Last week, new home sales were reported down again. Rather than dwell on these short-term negatives, it is time to look at the long-term implications of how the housing industry has changed. Remember, in spite of the "doom and gloomers", the underlying data is solid. Employment is high, personal income is up 6.1% and the number of people who will need housing is growing.
Once the fear factor declines, the buyers will be there, but they will be in a much different situation.
Most builders have made major staff cuts. People who left the industry won't likely come back and raising capital won't be easy for a while. So when the market wakes up, who will meet the housing demand?
We are seeing declining inventory in existing homes. With a smaller new home industry, a slight pick-up in demand will quickly put pressure on the new home supply. Smart people are realizing that now is the year to buy. Today's home prices are going to look like the bargains of the century in just 2-3 years.
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