2012 Housing Recovery

Filed in BP, Debt, economy, Gold Market, inflation, Lear, o by on January 20, 2011 0 Comments

The National Association of Homebuilders Chief Economist David Crowe just forecast 575,000 housing starts for 2011 — a 21% jump over the 475,000 starts of 2010. (Those numbers are based on this delirious idea that the U.S. jobless rate won’t get worse than 9.4% and on job growth of 200,000 jobs a month.) The National Association of Realtors’ chief economist, Lawrence Yun, just forecast 716,000 housing starts this year on sustainable job growth, the increasing population, and continued low interest rates driving construction. That’s great news if the existing supply burned down. Bulldoze the supply, rebuild the homes, and those numbers look great. Fannie Mae believes “home prices probably will start to gain in 2011’s third quarter and rise 0.6 percent for the year, the first annual advance since 2006.” They also expect housing starts to increase 17.3% this year, hitting 710,000. I’ll be sure to heed the well-researched “guess” of Fannie Mae, that respected bastion of real estate know-how. Was there some sort of gas leak? These predictions are the stuff of delirious daydreams. And no one’s buying it— especially not the homebuilders: The NAHB said early Tuesday its confidence index, which measures builder perceptions of current single-family home sales and sales expectations for the next six months, came in flat at a reading of 16 in January, matching expectations according to consensus estimates listed on Briefing.com. Any reading below 50 indicates poor sentiment. The index has not been above 50 since April 2006. The index’s components include current sales conditions, sales expectations and traffic of prospective buyers. The first two components were unchanged in January at readings of 16 and 25, respectively, while traffic of prospective buyers edged up a single point to 12. Lennar Corporation and KB Home don’t see improvement in housing, either — not with the reality of higher unemployment and mounting foreclosures that’ll discourage buyers for months to come. Truth is, w ith a glut of properties still on the market and more Americans heading to the poor house on imbecilic inflationary actions of the Fed, adding more glut to the market and/or assuming that housing prices will appreciate is delusional, plain and simple. I’m also assuming the large backlog of foreclosures along with the backlog of non-distressed properties — held back for an improving market — will only glut the market much longer than any one realizes. Prices only stabilized a bit in 2010 because of the tax incentives and lower interests rates. Demand was simply pulled forward. The decline in housing prices that should have happened in 2010 were pushed to 2011, 2012, and beyond. To sustain home prices, you have to wait until demand meets supply. And builders know this. It’s why they’re not rushing out to build a million and a half homes this week. …

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2012 Housing Recovery

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