Bigbuilder

Calling a Housing Bottom

Look at the "big picture". Residential housing in the US is currently valued at about 22 Trillion. When this aggregate number is placed in comparison with other economic metrics such as GDP, and compared to the historical ratios, one finds that in order to revert to the mean, housing will need to "give up" about 5 to 6 Trillion in value.

This will put us in balance with historical ratios, never mind falling below them.

Housing will not hit bottom until that reversion to the mean takes place. Perhaps inflation will raise other nominal measures to return the balance, but it still is fundamentally true that we have squandered trillions of precious capital by placing it in "non productive" fixed long term investments. (E.g. granite counter tops; media rooms; extra bedrooms and baths, etc.). This capital "investment" will produce negative returns for quite a while (unless cash strapped owners of McMansions start taking in boarders!).

Years of heading in the wrong direction will not change overnight. This is a world calls blunder for the ages! You may die of old age waiting for a bottom in housing.