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Housing market continues to gain as inventory falls


By iwog   Follow   Mon, 26 Nov 2012, 11:31pm PST   3,957 views   62 comments
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It's even more significant since we should be well into the winter doldrums.

http://online.wsj.com/article/SB10001424127887324307204578128900029337018.html

Sales of previously owned homes were stronger than expected in October, putting them on track to hit their highest annual level since 2007.

Existing homes sold at a seasonally adjusted annual rate of 4.79 million units in October, the second-highest level of the year and up 2.1% from September, the National Association of Realtors said Monday. October's level represented a 10.9% gain from a year earlier and was the 16th consecutive month of year-over-year home-sales gains.

Prices are rising amid sharp declines in the number of homes listed for sale. Just 2.14 million homes were for sale at the end of October, down 22% from one year ago to the lowest level in a decade, according to NAR estimates.

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David Losh   Tue, 27 Nov 2012, 1:21am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 23

Call it Crazy says

Overall trend line is DOWN

You would have to go back further than 2003 to establish a trend line.

iwog   Tue, 27 Nov 2012, 3:14am PST   Share   Quote   Permalink   Like   Dislike (3)     Comment 24

David Losh says

Call it Crazy says

Overall trend line is DOWN

You would have to go back further than 2003 to establish a trend line.

It doesn't matter anyway. Nationwide real estate trends shouldn't be measured by a single county in New Jersey.

The market has been essentially flat since 2009 and sharply higher for 2012. If it continues, 2009-2011 was the bottom depending on which region you are in.

dodgerfanjohn   Tue, 27 Nov 2012, 3:25am PST   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 25

iwog says

dodgerfanjohn says

The spin actually comes from you, correct?

That is you misrepresent the actual level of inventory in2002 by failing to include new build.

Inventory has nothing to do with new or old build. Inventory is measured by how many homes are currently available for sale.

Wow, can you ever stop the bs deflection?

The graph you posted depicts previously owned homes only.

However, in 2002 there was a substantial amount of new build.

Therefore the graph you posted does not accurately support the point you are attempting to make.

iwog   Tue, 27 Nov 2012, 3:28am PST   Share   Quote   Permalink   Like   Dislike (2)     Comment 26

dodgerfanjohn says

The graph you posted depicts previously owned homes only.

Yes.

dodgerfanjohn says

However, in 2002 there was a substantial amount of new build.

Which were sold in 2002, therefore are counted as previously owned.

dodgerfanjohn says

Therefore the graph you posted does not accurately support the point you are attempting to make.

The point I was trying to make is that inventory continues to fall and housing starts continue at depression levels. This doesn't look good for lower home prices and may well be setting us up for a large spike next year.

Honestly I have no idea what you're talking about or what you're trying to challenge me on. You should probably clarify.

tatupu70   Tue, 27 Nov 2012, 3:29am PST   Share   Quote   Permalink   Like   Dislike     Comment 27

dodgerfanjohn says

My leaning is that the graph above is failing to include new build which was rather substantial in 2002 and 2003, but is non existent in 2012.
I would think that might color things in a very different light...that is if there was a very large amount of new build in 2002/2003.
Supply is supply in my thinking.

If that were the case, it makes Iwog's point even stronger. More inventory in 2002 means that situation now is even more strongly tilted towards price increases.

bmwman91   Tue, 27 Nov 2012, 3:40am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 28

My question is...how long will this boom last before the next bust? 3-5 years? CA will probably see some serious price increases with 60% of foreclosures being cancelled thanks to the Homeowner Protection Act passing. That should buy people at least a year or two of time to "ask for loan mods." If prices increase enough and get buyers that bought at the last peak back above-water, will they decide to sell, thus increasing inventories? It seems plainly obvious that the government and Fed won this round, and prices are going to assume an upward trajectory in the popular coastal areas.

