The hopeful maxim of Charles Dickens’ perennial debtor that “something will turn up” nourishes American housebuilders, realtors and homeowners. The industry has endured a horrible five years. Housing starts rallied a little in June but are still at historic lows. Prices continue to fall, although there is huge variation between regions. The stockmarket is above its mark of five years ago; the homebuilders index is 60% below.
Eventually, perhaps soon, the market must obey Mr Dicken’s dictum. Prices have dipped below fair value, according to The Economist’s price-to-rents ratio. Homes are now affordable. The rate of household formation, suppressed for years as people have put off renting or buying their own homes, will bounce back: few sane people want to live with their parents until they’re 40. A big bounce is unlikely: credit for mortgages is hard to get and consumer confidence fragile. But rental markets are tightening and builders are already talking about inflection points.
Not long ago “there was no light at the end of the tunnel,” “Now there’s light, it’s just that the tunnel is very long.”