The housing situation is going from bad to worse
Second, the housing situation is going from bad to worse and you can forget about a recovery until next year. The starkest piece of information last week was the news that the national unsold existing inventory of single-family homes and condos surged at an astounding 82% annual rate so far this year. We still can’t wrap that number around our head. The overhang is now up to an 8.9 months’ supply, which is the highest inventory-to-sales ratio in 15 years. By way of
comparison, the months’ supply of inventory was 6.4 a year ago and 4.3 two years ago. The massive excess supply we have on our hands today is simply going to reinforce the deflationary state in the housing market, at a time when home prices on average have already declined at an annual rate of 5% in the past six months, the biggest drop we’ve seen since the summer of 1991, and fully three quarters of the country is now deflating (outside of Manhattan, that is). Clearing out the excess inventory is going to mean at least another 10% downside in average home prices, in our view, which is just going to reinforce the weak performance we’re seeing in the homebuilders, financials and consumer discretionary space.
