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Monday, October 17, 2022

Some "Good News" for Homebuilders

by Calculated Risk on 10/17/2022 11:49:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Some "Good News" for Homebuilders


Yesterday, in Monthly Mortgage Payments Up Record Year-over-year, I mentioned some “good news” for homebuilders:
Even though we can expect significant further declines in new home sales and single-family housing starts, the good news for the homebuilders is activity usually picks up quickly following an interest rate induced slowdown (as opposed to following the housing bust when the recovery took many years).
New Home Sales Three Housing BustsHere is a graph to illustrate this point. The following graph shows new home sales for three periods: 1978-1982, 2005-2020, and current (red). The prior peak in sales is set to 100.

When the Fed took their foot off the brake in 1982, new home sales recovered fairly quickly (blue). The same is true for the 1989 -1991 bust (not shown).

However, following the housing bubble, new home sales languished for several years - well after the Fed reduced the Fed Funds rate to zero - due to all the distressed sales on the housing market.
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