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In United States
Registered May 30, 2011
Coogan99's most recent comments:
- On 22 Dec 2011
Why Homeownership Decline Is Only Temporary,
Supply = rental units + owner occupied units. While there is some friction, millions of units can move back and forth between categories. Don't believe me? As condo prices went bonkers, think of all the 'condo conversion' projects we saw. This mechanism prevents rents and home prices from trending independently from one another over meaningful timeframes. Housing starts beat expectations yesterday, so supply remains inflated and growing.
Now lets talk about demand. What determines demand? What determines the total dollars available to be spent on housing (both rental and owned). 1- Number of people, that's obvious, going up, not too fast. 2- Savings and incomes, both of which have been decimated over the past 5 years. 3- Percentage of savings and incomes that people can spend on housing. All of the other rising costs (taxes, health care, education, energy) leave consumers with a smaller percentage available to spend on housing.
Supply: stable and rising
Demand: stressed and falling
We have transitory imbalances (home prices haven't normalized to rents) and government programs (HARP, artificially low rates) which temporarily shift rents/home prices away from their equilibrium. In the end, the number of units and dollars available for housing determine rents and home prices. Home prices must go lower.
- On 31 Oct 2011
Why We Need to Keep Home Prices Inflated,
Higher home prices do not benefit the economy. If home prices go up 1%, eventually rents go up 1%. So while home owners "perceive" they have an additional 1% to spend, renters "actually" have 1% less to spend. Housing is a form of consumption, not an investment. The more you spend on housing, the less you have to spend on food, clothing, healthcare, education, energy and transportation. Dollars sunk into housing steal dollars away from other productive investments.
Any benefit from higher prices to home owners hurts renters and prospective home owners. (Keep in mind that our nation's youth don't own homes... so high home prices hurt young people and children).
We've all been duped into looking at the housing market like the stock market, the higher the better. The difference is - you need a roof over your head to survive, you don't need 100 shares of GOOG. Higher home prices hurt America. The wealth effect, while real, benefits the half of America which needs help least.
- On 23 Oct 2011
Rents are rising because rental demand has risen faster than rental supply. However-
Demand has come from
1) Foreclosed upon homeowners turned renters
2) Strategic defaulters turned renters
3) Potential first time home buyers choosing to rent instead of buy
The new renters above have determined (on their own or with the help of foreclosure notices) that purchased homes remain, on balance, overpriced and/or unaffordable.
Also, regarding supply, we have tremendous housing/rental supply TEMPORARILY held off market, skewing the rental supply dynamic.
a) Vacant homes classified as delinquent, foreclosed or REO but held off-market.
b) Vacant REO for sale at on-the-moon 2007 prices, aka not really for sale.
c) Luxury condo developments where developer is obscuring or misrepresenting their unsold percentages (see link).
Eventually, this supply will hit the market as lower priced homes OR rentals, unless they tear it down. This supply deluge at competitive prices will drive down both home prices and rents.
Don't ask me, just ask every economist working on wall street or at a meaningful firm involved in housing (other than NAR):
"Home prices are expected to drop 2.5% this year and rise just 1.1% annually through 2015, according to a recent survey of more than 100 economists to be released Wednesday."
Most firms professional economist see home prices falling another 10%-15% from here in order to clear the backlog of distressed supply.