Housing starts have been at or near record lows for the last 4 years. Inventory is now falling, but that all by itself is not predictive of rising prices. (There’s plenty of over-hang in the market. Exactly how much, I don’t think anyone knows.) One of the required assumptions needed to predict that housing stocks will rise is that prices will rise based on increased demand. They simply can’t make much money in most markets at current prices (including carrying costs). In order to assume rising prices, you must also assume that there is a need for more homes. Builders don’t think so today. Their expectations for new starts in 2012 will not exceed 2011 by more than 15%. That will keep starts at a level only seen at the troughs of recessions over the last 50 years. I doubt we’ll see 900,000 units before 2015.
Some big builders will make money. Some won’t. It’s far from a sure bet.
