• 487 days Will The ECB Continue To Hike Rates?
  • 487 days Forbes: Aramco Remains Largest Company In The Middle East
  • 489 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 888 days Could Crypto Overtake Traditional Investment?
  • 893 days Americans Still Quitting Jobs At Record Pace
  • 895 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 898 days Is The Dollar Too Strong?
  • 899 days Big Tech Disappoints Investors on Earnings Calls
  • 899 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 901 days China Is Quietly Trying To Distance Itself From Russia
  • 901 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 905 days Crypto Investors Won Big In 2021
  • 906 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 906 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 909 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 909 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 912 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 913 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 913 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 915 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

When Will Housing Bottom?

Those looking for a housing bottom anytime soon are likely to be disappointed. Let's see why from three different angles:

  • Mortgage Rate Resets in Conjunction With a Consumer Led Recession
  • Historical New Home Sales
  • Historical Housing Starts

On the basis of mortgage rate resets and a consumer led recession I mentioned a possible bottom in the 2011-2012 timeframe.

See Housing - The Worst Is Yet To Come for more details.

Let's take a look at housing from another perspective: new home sales historic averages and housing from 1963 to present.

New Home Sales 1963 - Present

New home sales reached a cyclical high in 2004-2005 approximately 50-60% higher than previous peaks.This happened in spite of a slowdown in population growth and household formation as compared to the 1960-1980 timeframe.

From 1997-1998 and 2001-2002 to the recent peak, the average sales level was 1.1 million units, or 45-50% higher than the 40 year average. This translates to an average of 300,000-400,000 excess homes for nearly a decade, and arguably as many as 3-4 million excess homes.

Such excess inventory may require as many as 5-7 years at recessionary average sales to absorb this inventory. The following charts are from a friend who goes by the name "BC".


Larger Image

 

Housing Starts 1959 - Present


Larger Image

 

Flashback Of The Week

Here is the flashback of the week with thanks to Toddo on Minyanville for the link.

October 27, 2005
Bernanke: There's No Housing Bubble to Go Bust

Toddo's comment: "Don't you feel better knowing Bernanke's on the case?"

My comment: Was that a blatant lie or is Bernanke the dumbest PhD in history? Also note his timing. Bernanke made that statement right as the bubble was busting. Housing peaked the summer of 2005.

Cycle Excesses Greatest In History

The excesses of the current cycle have never been greater in history. The odds are strong that we have seen secular as opposed to cyclical peaks in housing starts and new single family home construction. With that in mind it is highly unlikely we merely return to the trend. If history repeats, and there is every reason it will, we are going to undercut those long term trendlines.

There will be additional pressures a few years down the road when empty nesters and retired boomers start looking to downsize. Who will be buying those McMansions? Immigration also comes into play. If immigration policies and protectionism get excessively restrictive, that can also lengthen the decline.

Finally, note that the current boom has lasted well over twice as long as any other. If the bust lasts twice as long as any other, 1012 just might be a rather optimist target for a bottom.

 

Back to homepage

Leave a comment

Leave a comment