US Association Of Realtors July 2008 Report
US National Association Of Realtors – July 2008 Report
AUGUST 26, 2008
The key point here is that while sale levels have generally risen due to the substantially lower prices in the bubble markets – inventory levels are increasing at a faster rate (now in excess of 11 months supply overall – equilibrium 6 months supply) – due to the large foreclosure volumes.
Unfortunately researchers and media in other countries fail to inform the public of “months of supply” as the Americans do.
The economists and general comments in the Wall Street Journal article below are worth reading closely.
The reality is that if the “bubble markets” (e.g. California, Florida, Nevada etc) were taken out of the equation – the United States would not have a problem of any significance. The 2008 Demographia Survey (data Sept Qtr 2007) illustrates that of the 227 urban markets covered within the 6 Anglo countries – the Median Multiple (median house price divided by gross annual household income – refer Fig 1, Page 11) was US 3.6 times household earnings – Canada 3.1 – Ireland 4.7 – UK 5.6 – Australia 6.3 – New Zealand 6.3.
At its peak – California hit in excess of 9 times earnings. With the collapse of the California bubble – it now seems likely than Sydney and Australia will have the most inflated markets in the 5th Annual Demographia International Housing Affordability Survey – due for release January 2009 (data Sept Qtr 2008).
At or below 3 times annual household income should be considered “real value” – above that “bubble value” or “fake value”.
This would suggest that the US has to work out of the system around the equivalent of 70% of its GDP – the UK and Ireland slightly below double – New Zealand and Australia, slightly above the equivalent of double their GDPs of fake or bubble value.
The greatest advantage the United States has is the diversity of its urban markets – where the soundly governed “discipline” the poorly governed. The rigid “one size fits all” regulatory regimes of the UK, Ireland, Australia and New Zealand have far larger bubbles and greater problems – and will not have the capacity to “self correct’ as quickly as the United States housing markets. An example of a rigid regulatory environment is the “Japanese bubble” which took 16 years (1990 – 2006) to correct.
Real Time Economics : Economists React: Troubling Housing Inventories – Wall Street Journal – Economists and General comments