Monday, July 30, 2018

US home prices like to go higher

US residential market has a supply and demand issue says Gary Shilling in a Bloomberg article. He points that construction material costs, construction wages have gone up and investors holding properties longer as signs of supply issues.

"Residential construction is a small but very volatile component of the economy, accounting for 3.9 percent of GDP in the first quarter. Still, it can have oversized effects on overall economic performance due to its volatility. As a share of real GDP, it fell from 6.7 percent in late 2005 to 2.5 percent in early 2011 during the subprime mortgage collapse. That decline of 4.2 percentage points in itself constitutes a major recession."

"Housing activity is likely to recover further, but many of the supply and demand deterrents are unlikely to dissipate soon. As a result, residential construction is likely to be a much more subdued component of the economy for some time."

Monday, July 16, 2018