I just can't tell if I should jump in now and try to get out early enough with some extra cash, or if I should wait it out. Unlike last time, rents won't be cratering because the price-driver is low inventory, so everyone HAS to rent while they wait, which increases demand on the existing supply of rentals.

iwog   Tue, 27 Nov 2012, 3:42am PST   Share   Quote   Permalink   Like   Dislike (3)     Comment 29

bmwman91 says

My question is...how long will this boom last before the next bust? 3-5 years?

10 years. The next real estate cycle supported by low interest rates and the next economic boom supported by a new health care gold rush is already written in the history books.

They just haven't been published yet.

errc   Tue, 27 Nov 2012, 4:39am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 30

So do you think we will see median house price here in usa of 300k come 2020? Do you see interest rates doing anything other then declining into perpetuity in this ten year boom? Will wages move off their current multi decade flatline?

Call it Crazy   Tue, 27 Nov 2012, 5:44am PST   Share   Quote   Permalink   Like   Dislike (2)     Comment 31

iwog says

It doesn't matter anyway. Nationwide real estate trends shouldn't be measured by a single county in New Jersey.

The market has been essentially flat since 2009 and sharply higher for 2012. If it continues, 2009-2011 was the bottom depending on which region you are in.

I guess you missed my other chart showing the U.S. data...

The market has been flat since 2008 except for the "Spring bounces"... and if you noticed, the Spring bounces have been smaller and smaller the past few years...

Call it Crazy   Tue, 27 Nov 2012, 6:00am PST   Share   Quote   Permalink   Like   Dislike (2)     Comment 32

Call it Crazy says

iwog says

Don't change the premise you challenged me with. If you think the NAR is lying, post a source that disagrees with them.

Come on... your smarter than that..... NAR is a "Sales" organization.. they ALWAYS try to "spin" data in their favor. Anyone with functioning brain cells knows that.

Since this article came out today, I'm sure there will be other ones that will take a closer look at the data...

Like I said, here is another look at where the "gains" are coming from:

Bulk Investors and the Real Estate Market
http://www.acting-man.com/?p=20728

Investors typically buy lower end properties. Say at an average of $100,000 per unit, the $6 billion to $8 billion raised so far would not even amount to 100,000 homes.

On the national level, and using the most recent releases, Existing Homes Sales and New Homes Sales combined are coming in at a pace of just over 5 million for 2012. The median price is $178,000 for existing homes and $242,000 for new homes. 100,000 homes would not even show up on the radar.

As for foreclosures, there are 5.6 million total non current loans in various stages of default. The current estimate for under water mortgages still exceeds 10 million, or about 20% of all mortgages. The Wall Street bulk investors are unlikely to put a dent in the distress property arena for the foreseeable future. In comparison, when the Resolution Trust Corporation (RTC) was dissolved back in 1992 due to the sunset clause, investors cleaned the entire inventory of REOs and loans off the books with just a few auctions.

On the localiz level, it is a slightly different story. I am going to use three Western metro areas as examples. Phoenix, Southern California and Las Vegas were hotbeds of the subprime bubble and are once again the most sought after areas, this time by bulk investors. Using September data from DQNews, investors purchased 38.6%, 27.3% and 48.5% of all sales respectively.

Of the aforementioned metro areas, Las Vegas is the most out of whack. There were 4,570 sales in October. 50.2% were sold to absentee owners, 52.5% in cash (43.2% were short sales, 16.7% were REOs) and 36.1% FHA financed. I have never seen a market where over half of the buyers paid cash and over 1/3 of the sales were financed via the FHA, leaving only 14% of sales in the "other" category.

Here in Southern California, the herd mentality is in full control with buying increasing at all levels. How long will this feeding frenzy last? Will the bulk investors be able to generate enough returns to whet their appetite for more? Will the local investors continue to ride on the coattails of the Wall Street moguls? Will owner occupiers continue to overpay for new homes because the 1%ers are paying cash and squeezing them out of the non-FHA market?

Stay tuned.

tatupu70   Tue, 27 Nov 2012, 7:02am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 33

Call it Crazy says

The current estimate for under water mortgages still exceeds 10 million, or about 20% of all mortgages.

