Three Key Reasons Housing Not Coming Back: Demographics, Student Debt, No Jobs
http://globaleconomicanalysis.blogspot.com/2012/06/three-key-reasons-housing-not-coming.html
Mish
Three Key Reasons Housing Not Coming Back
By Mish Follow Sat, 23 Jun 2012, 11:48am 9,120 views 100 comments
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KILLERJANE says
True, but they are not buying houses, but continuing to live in their parent's basement...
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Not for long. The murder rate would rise.
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Right with you Ms.KillerJane! Who is this boobus “mish” acting like he knows about economics and what not>>??? You have your finger on pulsebeat ***SEX*** BABOOMBA BOOM! That is what housing is all about!! not this demographics, debts and jobs stuff! NONSENSE. I think “mish” needs to go out and buy some houses ---nod nod nod--- and when you do “mish” be sure and pay max commish to the Realtors™ they are looking out for you!
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Duck you need some goose.
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Good article from Mish as usual.
To killerjane's "analysis" re: births and housing: http://www.aneki.com/birth.html
Yeah those housing markets are to die for. :p As usual the pineapple spouts nonsense.
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Santa Cruz, CA
Housing is not coming back in California at least.
Where I live a couple friends are telling me how house prices must go back up. They are pissed they aren't "rich"=live in houses that are expensive.
I say to them "Ok, take a look around Trader Joes. Which of those guys would you imagine has $100K cash in their jeans to buy? Which of those illegal alien teenagers will make enough in their mcjobs to buy as they grow older? Which of those sec.8 , SSI, food stamp losers will?" None will.
California is a mess and house buyers are squeezed between taxes, fees, and these are ever-increasing. We have cap and tax now for example. Businesses and productive people are fleeing the state and losers are flocking here.
Of course, I live in bubble ground zero Santa Cruz.
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What many of the comments here and on other blogs that I read occasionally do not reflect is an an understanding of basic demographics. It is a fact that the birth rate deceases during times of distress. Sure, people still have sex and babies, even during times of great hardship, even warfare; but overall, the birth rate declines during stress on civilian populations. This has been shown time and again. It is a scientific fact.
Unfortunately, most Internet blog readers are essentially scientifically, mathematically and economically illiterate so this point will be lost on them.
Now, relating this fact of demographics to the current housing situation in the United States is another thing. My own interpretation is that housing prices have nowhere to go but down, at least in my area, the Pacific Northwest. That is why I sold my home in 2008 and moved into a similar rental house. Since then I have watched my landlord's bubble pop to the tune of over $500K (40% drop from 2008) while I have paid him $96K for the privilege of living in his house. He takes all the risk of further price declines; I wait until local home prices start to rise consistently, not yet seen, and then purchase another home with a low mortgage rate or cash, if need be. Meantime, I watch as 'homeowners' I work with or have as neighbors struggle to keep the homes they are 'renting' from their mortgage holder; all the while thinking that they are 'homeowners with equity. Unfortunately, they are all underwater but can't yet face the reality that bubble pricing is not coming back. LOL
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Pacifica, CA
I disagree with Mish about other subjects, but I can't see anything glaringly wrong with this analysis.
He does say that he thinks housing has bottomed, but that it's not going anywhere (upwards) for a while.
I don't think housing has bottomed, because in the Bay Area, we have such high prices. There is a mini-tech boom going on, but not that many jobs are being created - it's nothing like 1999.
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Die, Boomer fucks, fucking Die and take the banksters and Realtor®s with you to hell!
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Corning, NY
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clambo says
Sounds like New York.
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Corning, NY
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reallife says
Ain't that the truth.
Interest = Rent
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clambo says
But,but,it is a golden state for a reason. LOL. It should be the richest state in the country but still it is red then most states - despite all that hefty property tax collected by state.
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wthrfrk80 says
Also sounds like New Jersey..
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San Leandro, CA
What does that mean ? "Housing not coming back"
Housing is not coming back to an annual appreciation rate of 20% ?
Not coming back to 8 to 10 times annual income ?
DUUUH ?
Why won't my finger come back ?
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Housing is supposed to appreciate at 100% per year - guaranteed!
Ask any Realtor® if you can get their attention while they're fisting you.
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Santa Cruz, CA
I just visited today with a new resident of California. She is the illegitimate daughter of my illegal alien female friend. These are called "anchor babies".
Her mother is a high school dropout who is barely literate in two languages.
Neither baby nor her mother will ever be productive and pay in taxes a portion of how much society will pay to keep them going.
Just when baby was born cost us a fortune: mommy had to have an emergency C-section birth to protect the baby for some reason.
The cost of that baby's prenatal and childbirth cost California taxpayers over $50,000. Mommy had minor surgery also during pregnancy.
What does this have to do with houses in California you say? EVERYTHING. These people are going to continue to bankrupt the state. Doubt me? Go look at maps of foreclosures in alien landing grounds: Modesto, Stockton, Fresno. The same is true in Arizona.
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San Jose, CA
Pineapple, you're totally missing his point. Yes, the population is always growing (at least so far), but what Mish is focusing on is the house-buying age group. HE says it is shrinking, that is all.
So sure there are tons of babies being born, but are you telling me that these babies are buying houses? Not yet, but they will 25-35 years from now.
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Fremont, CA
tdeloco
Excellent point. Further, considering the unemployment rate amoung the young I would not be expecting them to buy homes even then.
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APOCALYPSEFUCK is Shostakovich says
lol, funny but true.
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"but what Mish is focusing on is the house-buying age group. HE says it is shrinking, that is all."
