{"id":2995,"date":"2011-01-18T08:47:34","date_gmt":"2011-01-18T15:47:34","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=2995"},"modified":"2018-08-15T20:45:01","modified_gmt":"2018-08-16T00:45:01","slug":"dead-bodies-lie-on-the-housing-market-fields","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2011\/01\/18\/dead-bodies-lie-on-the-housing-market-fields\/","title":{"rendered":"Dead bodies lie on the housing market fields"},"content":{"rendered":"

This morning the National Association of Home Builders announced that its housing market index was 16 for the month of January.\u00a0 That is the third consecutive month of a reading of 16.\u00a0 But what does this mean?<\/span><\/p>\n

 <\/p>\n

Analysis:<\/strong> The index is essentially a measure of the confidence of home builders as regards the housing market.\u00a0 A value over 50 means that a majority of the NAHB’s members feel good about the housing market.\u00a0 So a reading of 16 is an indication of grim prospects for the housing industry.\u00a0 It has been almost five years since this index had a value over 50, and I’m afraid it will be another 18-24 months before it exceeds that level.\u00a0 Why?<\/span><\/p>\n

 <\/p>\n

My reasoning is that there is still massive housing inventory in the United States.\u00a0 That is, houses that are on the market for sale.\u00a0 These homes are composed of:<\/span><\/p>\n

 <\/p>\n

1.\u00a0 The normal number of homes for sale.\u00a0 These are the homes of folks who are moving some place else.\u00a0 This could be because they want to upgrade their current house, downgrade their current house, move to a different neighborhood, or are relocating.<\/span><\/p>\n

 <\/p>\n

2.\u00a0 Foreclosures.\u00a0 This is inventory arising from the unfortunate situation in which people couldn’t or wouldn’t pay their mortgage and so have lost their house.\u00a0 The number of these houses is still growing.<\/span><\/p>\n

 <\/p>\n

3.\u00a0 Unsold inventory from the bubble.\u00a0 Many home builders built speculative houses during the boom years.\u00a0 These were houses that they built in anticipation of finding a buyer.\u00a0 At the time this strategy made sense because builders were having a hard time keeping up with demand.\u00a0 Again, unfortunately, there are huge numbers of these unsold houses awaiting a buyer.<\/span><\/p>\n

 <\/p>\n

4.\u00a0 Second and third homes for sale.\u00a0 Folks with slightly fatter check books often bought second or third homes during the massive real estate bubble.\u00a0 Now they either can no longer afford them, or want not to have them.\u00a0 Either way, there are large numbers of these houses still hanging around in inventory, too.<\/span><\/p>\n

 <\/p>\n

So we are in an economics 101 scenario here.\u00a0 What happens when there is way too much supply of a good relative to its demand?\u00a0 Prices fall.\u00a0 In other words, there are lots of dead bodies lying on the housing market battle fields.\u00a0 It is going to take a long time to clear the bodies.<\/span><\/p>\n

 <\/p>\n

Importance grade:<\/strong> 6; many economic participants have adjusted to the new reality: housing is not nearly as important to the economy as it was 5 years ago.\u00a0 That means that the carnage in the housing market has already been absorbed by most businesses and individuals.\u00a0 So the importance of the news about the NAHB index is much less severe than it would have been in the past.<\/span><\/p>\n

 <\/p>\n

Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

This morning the National Association of Home Builders announced that its housing market index was 16 for the month of January.\u00a0 That is the third consecutive month of a reading of 16.\u00a0 But what does this mean?   Analysis: The index is essentially a measure of the confidence of home builders as regards the housing […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-2995","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2995","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=2995"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2995\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=2995"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=2995"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=2995"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}