Housing Recession = Loss in Construction Jobs
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.
Currently, we project:
12% Appreciation in 2022
4.2% Appreciation in 2023
4 reasons why home prices will keep growing
1. Massive undersupply
2. Decreasing supply
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.
3. High residual demand
4. Conservative lending
The evidence is clear
But, some cities are at a high risk
Some might correct by 5-10%. Then, they’ll quickly bounce back.
Almost none will crash by 20% (excluding seasonality).
Why? Some cities have massively overbuilt housing inventory.
You can read more here.
*IF* there’s a crash…
The Fed will reverse course
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.
What do you think?
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.