Wednesday, November 17, 2010


Housing woes are starting to come back into the forefront as several reports in recent weeks have shown a sharp decline in US real estate prices.? Unfortunately, the problems are severe and likely to persist.? As I’ve regularly argued in recent years the current housing issue remains an econ 101 story – supply and demand.? The current supply is simply too enormous for the market to overcome.? In today’s chart of the day Bloomberg highlighted just how enormous this supply overhang is:

“So many U.S. homes are unoccupied these days that demand may not catch up with the supply until 2014, according to Josh Levin, an analyst at Citigroup Inc.

The CHART OF THE DAY displays the percentage of housing units that are vacant, according to quarterly data compiled by the Commerce Department. The chart also shows housing starts as a percentage of homes already built, or the housing stock.”

“Last quarter’s vacancy rate was 10.96 percent, near a peak of 11.05 percent in the second quarter. These figures are based on the number of homes for sale and apartments for rent that are designed for year-round occupancy, and include mobile homes.

About 2.1 million homes now available aren’t needed, Levin wrote in a report yesterday. The estimate is based on the overall rate, along with separate figures for houses and apartments.

“It will take three to four years to work off the excess supply and reach equilibrium,” he wrote. This means housing starts are unlikely to follow “a V-shaped recovery pattern” after plunging in the past few years, the report said.”

Source: Bloomberg


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