Why is investment news still surprised of housing glut

OK, so I'm watching the business news this morning and the story is that the markets are reacting badly to the housing market, that there's no recovery in sight, and other such blah...

"Old story" we should be thinking. That'd be like me reacting negatively to news that I'm fat.

We've talked about the housing glut, falling sales, and inflated home prices. Sure there are pockets where it's better, but at the macro level we have too many empty homes sitting out there (they're still building more), priced too high, and there aren't as many buyers as there used to be. It's ugly and it's going to stay ugly.

Here's a story from the Businomics blog that covers the housing glut pretty well. He calculates that at current construction and purchasing rates it'll take almost 5 years to work off the surplus.

Now we can quit being surprised when the housing market doesn't turn around any time soon.

No bailout

I like this comment from Warren Buffett on a potential bailout of the many troubled lenders.

"If lenders lent money that they are not going to get paid back, that's their problem, frankly"

Here's the commentary from seekingalpha.com

Housing Stats

Here's a link to some housing stats.

In the first graph look at all the Adj.Rate Mortgages yet to reset to their new rates - we're not yet to the peak... In the second graph: the time to completion of a sale of residential property (6mo) is at it's highest level since 1994... Unsold inventory has doubled in a little over 3 years... and nationwide home prices are declining.

If I was shopping for a house (not that I am, but thinking out loud) I'd be thinking there might be some steals a couple years out.

Too many houses, not enough people

Check out another of Bill Connerly's excellent posts on the housing glut.

Obviously housing markets are local, and these are nationwide stats, so some markets will be less impacted than others, but as an asset class housing seems in a huge bubble right now.

I don't particularly want to be a renter, but the case for expecting appreciation in home prices right now is not strong.

Keep homebuilders on the back-burner

Bill Conerly's Businomics Blog does an excellent job of tracking developments in the home building sector. Based on his arguments there's no reason to expect any improvement in the home building sector for years to come. In his most recent post he discusses why he thinks it could easily take 3 years for the excess inventory to be worked out of the system.

Bill's post from January presents a graph back through the 1970s that does an excellent job of showing the long run "normal" level of home inventory vs. the unprecendented levels we have to work through currently.

As an investment it was fun to watch the homebuilder stocks multiply many times, but my take on this is don't be in a hurry to jump in as the homebuilder stocks have fallen back to earth. It could be a long wait for a rebound.