by Calculated Risk on 6/23/2007 04:32:00 PM
Saturday, June 23, 2007
Housing: Total Inventory
Floyd Norris at the NY Times writes: Homes Sell. Homes Don’t Sell. Builders Still Build.
And here are the charts from the NY Times story.
THE American housing market, as measured by home-building activity, is falling at the most rapid rate in decades ... [and] the weakness will last while builders seek to sell homes they have already built.However, it isn't just the inventory of new homes for sale that will impact the homebuilders. Existing homes are a competing product for new homes, and the record inventory of existing homes for sale will also pressure home-building activity.
It is unlikely that home starts will turn up significantly until that inventory is significantly reduced.

This graph shows the year end inventory levels, since 1982, for new and existing homes. (2007 numbers are for April).
The second graph shows annual starts vs. total housing inventory (new and existing homes).
Look at the previous housing bust in the early '90s. Starts picked up as inventory fell in '92, and starts continued to increase in '93 and '94 as total inventory fell further.

More data will be available this week, as the existing and new home sales reports for May will be released on Monday and Tuesday, respectively.