Any comments on the following article? Namely, the non-italicized part. It’s on a blog for stock traders hence is targeted more for market investing than home buying, imo.
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.
Good points and I don’t disagree with you. At first I was incredulous reading the article but then remembered that what everyone says can’t happen is usually what does. Example: the current bond rally.
Will have to take your word for it that ‘required assumptions needed to predict that housing stocks will rise is that prices will rise’. The article only mentions housing starts possibly starting to rise.
Great observation about the consolidation (sideways movement) in starts since 2008 or so. I notice that in the chart that only occurs at the tops and not the bottom points. Could it be predicting another leg lower instead?
A 15% rise in anything from one year to the next is in most cases considered a lot.
I’m on the sidelines and so not in a hurry. I’m looking forward to see how it all plays out. Are we at the start of another 18 year cycle…
.
