the talking heads, doom & gloom media feel so inclined to paint this ugly “housing double dip” picture for all of America to see….daily nonetheless! let’s look at this from my perspective, shall we? this week’s report on existing home sales showed activity edging down 0.6% to 5.02 million units and data on february’s new home sales declined 2.2% to an all time low of only 308k units. although sales, in my opinion which i share with MANY others, are more than likely bottoming out, the level of total housing demand is closer to where it was in mid 2008. with that said, the supply side is more favourable than what it was between july ’07 and july ’09 as inventories and upcoming supply is more than ONE million units BELOW recent peak. despite the recent decline in total housing demand the US market is less in disequilibrium than two years ago (see chart below). even with the recent increase in foreclosures there is not a major concern about a second wave of home price deflation that could jeopardize the current recovery and eat into household’s wealth. fundamentals will play a key role in the coming quarters as an acceleration of household formation is expected on the back of an improving labour market. this SHOULD contribute to restoring a better balance in the residential market over time.
according to cole the housing demand tsunami continues to build AND the real estate sky is NOT falling!
thank you to NBF Economics & Strategy Group for their charts and their march 24, 2010 article Vol. XI, No. 40