mbacapitalist

Financials and Housing: The Outlook Remains Ugly

Some interesting and useful solutions have been presented. Reducing the supply is the only sure way that the housing market will be stabilized. Changing the rules, adding incentives, etc, will not ease the amount of supply that is flooding the market. The builders are somewhat growing a brain in this area. They've sort of slowed down production of new constructs pending the approval of the financing. If the current president can get it right by commenting that if you build too much, you'll have an excess supply (obviously not in such sofisticated words), I'm sure the issuers of housing permits and builders can slow down the dumping of new supply on the market. There's just too much housing available out there.

The DC metro market is a great example. The builders continued to flood the market with excess inventory over the past several years, even post-2005 which is when the market started to dramatically cool in this area. As a result, builders have given out massive incentives, propelled the rapid cooling of housing prices, and still continue to deliver more homes. Until these units are absorbed, home prices will not even begin to stabalize. I do not see the number of people (absorbers) moving into this area exeeding the number of available housing units; its more likely the other way around. The DC market is certainly a buyers market, and if I were a buyer in this area, I would take my time.