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Another Housing Bottom This Year (Maybe)
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2012 Jun 29, 5:53am 51,421 views 89 comments
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dunnross
2012 Jul 3, 7:49am
You have to be careful using when you use real vs nominal numbers. Houses can and will appreciate in nominal terms, but may not in real terms. Just as nominal wages will grow even if real wages are stagnant.
I am sorry, but silicon valley prices are up over 80%, at least, in both real and nominative terms since the 1990's, while both employment and wages are down.
This is exactly why silicon valley prices will continue to drop both nominally and in real terms, whether we have growth in employment or not.
but they won't explain what exactly is driving this supposed "recovery". Because I think if they spent time actually analyzing what was driving this "recovery" they might figure out that there really isn't anything to drive home prices up at all, except for government props, and artificial market manipulation.
Goran_K: The data points about wage growth and unemployment further illustrate the divide between the haves and the have-nots. Unemployement is still low for those with higher education degrees. Wage growth has been higher for the top 3 tiers. The middle/lower middle class is struggling and has been for the last decade.
Currently homebuyers are investors with cash and upper quintile incomes. Private Equity is jumping into SFH like no time in history.
What's driving the recovery of home prices? Prices getting closer to rental parity have set a support and people unable/unwilling to sell their homes have contributed to low supply. Let's say that home prices either stay flat or dip from now until 2020. You'll have about 15 years of buyers that will be unwilling or unable to sell. That alone will help keep price from dropping as supply decreases. Every percentage drop in home prices will keep a percentage of homes off the market. A large portion of home sales will be distressed sales, similar to the current situation now.
I just look around in real life and when I see activity, neighbors remodeling, people eating out etc etc, I get the vibe of a recovery.
Bay area folks living on massive credit. Take the credit cards away, and things will be a bit more austere.
Its amazing to see so many people in the red and spending like there is no tomorrow.
Wage slaves and debt slaves all in one. Fascinating. And the government is trying to get people to leverage more with 0% interest rates.
Goran_K
2012 Jul 4, 4:09am
What's driving the recovery of home prices? Prices getting closer to rental parity have set a support and people unable/unwilling to sell their homes have contributed to low supply.
I agree with this. Home prices in certain markets are getting close to parity with record low rates, and I also see some homeowners "stuck" because they are underwater.
The question then becomes, how long will they hold onto their overpriced home that has zero change of appreciating back to the bubble price they paid within the next 10 to 15 years?
Also, let's not forget, banks are taking TWICE as long to foreclose as they did in 2008-2009. So many of those homeowners may have already thrown in the towel, and are living rent free at the banks expense.
duckhead
2012 Jul 4, 5:08am
suboinK: “I get the vibe of a recovery†BOOMCHUCKALUCKA that’s the spirit go with the viiiiiiiiiiiiiiiiiiiiiiiiibe man!!! Credit where credit is due Mick, to the OINKER not Goran. Goran is too fixated on facts and stuff when what you really need is the “vibe†baby! OINKAOINKA and Mick you’ve seen the vibe in action: “Its amazing to see so many people in the red and spending like there is no tomorrow.†Yes these people are living for today, that’s the way to do it DUCKHEAD STYLE BOOMBA.
Goran_K
2012 Jul 4, 6:00am
I love that song. Didn't grow up in that era, but I agree with many of the values.
Goran is too fixated on facts and stuff when what you really need is the “vibe†baby!
Facts and Stuff?
LOL
bmwman91
2012 Jul 4, 12:17pm
Only time will tell. In much of the Bay Area, it looks like things may be on the rise again, despite the fact that it is an affront to many people's sensibilities. But, it is what it is for now. Will it be like this a year from now? Nobody knows, and anyone that claims to know for certain is a charlatan or fool.
Just from observing things, many people looking for their first home are panicking and trying desperately to buy. Investors and wannabe investors are all aboard the bandwagon. The herd is on the move. My general feeling is that it is totally unsustainable as history repeatedly demonstrates. The thing is though that the herd can keep the momentum up for a very long time, as in the better part of one's lifetime. Don't hold your breath for house prices in the SFBA to hit a low level where you can both buy a house and have disposable income for living your life with. It's one or the other at present, and likely into the foreseeable future.
I used to really want a house for all sorts of common reasons. Once I ACCEPTED that buying would be nothing more than a heavy list of compromises, I decided to forget about it and focus on living life day to day. Sure, it is hard and even heart-wrenching to let-go of an ideal that you have sought and invested a lot of yourself into pursuing. Recognizing when to cut your losses is an important skill though. Life becomes vastly more enjoyable when you stop pining away for something totally beyond your control.
David9
2012 Jul 4, 3:21pm
Trulia says many markets are 'In the clear' regarding a housing recovery today.
