patrick.net

Wow, someone telling the truth in Real Estate ! How quaint. Easy to understand... no jobs, no income, no mortgage.

tatupu70 says

Not according to this article:

Trust me on this I this I follow the data daily

There isn't one person I know in America that said in 2014 total net inventory was lower than 2013, there is no stat to show that because it isn't true.

What you're talking about is Jan 2015 vs Jan 2014 and I am talking complete Year over Year data on a national trend.
Inventory was up not only for existing homes but for new homes as well. This was the core root thesis for many housing bulls who kept on saying we don't have a demand
issue it's a inventory one and it backfired on them badly in 2014

You had more net demand in 2013 with on par and slightly higher interest rates, so the we don't have a demand problem housing pundits got stuck in a bad call because inventory rose and rates fell in 2014.. so the why factors were positive for 2014 and it didn't even create a flat sale year even with 30% net cash buyers

There is simply no where to run to anymore, no more polar vortex, no interest rate spike, nothing to curve the demand trend except pure net demand.

This is Math, Facts, Data and Numbers going against an economic assumption thesis and math won

Logan Mohtashami says

This was the core root thesis for many housing bulls who kept on saying we don't have a demand

issue it's a inventory one and it backfired on them badly in 2014

How did it backfire exactly?

Call it Crazy says

Sure you did..... at $468K, after paying commissions, transfer fees and closing costs, you lost money. Plus, you sold it for 4% more then you paid for it after 2-1/2 years... Not what I would call a very nice return... That's like a 1.6% annual return.. You should have rented and put your money elsewhere...

After you back out any upgrades you did while there plus closing costs going in, you LOST money, big time...

,
Wow, you're wrong on so many fronts. First, as I told you earlier, I was transferred out of NJ so my employer paid all the closing costs, commissions, transfer fees, etc. Second, you must have the wrong house because it didn't sell for $468K. We made ~8% on the full price of the house, which is closer to 33% on the actual investment (down payment). Then factor in that we paid down ~5% of principal over the life of the loan and saved about 3% over renting. As you can see it adds up pretty quickly, and it's much, much, much more than 1.6%. And that's not even considering the tax savings.

tatupu70 says

How did it backfire exactly?

Because when you estimate 20%-30% sales growth and it comes negative year over year your value as a economist or housing analyst. See it wasn't hard for me to calculate my models because we have been doing this for 30 years as family

I just don't think these bulls have the sophisticated background to do real analytically work

Great example, is Ivy Zelman considered to be the top analyst in Housing for America

2013 Housing is In Nirvana

http://www.cnbc.com/id/100533720

Logan Mohtashami

May 7, 2013

http://loganmohtashami.com/2013/05/07/housing-mammoth-stuck-in-tar-has-bigger-problems-to-worry-about/

( 2nd hand of housing inflation) will impact demand, from this date of the article started the bear market for purchase applications

In 2014

Housing Nirvana is just around the corner Ivy Zelman

http://www.cnbc.com/id/101449024

April 11, 2014 Miss Housing Nirvana cries uncle

http://loganmohtashami.com/2014/04/11/miss-housing-nirvana-crys-uncle/

Causation Correlation and Representation

Housing bulls to me are great story tellers and this has been happening for 15 years not just with this cycle.

Housing bulls are people that would have discounted Galileo, Leonardo da Vinci, and other brilliant men and women who simply says you can't deviate from math, numbers and facts

They are professional story tellers and even with 6 years of data right in front of them, it doesn't matter. I have come to accept this economic narcissism as part of the system we live in

Call it Crazy says

So, the numbers on the deed are fictitious??

Or you are looking at the wrong deed, obviously.

Logan Mohtashami says

Housing bulls to me are great story tellers and this has been happening for 15 years not just with this cycle.

Housing bulls are people that would have discounted Galileo, Leonardo da Vinci, and other brilliant men and women who simply says you can't deviate from math, numbers and facts

They are professional story tellers and even with 6 years of data right in front of them, it doesn't matter. I have come to accept this economic narcissism as part of the system we live in

You must have a different definition of housing bull than me. I've always assumed they were bullish on price, not sales volume. Because bulls have been correct for the last 3 years as far as I can tell.

tatupu70 says

You must have a different definition of housing bull than me.

