New Homes vs. Used Homes

Aren't we forgetting an important quality of used homes?

I am not an economist, although I did stay at a Holiday Inn Express last night. No, I didn’t. But really, looking at the track record of economists over the past decade or so, I figure I have all the qualifications to be as wrong as they have been.

So let’s go be wrong together on a topic of some interest.

Recently, I saw a perfect example of a debate within the housing analyst camps. It comes from Gordon Johnson, a financial analyst, on Twitter. Thread is here.

Johnson’s main thrust is that homebuilders are a major part of the housing market, and since they are discounting like crazy, buying down rates like mad, and selling houses in this insane market, the homeowners will eventually have to accept reality and start cutting prices as well. That would then result in a collapse in home prices.

He is what one would rightfully call a housing bear, who thinks housing is dramatically overpriced and that we’ll see a major correction soon. #REBubble is a popular hashtag with the bears. On the other side are housing bulls, who think that housing will not collapse because we have decades of underbuilding, a real shortage of supply, and demand keeps skyrocketing. NAR’s Chief Economist, Lawrence Yun, recently stated that the housing recession was over.

As someone who is neither a bear nor a bull… or perhaps more correctly, who is both a bear and a bull, I thought I’d offer my sure-to-be-wrong thoughts.