BusinessWeek interviewed two analysts from Standard & Poors regarding the U.S. home builders. While this takes a financial angle in terms of stock price and bond quality, it’s still helpful in getting a sense where we are in the overall cycle.
A couple of key items from the article:
- Single family home starts expected to end the year around 600,000 homes – that’s at 1/3rd the level from the peak in 2005 at 1.7 million homes
- they expect prices to lag and continue to decline for the next year
- Overall supply of homes for sale is 11 months – historically that has been around 6 months
- There remains a shadow inventory of homes to be sold – these are sellers who are not yet on the market because it remains so difficult to sell. As soon as it looks like the market is turning, they expect many more sellers to jump in slowing down the recovery
I would also say there is a massive shadow inventory all over the country and certainly in the Twin Cities and that is in the new developments where the lots have been fully developed, but the builders have not yet put up a house. It’s not listed on the MLS yet. There are literally tens of thousands of these empty, developed lots quietly for sale.