NAHB has a New Concern: A Lack of Inventory

The supply of ready-to-occupy new houses has fallen to a point where the lack of inventory "could become a problem in certain markets and certain prices ranges," the chief economist for the National Association of Home Builders warned in Las Vegas at the group's annual convention. While there's still a six-month supply of houses sitting on builders' shelves, David Crowe said the actual number of new units that are finished and waiting for buyers is at the lowest level since 1971. That point was part of a rather upbeat forecast by the housing economist, who told the meeting that "we are starting to see some improvements" in the housing landscape. Mr. Crowe's annual outlook wasn't without some negatives, or, as he called it, "not so good news." But he pointed out that the recession is over, inflation is in check, mortgage rates will remain under 6% through the rest of the year, and house prices have "finally settled down" to a point where they are now at 3.28 times median income, which is roughly in line with long-term stability. At the height of the housing bubble, the price-to-income ratio had reached 4.7% nationally - and 9.2% in California. Noting that "conditions are ripe for people to come back into the market," Mr. Crowe predicted that it won't be long before buyers recognize that the bottom has been reached. He also said by the end the year, ten states - Mississippi, Alabama, Louisiana, Texas, Oklahoma, Nebraska, New Mexico, Wyoming, North Dakota and Montana - will be back at 100% or more of normal production. At the same time, though, 10 others - California, Nevada, Arizona, Florida, Michigan, Ohio, Illinois, Minnesota, Vermont and Maryland - will still be below 70% of normal.