Housing Employment

Housing EmploymentNow, the first thing people will say as they read this is, “shadow inventory”. So let’s address it before we continue. “Shadow inventory” would be the number of homes, not for sale but currently in some state of foreclosure or already foreclosed on and owned by the banks (REO). As of Oct. 2011, that number stood at 1.6M homes. Now, before we get all excited, we should note that at the peak of the housing bubble, that number was 380K. So, this isn’t a case where we need to eliminate the shadow inventory but rather reduce it. To what level? Well, that depends on the number of monthly sales were are seeing.

There lies some good news as existing sales are at their highest levels since the crash giving way to the accelerating of the inventory decline we are seeing. Couple this with employment trends that are steadily increasing and we should see this trend continue.

So, yes, the shadow inventory is a concern but not nearly as large a one (and dwindling) as in 2009 when we had 12mos supply and >2m homes in shadow inventory.

The bottom line here is that we can expect more employment in the housing sector…..

“Davidson” submits:

Residential Construction Employment which has been one of the laggards in the economic recovery is turning higher. It is closely tied to the Monthly Supply of Homes for Sale as shown in the chart below. Employment peaks when monthly supply rises above 7mos and rises when monthly supply falls below 6mos.

Monthly supply is currently at 5.6mos and falling sharply. Good news for employment.



About the Author

valueplays
Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.