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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (15933)	6/27/2004 5:27:46 PM
From: CalculatedRisk	Read Replies (1) \| Respond to of 110194

ild, according to that Register article, 372 homes sold in Irvine (zip codes: 92602, 92603, 92604, 92606, 92612, 92614, 92618, 92620) over the last 4 weeks. Using your numbers, that still only gives a ~2.2 month supply of inventory (fairly low). In a slowdown, the supply will probably be 4+ months. Of course, the Months Supply can increase in two ways: more supply and/or less demand. In my community (at the beach), there is an epidemic of "For Sale" signs. I think the high end is already feeling the slow down. It hasn't hit prices yet, but I've seen several signs that say "For Sale or Lease" and "Price Reduced". This feels like the peak of the housing cycle. Even more important, I'm still trying to figure out the impact of a housing slowdown on the overall economy. At best, GDP growth should slow to 2.5% or so. At worst, a housing slowdown will take the economy into recession next year (about 9 months after the peak if it follows previous cycles). Here is the UCLA forecast that is close to my view: U.S. growth strong but housing market at risk-UCLA reuters.com Excerpt: 'Low interest rates have fueled a housing boom, robbing the economy of future home sales and guaranteeing weakness in the housing market in coming years, according to Leamer. The market will further weaken as rates rise and may even collapse, Leamer said. Battered by rising rates, the housing market fell in advance of eight of the 10 economic downturns since World War Two, Leamer said. "When we see the next downturn in this country, it's highly likely it will be on the consumer side, particularly with homes," Leamer said. "The question is will that weakness be strong enough to cause an official recession?"'