are also on the horizon.
A frequent interviewee on economic issues for local stations and national cable networks, he said he would rather be retired than relearn the banking business in the wake of today's credit crisis. "It's a new world," he said. "People will remember this a long time. They'll be smarting from this."
Although he quoted Eleanor Roosevelt - "You must do the thing that you fear" - he had advice for bargain hunters in the coming days as well: as the bottom nears in stock prices, "Pick through the pile but pick carefully."
And he even included what may have been some much-needed humor: referring to the $700 billion bank bailout fund, he said, "We should form a little bank to get some of that."
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