DCM

Get Ready to Short Homebuilders

I wish someone could explain to me where the buyers are going to come from to buy this historically high excess inventory. The housing bubble was created because people who previously could not qualify for a mortgage (poor credit, insufficient income, no down payment) were financed with sub-prime mortgages. Assuming that millions of people will not be back in the market or will now be unable to qualify for a mortgage, where exactly are these buyers going to come from?

The reason we have an historically high inventory is because there are fewer qualified buyers. Most potential buyers are not waiting on the sidelines for prices to fall further (i.e become more affordable.) Most are not buying because they cannot sell the homes they live in now! It is going to take an unprecedented number of qualified first-time home buyers to soak up the current excess inventory of homes. Given the new (old) lending standards, it does not seem likely that this is going to happen anytime soon. This is one time I hope I am mistaken and am missing something here.