patrick.net

http://loganmohtashami.com/2012/12/31/2013-housing-prediction/

I have 2013 SAARS being at 5.1-5.3 million
2014 SAARS being at 5.25-5.45 million

2013 predictions

Prices will go up with housing starts

A crash in this market would have to be SAARS coming down to 4.1-4.4 million wouldn't you agree?

Now, if we look back in at December of 2012 Sales were running at 4.9 million and lets just say December 2013 will end at 5.2 million.

So you had an increases but SAARS and total sales but no more low base numbers to work off of.

Even the NAR has sales being flat in 2014. Housing inflation is starting to take it's toll in a low wage paying job economic cycle.

However, as long as the cash buyer can stay above 30% and rates still stay below 5% the market has a cushion.

Both can't stay at those levels forever, it's just a matter of time. So for me SAARS of 5.25-5.45 million in 2014 would require 30% plus cash buyers and mortgage rates to get no where near 6% because simply the market doesn't have firepower to keep growing sales year over year.

Also, the falling labor participation rate is hitting the numbers as well, if you look at majority of the jobs recovered in this cycle it has gone to the AARP crowd, 50 and over

1. Well, the 2-5% was on the national level. I don't ever speak per one state, even though I do live in California and know all to well of the massive prices gains here.

Clearly Housing Inflation has gone wild in CA. = Mini Bubble 2.0
Inventories have been awful year round, not even breaching 3 months

On a national level Depending on who you want to take on prices.

-Corelogic and Case S. are in the 11 -12.5% range increase

- Zillow in the 6%-6.4% range
http://www.calculatedriskblog.com/2013/10/zillow-home-value-appreciation-slows-in.html

-FNC has home price up 5.3% over
http://www.calculatedriskblog.com/2013/10/fnc-house-prices-increased-53-year-over.html

Personally I don't like Zillow or FNC, I would go with CoreLogic 11-12% YOY increase in prices. When I attended the UCLA Anderson economic conference this year in June I saw all the data points that the Zillow economist used and I don't believe they grasp how much housing inflation is in the market palce

- 4.25% Nope.. didn't happen, even though we are near there now. The Bond market bubble it's first snap and that 1.60% 10 year note yield moving to 3% % wise was the biggest move we have seen in 53 years. Now, of course we are using a very low bar.

Though an Inverted head and shoulders patters is forming on the 10 year. A break through 2.47% could get us as low as 2.07 -2.12%

On housing starts, traditional you take the total number of starts for an entire year. I see your chart shows Starting point of 2013.

Let me use this as an example, because the last 4 years on housing starts were the worst 4 year period on record since they kept data at the start of 1959

Per the Census Data points and how this is tracked. ( We missed last month data due to the government shutdown so forgive outdated number)

Housing Starts:
Privately-owned housing starts in August were at a seasonally adjusted annual rate of 891,000. This is 0.9 percent above the revised July estimate of 883,000 and is 19.0 percent above the August 2012 rate of 749,000.

Building Permits:
Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 918,000. This is 3.8 percent below the revised July rate of 954,000, but is 11.0 percent above the August 2012 estimate of 827,000.

Single-family authorizations in August were at a rate of 627,000; this is 3.0 percent above the revised July figure of 609,000. Authorizations of units in buildings with five units or more were at a rate of 268,000 in August.

Make no mistake this is an increase but not as strong as a lot people would like have to see. There is ample supply of homes out there and builders don't want to rush into anything yet

Are you dealing with Chapter 7 or 13

For now there are no major changes to FHA, because their QM hasn't taken place yet. Even with the Congressional 2012 FHA solvency Act passed they really didn't change core guidelines just added a higher MI and UFMIP charges.

Chapter 13 in some case can even get a loan with in a year if the court order payments are made in order.

There is some wiggle room for Chapter 7 BK but hard to see someone buying with a FHA with a Chapter 7 filing

For the most part even though it's not an official yet, QM and CFPB will have the same rules put into BK as before. Details will get more attention next year for sure. However, there isn't anything major so far.

As you can well know keeping the buyer clean and getting something established is crucial

I don't believe that will a big enough pool of buyers to expand SAARS over 5.45 million for 2014.

Under this thesis then you must believe mortgage purchase application will have the best year in a long time because these aren't going to cash buyers they have to be mortgage buyers.

To me in a normal housing market, the mortgage buyer profile should be around 85% not 68%. Cash buyer has stayed strong.

So, a year from now, October 24th 2014 that Mortgage purchase application chart has to be much stronger than what it is now because under your thesis ... the pent up demand would should up there first

You're a CA guy, this is my email amclending@aol.com .. send me your information and if I run into BK Pre Q's I can send them to you if they are no good to me.

egads101 says

You posted housing would crash like a year ago.... Care to explain how you fucked that prediction up so bad??

perhaps he did, but what does that have to do with this topic? why are you always so defensive and willing to attack anyone who shares bad news about housing? DO you deny there is the beginnings of a housing slump here?

