Jim’s Mailbox

Posted at 12:14 PM (CST) by & filed under Jim's Mailbox.

No Real Estate Rebound Until 2034

While the housing market will see periods and ebb and flow, it won’t rebound until 2034. By then, the Fed paper will be a distant memory of analysis that underestimated supply and credit damage.

Months Months Supply of New One-Family Houses for Sale And Change YOY

Jim Sinclair’s Commentary

This prediction is much too bullish.

Headline: No US home building rebound until 2014 – Fed paper

(Reuters) – U.S. home building likely won’t return to normal levels until 2014, and then only if housing prices rebound and foreclosures drop sharply, research from the San Francisco Federal Reserve Bank showed.

Continued weakness in the housing market is dragging on the U.S. economy, which is losing ground under the weight of 9.2 percent unemployment and declining consumer confidence.

A report on Friday is expected to show the U.S. economy expanded at a 1.8 percent clip in the April-to-June period, below the first quarter’s tepid 1.9 percent rate.

Research released Monday by William Hedberg, a San Francisco Fed research associate, and John Krainer, a senior economist there, indicate the drag from housing is likely to continue for years.

"Our analysis suggests that even an unusually strong period of real house price appreciation would not, on its own, lift starts to long-run average levels," the researchers wrote in the regional Fed bank’s latest Economic Letter. "A significant easing of the drag on housing stemming from the inventory of foreclosed homes is also needed."

Foreclosures would need to drop by 50,000 homes per quarter starting in 2012, the researchers found, and home prices would need to stop falling by 2013 and then begin to rise, for housing starts to return to pre-2004 levels by 2014.

Source: reuters.com