Housing Will Remain Weak For Years (Decades)

The state of housing is often quite different than picture painted by headline interpretations. The game of perception often suggests that the worse is over in the real estate market. It is not. New home sales continue to contract as supply swamps demand. The sharp and steady decline real or currency adjusted prices reflects cycle weakness that will take decades to overcome.

(1) New home sales continue their sharp and steady contraction. In time the unwinding in the real estate market will be compared to the contraction from the Great Depression.

New Home Sales And Change YOY, SA:


(2) Supply, which fails to account for substantial 'shadow' inventory held in foreclosure, dominates demand.

Months Supply And Change YOY:


(3) A supply driven market means real (devaluation adjusted) prices will continue to decline.

Median Home Price to Gold Ratio (MHPGOLDR) And YOY Change:


Headline: Sales of New U.S. Homes Fell More Than Forecast in January

Purchases of new houses in the U.S. fell more than forecast in January, reflecting declines in the West and South that indicate a California tax credit and bad weather may have played a role.

Sales declined 13 percent to a 284,000 annual pace, figures from the Commerce Department showed today in Washington. The median estimate of economists surveyed by Bloomberg News projected a decrease to a 305,000 rate. Demand dropped 37 percent in the West and 13 percent in the South.

Foreclosures will keep depressing prices, making distressed, previously owned properties more attractive to prospective buyers than new houses. Combined with unemployment at 9 percent and tight credit standards, home construction may keep lagging behind the rest of the economy this year.

Source: bloomberg.com