These are same people who send me an email with the Real Estate advice:
"don’t even bother trying to align your buy or sell with market peaks and troughs. It’s a better practice to time your transaction in accordance with your life,"
What's driving the recovery of home prices? Prices getting closer to rental parity have set a support and people unable/unwilling to sell their homes have contributed to low supply.
The question then becomes, how long will they hold onto their overpriced home that has zero change of appreciating back to the bubble price they paid within the next 10 to 15 years?
I think the answer for most of them is as long as they're at or below rental parity they'll stay whether it be 10, 15 or 30 years. Less people will trade-up. Does it matter if you're underwater if you're paying less than a comparable rental? .. If they're close rental parity and they HAVE to move, I'd think many people will opt to become landlords rather than foreclose or bring money to the table. It might not be the ideal scenario and an additional headache, but it could make financial sense.
For all your musings about stagnant wages, you didn't respond to my assertion that the top quartiles of Americans are doing very well, while the bottom quartiles are stagnant and facing high levels unemployment. If you just look at median income numbers and regular unemployment figures you might deduce that housing prices need to follow that trend. However, homeowners these days are going to be in the top quartile and aren't necessarily facing the same hardships of those in the lower tiers.
Perhaps we're looking at a trend of lower homeownership rates and a separation of income/housing ratios. Wealth is increasing as a whole in the United States but is sharply diverging away from the middle class. Home ownership could do that as well, don't you think that's a possibility?
Goran_K
2012 Jul 5, 5:16am
I'd think many people will opt to become landlords rather than foreclose or bring money to the table. It might not be the ideal scenario and an additional headache, but it could make financial sense.
That's a huge assumption, and one I'm not inclined to agree with.
As for your point of the "top quartile" of Americans doing well, I didn't respond to it because the amount of households that make $150,000+ is about 5% according to IRS data.
Is that what you feel is normal? 5% of the nation being perfectly okay with stagnant wages? I'm not sure what your point was to be honest.
Perhaps we're looking at a trend of lower homeownership rates and a separation of income/housing ratios. Wealth is increasing as a whole in the United States but is sharply diverging away from the middle class. Home ownership could do that as well, don't you think that's a possibility?
What your describing is wealth disparity, and yes I do think that is happening, to the detriment of the majority of the people in the country. So if your point is that home ownership will become a rich man's game in the future and the U.S may become a failed nation, then yes, that's a possibility.
As for your point of the "top quartile" of Americans doing well, I didn't respond to it because the amount of households that make $150,000+ is about 5% according to IRS data.
Is that what you feel is normal? 5% of the nation being perfectly okay with stagnant wages? I'm not sure what your point was to be honest.
The top 20% of Americans have not had stagnant wages. Those 20% are the ones that are buying homes, especially in metro coastal areas. Furthermore, it's that 20% that are investing either as small investors or in pools of money that are buying up multiple homes. We're trending towards more homes being held by fewer people.
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http://www.nytimes.com/2012/06/28/business/economy/new-indications-housing-recovery-is-under-way.html?_r=1&hpw
Okay, this is my first posted Real Estate Discussion, please feel free to tear apart at will. I expect nothing less.
Articles like this irritate me, so I thought I would take quotes from the article and write my housing bear thoughts, which the article did evoke.
1.) "Joe {Last Name}, a real estate agent in the Minneapolis suburb of Eden Prairie, said he recently concluded a streak of 13 consecutive bidding wars over homes that his clients wanted to buy. Each sold above the asking price."
-- I just don't buy these stories and every time there is an opportunity to search for the sales record I can't find it.
2.) "Millions of people remain underwater" & "Millions of families still face forclosure"
-- So how in the hell is there a housing recovery and / or bottom?
3.) "Our sense is that the market is recovering"
-- Well, isn't that reassuring. Data? A thread of evidence?
4.) "The trend is clear in the data. The widely respected S.&P./Case-Shiller index reported earlier this week that sales prices for existing homes rose in April for the first time this year." & "Indeed, in a growing number of areas demand for homes is outstripping supply."
-- Yes, that is true. There is no inventory. Why? Please refer to # 2
5.) "This is the fourth consecutive year that the housing market has shown signs of revival, and each previous episode ended with prices renewing their downward slide."
-- And this year is different because?
6.) "Government efforts to help homeowners have intensified, allowing more borrowers to refinance or avoid foreclosure."
-- Yes.
7.) "The influx of investors is a major reason that the market is looking stronger"
-- Really? Ok, in what way? True, Wall Street is a cash cow for a few.
8.) "And the rise in prices is happening despite the vast number of vacant houses awaiting buyers, up to two million more than the normal level, with several million more houses still at risk of being foreclosed."
-- Again, this indicates a recovery?
9.) "There are still reasons for caution."
-- Agreed.
#housing