Housing Huge Obstacle to Economic Recovery

The pollyannas continue to claim there is an economic recovery underway.

Hapless Joe Biden shamelessly tells us how many jobs were saved by the Administration. Apparently he and others of his ilk believe that people are unable to see or think. Certainly that impression is consistent with their desire to run everyone’s lives.

Unfortunately, the mathematics of a recovery don’t hold up. There are numerous instances that contradict the rosy scenario being sold by Washington. A few of these include tax revenues, employment, discouraged workers, retail sales amongst many others.

Housing, arguably the great beneficiary of the credit boom, is another area that points to a long, drawn out economic malaise. Regarding housing, Dhaval Joshi, Chief Strategist at London based hedge fund RAB Capital (and former Societe Generale and J P Morgan Strategist), summarized the problem thusly:

Prices are likely to be weighed down by a massive oversupply of homes relative to underlying demographic demand. Whether you look at the houses to population ratio, the houses to household ratio or vacant houses ratio, the conclusion is the same – there is a 3% surplus of properties, equivalent to 4 million homes. And with household formation running at just 0.9 million while the US is still building 0.6 million new homes annually, only 0.3 million of the oversupply will be absorbed per year (see page 5).

Of course this only describes a part of the problem. To understand why housing is not going to cooperate for several if not many years, read his full and thorough analysis at The Big Picture.

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