Jump to content

Housing Bottom Getting Closer?


Parsad
 Share

Recommended Posts

Thanks ValueInv!  Exactly what I was looking for.  Looks like we are more than half way through and we should see some stabilization in the next 12 months, with an upturn in starts in 2013 based on demand and supply.  Cheers!

Link to comment
Share on other sites

It looks like there are several people looking at this. First chart is inventory ;) Household formation has been a problem though.

 

 

http://soberlook.com/2012/01/five-reasons-2012-will-be-start-of-us.html?utm_source=BP_recent

http://soberlook.com/2012/01/story-of-household-formation-is-about.html

 

And Jamie Dimon's:

 

http://variantperceptions.wordpress.com/2012/01/14/dimon-on-housing/

Link to comment
Share on other sites

It looks like there are several people looking at this. First chart is inventory ;) Household formation has been a problem though.

 

Household formation is everything.

 

A month or two back I counted the number of housing units built since 2000 and subtracted out 250,000 per year for the amount (estimated) destroyed annually.

 

It turns out that we have not added more homes to national supply than needed -- if you assume 1.3m annual trend new household formation (this was the trend up until the financial crisis hit).

 

We built too many for a few years and now we've built too few.  We're at even.  The problem isn't too many homes anymore, it's the fact that this jobless rate has driven new household formation way below trend line.

 

It's the jobs stupid, just the jobs.

 

 

 

Link to comment
Share on other sites

It looks like there are several people looking at this. First chart is inventory ;) Household formation has been a problem though.

 

Household formation is everything.

 

A month or two back I counted the number of housing units built since 2000 and subtracted out 250,000 per year for the amount (estimated) destroyed annually.

 

It turns out that we have not added more homes to national supply than needed -- if you assume 1.3m annual trend new household formation (this was the trend up until the financial crisis hit).

 

We built too many for a few years and now we've built too few.  We're at even.  The problem isn't too many homes anymore, it's the fact that this jobless rate has driven new household formation way below trend line.

 

It's the jobs stupid, just the jobs.

 

They reinforce each other, jobs <-> construction.

 

There is job growth in most other sectors of the economy. Instead construction jobs are well below average.

 

In a normal recession construction usually leads us out of it and that obviously has not been the case. If construction starts to pick up, and it can be multifamily not necessarily housing, they can help each other. Multifamily vacancy is around 3% at all time lows (usually around 5-6%) and there are no apartment buildings coming up. Rents starting to get hot, that is what Dimon says that is cheaper to buy that to rent in a lot of places.

Link to comment
Share on other sites

They certainly do reinforce each other.

 

1)  Construction worker (or related industry worker) gets laid off

2)  Loses house

3)  House in foreclosure or threatening to be there (shadow inventory +1)

 

However...

 

4)  Construction picks up (meaning he gets his job back)

5)  Shadow inventory -1

 

So just by building a new house, does it add to supply or does it reduce shadow inventory to actually reduce supply?  It has been estimated that a single family home creates 3 jobs.  So if you get new household formation greater than 1 as a result of building that new house, then building a new house actually reduces total supply on the market.

 

 

So ironically it's possible to have construction of new homes actually reduce the supply -- or at least the 3 jobs created might at least create an offsetting demand.

 

 

 

Link to comment
Share on other sites

I live in Georgia and I am seeing new houses being constructed now after 3 years and people buying them.Some of the lots which were abandoned by builders 3 years ago are being constructed by the builders who bought them in bankruptcy.The prices are still very low compared to what they were being sold at their peak.

I think housing will stop being a drag on GDP in 2012.

If job market keeps on improving housing market will also bottom out.

Link to comment
Share on other sites

They certainly do reinforce each other.

 

But the economy is depressed, in large part, because of the housing bust, which immediately suggests the possibility of a virtuous circle: an improving economy leads to a surge in home purchases, which leads to more construction, which strengthens the economy further, and so on. And if you squint hard at recent data, it looks as if something like that may be starting: home sales are up, unemployment claims are down, and builders’ confidence is rising.

 

Krugman also thinking about this.

http://www.nytimes.com/2012/01/23/opinion/krugman-is-our-economy-healing.html?_r=1&smid=tw-NytimesKrugman&seid=auto

 

 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...