The Case-Shiller home price index sagged 1% MoM in December with 19 of the 20 cities deflating. This was the fifth decline in a row, during which home prices nationwide have fallen over a 10% annual rate. In terms of the macro impact, this is akin to the stock market tumbling 20%. In fact, unless the stock market finds its footing here, the combination of weaker equity and home prices will most assuredly take the U.S. personal savings rate back on its upward trajectory.
...We have 3.6 million listed housing units for sale. There are another 3.6 million empty units that have been taken off the market for unspecified reasons. And then there are an additional 2 million homeownership units that are vacant for sale. That is just under 10 million housing units in supply — units that are simply waiting for an occupant.
There is no doubt that there is always a good part of the unsold supply that is obsolete or in totally undesirable levels — and that comes to just over 5 million units historically in terms of “frictional” supply. So that in turn means that we have, conservatively speaking, between 4 and 5 million housing units in excess supply that is over and beyond what could possibly be termed as “normal” by the standards of the past. So, even if the recent blip in net household formation of around a million is sustained, and assuming that the homeownership rate stabilizes near 65%, it would still take between six and seven years for the excess inventory to be fully mopped up and thereby carve out a decisive floor in residential real estate pricing in the United States.
---today [My bold/italic]