Your attacks on housing bears makes many people on this forum believe that your positions on housing are vulnerable to a housing slump... otherwise what other reasons would you be so defensive about this subject? Either you are over-leveraged and scared, or you are just an a$$shole. either way it sucks to be you...

I believe we are really talking about 2 different things.

For CA only

California has an inventory problem but the numbers are getting slightly better.

"Housing inventory levels improved for the fifth straight month but remained low. The Unsold Inventory Index for equity sales inched up from 3.1 months in August to 3.5 months in September. The supply of REOs edged up from 2.3 months in August to 2.7 months in September, and the supply of short sales rose from 2.3 months in August to 3.8 months in September."

http://www.car.org/newsstand/newsreleases/2013releases/septpending

Some up to date charts with respect to yields and Fed/S&P 500 relationship.

As the first chart on the thread shown, there was an impact on purchase applications and the rise of the 10 year even though rates really peaked at 5% on some loan products, not all

Also, if there was soo much pent up demand, why did Mortgage Purchase application fall so dramatically that the 4 week moving average went negative year over year .

I admit I got this one 100% wrong, because the bar was so low in 2012 that even I thought we can pull out a positive year all the way through.. which didn't happen and the trend isn't your friend

Obviously, I list my reasons here but would love to hear your theory on the decline on mortgage purchase applications which concerned the Fed in their last discussion per the FED minutes

http://loganmohtashami.com/2013/10/24/mortgage-purchase-applications-falling-slope/

What's not accounted for here are the vast majority of those foreign families are selling drugs/sex on the side to finance the million dollar purchases on a janitor's salary.

Facebooksux says

I want to meet all these "foreign families" who work as janitors and Merry Maids who have scraped together $100,000 bernanke bux in an era where MY FUCKING SAVINGS ACCOUNT PAYS ME 0.5% APR ON A BALANCE THAT IS IN THE MID SIX FIGURES and I will stop arguing with you.

Facebooksux says

MY FUCKING SAVINGS ACCOUNT PAYS ME 0.5% APR ON A BALANCE THAT IS IN THE MID SIX
FIGURES and I will stop arguing with you.

You have mid-six figures in a savings account?

sbh says

SoftShell says

What's not accounted for here are the vast majority of those foreign families are selling drugs/sex on the side to finance the million dollar purchases on a janitor's salary.

It's clear that a ton of people on Patnet who vilify ethnic minorities in America are financially illiterate victims. CaptainFucked up comes to mind. Minorities generally have a greater ability to save on extremely modest incomes and don't have the ridiculous spending habits as a lot of bigoted American imbeciles. Those bigoted American white trash finger pointers are absolutely convinced the only way anyone of a darker hue can afford a house or a mortgage is through crime or fraud or by somehow gaming the system. Where's your backbone? Why do you need a villain to explain your malaise?

Dipshit,

I'm not vilifying anyone. I'm stating that someone who essentially makes $10-$15 an hour will not be able to save $100,000 in a reasonably short period of time. Yes they work hard and I'm not begrudging them anything.

Add in kids to feed, and this becomes an even worse proposition.

If you literally pool 10 family members who all work, then MAYBE it can be done, but you're talking 10 adults living in one house.

tatupu70 says

Facebooksux says

MY FUCKING SAVINGS ACCOUNT PAYS ME 0.5% APR ON A BALANCE THAT IS IN THE MID SIX

FIGURES and I will stop arguing with you.

You have mid-six figures in a savings account?

Doesn't everyone?

bgamall4 says

How is it different this time?

This time is different! (TM)

If you take a step back and look at what the Fed has done to assist housing. The mortgage buyers have been soft even with

- 3.7 Trillion plus Fed balance sheet that
- ZIRP for an extended period of time

My thesis is that we simply don't have the income growth to offset the housing inflation and we really never had enough qualified home buyers. This has nothing to do with tight lending standards because I don't believe that thesis is legit.

Globalization
Technology
Debt
Demographics

Will all limit capacity growth here in the U.S. and this is a reason Median incomes are soft.

Already California has 4 out of 5 most unaffordable counties in America and this is with Rates under 4.5%

Yet the money keeps being created, corporations and investors can buoy the RE market, that whole shebang is just getting going.

Where I live, the cost of the house is somewhat negligible as the yearly taxes on a typical 150k home are approaching 4k per year, that's 6 months rent for me.

New Renter says

There are still plenty of $400k-$500k starter homes in the Bay area.

starter home requiring 3 cars and tons of work. you can keep em.

egads101 says

you give me a payment 1/2 of current rent, and I really don't give a crap what the house costs! give me -10% interest rates, and I'll pay millions!

