My long-form take on housing sales, updated with yesterday morning’s housing permits and starts report, is up at Seeking Alpha.
Like my Weekly Indicators posts, I make a penny or two when you decide to read. So decide to read!
Also worth mentioning: my overall view of housing differs somewhat from that of Bill McBride a/k/a Calculated Risk. Like Bill, I don’t think housing has already peaked. But unlike Bill, I see inventory as the tail, rather than the (a?) head. “Months’ inventory” typically turns up precisely because sales turn down, so doesn’t give me any new information. Also, Bill is really focused on the demographic tailwind, and on “pent-up demand.” I’m not sure about the latter, since the bubble years where 2+ million units were added a year, coincided with the demographic *nadir,* i.e., there was a lot of excess housing to be absorbed. As to the former, high enough interest rates and prices will be enough to overcome it. I don’t think we’re quite there – yet.
Prime housing years, especially with the modern “grow up later” economy, is more like the 40’s. So that means we are a decade away from the demographic headwinds McBride thinks is great, from really impacting anything.
The truth is, housing prices are as high as they got in the 80’s. They need to decline and go down to help future buying. That is exactly what the market is trying to do. Corporate bond markets won’t allow anymore borrowing for buybacks either, which should also cool economies in these “frothy” regions in 2019. Allen Greenspan who is still kicking, finally got his “froth”.
Have you taken the changing the changing graphics into account?
Back in the 1970s the baby boomers entering the prime house buying years ensured that the demand for over 2,000 annual housing starts was justified. But now the adult population is not growing fast enough to justify 2,000 annual housing starts — maybe something more like 1,200 to 1,500 starts. So the recent level of housing activity is the new, new.