is housing near its bottom? the financial parasites keep chanting it,
along with their porn sellers in the media, and of course the
indoctrinated chanters.
but, with lots more ARMS to be reset this year, and lots more in
2009, and with ever more new and abandoned homes still coming onto the
market, do not bet on it.
how low will housing prices fall? its looking like 50% or more may be
a realistic picture.
there maybe a 6-7 year backlog of unsold homes at current inventory,
but that is based on current sales.
as the economy falls ever deeper into a free market blowout, sales
may tumble ever more.
so far the federal libertarian nanny state has almost completely
concentrated on bailing out, and even a backdoor debt forgiveness for
the free market, self reliant, self responsible, rugged individual,
born with a silver spoon in their mouths, pull themselves up by their
own bootstraps with tax payer dollars warriors.
almost nothing has been done for the real economy, the demand side.
for the less intellectually curious, yes i know the graphs are
missing for obvious reasons, please click on the link to view the
complete post.
http://www.suddendebt.blogspot.com/
MONDAY, MAY 5, 2008
(Off The) Cliff Notes
We all know that new house sales have dropped off the cliff. The most
common picture of the bubble's end is the chart below: the seasonally
adjusted annualized rate of sales per month (click to enlarge).
Looking at this chart alone we could be tempted to conclude we are
close to a bottom and may soon see a rebound. Is this likely?
Data: Census Bureau
Dramatic as the above picture may be, it does not tell the whole
story. The housing boom started in 1991 and lasted for an
unprecedented 15 years, during which more houses were built and sold
in the US than any previous cycle. Therefore, we need to include a
longer view in our picture. Looking at the blue SAAR line above we
observe that housing booms before 1991 lasted ~3 years. The next
chart, then, includes a 3-year rolling total, i.e. how many new houses
where actually sold in any three year period (red line).
Data: Census Bureau
We see that by this measurement the housing market is still far above
historical lows. If 3-year total sales are to revert to the historical
1.5 million low, annual sales must stay at 500.000 per year for three
years, or dip well below that before rebounding. The 15 year boom
apparently created more housing supply than demand for shelter could
realistically absorb, eventually leading to a speculative bubble. It
will take a significant time to work off the excess physical supply of
homes. How long will the downturn last?
For additional insight, let's look at home vacancy data: Homeowner
vacancies are currently at an all-time high of 2.9% and of those
vacant homes, a record 2.28 million units are for sale only, up from
1.39 million in 2005 (see chart below). That's another four years
worth of supply at the current pace of sales, up sharply from one
year's worth in 2005.
Data: Census Bureau
This additional supply of vacant homes for sale is now acting as a
lead weight pulling down new home sales further. If annual sales
stabilize at current levels, then housing could be in for another 6-7
years of sub-par activity before all the excess supply is absorbed.
|
