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Another indicator housing crash not over yet


By Patrick   Follow   Thu, 1 Nov 2012, 5:15am PDT   5,585 views   61 comments
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This image from Forbes today seems to show we have a ways to go to get back down to the normal ownership level of 64% or so.

Maybe it won't happen, but it's one more piece of evidence.

Image is from http://www.forbes.com/sites/mikepatton/2012/11/01/home-sweet-home-the-housing-market-in-perspective/

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Mobi   Fri, 2 Nov 2012, 2:50am PDT   Share   Quote   Permalink   Like   Dislike     Comment 22

In where I am, we are not too far away from the bottom. That being said, I will not be surprised if the economy/goverment/bank hit the brick wall again 5 years down the road. I am just hoping I can get my money back before the SHTF.

everything   Fri, 2 Nov 2012, 9:28am PDT   Share   Quote   Permalink   Like   Dislike     Comment 23

I was down in Milwaukee this weekend driving around and just happened to be in a rental area. Well, this rental area went on for miles and miles, investors paradise. Whether the crash is over or not, I think it's easier to win a RE from an investment perspective. Around WI small farms were still doable until the 80's, then they went to factory size, I've seen farmers go from milking to building rental properties, then collecting rents, it's similar to milking cows. Many of the old dairy farms just went bankrupt instead as many were sold equipment and a growth model that milk prices never supported.

upisdown   Fri, 2 Nov 2012, 9:36am PDT   Share   Quote   Permalink   Like   Dislike     Comment 24

Go west of Madison and there's a realtor named Babb realty/real estate. com?, and you'll see just how cheap property is.

RentingForHalfTheCost   Fri, 2 Nov 2012, 9:43am PDT   Share   Quote   Permalink   Like   Dislike     Comment 25

David9 says

QE 3 buys $40 billion in Mortgage Backed Securities every month from now on (Sept. ’12)

This prop up of homes will come at a price. Soon enough the pressure of adding 40B/mth onto the back of Americans will cause some accountability. It can not be "from now on" or we will be in default, and everyone can kiss their house and jobs goodbye IMHO. It is a sham, trying to calm the market. Fools are falling for it, thinking we have 40B/mth to fix the issue. We don't. We haven't for a while now. The money is coming from the next generation.

Oxygen   Fri, 2 Nov 2012, 9:43am PDT   Share   Quote   Permalink   Like (2)   Dislike     Comment 26

the overall US housing market wont even hit bottom for another 5 or so years..probably another 20 years. like an egg, it'll splatter and flatline for years, definitely won't bounce back like a ball

RentingForHalfTheCost   Fri, 2 Nov 2012, 9:46am PDT   Share   Quote   Permalink   Like   Dislike     Comment 27

E-man says

Goran_K says

Guess you have to park your money somewhere.

Isn't that what it's all about now?

You can park it in much much better places. Like real investments that pay dividends and actually do things beside decay.

New Renter   Fri, 2 Nov 2012, 10:47am PDT   Share   Quote   Permalink   Like   Dislike     Comment 28

RentingForHalfTheCost says

You can park it in much much better places. Like real investments that pay dividends and actually do things beside decay.

What do you recommend?

Patrick   Fri, 2 Nov 2012, 10:54am PDT   Share   Quote   Permalink   Like   Dislike     Comment 29

RentingForHalfTheCost says

You can park it in much much better places. Like real investments that pay dividends and actually do things beside decay.

To be fair, the house decays, but the land does not.

Anyway, you can get 3% dividends from a lot of pretty solid stocks, which seems like a decent place to park money at moment.

Patrick   Fri, 2 Nov 2012, 10:57am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 30

Oxygen says

the overall US housing market wont even hit bottom for another 5 or so years..probably another 20 years. like an egg, it'll splatter and flatline for years, definitely won't bounce back like a ball

Yes, my guess is that the US is recapitulating Japan after their 1990's crash.

CDon   Sat, 3 Nov 2012, 3:43am PDT   Share   Quote   Permalink   Like (2)   Dislike     Comment 31

Billybigrig says

I guess you young bucks have been around long enough too know , just go ahead and throw pure logic and formidable circumstances out the window ...It will be a jaw dropping experience

Jaw Dropping?

OK, maybe I am just a "young buck", but in the past 40 years I have been on the planet, that index has bottomed at 64%. Thus, I agree with Patrick's assessment that it is likely going back to 64%.

So (Per ChrisKolmar's link) we are now down to 65.4%. Thus, a move of -1.4% to get back to the 40 year bottom hardly seems "jaw dropping".