Says the guy who can't pony up 10K.

A bit of hyperbole, don't you think?

egads101 says

you give me a payment 1/2 of current rent, and I really don't give a crap what the house costs! give me -10% interest rates, and I'll pay millions!

Yeah, the condo I rent is $1900 a month, but sell for $450,000 and there is a 350 HOA so your monthly payment would be over $2500 if you shelled out a $95k down payment. So when rents go up to $5000 a month you will sound like you know what you are talking about in the RBA.

One item people tend to forget as well that I have constantly brought to CNBC, Wall Street Journal and Bloomberg is that this housing cycle isn't not well know for it's 20% down borrowers.

Take out the cash buyer and there are a lot people putting 3% 3.5% 5% 10% down on their homes because they simply don't have 20% down.

With housing inflation rising due to prices rising that 20% down is even more difficult to obtain.

This means you have to add MI calculations to the total payment equation.

Principal & Interest, Taxes, Insurance, ( HOA) and for CA condos can get pricey and mortgage insurance payment

Just for FHA you have UFMIP charge of 1.75% which almost always gets added to the loan balance and a MI monthly charge of 1.30% now.

Today's number

NAR: Pending home sales *down* 5.6% in September and fall 1.2% below year-earlier level. This is the first year-over-year drop in 29 months.

I tried to explain to the financial media it won't be until September until we see the the first real impact of the falling mortgage purchase applications because before May we had a 14% increase YOY on the index and those people were prequalified to buy.

It takes some time to filter out those buyers and you need to replace them. So it takes at least 4-6 months to see the impact on falling applications since there was a good rise in first part of the year

Purchase applications started their fall in May

Now again, this doesn't mean a collapse in housing but it shows that the capacity mortgage buyer has limits even when rates hit 4.5%

bgamall4 says

Is demand for treasuries increasing, decreasing or just holding stable due to these counter forces?

What we saw this year from that move of 1.60% -3% was truly epic. However, I always believed that the bond market was an over crowded trade and close above 2.21% was game on and the Fed could easily lose this market place.

- Once people saw negative returns on their bond market funds, they would split, we saw outflows form bond funds

- Major outflows from foreign country as well

- Computer trading, a lot technical damage done to that 10 year note

With all that said, that 3% was a solid line that didn't break, so the natural buying and selling of an asset would create a purchase cycle for bonds.

So at 2.51% we shall see what happens with the Fed talk. Taper gone for 2013 and Yellen is a big Dove so, I wouldn't expect her to talk taper too much until 2014.

Again, a historical look at the 10 year.. we are so far from normalized rates and my first target rate 10 year on coming back to normal is 3.71%... so we are still in bubble mode for the pricing of the 10 year.

Or the other case to be made is that we are Japan 2.0 and we are stuck in a liquidity trap for a while

We will always get Top status and Last Man standing Status in regards to our bonds because we are the biggest economy and have the biggest military.

I believe there will always be demand for our debt considering everyone else around the world.

On the Japan theory, if we don't get a increase on wages especially to profits by 2015 then the Japan 2.0 thesis will get more play.

I am willing to cut some slack here in the U.S. because historically it takes a country 9-12 years to recover from a financial crisis .

sbh says

That's my bet. How do you see the trap being resolved?

A spoon full sugar makes the medicine go down?

Such a difficult problem because of

-Globalization
-Technology
-Debt
-Demographics

Median incomes needed to be around 93K by now not 54K
So when you base your economy on debt and incomes don't rise you get yourself stuck in this low growth Japan style problem

You can do things in the short run, borrower money for a major infrastructure plan targeting the long term employed.

However, longer term, without innovation it's going to be difficult.

On a bright note our energy expansion is a plus for us here in the U.S.
If you see what is happening in North and South Dakota and their economies it's pretty clear.

I am not sure if we can maximize this. Take a look at Natural Gas.
This is one item where we have pricing and supply advantage over the world and we are not making a full commitment to it for obvious political reasons.

In fact I believe there are some acts being presented to congress to prevent the exporting of nat gas so we can keep the price cheap here in the U.S.

When it comes down to it. Look at our great innovations... Facebook, Twitter... these aren't companies that created millions of well paying jobs. Technology has done a number on labor.

We need a Henry Ford innovation and as of right now the supply and demand is in energy so.. time will tell..

There is no silver bullet to this issue and come 2022 our mandatory side of our yearly budget is going to expand due to demographics and net interest payments. So, it will be deficits forever until 2052-2057 time frame.

Gentlemen, I would recommended this movie when it comes out for DVD or nextflix

Money for Nothing, about the Federal Reserve, it's history and economic bubbles

http://moneyfornothingthemovie.org/

evilmonkeyboy says

It seems to me that purchasing in the "affordable" Bay Area might result in A) locked in high property taxes and B) a property that would be unaffordable to buyers in the future if interest don't stay at record lows.

