Housing starts were essentially flat in July. They were down only 1%, after being up 4 months in a row.
But there are good reasons for optimism…here’s the logic:
· New housing construction is down 50% from year-ago levels, and down 75% from peak 2006 levels. This means inventories of unsold homes are a lot lower, bringing supply back into better balance with demand.
· Median home prices are down an average 15% nationwide from last year – and as much as 40–50% in some areas.
· And new homes are getting smaller – also helping prices…and ultimately, sales.
But don’t expect housing to bounce back with a vengeance…the underlying arithmetic of housing has changed:
· The Baby Boom pressures that for years caused housing to be an investment are long gone.
- The number of kids the average family had during the peak of the Baby Boom was 4.
- The number of kids the average family has had since?...2
…or half the level of new demand.
You can take this arithmetic to the bank…along with the new psychology that a home once again is a place to live…not an investment.
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