Moreover, even if we get back to 1960's levels of 62%, that means we are dropping -3.4% from here. Again, hardly jaw dropping.

But again, people like Patrick and myself are just young bucks and havent been arond long enough to know. Apparently, you have been around long enough (>52 years) to "know".

So in your estimation, where to you see the ownership % ending up?

toothfairy   Sat, 3 Nov 2012, 4:18am PDT   Share   Quote   Permalink   Like   Dislike     Comment 32

RentingForHalfTheCost says

E-man says

Goran_K says

Guess you have to park your money somewhere.

Isn't that what it's all about now?

You can park it in much much better places. Like real investments that pay dividends and actually do things beside decay.

I was getting a 4.5% dividend in MT until last week when they announced a 70% cut in the dividend. Not to mention the stock being down about 50% over the past year.

Patrick   Sat, 3 Nov 2012, 4:34am PDT   Share   Quote   Permalink   Like   Dislike     Comment 33

I had a similar experience with FRO (Frontline).

The company has to have a profit margin well above the dividend rate for the dividend to be sustainable. And even so, there are inevitably surprises.

David9   Sat, 3 Nov 2012, 6:07am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 34

Billybigrig says

In our neck of the woods

I read some of these articles and I can't be analytical. I see this quote:

"whatever gains have been made over the past two years in eliminating distressed properties – and their dragging down the market – has not translated into more home owners"

What? Are they seriously mentally challenged? Everyone knows it's the investors and the hedge funds that have been purchasing property over the last two years. geez.

David Losh   Sat, 3 Nov 2012, 7:22am PDT   Share   Quote   Permalink   Like   Dislike     Comment 35

robertoaribas says

Let's see how this compares to 3% dividends.... Just curious!

I'm going to throw in something that I have talked about before, but not to any extent.

My business now gets solicitations from people who want to lend us money. I saw on television last night an ad from Scion that they will give a new business idea $10K and help with management. Here in Seattle we have an entire office building dedicated to Venture Capital with a bull pen of young software enterpenuers on the first floor, and in the basement.

The future returns will be for, and from, people who do something. Businesses that hire people will be needed, and those businesses need help.

Real Estate agents can list, and sell more than just houses, or property.

Business Opportunity is a niche that isn't discussed much, but it is a viable way to make hefty returns.

mell   Sat, 3 Nov 2012, 7:24am PDT   Share   Quote   Permalink   Like   Dislike     Comment 36

robertoaribas says

My next home purchase is $86,500.00 Tax is around 1200, insurance say 600 Toss in 1 month vacancy a year and $1000 maintenance. The home will rent for $1000 easily. Go ahead and calculate the rental return...

Supposedly, I'm getting a mortgage for 75% of the price, at 4.5%. Figure out my percent return on the downpayment...

go ahead and add worst case $5000 for appliances and cleanup to get it rented...

Let's see how this compares to 3% dividends.... Just curious!

You have to at least admit that it requires quite a bit more skills and knowledge to be a successful landlord and also a bigger appetite for risk than for somebody who parks their money in dividend paying large cap stocks that have been around forever and that they can sell with a mouse-click if the stock market turns down sharply.

CDon   Sat, 3 Nov 2012, 7:30am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 37

Billybigrig says

In our neck of the woods
http://lbbusinessjournal.com/realty-views/692-homeownership-rate-in-decline.html

OK, so per your source, the western US is down to 59.9%.

As far as I can tell, with the exception of the bubble, the census indicates that homeownership in the western US was somewhere in the 58-62% range for the last 45 years.

Further, per your source if its now at 59.9%, it bolsters ChrisKolmar's statement

"not that much further to fall"

Still, we are just young bucks, and the census table I saw went back only to 1965.

Clearly, you must be talking about some timeperiod much before 1965. Tell us about the homeownership rates that you have firsthand knowledge of that will cause our jaws to drop.

lostand confused   Sat, 3 Nov 2012, 11:29am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 38

upisdown says

What is the real overall reason for the sky-high prices?

Back before the early 2000s, you could get a good decent house for 300k+ in the bay area. I know plenty of people who bought decades ago for 40-50k .A million dollar meant a lot -not just the price of a sub-urb McMansion. This was when the economy was red hot and the state was in a surplus.

Then the FED pumped bubble happened and owning a house was like finding an oil well in your backyard. Money just came from thin air-with little effort. It was just a frenzy and I think people stopped looking at it like a house and more like a dotcom stock that will give you millions. Only unlike a dotcom stock, this was "live" and every month it went up.