At what point will you agree that people with underwater mortgages are NOT shadow inventory because if they haven't defaulted by now, they're not going to? Don't you think it's pretty unlikely at this point?

Call it Crazy   Tue, 27 Nov 2012, 7:06am PST   Share   Quote   Permalink   Like (1)   Dislike (2)     Comment 34

tatupu70 says

At what point will you agree that people with underwater mortgages are NOT shadow inventory because if they haven't defaulted by now, they're not going to? Don't you think it's pretty unlikely at this point?

What do you think of the people who's houses were damage in Sandy will do with their underwater mortgages??

Cheeseus Sonofdog   Tue, 27 Nov 2012, 7:45am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 35

Nice chart. It shows the decline in inventory due to the homebuyers tax credit. Then in 2010 inventory started skyrocketing. That was rocket docket, where banks were trying to speed up foreclosures in the court system. Then you see towards the end of 2010 invenmtory started going down. What was that? ROBO-SIGNING SCANDAL. It backlogged foreclosures until this year. Even now, cases are still backed up as banks are made to jump through hoops. Your charts show exactley what is going on. Inventory is not down because of some type of organic growth, but rather due to government intervention. Prices are still absurd and deleveraging hasn't happened. A long way down to go....

iwog   Wed, 28 Nov 2012, 10:28pm PST   Share   Quote   Permalink   Like   Dislike     Comment 36

The problem with your theory is the robo signing scandal didn't stop foreclosures in non-judicial states like California and Nevada, two of the three biggest bubble states.

Even if you're right which I think is impossible, banks can hold these homes indefinitely while prices are moving up and only help their situation.

tatupu70   Wed, 28 Nov 2012, 11:38pm PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 37

Call it Crazy says

What do you think of the people who's houses were damage in Sandy will do with their underwater mortgages??

How many houses do you think you're talking about there?

Call it Crazy   Thu, 29 Nov 2012, 12:24am PST   Share   Quote   Permalink   Like (1)   Dislike (2)     Comment 38

tatupu70 says

Call it Crazy says

What do you think of the people who's houses were damage in Sandy will do with their underwater mortgages??

How many houses do you think you're talking about there?

From an article on the Asbury Park Press:

"Christie said more than 30,000 homes and businesses were destroyed or sustained structural damage during Sandy and that 42,000 buildings sustained lesser damage from the Oct. 30 storm."

tatupu70   Thu, 29 Nov 2012, 1:01am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 39

Call it Crazy says

tatupu70 says



Call it Crazy says



What do you think of the people who's houses were damage in Sandy will do with their underwater mortgages??


How many houses do you think you're talking about there?


From an article on the Asbury Park Press:


"Christie said more than 30,000 homes and businesses were destroyed or sustained structural damage during Sandy and that 42,000 buildings sustained lesser damage from the Oct. 30 storm."

OK--so assume 40% of those were owned with no mortgage--now we're down to 18K homes. What is the latest underwater average? 50% of people with a mortgage? Now you're at 9K homes.

I don't think another 9K homes is going to have a large effect. Maybe very locally. But almost no effect once you're a few dozen miles away.

Call it Crazy   Thu, 29 Nov 2012, 1:43am PST   Share   Quote   Permalink   Like (1)   Dislike (2)     Comment 40

E-man says

I see new construction jobs are being created. Construction suppliers will also benefit tremendously. Insurance companies are the ones hurting.

So if insurance companies are hurting, who's going to be paying for the rebuilding??? HELOCS???

Call it Crazy   Thu, 29 Nov 2012, 1:47am PST   Share   Quote   Permalink   Like   Dislike (2)     Comment 41

tatupu70 says

OK--so assume 40% of those were owned with no mortgage--now we're down to 18K homes. What is the latest underwater average? 50% of people with a mortgage? Now you're at 9K homes.

