Sunday, August 27, 2006

Simple math

The most talked about presentation on the web (for housing)

You've probably already heard about Lereah's new powerpoint at the Leadership summit in chicago. If not, please read it as the cheerleader of realestate is now a bear. In particular, a polar bear.

Now for the simple math. From the presentation 28% of home sales were to investors in 2005. *Assuming* investors stop buying (they will), and sales don't slow further (they will):

(investor sales * 12 months) divided by (100%-investor sales)
is equal to the number of months it will take to sell the flipper inventory if only flipper inventory sells.

Or (28% * 12 months)/(100%-28%)=4.7 months.

I cannot imaging flippers can command more than 30% of total sales. So that gives us a minimum "time of falling home prices" of 15 months if everything goes well for the flippers.

It won't.


A shorter version was first published on David's excellent bubblemeter blog.

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