Latest Housing Stats and My Back of the Envelope Number Crunching

The key numbers and what they mean:

  • Foreclosures: 157,000 properties were repossessed during the quarter. That’s about 52,000 per month or an annual rate of about 600,000.
  • New homes starts: 950,000 (annual rate).
  • Add those two numbers together and you get a 1.55 million homes per year coming onto the market (not including non-foreclosure existing home sales).
  • The current annual new home sales rate is 526,000 per year.
  • Putting it together: supply = 1.55 million and demand = 0.526 million.

So supply is about 3x demand. Even Alan Greenspan should know what that means: Something must adjust. That something mostly being price adjusting down. Also starts still need to come down. But foreclosures have probably not yet peaked and will continue to offset declining starts. Lower prices will stimulate demand (eventually). But if people sense prices will be lower tomorrow, they will wait and/or put in low bids to compensate for the risk (that whole “catching a falling knife” thing). Bottom line: Eye of the storm.

Well, that’s the update. Don’t shoot the messenger!

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