Stressing out over recent real estate selling trends pointing to a housing recession on the horizon? Not everyone is on board with that assessment, including Forbes article contributor Lawrence Yun. Despite existing home sales falling 2%, falling nearly every month of 2018, and a 12% decline in housing starts (typically an indicator of a recession), Yun does not see the possibility of a downturn on the horizon.
A Difference of Opinion
Yun sees incorrect conclusions being drawn from these statistics. He notes that rather than a demand shortage, as seen at the depths of the 2008 housing recession in which an oversupply of 12 months of inventory was on the market, today it’s quite the opposite.
Real estate selling trends showcase a shortage of inventory. It would take just 4.3 months to exhaust current supplies, as compared to a balanced market of 6-7-months of inventory. Homes continue to be pocketed at a swift pace, spending very little time on the market (about 26-days in June).
Bidding wars are still alive and well. Demand is there. Supply is not. ‘A problem much better to have,’ denotes Yun, who believes muted growth points to neither a price decline nor a looming foreclosure crisis.
Making Sense of Muted Growth
So what does he believe 2018’s muted growth points to? The affordability crisis. As a lack of inventory drives prices up, especially in hot markets, buyers are increasingly being priced out of home ownership. Until more homes are built to meet entry-level housing needs, prices will continue to climb.
The 1.3 million housing starts projected in 2019 will be insufficient to moderate prices and support sales. Skilled labor shortages, tariffs, crippling impact fees, and laborious permitting processes don’t help. Yun sees this as a far cry from the overbuilding and overzealous lending practices pre-bubble.
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