I myself look at several factors-what I can afford, money left over for travel and other hobbies, loan balance and how long I can go if for some reason I enter an extended period of unemployment. Mid-west, I will buy-but I am getting older and don't like the weather. Southern CA weather is perfect and so back. But housing prices are still insane.

Now if there was such a big difference for ever -fine, but this is just recent. There was always a difference between CA and the nation-but not this big.

Patrick   Sat, 3 Nov 2012, 11:52am PDT   Share   Quote   Permalink   Like   Dislike     Comment 39

lostand confused says

Now if there was such a big difference for ever -fine, but this is just recent. There was always a difference between CA and the nation-but not this big.

True! Realtors will tell you it was always crazy here, but not this crazy.

The divergence between rents and prices really took off only after the year 2000 or so. Before that, the rent to price ratio was the same in the Bay Area as everywhere else. Rents and prices were high, but they were in line with each other. Now prices are far far beyond what rents will support, except in parts of the East Bay, Oakland, etc.

CDon   Sat, 3 Nov 2012, 10:25pm PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 40

Billybigrig says

I would have to say that david9 completely validated the argument , no where in history has there been such a fake housing market

Yes - he did validate the argument that the housing market is fake. So now, the only question left is homeownership levels.

Again, us young bucks (>52 years old) think that homeownership levels will revert to the levels seen for the last 50+ years.

You however say us young bucks smply havent been around long enough "to know" otherwise, and that the homeownership levels will plunge so hard it will be "jaw dropping".

So for the benefit of us young bucks who only have knowledge of the last 50 years, what are these levels you saw, and when were they reached?

upisdown   Sat, 3 Nov 2012, 11:45pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 41

lostand confused says

Now if there was such a big difference for ever -fine, but this is just recent. There was always a difference between CA and the nation-but not this big.

Was in Santa Ana 20 years ago visiting some relatives and they were showing us their new house, that they bought after making a killing on the sale of their previous house, and bought that one for something like $400,000. It wasn't real big, had a poor layout with oversized rooms and vaulted ceilings, and had about 60 sq/ft of grass in the back yard and a small patio with a view of a large hill. Plus every house in the subdivision was exactly the same(they claimed there were 3 shades of the same color)down to the mailbox. At that time, I had just bought my first house for $25,000 and had to put on a completely new roof including rafters, because it was an original Sears house.

That's a huge difference in price(and obviously size too) but we both sold about 3 years after that and made almost the exact same amount of profit.

taxee   Sat, 3 Nov 2012, 11:58pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 42

New rules. This is unprecedented stuff. The fed decreed TBTF banks can now be landlords and won't be forced to sell their REO. The fed is buying the equivalent of 40,000 one million dollar homes per month with dollars they conjure up at a keyboard. No one audits the fed. We are not citizens. We are now subjects.

lostand confused   Sun, 4 Nov 2012, 12:03am PDT   Share   Quote   Permalink   Like   Dislike     Comment 43

upisdown says

Was in Santa Ana 20 years ago visiting some relatives and they were showing us their new house, that they bought after making a killing on the sale of their previous house, and bought that one for something like $400,000. It wasn't real big, had a poor layout with oversized rooms and vaulted ceilings, and had about 60 sq/ft of grass in the back yard and a small patio with a view of a large hill. Plus every house in the subdivision was exactly the same(they claimed there were 3 shades of the same color)down to the mailbox. At that time, I had just bought my first house for $25,000 and had to put on a completely new roof including rafters, because it was an original Sears house.
That's a huge difference in price(and obviously size too) but we both sold about 3 years after that and made almost the exact same of profit

That was when it was coming off the last real estate mania/bubble. It crashed and burned pretty bad. But my last job in the mid-west you still could buy a very nice home for 130k-granted not in the city. The same in Atlanta. When I was leaving Atlanta, a colleague bought a townhome for 65k -3br/2bath with garage. It was a sub-urb of Atlanta-but still had jobs there and commutable distance.