You're not a economist, housing pundit or analyst my work is directed more against them

but to your other point.... ;-) tatupu70 says

Because bulls have been correct for the last 3 years as far as I can tell.

It's the nature of the beast for housing bulls to discount real data, I know this, I have seen this for 15 years, internal demand reads are something they don't want to talk about.

I get it but I will never believe in that because if I do I am committing a crimes against real math, data and facts

Logan Mohtashami says

Because bulls have been correct for the last 3 years as far as I can tell.

And yet prices have continued to go up despite all this. To me it shows you need to reevaluate your theories.

Have you considered that supply and demand are interrelated in housing? And the sales volumes are misleading? When person A moves, person B buys his home, person C buys B's home, etc. But that's really only one first time buyer (at most).

And speaking of first time buyers--the housing bubble obviously pulled forward a LOT of first time buyers. It's not surprising that they have declined as a percentage of buyers after the bubble popped.

tatupu70 says

And yet prices have continued to go up despite all this. To me it shows you need to reevaluate your theories.

See this is what I mean, you can't help your self, you have to always believe.

See where I am coming from
I had home price increasing
2013, 2014 and 2015 and you don't ever hear me sounding like you

It's your nature to discount math, data and facts. This isn't your fault, that's just how it operates for you

I mean look at all this data and yet your don't care about it. History has show us that men who believe in science, math, and numbers have been fought against over time.
It's the nature of mankind

This is what makes a market place

I can show you 10,000 economic charts... and I know 100% it wouldn't change your mind

Logan Mohtashami says

I mean look at all this data and yet your don't care about it. History has show us that men who believe in science, math, and numbers have been fought against over time.

It's the nature of mankind

This is what makes a market place

I care about it but where on those graphs is their data and math that shows that house prices would go up for the last 3 years.

Logan, Tatu, Crazy....Some of you say the problem is affordability, income, inventory, and demand. I say the problem is the lack of a wide range of loans available to home buyers. Stated Income and Sub Prime with large down payments were always available well before the Great Housing Bubble, but no longer are.
Logan, do you know the percent of the total loans issued in a given year that comprised of Stated Income and Sub Prime? The ones that used to require 20% down or more?
Our answer as to why housing is so stagnant might lie here.

tatupu70 says

I care about it but where on those graphs is their data and math that shows that house prices would go up for the last 3 years.

Question question one that can be easily explained with the data above

Case in point.

Why have I said home prices will rise in 2013, 2014 and 2015

Inventory, as long as trend demand stays the same and inventory is 6 months and below home prices can rise

So how does the market keep trend demand with mortgage buyers being so weak?

Because you have 20% above historical norms cash buyers in play for years now and that comes to roughly 1 million home sales a year in a 6 month and lower inventory cycle that applies pricing power to housing

Inventory levels and non distress sales are key, inventory has been low and distress sales have been declining every year

This allows pricing power to stay in the market place because we don't have a new distress market coming anytime soo, that would require a job loss recession to happen.

So the YoY price gains have been cooling down since 2013, but the inventory is still to low to have a change in the prices. Now maybe, just maybe if demand gets so weak we have a flat year in prices but that would require higher inventory than 5.5 months at least.

However, the key thing to remember is inventory that will always give you clue with prices and how the economic cycle is looking and for 2015 it gives another year for prices gains and I have at least 1%-4% growth in prices for 2015

Strategist says

I say the problem is the lack of a wide range of loans available to home buyers. Stated Income

We have had stated income loans here in CA for a few years now and the issue is having that big down payment 20% and more. It's just hard for Americans, outside the Rich to have 20% down these days with home prices where there are at

3% down loans now but they would never ever make those stated income loans

Logan Mohtashami says

Strategist says

I say the problem is the lack of a wide range of loans available to home buyers. Stated Income

We have had stated income loans here in CA for a few years now and the issue is having that big down payment 20% and more. It's just hard for Americans, outside the Rich to have 20% down these days with home prices where there are at

3% down loans now but they would never ever make those stated income loans

That does not answer my question. Lots of business owners have 20% down for a home.
My daughter graduated and has had a good job with a major corporation for the last 16 months. She lives at home to save money, and plans on getting her own 2 bed Ladera Ranch condo for $400,000. She has $40,000 saved up, and I will gift her another $40,000 for a 20% down. She is debt free, with perfect credit. Because a large part of her wages are in the form of a bonus, she has to be on the job for 2 years to get a conventional loan, which means she has to wait until September. Now isn't that silly?