I don't think you are even close.... a lot of the houses destroyed are second houses or summer rentals that are big time leveraged and many AREN'T paid off. Many are trying to cover their mortgages with the summer rental revenues.

tatupu70   Thu, 29 Nov 2012, 2:02am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 42

Call it Crazy says

I don't think you are even close.... a lot of the houses destroyed are second houses or summer rentals that are big time leveraged and many AREN'T paid off. Many are trying to cover their mortgages with the summer rental revenues.

I'm just going by averages. If you have better data, please post it.

iwog   Thu, 29 Nov 2012, 3:07am PST   Share   Quote   Permalink   Like   Dislike     Comment 43

errc says

So do you think we will see median house price here in usa of 300k come 2020? Do you see interest rates doing anything other then declining into perpetuity in this ten year boom? Will wages move off their current multi decade flatline?

Wages are going up guaranteed because the baby boomer healthcare boom is going to required skilled and semi-skilled workers by the millions. The amount of money involved is staggering which is why Social Security and Medicare are in so much trouble. Even if those benefits are reduced, the burden will only be shifted to the boomers themselves who as a group are quite wealthy right now compared to workers.

We are also in the midst of an energy Renaissance in the United States with natural gas nearly too cheap to meter. (your utility company is pocketing the difference) I don't know how long it will last, but the amount of wealth it is generating will also factor into the economy.

Risk factors include the fiscal cliff brought to you by the Republican party, who both wrote the doomsday expiration date into the original law AND will threaten to kill the economy if they don't get 100% of their demands met. I'm not convinced this will last longer than a year however since 2013 should be an exceptional year for building industries. New housing starts are starting to increase and may spike soon.

iwog   Thu, 29 Nov 2012, 3:09am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 44

Call it Crazy says

The market has been flat since 2008 except for the "Spring bounces"... and if you noticed, the Spring bounces have been smaller and smaller the past few years...

I have no idea what you're talking about. The spring bounce of 2012 was the largest since the boom AND the winter doldrums seem to have missed the curtain call.

Call it Crazy   Thu, 29 Nov 2012, 3:17am PST   Share   Quote   Permalink   Like (1)   Dislike (2)     Comment 45

iwog says

I have no idea what you're talking about.

Go back up and look at the chart (total homes sold)... we are at the same level we were back in 2008. The only bounces were the first timer credit in the beginning of 2010 and the normal spring bounces. Draw a line from the start of the chart to the end.... you get a flat down trending line...

iwog says

The spring bounce of 2012 was the largest since the boom

When you add in the big block purchases by the institutional investors this year, you get that larger spike. Time will tell if it can continue like this.

iwog   Thu, 29 Nov 2012, 3:20am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 46

Call it Crazy says

Go back up and look at the chart... we are at the same level we were back in 2008. The only bounces were the first timer credit in the beginning of 2010 and the normal spring bounces. Draw a line from the start of the chart to the end.... you get a flat down trending line...

I'm perfectly aware that the market has been flat, in fact that was my premise in most threads I posted to in 2008,2009,2010, and 2011. All I did was catch shit for it although I was far more accurate than most.

Investors are perfectly happy with a flat market. They do not become sellers and they will continue to buy as long as rents are stable or rising.

Rents are rising. The winter slump didn't show up, in fact the market continues to rise in Northern California and elsewhere. Market action is screaming buy right now and there is NOTHING on my radar that flashes danger.

Call it Crazy   Thu, 29 Nov 2012, 4:31am PST   Share   Quote   Permalink   Like (1)   Dislike (2)     Comment 47

iwog says

The winter slump didn't show up, in fact the market continues to rise in Northern California and elsewhere.

Just a hint, we aren't in winter yet..... plus, housing data is usually delayed by a few months...

Come back in Feb. or March and re-visit the numbers...

iwog   Thu, 29 Nov 2012, 4:35am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 48

Call it Crazy says

Just a hint, we aren't in winter yet..... plus, housing data is usually delayed by a few months...

