Deutsche Bank have dismissed all the talk of a housing double-dip and, instead, suggest we’re going to see stability, or even a rise in prices in the near term.
Their argument is that housing has already fallen to its lowest share of GDP, so it can’t fall much further
From Deutsche Bank, emphasis ours:
One, the residential share of GDP is 2.5%, just 0.1% higher than its all-time record low set in Q2 2009. To put this into perspective, the current ratio is about three standard deviations from its long-term average calculated from 1947 to 2003. We chose to avoid the bubble years so as not to distort the mean. Basically, we believe that it is going to be difficult for a sector of the economy which has already collapsed and which accounts for a minuscule level of output to do much further damage.
OK, but wheres are the signs of growth? In the residential architectural billings index (what?), of course. The index shows steady growth, which is a leading indicator for future building. What is this index suggesting right now?
From Deutsche Bank:
Since billings are up sharply but starts are up only modestly, the latter should accelerate over time. To what level? Billings point to 1200k on starts, twice the present reading. Clearly, this is extreme and unlikely to happen any time soon. But perhaps, so too, is the view that housing activity is headed for a double- dip, taking the economy down with it.
Right, maybe it’s is time to question the value of this indicator then.
Photo: Deutsche Bank
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