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Notes to myself, possibly of interest to others.
-- Bill Northlich

Monday, April 11, 2011

Rosenberg Daily - Housing price bottom could be five years away

The S&P 500 homebuilders are down 13% from this year’s nearby peak. Relative strength is to close the lows for 2011, and for a good reason.
  • New home sales have collapsed at an 82% annual rate so far in 2011. Yes, you read that right.
  • The unsold inventory of new homes has expanded from 6.8 months’ supply in December 2010 to 8.9 months currently.
  • Both median and average prices for new homes have sagged at over a 60% annual rate. You can’t make this stuff up.
  • It is still taking over eight months (the median) for homebuilders to close the deal on a new home― 60% longer than what you would see in a normal market.
And the problem of supply just won’t go away:
  • According to the U.S. Census data, there are 3.7 million homes that are vacant and are for sale. This is nearly 30% above normal.
  • According to the National Association of Realtors, there are 3.5 million homes that are occupied but with a for sale sign on the front lawn. This is 50% above normal.
According to Corelogic (courtesy of Chris Wood at CLSA), there are an estimated 1.8 million homes that are “distressed” ― the “inventory pipeline” of homes in arrears or in the foreclosure pipeline.

Wow. That is nine million units of inventory. Not all of it has to be cleaned up since there is always some frictional level of vacancies, but suffice to say that even with a reasonable set of assumptions surrounding what will happen to household formation and homeownership rates, it could easily take five years to mop up this excess supply and ultimately provide a firm bottom for national home prices.

Bill:  Also, what about housing finance?  Here and second graph here.  What about employment (which you, ah, need to get a loan)?

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