The New Housing Economy
Our friend, Steve Johnson, of the self-described "real estate think tank" (RETT), gives us an idea of the fascinating new concepts they've discovered down there. "The resale market is the most significant driver of the new housing economy, due to the trillions of dollars of equity relative to debt."
"'Conservative lending practices and a universal merchant marketing/retail approach to new home production drastically limits speculative building in this region,' Johnson said."
He fails to mention that the trillions in equity can go away, while the trillions in 'conservative' debt will not. And it's the speculative buying that's the problem.
The article does have a couple of surprises for the market. "Southern California housing starts were off 6 percent in the first quarter compared to 2004, but the area remained on pace to build 68,229 units this year."
This is puzzling as well. "Year-over-year job gains at the end of March totaled 111,500...Inventory levels remain undersupplied relative to the half a million people a year by which the metropolitan area is growing." See the value of a RETT? They invent a new economy so those newcomers without jobs will have something to do!