Little New Housing Available in the U.S.

According to the gloomy financial news stories out today (for instance New Home Sales Drop to Record Low at CNN) the annually adjusted rate of new home sales in July 2010 was only 276,000, relaying data from the Commerce Department new housing report. (If not seasonally adjusted, that is 23,000 homes sold per month)

The sky is falling. Or maybe it isn't. The inventory of new homes was 210,000 or so at the end of July. This is in contrast to the vast inventory of used homes for sale.

Suppose that for, whatever reason, the U.S. economy begins to normalise this fall. That would return the annual new home sales rate to about 600,000.

Which means all of the current inventory would disappear at a rate of 50,000 homes per month, less however many homes per month could be built.

Another way to think about it is in terms of new homes per population unit. Divide the nation into 100 markets of 3 million persons per market. Divide the inventory into 100 parts. You end up with 2,100 new homes available for every 3 million people. Or 2.1 homes per 3000 people. Or 0.7 homes per 1000 people.

Sure, we could slide back into recession. But counting all the downside risks without looking at the upside risks is as foolish as investing by looking at only the upside.

Even the used housing inventory, as vast as it looks at the moment, would not amount to much if the economy started reviving.


In June many American business executives caught the I Don't Do Greek panic and paused in hiring and other expansion plans for July. But in talking with a variety of CEOs, or hearing them on analyst conference calls, most saw little impact on their actual sales in Europe. A couple said they did well in Germany, which turned out to predict the recent Good German economic statistics.


Panic, or even lack of confidence, can cause or exacerbate a recession. Good leaders don't panic, because it leads to poor long-term decision making. Predicting whether business leaders as a whole will panic is not easy art. A good assumption is that there are both downside risks and upside opportunities in the situation.

August numbers will be skewed by vacations. Watch the September numbers closely. If consumer demand and industrial production start rising again in the U.S., you won't have long to buy up stocks at low prices or scarce assets like cheap, newly built houses.