CA actually has low prices in the inland empire and other places. Stockton and Tracy are pretty reasonable now as are many places in north CA. But the coastal/job centers are still over valued, when compared to the economy. Will it stay put like this-who knows? I only know I am not buying at these rates. Now from what Roberto is saying, Phoenix seems pretty reasonable?

taxee   Sun, 4 Nov 2012, 12:15am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 44

And it is misleading to talk about the percentage of 'home ownership' when what you're really talking about is 'home loanership'. Only 42% of rural 'owners' are mortgage free and that drops to 27% for everywhere else. In case you hadn't noticed, fewer and fewer people with mortgages ever pay them off. http://www.dailyyonder.com/true-homeownership-rural-america/2012/07/23/4205

upisdown   Sun, 4 Nov 2012, 12:19am PDT   Share   Quote   Permalink   Like   Dislike     Comment 45

It seems as though here in the Midwest some properties didn't really inflate at all, and the new house weren't out of whack in price p/sq/ft, although they were built cheaply and right at code-standard. Some older houses that were brought up to date brought some ridiulous prices for the size and location though(130,000 for basically a 90,000 house). But, prices have really dropped in some categories, and mostly the aftershock of the bubble was from people being over-extended, and pulling out inflated equity. Sellers thought that a new roof and $150 worth of paint equaled thousands of dollars.
In my opinion, the biggest perpetrators of fraud were the appraisors and home inspectors around here. Bankers will lend, that's what they do, however they can make it happen. realtors will sell, whatever way they can. And a lot of people will borrow any amount of money if you offer to loan it to them to buy something.
What I've noticed in the last couple of years is that some people complain about the size of a bedroom(10' x 12')and how it's so tiny, but now that's all they can afford.

Mick Russom   Sun, 4 Nov 2012, 1:46am PDT   Share   Quote   Permalink   Like   Dislike     Comment 46

robertoaribas says

Oxygen says

the overall US housing market wont even hit bottom for another 5 or so years..probably another 20 years. like an egg, it'll splatter and flatline for years, definitely won't bounce back like a ball

yeah... and yet Phoenix is up 30%.... that non bounce is really something!

More of the man who wants to steal from the next generation. While QE buys 40B/month to keep your scam going skyrocketing already high living costs so that the consumer economy gets into even deeper trouble.

Patrick   Sun, 4 Nov 2012, 1:48am PDT   Share   Quote   Permalink   Like   Dislike     Comment 47

E-man says

Fact is a bitch isn't it? How do you expect Billy small rig to dispute facts? By dropping his jaw? :)

Try the "Invite an expert to fact-check this" link at the top!

Just find someone who you think has the facts or is an expert and invite them.

Click the link, check it out.

Why doesn't anyone use it?

bdub   Sun, 4 Nov 2012, 1:43am PST   Share   Quote   Permalink   Like   Dislike     Comment 48

What's going to happen to house prices when mortgage rates double? The rates can't maintain these record low rates. I think prices are still artificially inflated. There is no way you can tell me prices are going to maintain or go up with 30 year mortgage rates around 3.5%.

David Losh   Sun, 4 Nov 2012, 3:23am PST   Share   Quote   Permalink   Like   Dislike     Comment 49

taxee says

In case you hadn't noticed, fewer and fewer people with mortgages ever pay them off.

Mortgages are the real issue.

I have paid off two houses in my economic life. The first I bought for $35K, the second I paid $86K.

What would you find today that is twice your income, or less, and affordable?

Patrick   Sun, 4 Nov 2012, 6:36am PST   Share   Quote   Permalink   Like   Dislike     Comment 50

Please, no direct personal insults, like "idiot".

matthew79   Sun, 4 Nov 2012, 7:15am PST   Share   Quote   Permalink   Like   Dislike     Comment 51

Really? I've read way worse than "idiot" on here!! :)

exflirt   Sun, 4 Nov 2012, 7:19am PST   Share   Quote   Permalink   Like   Dislike     Comment 52

matthew79 says

Really? I've read way worse than "idiot" on here!! :)

New rules - we're all going to play "nicer" :-)

SubOink   Sun, 4 Nov 2012, 8:40am PST   Share   Quote   Permalink   Like   Dislike     Comment 53

bdub says

What's going to happen to house prices when mortgage rates double? The rates can't maintain these record low rates. I think prices are still artificially inflated. There is no way you can tell me prices are going to maintain or go up with 30 year mortgage rates around 3.5%.

3.5% for 30 years for me :)

Iwog, what's you take on the common misconception of "if rates go up, house prices will crater"?

David Losh   Sun, 4 Nov 2012, 11:13pm PST   Share   Quote   Permalink   Like   Dislike     Comment 54

robertoaribas says

we have a currency crisis in a recession

I think most people view QE 1, 2, and 3 as a currency crisis.

Let me recap, the Fed, Bernanke, has dumped Trillions of Dollars, of borrowed funds, into the economy in hopes of getting inflation started. The consumer however has hit a brick wall, and can't afford any more price increases.

