Consider the following charts
This is the first month to month gain we've seen in a long time so it's way too early to call a bottom. But it's a very good sign.
Liveblogging World War II: May 21, 1943
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Here's my obligatory Housing Disaster scenario:
Given yesterday's uptick in new home sales numbers, and given recent increases in new permits and new starts, let's assume that new home sales have at least plateaued. Fine.
Existing homeowners are reluctant to be the first on the block to lower their prices when they have time to sell, so at best, existing prices will lag new home price downward. Fine.
Now, existing homeowners who are forced to sell will feel extreme pressure from both new sales price declines and from the past wave of foreclosure sales prices to lower their asking prices almost to foreclosure price levels. Fine.
However, eventually, ALL existing homesellers will have to match, but slowly, so this gives us a plateau in Existing Sales in a year or two.
THEN... The shadow inventory kicks in!!!
This once again knocks the wind out of the sails of all three categories in this order: Foreclosure Sales, New Sales, and Existing Sales.
That puts my thinking on a three to five year time scale. Will the overall economy be better by then? I think not. I think we are in for a Lost Decade, at best, and a Depression, at worst, with about equal probability in the absence of additional stimulus money.
So here it is: About three years from now we will see the plateau forming now in New Sales collapse because of the Shadow Inventory, and the plateau to form in Existing Sales two years from now collapse about four years from now because of the New Sales Recollapse.
Have a nice day!
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