Correction, Crash, and Recession

Jan 18 | 2 minutes read
Correction, Crash, and Recession


Home builders have been very active during the past ten years.

new home contruction


While oil providers have OPEC, the housing supply does not have a similar cartel.

Therefore, most builders and many city councils became overly enthusiastic and overbuilt inventory.

As a result, the months of supply from new buildings is greater than 400% that of resale apartments!

new home months of supply MoS


As a result, builders are currently halting new projects and marketing their ongoing ones.

home builder sentiment has crashed


A housing-related recession will hit construction if builders commence widespread layoffs.

Additionally, a national headline recession may occur since a significant portion of all jobs are in the construction industry.

BUT as of now, we anticipate:

12% Increase in 2022

4.2% increase in 2023

US home price growth


4 factors that will keep property prices rising

home price 1920-2022 & 2022-25 forecast


Significantly insufficient supply

there just aren't enough homes available for sale


Supply is dropping

most for-sale supply comes from resales not new homes


Because 90% of homeowners already have a mortgage, the supply from resales will continue to fall. Instead of selling, most people will choose to become landlords.


Strong unmet demand

lots of room for homeownership & home price to grow


Reluctant lending

delinquency risk is low. the RMBS portfolio is pristine


There's no denying the evidence.

homes are still getting sold in 21 days



home purchase volume is still near 15-year highs


However, there are some cities that are particularly vulnerable.

Up to 10% can be off in some cases. Then they'll get right back up again.

Very few will have a 20% decline (excluding seasonality).

Why? Inventories of homes in several cities are seriously swollen.

In the event of an accident...


Three federal interventions will cause the Fed to change course

  • Cut or lower the rates used as a reference
  • Revive RMBS QE
  • Get back into mortgage forbearance


Saving home equity by settling debt is a win-win. And then housing prices will increase again.

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