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Weekly Economic Letter

Home prices in United States expected to stabilize in 2009

Tue, Feb 17 2009, 06:05 GMT
by Economic and Strategy Team

National Bank of Canada  |  View company's profile


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Summary

  • The tide is turning. Relative to the median household income, the median price of existing homes has now fallen back to its long-term equilibrium level.

  • What’s more, home and condo inventories have decreased by about one million units since peaking. By and large, about another million need to be sold before returning to a balanced market.

  • As it happens, job losses in the economy do not translate automatically into new home listings and, historically, lower mortgage rates have been the best tonic for home sales.

  • In times of recession, home sales bottom out long before employment does. By the time employment hits its trough, home sales have normally bounced back already by nearly 10% on average.

  • At present, there are 10 million renter households in the United States that could potentially become homeowners. If only 5% of these decide to buy a home, it would represent exactly one full year’s supply of housing starts at their current rate.

  • It is just a matter of time before present economic incentives gain the upper hand on consumer doldrums.

  • Our degree of confidence that home prices in the United States will stabilize in 2009 is relatively high.

Published on  Tue, Feb 17 2009, 06:07 GMT


National Bank of Canada http://www.nbc.ca/ | info@nbc.ca

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Legal disclaimer and risk disclosure

This presentation may contain certain forward-looking statements about the 2009 Economic and Financial Outlook. Such statements are subject to risk and uncertainties. Actual results may differ materially due to a variety of factors, including legislative or regulatory developments, competition, technological change and economic conditions in Canada, North America or internationally. These and other factors should be considered carefully and readers should not rely unduly on National Bank of Canada’s forward-looking statements. This presentation may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express consent of National Bank.
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