Your rents are a big part of that brick wall. Housing is becoming less of a concern to the bigger issue of deleveraging, and getting to cash.

As long as consumers keep borrowing into that feeling of wealth we have a problem.

In addition we have high unemployment, under employment, and stagnant wages.

upisdown   Sun, 4 Nov 2012, 11:36pm PST   Share   Quote   Permalink   Like   Dislike     Comment 55

David Losh says

I think most people view QE 1, 2, and 3 as a currency crisis.
Let me recap, the Fed, Bernanke, has dumped Trillions of Dollars, of borrowed funds, into the economy in hopes of getting inflation started. The consumer however has hit a brick wall, and can't afford any more price increases.

That's why it's called a balance sheet recession. Consumers are deleveraging and are tapped, and like you said, with the stagnant wages and also underemployment compounds the problem.

But, banks are never reserve constrained and can create reserves automatically when they lend. Consumers aren't lending, and businesses are lending just enough to stay afloat. The Fed Res actions of swapping reserves for MBS does absolutely nothing to put many into the economy, and doesn't do anything for the banks reserve positons, because that wasn't an issue, it just relieves banks of some really bad debt and nightmares that would otherwisse haunt them. Or worse, those bad bank debts could become public and be a huge liability nightmare.

RentingForHalfTheCost   Mon, 5 Nov 2012, 4:24am PST   Share   Quote   Permalink   Like   Dislike     Comment 56

New Renter says

RentingForHalfTheCost says

You can park it in much much better places. Like real investments that pay dividends and actually do things beside decay.

What do you recommend?

Keep it simple. Load up on stocks like MCD(3.5%), GE (3.2%), PG(3.2%), ATT (5%), INTC(4.1%). Then in addition to the ~ 4% average dividend returned, you sell calls off your stocks. You can bump your yearly return to over 10% with some discipline.

I have been doing the above for years now and don't see much downside risk. The very worst thing that happened to me was after a big run up in GE I got my shares taken from me. Albeit with a handsome 12% ROI. I'll take that downside any day over a housing price drop with 5-1 leverage.

APOCALYPSEFUCKisShostikovitch   Mon, 5 Nov 2012, 8:40am PST   Share   Quote   Permalink   Like (3)   Dislike     Comment 57

In the end, we'll all be defending our yam crops from starving neonazis and Mexicans, butchering the healthy ones and eating them in front of foreclosed hovels and howling at the moon.

dublin hillz   Mon, 5 Nov 2012, 8:49am PST   Share   Quote   Permalink   Like   Dislike     Comment 58

APOCALYPSEFUCK is Shostakovich says

In the end, we'll all be defending our yam crops from starving neonazis and Mexicans, butchering the healthy ones and eating them in front of foreclosed hovels and howling at the moon.

Dude, are you the director of those movies that they show late at night on showtime/TMC?

RentingForHalfTheCost   Wed, 7 Nov 2012, 5:06am PST   Share   Quote   Permalink   Like   Dislike     Comment 59

robertoaribas says

ATT is a dog... where are they going to get growth going forward? their service sucks in my market, verizon is much better, and who the hell uses long distance today? I'd take a house over ATT...especially a house paying 10% compared to ATT 5%, and you can take a tax depreciation on the house...

wired networks are not growing, but the wireless market is for ATT. You might no like them for your particular neighbourhood (I don't as well), but they have a national foothold. Growth is there, smartphone/tablet/laptop wireless (3G/4G) traffic is up as well as the revenue for these services. You don't really need much growth when you have a 5% dividend and another 5% income from covered calls. You just don't want negative growth, which could happen,but I doubt it. People are addicted to data.

Dan8267   Wed, 7 Nov 2012, 5:45am PST   Share   Quote   Permalink   Like   Dislike     Comment 60

APOCALYPSEFUCK is Shostakovich says

In the end, we'll all be defending our yam crops from starving neonazis and Mexicans, butchering the healthy ones and eating them in front of foreclosed hovels and howling at the moon.

Why wait. I howl at the moon all the time.

Dan8267   Wed, 7 Nov 2012, 5:46am PST   Share   Quote   Permalink   Like   Dislike     Comment 61

robertoaribas says

why the hell haven't they hired you to write for "walking dead" yet???

I suspect that APOCALYPSEFUCK wrote the movie Abe Lincoln vs Zombies. It was much better than Abe Lincoln Vampire Hunter.

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