As much as everyone would like this to be the case, it's difficult to accept the word of a Wall Street cheerleader who has so much to gain from the market bouncing back. While there may be a case to be made for housing starts nearing a necessary low which will enable inventory to finally sell, this also misses the point of increasing unemployment and continuing banking problems. There are few who think the banks have bottomed out yet and until they are stabilized, lending will be tight. The bigger problem will be the unemployment numbers that are expected to grow in excess of 9% if not 10%. Sure people need a roof over their heads but people have also been losing everything and many more will be evicted or lose their current homes as the recession gets worse.
Hoping for the best is great, but it still won't replace the real world problems created by the cheerleaders. From CNBC:
Importantly, housing completions fell a record 24.2% to a record low 776k annualized rate, the first reading below 1.0 million since 1982. The is extremely important because until now builders were still completing homes at a pace too strong for current conditions, preventing inventory levels from falling more rapidly than they recently have. Now that fewer homes are hitting the market for sale, the growing U.S. population will have fewer homes to choose from. This will accelerate the recent decline in home inventories. Have no doubt: this is a game changer for inventories and prices.
Doubters on the inventory idea will surely point to the difficulties that prospective homeowners face in obtaining credit to purchase homes. In doing so they will ignore the most important top-down concept, which is to compare the net change in the housing stock to population growth and household formation.
The concept is simple: a basic element of human survival is shelter and the need for shelter increases along with the population. Housing starts have now fallen to levels well below what is needed to support population growth. Whether people can afford to purchase a home or obtain the credit necessary to do so is not as important as the fact that they need shelter and will rent space if necessary. The bottom-line is that empty homes will become occupied one way or another so long as builders under-build relative to population growth.
