wall street nuggets » Are we at the bottom in housing?

Are we at the bottom in housing?

When this question is asked, I recall a mountain climbing experience about 35 years ago at Mt. Tahquitz, just east of Los Angeles, when my partner and I got disoriented on a very cold and rainy day and found ourselves in the dark and fog after descending as many pitches of rope as we had climbed, and naturally were assuming we must be back at the bottom. Prudence dictated that we just toss a stone to make sure we were at the bottom. There was a sensation of utter panic in the pit of my stomach, as several seconds passed before we heard the clunk of the stone landing far below.

So has the housing market really hit bottom? We really can’t toss a stone over the edge, but looking at some graphs should give us some confidence. Let’s look at the past 30 years or so of history for housing starts.

Under the assumption that housing does tend to need replacement after some period of time and that demographics does not suggest any dramatic drop in demand over the next few years, it would seem that housing starts have fallen considerably more than they rose over that past 18 years or so, and that we should be rebounding soon to an equilibrium level around 1.2 million units per year.
Permits and new home sales for about the past 40 years tell a similar story.

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