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Kana -> RE: Purchases of new homes in the U.S. exceeded forecasts (2/24/2012 4:12:53 PM)
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quote:
ORIGINAL: Edwynn
On what basis of future demand are these numbers given? Just as supply never remains constant, neither does demand. Based on the present demand and the concomitant price elasticity of demand, I wouldn't doubt her numbers, as from current market value contemporaneously applied. Predicting future demand is another matter.
Real estate has not always been about simple consideration of whatever measure of 'housing units per population' vs. 'population seeking housing units.' Those formerly seeking better houses in better neighborhoods for purpose of increasing personal wealth have seen demonstrated in most blunt fashion obliteration of the now anachronistic notion that your own house is a good investment. That and the employment and general economic situation are the determiner of housing demand, and that is why it stands where it is at present.
I'm not saying that we might ever recover from our current housing density vs. population density limitation that applies in third world countries, but if that were to be the case I sure as heck wouldn't want to brag about it.
Really, frankly, I have no idea where she got the numbers. What I do know is that:
1-She did long term in depth financial analysis of the US real estate market concentrating more on private dwellings than commercial real estate.
2-She took a macro rather than a micro view of the market so of course some pockets exist.
3-While I don't know the exact numbers I did work enough with her to know the basic format. When doing long term financial analysis folks build mathematical models of varying degrees of complexity. Each of these is going to be worked at least 3 ways-worst case scenario, best case scenario and average outcome. Now, she built models working on at least 5 different spectrum's, factoring in kinda bad, kinda good scenarios as well. Then you punch the whole thing through regression analysis to make sure your coefficients are actually valid. When discussing results generally, the mid range is used.
Thus, her models included population growth, economic growth (Or the lacks thereof) as well as a variety of other scenarios (Fuel prices for instance),then she would extrapolate the results. When she made her "having enough residences for a decade" comment, she was taking the middle of the road.
And she wasn't the only one. I've sat in on conferences with her and folks from the Fed, the Treasury as well as the World Bank and she toed the same line with all of em....to the point of commenting that her while her digits came out with a decade, she personally, and professionally, thought the glut was larger than that due to folks stuck underwater in mortgages they couldn't afford who would be defaulting in the near future.
And not one of the "experts" blinked at her assessment. Most of them, in private, concurred, and more than a few agreed that her numbers were a bit rosy
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