Yeah except none of that is true and the housing slump usually starts in September and there is plenty of real time and almost real time housing data that shows the winter slump isn't coming.

Call it Crazy   Thu, 29 Nov 2012, 4:39am PST   Share   Quote   Permalink   Like   Dislike (2)     Comment 49

iwog says

Yeah except none of that is true and the housing slump usually starts in September and there is plenty of real time and almost real time housing data that shows the winter slump isn't coming.

Well, you solved it!!! It didn't realize the entire country lives in Santa Clara.

iwog   Thu, 29 Nov 2012, 4:50am PST   Share   Quote   Permalink   Like   Dislike     Comment 50

Call it Crazy says

Well, you solved it!!! It didn't realize the entire country lives in Santa Clara.

I said Northern California and just used one of the largest counties as an example.

From what I hear, much of the rest of the country is showing similar results. Do you have data to refute this?

iwog   Thu, 29 Nov 2012, 4:51am PST   Share   Quote   Permalink   Like   Dislike     Comment 51

robertoaribas says

I threw alot of that shit at the duck too, back in those days. I was seriously sure that he got in early, and that the bay area would drop hard... It really never did...

I think anyone who bought in the last 3 years is going to be very happy in the coming decade. I pretty much dollar cost averaged from 2008 to 2012 with the last property closing in March.

I think I'm done. I hate bidding wars.

Call it Crazy   Thu, 29 Nov 2012, 4:59am PST   Share   Quote   Permalink   Like (1)   Dislike (2)     Comment 52

iwog says

From what I hear, much of the rest of the country is showing similar results. Do you have data to refute this?

Yea, one of the largest counties on the east coast...
*

Call it Crazy   Thu, 29 Nov 2012, 5:04am PST   Share   Quote   Permalink   Like (1)   Dislike (2)     Comment 53

iwog says

From what I hear, much of the rest of the country is showing similar results. Do you have data to refute this?

Notice the little upswing on this chart at the end of 2011 before the drop in the beginning of 2012.... will history this year repeat that, we will see...
*

Nobody   Thu, 29 Nov 2012, 5:22am PST   Share   Quote   Permalink   Like   Dislike     Comment 54

I see the price of real estate is going up overall. More so here in Silicon Valley. What can I say? We have more Chinese from China here. And they are blind as a bat with lots of cash. And the result is pretty predictable. They are just bringing in their bubble here in Silicon Valley.

CDon   Thu, 29 Nov 2012, 5:23am PST   Share   Quote   Permalink   Like   Dislike     Comment 55

Call it Crazy says

Yea, one of the largest counties on the east coast...

I find it interesting how different various markets can be. For example, heres another east coast market 2X the size and about 100 miles South as the crow flies.

http://www.zillow.com/local-info/VA-Fairfax-home-value/r_4655/#metric=mt%3D34%26dt%3D1%26tp%3D5%26rt%3D8%26r%3D4655%252C53279%252C245345%26el%3D0

Out there, the idea as to whether the 11 or 12 bounce was the bottom is absurd as the data makes clear, it was a hard bottom in 09, and then a respectable, non bubbly rise in prices for the last 4 years.

Honestly, without looking at it, I would have guessed more markets look like this one, but obviously yours is far different - and I can see while you remain bearish.

I guess it goes to show as much as many hate to hear it the realtard slogan "all real estate is local" is quite true.

Bellingham Bill   Thu, 29 Nov 2012, 6:07am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 56

iwog says

I think anyone who bought in the last 3 years is going to be very happy in the coming decade. I pretty much dollar cost averaged from 2008 to 2012 with the last property closing in March.

"Calculated Risk" (Bill McBride) recently said that he thinks the Fed is going to double QE3 rate to $80B/month.

People don't yet understand what this means. This is a higher-power monetary stimulus than the 2003-2007 housing credit bubble that got us where we are today.