Exactly, kids getting out of college and then moving back home with parents or never moving out at all. Not just younger ones, those caught later in life with no jobs, not old enough for the safety nets combining with elderly parents.
Household consolidation, a way to cope with declining employment and incomes. Less houses needed, prices fall. So simple even a Realtor can understand it.
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Kids should just start hedge funds like Romney. Or flip real estate and become billionaires. Why do they hate prosperity? And China! Zillions of jobs there! If they had any ambition at all, they'd swim there and get a job! ANd come back and buy million dollar 3/2s in BA like the prosperity-loving Chinese!
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“get a job! ANd come back and buy million dollar 3/2s in BA like the prosperity-loving Chinese!” APOCOLYPSEFUCK I used to think you were crazy but I see now you are ON THE MONEY BOOMBA! I can see you will soon be a landLORD like myself, buy houses + rent them out = RICH TYCOON! Simple really, these doomers are missing the boat.
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Corning, NY
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duckhead says
A+ or GTFO!
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Los Angeles, CA
no way! the illegal aliens are job creators
if she had not come here to have a baby - the doctor/hospital/nurses would be out 50k of income that they used to buy million dollar 3/2's (to flip to other doctors back and forth each time adding 200k in price).
thats how CA works.
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Prices here are extreme. Now that I am in the process of moving back here-wow-sticker shock again. I have been going around as a consultant, mostly different parts of the midwest and the south. The climate is better here, but the salaries-not that much of a difference. In fact I was once offered a contract gig in S.F, for less than what I was being paid in Missouri. I mean, come on!
But the housing is still double, triple or worse and I really don't know how to justify it. perhaps all the oldies who got their houses way back then and are paying miniscule amounts in taxes and their descendants-who I beleive the tax rate rolls over to- refuse to sell no matter what and so the rest of us are stuck buying/selling to each other?
Prices need to come down to reflect reality. I think they will. I am very tempted to stay in other places-same pay and 1/3rd the price for housing and not much of a commute-but all my friends and most of family in CA and I do miss it. A man's got to have a home. Let's see-prices haven't shot up, despite the lowest mortgage rates in recent history-so a little climb in the rate, might just shake things up.
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Los Angeles, CA
if you are wating for prices to go down you might never ever buy here (which is ok).
i predict lower rates FOREVER. its TEOTWAKI if they raise rates....so they wont. its very simple. look at federal deficit - impossible to repay, they will let it sit super higher - ever higher - but with ever lower rates forever. (forever means longer than a working life 30+ years)
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APOCALYPSEFUCK is Shostakovich says
Couldn't have said it better myself! GREEDY ASS BOOMERS!
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"Prospects for family formation are fundamentally very weak and overall economic fundamentals are very weak as well."
Dear Mish, in regards to family formation, you are incorrect, people have sex, have babies, that you can be certain of, especially during hardships.
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Bellingham, WA
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"The 35-44 population has shrunk by 4.5 million over the past 12 years."
Actually the age 25-35 demographic is growing.
Not counting immigrants, 2002-2008 was a demographic trough of this age group, at ~33M.
We're now at 36M and this will continuously rise to 43M by 2050.
And if we count immigrants -- and we certainly should -- these numbers would show more growth.
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Bellingham, WA
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LOL, the one thing Mish misses is the need for higher taxes.
I think that's going to kill housing valuations more than anything, but Mish does not want higher taxes so that eventuality does not exist in his ideology-bounded thoughtspace.
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pazuzu says
Take a bite outta crime, abstinence is for you!
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Too bad for you
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The point is, maybe new households are slowed momentarily, but that's temporary. I mean give me a break and use your noggin.
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Bellingham, WA
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clambo says
to the extent business are leaving the state they are going to lower-wage environs, yes, destroying your entire argument.
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Population 2010 us census 308,745,538
http://2010.census.gov/news/releases/operations/cb10-cn93.html
2000 population projection for 2010 was 308,935,581
http://www.census.gov/population/www/projections/files/SummaryTabA1.pdf
So the projection was off by what?less than 200,000 nothing to freak out about. People need to live in these houses at some point. Some places were overbuilt, now population growth has a box to expand in.
2000 census us population 281,421,906
Population history chart
http://www.u-s-history.com/pages/h980.html
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Scottsdale, AZ
robertoaribas's website
And yet, it is coming back In Arizona... Strongly so far...
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Scottsdale, AZ
robertoaribas's website
Case - shiller just came out with more data showing Phoenix prices increasing.
Now, if you aren't in Phoenix, what can we learn from this? When inventory drops relative to demand, and homes start seeing bidding wars, prices will increase. PERIOD. the rest of the nonsense saying why they won't is flat out wrong, they are called the LAWS of SUPPLY AND DEMAND, not the general notions of supply and demand.
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Lafayette, CA
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Three key reasons housing is going to begin a new bull market cycle:
1. Record low affordability. With current interest rates on 30-year money, buying a house has never been cheaper as long as records have been kept.
2. Pent up demand. The housing crash and resulting fear from ownership has delayed millions of home buying decisions.
3. A near total shutdown of new home construction since 2008.
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da Bulls
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Well record affordability in some places but not in Los Angeles. 500,000 for house with 7000 in taxes is not affordable at any interest rate. You can't rent it out for 1% purchase price. The total 30 year payoff is outrageous.
Now where the market has overcorrected in AZ NV FL GA and Similiar it is very good.
People want to buy in the LA area still and banks will lend if you get the FHA on board. But it is overpriced old ugly small houses.