Inventory levels will not rise in perpetuity. Nor will prices or credit expansions, unless incomes do the same.
That being said, inventory levels are still at historical highs.
There are so many variables to the housing market:
SUPPLY:
-distressed vs. non-distressed inventory levels
-building (still going on) vs. obsolete/uninhabitable
homes
-bailouts vs. foreclosures
-on the market vs. pent-up/hidden inventory
(I’m seeing more and more empty houses with no
activity.)
-types of new units vs. tear-downs (multi-family
and SFH)
DEMAND:
-credit expansion vs. credit contraction
-wage growth vs. wage declines
-wealth gains vs. losses
-population growth vs. population decline
(also shift in demographics…new residents rich
or poor? those leaving are rich or poor?)
-family formation/living arrangements
(living arrangements becoming more crowded, or
spreading out?)
-falling dollar vs. strengthening dollar
-age demograhics: is a majority of the population
moving into their buying years, or selling years?
I know there’s still a lot missing from the above, but it’s just too difficult to determine exactly what prices will do in the future.
Personally, I think prices will decline to pre-2001 levels if there is only a mild recession. If the recession gets severe or becomes a depression, all bets are off. We could (possible, not likely) see the credit expansion return to 1982 levels, IMHO.