Under Prop 13 property taxes do adjust downward when the value of the home dips.

Of course the taxes also track back up with the value of the house up to the purchase point + 2% annual.

I'm sure a smart person could figure a way to reset the value of the house to the lower value.

sbh says

I don't see how savings can be pried out of the hands of corporations and paid into the hands of labor without spooking the capitalists.

With Pitchforks!

Updated today, looks like we have bottomed in early 2013 on the inventory cycle. First time all year we had a positive YOY number on the inventory side, albeit 0.3%

Total inventory is still very low, but should get to the 6 month on sale inventory some time next year.

bgamall4 says

only the wealthy are buying.

33% cash buyers is very high, especially at this stage of the economic cycle with rates under 4.5%.

We can't ignore the fact that the Student Loan Debt problem with be here for years to come

Every single economic conference I went to this year, every housing bull had that is a major long term concern

The Young and the Renting ....

http://loganmohtashami.com/2012/10/26/the-young-and-the-renting/

Call it Crazy says

How do these people come up with money for down payments???

The answer is they don't.
In fact let me give a stat so far this year, this is a very small pool.

My purchase clients for 2013 so far that have bought a home (not a pre q) have had a total household income range of 108,000 - 198,000 and the number of them that had 20% down = 0

The market is leaving FHA to go to 95%-85% conventional loans, because the MI is better but still 20% down isn't there.

This is why the NAR affordability index needs a serious * to it because they base their assumptions on a 20% down 740 Fico Perfect teeth and children borrower at a 25 DTI base. Hmmmm

Updated for today's MPA numbers and the FED

"housing sector has slowed somewhat in recent months"

bgamall4 says

Supposedly, individuals are supposed to save when times are tough, but we aren't. We are too poor to save as a nation. Only the corporations save. And the individuals live 76 percent paycheck to paycheck.

In the 90's it was 50 percent. Now it is 76 percent. How high can it go before rules are in place to stop the speculation in assets/commodities?

I am a saver (and will continue to be one), but sometimes I think the rules have changed. I question the financial lessons my parents taught me. My world is very different than theirs. They told me that the goal of my personal finances should be to save enough to live in on the interest.

I am not always 100% sure what I am saving for. My money is growing so slowly that it seems silly sometimes. It seems like there is some wisdom in being in debt, especially if inflation is coming.

Low rates and inflation make me question my saver's stance. I guess I am having some existential reflections this morning.

bg says

but sometimes I think the rules have changed. I question the financial lessons my parents taught me.

Yeah, they REALY want you over into some risk assets, whether you want to be or not. To pump the value of their assets and give them access to yours, of course.
sbh says

to require ones capital to be productive. Saving is only the first part of the undertaking that allows one to embark on the relationship between time and rate of return. Saving is a necessary predicate but it can be the least satisfying of the trio because its outcome is always at risk of loss or being spent.

Sure, it is safe once "one" turns it over to the racketeers that promise to "grow' it for you.
In an environment of rampant accounting fraud and stock manipulation in a market place of vipers slinging Dark Pool money in High Frequency microsecond "trading" I am afraid you are a hopeful lemming in a lion den, not an investor "deploying capital".
And I don't care about your success stories, the winnings are always yours only until Goldman/Chase/Morgan decide to harvest the muppet's money.

Goldman on housing: "Clearly identifiable reason for the recent weakness ... the sharp increase in mortgage rates"

https://www.youtube.com/watch?feature=player_embedded&v=9OpIbiFmY60#t=3

sbh says

fragged

Not sure what fragged means.
Does it mean financial independence from a fairly young age, doing whatever the hell I want every day, all day?
Thats me!

I am going to use this all the time.

sbh; How ya doin' Robert?
Me; I'm Fragged, Baby. Fragged to the bone!

"I will reap mine, as I always have"
"I'm getting exactly what I thought and sought"
sbh, His Royal Pompousness

3 years ago, no doubt since you warned us about mortgage purchases dropping, the market has fallen badly since then?

How much has it fallen near you?

or, in simpler terms, how do you dare to even think you know antyhing about housing economics, when you've been 100% wrong since you joined this site?

youareworthless says

how do you dare to even think you know antyhing about housing economics

Because the taper spike lead to negative year over year growth

In fact as soon as rates went up, purchase applications started a 18 month negative growth rate ending in 2015

leading the lowest or purchase applications ever recorded adjusting to population in 2014 :-)

Next?

See that downward slope action .... 2014..

Lowest level of purchase application demand this cycle and adjusting to population the lowest ever recorded since the data was collected

:-)

You're better than this