Logan Mohtashami says

We have had stated income loans here in CA for a few years now

At a bizarre rate from the Chinese Mafia.

Call it Crazy says

Strategist says

Lots of business owners have 20% down for a home.

While the majority of the general population can't scrape up 3%...

I find that hard to believe. First time buyers, yes, but not those who are moving up.

Strategist says

That does not answer my question. Lots of business owners have 20% down for a home.

Remember self employed Americans only make 8.9 million of all working Americans ( Well over 140 million and many S.E. have homes already)
I believe you're over estimating the self employed stated income buyer in the market place

Call it Crazy says

Didn't you read this thread?

What about the two thirds majority.?

Logan Mohtashami says

Inventory levels and non distress sales are key, inventory has been low and distress sales have been declining every year

This I agree with--inventory and change in inventory is the key metric. Much more important than the one you post with 5 colored lines...

Call it Crazy says

BTW, how's Illinois??

cold.

tatupu70 says

Call it Crazy says

BTW, how's Illinois??

cold.

Call Crazy, if you are done with the shovel I sent you, can you be kind enough to forward it to tatupu? Thanks.

tatupu70 says

This I agree with--inventory and change in inventory is the key metric.

Curious, I have asked this question of housing bulls for years and the answer I get is the main reason why I believe that this certain group of people really don't care about math, data and facts on internal net demand.

See, during 2003-2006 when I talked about MI2MP models, they just ignored it and they said it doesn't matter, prices are going up and that's all the matter, forget about real demand

2013-2015 I talk about the MI2MP models, they just ignore it and they say it doesn't matter prices are going up and that's all that matters, forget about real demand

15 years I have watched this kind of thinking and its amazing.

The sentence structure, the similarity to tone and actual wording of pro active statements is always the same.

It's the nature of the beast

One set has data
The other set has an economic assumption theory and doesn't provide data nor a reason for the actual mathematical fact of the other data line using internal net demand reads.

Then you show a long term chart of the equation and even then it doesn't matter even more. I find this fascinating

Call it Crazy says

Call Crazy, if you are done with the shovel I sent you, can you be kind enough to forward it to tatupu? Thanks.

He should never left the paradise of New Jersey.... He's on his own now!!

Sorry Tatupu, I tried my best to help you. Move to Sunny California, and save the airfare every time you visit Disneyland.

Still the best is when I show this chart and the answer is ....There is nothing wrong with this!

Logan Mohtashami says

Still the best is when I show this chart and the answer is ....There is nothing wrong with this!

Except........what the hell is that chart saying.

Call it Crazy says

Strategist says

Except........what the hell is that chart saying.

Thanks, now I know what it's saying. It's all gonna be back to business as usual.

Strategist says

Except........what the hell is that chart saying.

The pro housing group had a false sense reality in terms of main street America owning the debt of housing

Now I take all economic data from 1996-2007 with a grain of salt because of the financial bubble component factor. Now this doesn't mean everything was juiced but the housing market expanded from 1996-2007 in fashion that it couldn't possibly be continued. I think we can all agree on that.

So, now without a real financial bubble factor in this cycle, we are back down to fundamentals and who can or can't own the debt.

Very hard to have a re leverage of debt from a sector where the bubble debt had to be de leveraged, it takes a lot time for this to work itself out. The one problem we had in this cycle was the massive price gains we saw from 2012-2015 and it is still continuing as we speak.

If the buyer profile was different and we had more long term sustainable buyers in play then it wouldn't be so bad as we would just chalk it up to mild demand recovery. However, the strong new demand has been from a buyer that doesn't have a good track record of staying in the market place for a long time at 27%-33% of all sales

The graphic is a visual disaster and meaningness. The box is just a visual trick for the uninformed.

Low ownership rate is a bullish indicator. There, as simple as that.

