Queue the first chart please....
This first chart is always a jaw dropper. This shows new construction nationwide since the 1960s. Following past patterns, we should have entered a housing bust in 2000 but we didn't. Instead, new construction took on a meteoric trajectory which was followed by an absolute collapse. The silver lining is that, after being placed in the iron lung for the past four years, new construction is again showing a pulse and eked just above previous recession lows going back to the beginning of the records. NOTE: It would be curious to see how this chart would look adjusted for population growth.
This next chart brings some more sunshine to the subject. Queue next chart please...
This chart shows the Months Supply of new construction homes. This is important because it illustrates market forces. Since supply and demand dictate prices and new construction activity, low supply means that prices can move upward and more homes can be built. This chart shows that we are on the cusp of entering a period where builders can reasonably start to increase prices and/or the number of homes they build. That is good news for builders.
Our final chart looks at nationwide mortgage applications to purchase homes. Queue chart please...
As you can see, after a significant and persistent decline in mortgage applications, the bottom appears to be in. This portends a consolidation in the market. It may take a year for market psychology to accept the fact that house prices aren't going down any further and that postponing a purchase may cost more as time moves forward. Even the Mortgage Banker's Association is estimating that house prices will appreciate about 3.5% next year.
These measures seem to strongly indicate that we are transitioning, albeit slowly, from a bust phase of the real estate market cycle to a coming boom phase.
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