Tuesday, July 20, 2010

New Inventory Supply Low: Good News

As home builder confidence fell sharply earlier in the week we found out why today.  Housing starts came in dreadful this morning at 549,000 on an expectation of 575,000.

This is bad news for our bubble economy short term, which depends heavily on construction related jobs.  It is very good news for our economy long term because the last thing we need is additional supply with approximately 12 million distressed homes that are for sale now or coming soon from the shadow inventory.

The earnings numbers have been disappointing across the board as Muhamod El Erian from PIMCO explained this morning on CNBC.  The worry has come from total revenue (top line) which is the true measure of business growth.

As I've talked about in the past, the problem with the current economic recovery will be the final demand for goods that needs to come from the consumer.  As businesses have restocked their shelves it has boosted the economy but no one has shown up to purchase the goods.

The American consumer is deleveraging (paying down debt), and it will be a multi-year process. El Erian discusses below:



And speaking of PIMCO, last month they released their US Commercial Real Estate Project, which is the best report I've read this year for the direction of the commercial market.

They interviewed hundreds of people in multiple cities across the country to get real information on the health/outlook for the market.

I will try to condense the information into something easier to understand in a later post, but if you're looking for a great read, please enjoy:

PIMCO US Commercial Real Estate Project

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