Toronado, I am a homebuilder, before and after the meltdown the ratio has not really changed on specs (inventory homes), it is a basic rule and today it is incredibly hard for someone to get a line for several reasons...
The housing cycle is long, meaning from land acquisition to final product, for example, we had projects in California that took 7 years to get through lot development alone. I will not get to detailed here, but it constantly changes and when the bottom falls out it takes even the best with it...
The Housing Industry has an enormous impact on our economic well being, and to stay on topic but go in a different direction, a properly regulated Fannie and Freddie must survive, we will all suffer much worse than our current plight without them...
Interesting point on the cycle GVW.
The fast growing areas around St Louis really SEEM to have fewer new Subdivisions popping up. So I ASSUME there are fewer homes being built....
Is there a math trick I am missing in how inventory is calculated? 13 inventory homes in 2012 are going to take 6 months to sell... 13 inventory homes in 2003 might have taken a month to sell?
So you try to stay xx homes ahead of the curve no matter how long it takes them to sell type of a thing?
Forgive my lack of use of the proper terms. I am not in the industry.
We live in the #1 new home market in Houston, our peak was 54,000 starts in '07, we are down to roughly 16,000 now and still ranked #1, so you can imagine what happened to lesser markets, devastation...
With the downfall came large amounts of inventory of homes and lots that get dumped, hence some price correction...
I have changed my mind about the banking bailout, we would be in a more depressed economy had they been allowed to fail, GM & Chrysler are a different story...
A healthy inventory level is 30 to 35%, and yes your analogy about '03 & '12 are close, in today's market 1.5 closing a month per community is doing good...
Prior to the free mortgage money of 1996 from Clinton & FHA DPA and the stretching of CRA, you would rate a solid community with 40+ closings, after '97 the rules changed, the housing market was beginning to walk again, by '99 it was jogging and during the dot com meltdown the moderate to low income housing was starting to really run. From '04 to '06 model home parks grew 72% in the Houston market alone, by this time the free money had morphed to were a 560 FICO could get a stated Zero down, seller paid closing cost (all rolled into the price) no escrow loan with only $500 in the game, talk about a perfect storm...
Yes, you have to have lots and homes on the ground, imagine going to buy a car and all they had were pictures to show, limited success...
So when Washington points at Wall Street and Wall Street points at Washington, they are both to blame, Franklin Raines should have been put in jail IMO, Frank & Dodds as well...