Wow, CR. For a data junkie, it's like mainlining the pure stuff . . .

Wonderful.

Yea I've dug in to BLS data and it isn't pretty, but looks like 4 months inventory is as close to "0" as builders get as inventory includes homes under construction and, this is the good one... lots ready for construction.

But not including condos probably sounded like a good idea 40 years ago... the guy who made that decision probably now lives in the "its not my problem" retirement condo project.

Anyway, looks like a long way left to go down in starts now that public builder's bankers have figured out that a start=cash to builder and they had to stop the incentives.

Great analysis (as always).

But I think the way the mortgage market looks like it's just breaking up makes me think this situation is going to be really hard to parse.

If there's a real panic and people start walking away from homes en masse (as Jim Cramer seems to be advising) I think we could have an unprecedented crisis. And as happened in 1929, it seems that other speculative markets are drawing liquidity from markets that really need it - the Fed needs to cut rates to help housing, but he's up against the wall by the threat of rampant speculation in stocks, currencies, genetically modified pets, etc.

The stock market seems to be turning into something resembling a "credit vortex" as it did back then.

During the NASDAQ bubble the bears were overly optimistic predicting 60%-70% declines. We got 80%-90% declines in Internet and Telcom stocks, and the overall NASDAQ came close to that too (78%?).

So mabye Jim "Super-Bear" Cramer is right when he says the bears are way too optimistic this time around.

I worry that the market could just seize up and cause a real panic.

I may need to reinforce my bunker or build one much deeper.

BTW, tragic story in my neck of the woods.

They tried to rehabilitate a certain area that had degenerated but was once prime beach front property. The did a great job - got rid of all the strip joints and run down apartments and replaced them with really really nice condos and houses. They built tons and tons and tons of them over the past several years.

It's a new beautiful beach front community. Except only a few of the houses are sold. As far as I can tell over HALF the properties there are for sale or rent and nothing has moved since spring of last year. Residents are desperate watching their property values plummet.

But worst of all, crime is beginning to rise rapidly in the area. There's been more thefts and murders. Untended houses and streets are beginning to visibly deteriorate. The place is getting a very bad reputation, suddenly, due to the reports of increasing crime.

It looks like a downward spiral.

It's a terrible shame because it has the potential to be a great community.

But there's nobody to live there.

Another tragedy of easy money driven overproduction.

And this is before any of this recent mortgage turmoil or the advent of a local recession.

CR, what a great job!!! The graph of months of supply against inventory ALONE shows what a historical oddity this is. (If anyone wants to go back and take a second look, the surge in inventory over months of supply in the late 70's presaged the big spike in months of supply in the early 80's, and the average inventory running above months of supply in the mid-late 80's presaged the escalation of months of supply in the early 90's.)

My thumbnail estimate was that if we want to make meaningful progress at reducing inventory the rate of starts needs to go close to 900,000 for a couple of years. The situation is complicated by would-be retirees wanting to move to other locations, but it seems to me that many of those locations have been overbuilt already.

I really worry about what will happen in some areas with a big bulge of close-to-retirement folks seeking to move.

AC,

May I ask where you are talking about?

Eh... I like to retain a bit of anonymity on the Internets (in part so nobody can determine what I'm making up or not). But I'll say it's some place on the Atlantic ocean coast that was once a beach front resort area, that deteriorated dramatically in the past few decades.

Now they've rebuilt much of it very nicely, but there's no residents to support it.

I overdramatize things a bit, but my description isn't too far from the truth.

If you're that interested and have a site of your own, I could send you a link to a local news story.

You really have to drive around the area to really appreciate the magnitude of the problem though. The number of "For Sale" signs is simply unbelievable and they never get taken down.

It's worse than anything that I remember seeing during the Houston real-estate bust in the early 80s, but I paid less attention to these things back then.

It's worse than anything that I remember seeing during the Houston real-estate bust in the early 80s

Wow then it must really be ugly because I lived and lost in Houston then ( my 1st house )

In addition, like somebody had written in an earlier thread, there's plenty of 2nd homeowners in Miami from S. Amerca who looked at it as a "safe investment" free of political risk.

OOPS!!!

On its way down to 1,1 million units, it WILL/MAY occur that commertial construction starts begin to fall. Then, we would see what happens with the construction employment conundrum.

"How does the idea that builders have to build on the land they've acquired in order to stay afloat come into this?"

Good question Mr/Mrs ams.