Mr. Mortgage, welcome to Piggington’s. Thank you for doing all this research and sharing the data with us. While the data does paint a very dire picture, I don’t think you should be using the phrase “4.25 year supply”. The problem is that “supply” has a specific definition. In your analysis, you are changing the definition of the term “supply” from its conventional definition to your own definition. That’s why there’s such a big difference between what the media reports and what you have calculated. So by telling people that there is a “4.25 year supply” of housing, you’re effectively misleading them. People will think you’re talking about the standard definition of “supply” when, in fact, you are not.

I realize that part of your analysis deals with questioning how “supply” should be calculated. Should we include shadow inventory, etc? However, suppose you did come up with an acceptable definition. What would that tell us? By itself, it wouldn’t tell us anything because we have nothing to reference it against. You can’t compare your calculated value of “supply” to the standard value since it would be like comparing apples and oranges. You would need a lot of historical data to calculate historical values of your “supply” in order to draw any real conclusion. If you were to do this and, essentially, create your own metric, its possible that some interesting patterns may emerge. I just wouldn’t call your new metric “supply”.

I think the data you present does say a lot about the market and does point to grim future in real estate. I think this data is extremely valuable for doing forecasts and analysis. In the short term, I would suggest focusing more on this.

If you decide to continue working on creating a new metric and it provides some interesting results, then you should definitely share that as well. I’m sure the piggies would be happy to review it. Right now, I don’t think its ready for mass distribution.