Saturday, June 05, 2010

Fannie Mae's Duncan: Home-building industry to be tested until early 2013

by Bill McBride on 6/05/2010 05:46:00 PM

Some comments from Fannie Mae chief economist Douglas Duncan ...

From Greta Guest at Freep.com:

Douglas Duncan, chief economist for Fannie Mae, said he expects the home-building industry to be tested until early 2013 before demand will catch up with the large supply of houses on the market.

He said the combination of current inventory of unsold homes plus the foreclosures not yet for sale has elevated supply by roughly 2 million houses over normal levels.

He said that housing starts would be below normal levels until that inventory is absorbed.
And from Elizabeth Razzi at the WaPo: Is bulldozer the best option for some boom-time housing?
Said Duncan: "Some of that shadow investment could have to be torn down. It was not economically viable when it was put in place." ... Duncan said people could find that the cost of sustaining their lifestyle in some developments--including high transportation costs to far-away jobs--is greater than the cost of the home. That would wipe out demand.
...
The idea is being discussed by economists, but Duncan said he doesn't know of any policymakers who are considering it. "It's un-American to think about tearing down housing," he said. "But we have a long history of ghost towns."
And I posted this comment yesterday via Kathleen Howley and Daniel Taub at Bloomberg: Fannie Mae’s Duncan Says Homebuyer Tax Credit Shifted Demand
“Temporary tax credits change behavior temporarily. It’s simply shifted demand forward. ... It actually created some price appreciation that’s not supportable long term.” [said Douglas Duncan, Fannie Mae chief economist]