This wasn't in my thesis per se, but I didn't discount the possibility of aggressive Fed intervention at all, once I thought about it more and saw the 5% interest rate plateau break in 2011:

http://research.stlouisfed.org/fred2/graph/?g=dgm

Call it Crazy   Thu, 29 Nov 2012, 7:49am PST   Share   Quote   Permalink   Like (1)   Dislike (2)     Comment 57

CDon says

I find it interesting how different various markets can be. For example, heres another east coast market 2X the size and about 100 miles South as the crow flies.

http://www.zillow.com/local-info/VA-Fairfax-home-value/r_4655/#metric=mt%3D34%26dt%3D1%26tp%3D5%26rt%3D8%26r%3D4655%252C53279%252C245345%26el%3D0

That is an "artificial" market compared to the rest of the country. Your link is the D.C. suburbs.... there's A LOT of government money (ie: D.C. Jobs) that live in that county. It doesn't compare realistically with many other areas that don't have the D.C. money influence...

Call it Crazy   Thu, 29 Nov 2012, 7:51am PST   Share   Quote   Permalink   Like   Dislike (2)     Comment 58

CDon says

Honestly, without looking at it, I would have guessed more markets look like this one, but obviously yours is far different - and I can see while you remain bearish.

The whole state of NJ looks a lot like my chart above... not just that county. NJ has a lot of NY money influence but still continues on the downward trend...

Call it Crazy   Thu, 29 Nov 2012, 7:59am PST   Share   Quote   Permalink   Like (1)   Dislike (2)     Comment 59

CDon says

Out there, the idea as to whether the 11 or 12 bounce was the bottom is absurd as the data makes clear, it was a hard bottom in 09, and then a respectable, non bubbly rise in prices for the last 4 years.

Not happening here in NJ.... these are house prices....

CDon   Thu, 29 Nov 2012, 8:19am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 60

Call it Crazy says

CDon says



I find it interesting how different various markets can be. For example, heres another east coast market 2X the size and about 100 miles South as the crow flies.


http://www.zillow.com/local-info/VA-Fairfax-home-value/r_4655/#metric=mt%3D34%26dt%3D1%26tp%3D5%26rt%3D8%26r%3D4655%252C53279%252C245345%26el%3D0


That is an "artificial" market compared to the rest of the country. Your link is the D.C. suburbs.... there's A LOT of government money (ie: D.C. Jobs) that live in that county. It doesn't compare realistically with many other areas that don't have the D.C. money influence...

Granted, but this goes back to my point about it being local. Alot of money in DC means prices are up - alot of money in NJ and prices are down.

And as far as the rest of the country goes, I just did a random sampling on zillow and heres what I found.

Down
Pensacola, FL
Lawrence, KS
Albany, NY
Des Moines, IA
Harrisburg, PA
Medford, Or
Indianapolis, In

UP
Columbus, OH
Birmingham, AL
Burlington, VT
Knoxville, TN
Austin, TX

AND
Oklahoma City (a rocketship up)
Minot, ND (a huge "fracking" bubble which would scare the crap out of me).

So therein lies the problem with taking your local market situation and applying it nationwide. The staggering downturn in Ocean County, NJ is no more representative of the US than is the general uptrend in Iwog's Santa Clara Co., the respectable uptrend in Fairfax County, VA, or the Monumental fracking gas & oil induced bubble being blown in ND.

dublin hillz   Fri, 30 Nov 2012, 1:44am PST   Share   Quote   Permalink   Like   Dislike     Comment 61

Inventory is definitely down. In the city where we bought at the time of our purchase, there were 13 pages of listings in realtor.com website, now there are only 3 and the total is under 30 listings.

FunTime   Thu, 6 Dec 2012, 3:33am PST   Share   Quote   Permalink   Like   Dislike     Comment 62

bmwman91 says

My question is...how long will this boom last before the next bust? 3-5 years?

http://www.bloomberg.com/video/ecri-s-achuthan-defends-call-for-u-s-recession-BhnZZoJ3S8GB6V9sFCeeTw.html

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