The Times They Are A'Tricky

This was supposed to be a post about regional sales and construction trends, but I keep being re-convinced each time I do this that that the regional trends aren’t as useful as you would swear they must be.

And, actually, I think there is a hilarious confluence of tricky data trends because of the upside-down supply constrained context we are living in. I think there is a huge potential opportunity here for builders and for investors. It’s playing out plainly in front of our faces, but common presumptions make it invisible.

Let’s start with the monthly supply of new homes for sale. In every case where it has gotten anywhere close to this high, it has been associated with deep recessions. (To make it even funnier, I actually agree that we are likely to slide into somewhat recessionary conditions.)

The inventory is piling up. Deep discounts are around the corner. So say the permabears.

Figure 1

New construction has been declining for 4 years already, and home prices are even more elevated than they were before 2008. They will have to drop 40% just to get back to normal, it seems.

Figure 2

Let’s get to the funny and potentially lucrative details below the fold.