Bridgewater gets all sweet on the housing market. Well, as sweet as a financial economist is likely to get.
John Broussard
Assistant State Treasurer
Chief Investment Officer
State of Louisiana
Department of the Treasury
-----Original Message-----
From: Bridgewater Daily Observations [mailto:Bridgewater_Daily_Observations@bwater.com]
Sent: Friday, June 07, 2013 7:54 AM
Subject: Bridgewater Daily Observations - "Supply & Demand Dynamics an Increasing Support to US Home Prices"
Supply & Demand Dynamics an Increasing Support to US Home Prices
It appears that we are now in the sweet spot of the recovery in US housing, where continued healthy price gains, increased construction activity and rising sales volumes may all be compatible. The supply of available homes has diminished greatly as excess housing inventories, particularly in the form of distressed properties, have been absorbed or eliminated through improved borrower performance. At the same time, household balance sheets, and the general economic conditions facing borrowers, have improved substantially, allowing for an increase in demand for home purchases that wouldn't have been possible earlier in the recovery. To be clear, this does not mean that we expect a return to the frothy conditions of the mid-2000s. Households' leverage has been reduced, but remains high by historical standards, and, with a more punitive capital regime in place, banks are unlikely to lower lending standards to any large degree. These factors will act as something of a "speed limit" to credit growth. Nonetheless, we expect home prices to continue to increase at about the same pace they've risen over the last year or so, at around 10% annualized.
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