Yesterday, in Monthly Mortgage Payments Up Record Year-over-year, I mentioned some “good news” for homebuilders:
Even though we can expect significant further declines in new home sales and single-family housing starts, the good news for the homebuilders is activity usually picks up quickly following an interest rate induced slowdown (as opposed to following the housing bust when the recovery took many years).
When the Fed took their foot off the brake in 1982, new home sales recovered fairly quickly (blue). The same is true for the 1989 -1991 bust (not shown).
However, following the housing bubble, new home sales languished for several years – well after the Fed reduced the Fed Funds rate to zero – due to all the distressed sales on the housing market.