Summary
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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.
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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.
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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.
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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.
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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.
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It is just a matter of time before present economic incentives gain the upper hand on consumer doldrums.
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Our degree of confidence that home prices in the United States will stabilize in 2009 is relatively high.
