Recession ≠ Correction ≠ Crash
In the last 10 years, home builders have been busy.
But, housing supply doesn’t have a cartel like oil suppliers have OPEC.
So, most builders & many city councils got overzealous & overbuilt inventory.
As a result, months of supply from new construction is >400% that of resale units!
So now, builders are stopping new projects while trying to sell off current projects.
Once builders start trimming jobs en masse, construction will see a housing-related recession.
And since construction jobs are a material part of overall jobs, we could a national headline recession as well.
Supply from resales will keep decreasing because 90% of mortgage holders have a <5% mortgage. Most will become a landlord instead of selling their home.
Why? Some cities have massively overbuilt housing inventory.
You can read more here.
3 interventions from the federal government:
- Pare or reduce benchmark rates
- Resume QE of RMBS
- Resume mortgage forbearance
This will protect housing equity by sacrificing debt.
And, then, we’ll see another spike in home prices.
Our belief? Never bet against America.
Note: All statements above are subject to revisions based on changing assumptions and market conditions. Figures could be rounded by +-10% for improving readability. We are neither a tax advisor nor a financial advisor and none of our statements should be interpreted as tax advice or financial advice.