Stewart Hsu

Just a few years ago, single-family home permits were on the rise, breaking records each quarter. It seemed as if the growth would last forever. It was definitely reminiscent of the tech bubble days 1999-2001.

Now, based on Census Bureau data thru July 2008, the correction (well overdue) is finally here. This is the natural course of all markets, i.e. demand exceeds supply for a period of time, then supply exceeds demand, repeat. This “correction” is a good thing in my humble opinion: the sooner the excess housing can be absorbed, the sooner we’ll hit bottom and the sooner the housing industry can begin a healthy recovery.

Credit: Thanks to John Burns Real Estate Consulting for the chart!

A related thought from Warren Buffett:
“The most common cause of low prices is pessimism — sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It is optimism that is the enemy of the rational buyer.”
- The Essays of Warren Buffett, 1st Revised Edition, pg 103.