I like the historic house price vs median income historic graph. I'm wondering if you'd have something adjusted for inflation.

But most importantly, if we are really in a secular stagnation, and interest rates stay low for long, wouldn't we expect the slope to change as a trend?

Logan Mohtashami says

Curious, I have asked this question of housing bulls for years and the answer I get is the main reason why I believe that this certain group of people really don't care about math, data and facts on internal net demand.

See, during 2003-2006 when I talked about MI2MP models, they just ignored it and they said it doesn't matter, prices are going up and that's all the matter, forget about real demand

2013-2015 I talk about the MI2MP models, they just ignore it and they say it doesn't matter prices are going up and that's all that matters, forget about real demand

They care about math, data. and facts, but they pick the ones that are useful--prices went up in those time periods. What good is a model predicting the exact opposite of reality?

Logan Mohtashami says

One set has data

The other set has an economic assumption theory and doesn't provide data nor a reason for the actual mathematical fact of the other data line using internal net demand reads.

Last I checked, inventory numbers are data. So, in reality, both sides have data. I choose to follow data that more closely correlates with changes in price.

SFace says

The graphic is a visual disaster and meaningness. The box is just a visual trick for the uninformed.

Low ownership rate is a bullish indicator. There, as simple as that.

As always no matter what the data shows you have never said anything bad about the housing market in terms of real net demand and trust me you never will because math, data and facts don't matter to someone who never looks at data. Trust me, I understand this, it is what it is

tatupu70 says

Last I checked, inventory numbers are data. So, in reality, both sides have data. I choose to follow data that more closely correlates with changes in price.

Then explain why homes sales went negative when inventory was up in 2014 and interest rates fell all year long

Like I said 2014 was the first year ever recorded in American history where purchase applications had a negative YoY print every single week of the year compared to year over year numbers and for 11 months it was down double digits

We have never seen that happen in a up cycle where inventory was up and rates went lower post WWII

So explain to me how that possibly could happen?

Logan Mohtashami says

Then explain why homes sales went negative when inventory was up in 2014 and interest rates fell all year long

Like I said 2014 was the first year ever recorded in American history where purchase applications had a negative YoY print every single week of the year compared to year over year numbers and for 11 months it was down double digits

We have never seen that happen in a up cycle where inventory was up and rates went lower post WWII

So explain to me how that possibly could happen?

Like I said earlier--I don't care about sales volume. The only reason to follow sales volume is as a predictor of future price changes. Clearly, it failed as a predictor. That's why I choose to follow inventory.

Here' s an example as to why sales volume is a flawed statistic:

Example A: Grandma passes away and her house goes for sale. First time buyer Joe buys it. One transaction.
Example B: Grandma passes away and her house goes for sale. Jack moves up to Grandmas house. Dick moves up to Jack's house. John moves up to Dick's house. First time buyer Joe buys Dicks house. 4 transactions.

There's really 1 net new buyer in each case but there is 400% high sales volume in the second case.

If you can get 17%-27% growth in purchase applications and cash buyers only fall slightly not the 6% drop we saw in Jan then you can get over possibly 5.10 million in sales which is still very low and below the 5.5 million trend line you usually see with E. Homes sales

So far we haven't seen the growth in purchase applications, even I said we should see 5%-10% growth year over year because we hit a 21st century low last year and match that to employment to population numbers we should have some growth there because the bar is so low

However, so far it's been flat to slightly higher, have about 6 more weeks left for this metric to show what spring demand is

tatupu70 says

There's really 1 net new buyer in each case but there is 400% high sales volume in the second case.

Wow

Brother this equation is for you then

lim f(x)=sky
x-a

tatupu70 says

Like I said earlier--I don't care about sales volume

We just work from different worlds then, because I have to use all variable factors for housing.

I can't be a just a price guy. I remember all the price people back in 2003-2006 and a lot of the same people those who are left are saying the same
thing from 2012-2015

However this cycle is unique all the demand is real, the owners do have the capacity to own the home. The cash driver is the biggest variable factor because it amounts to 1 million home sales for E. Homes

New home sector has a much bigger economic impact so that is always considered more important than existing homes especially now people aren't cashing out on their homes to consume on debt