patrick.net

That's exactly the point prices are going up with net demand negative trends for 16 months now and home prices will rise once again in 2015 making it even harder for mortgage demand to grow

Not sure if sales are an appropriate measure of demand if supply is stable or shrinking and prices are rising.

5

_ 2015 Feb 23, 1:59pm

This is one of the variable factors we had 2 different housing demand trends both hit 21st century low's in 2014 even when inventory rose and interest rates fell all year long.

The crazy stat for 2014 was this

2014 was the first year ever recorded in which mortgage purchase applications fell every single week of the year .. Year over Year and for 11 months of the year the demand drop was between -10% to -21%

We have never had this happen in a up cycle where inventory rose and interest rates fell. We are also not talking about a very high bar to beat as well

6

_ 2015 Feb 23, 1:59pm

Not sure if sales are an appropriate measure of demand if supply is stable or shrinking and prices are rising.

Low inventory

Historical high levels cash buyers

Are primarily drivers here for prices and it will continue in 2015, although the price gains are cooling down

7

tatupu70 2015 Feb 23, 2:02pm

Low inventory

Right---if a car dealer had only 3 green sedans and 1 yellow SUV and there were 20 people wanting to buy a red SUV and 10 looking for a silver sedan, that's not reduced demand.

8

_ 2015 Feb 23, 2:06pm

that's not reduced demand.

Inventory was up in 2014 for both new and existing homes
We had on net more demand in total in 2013 with less homes on the market and on par with slightly higher rates in 2013

2014 sales were negative year over year by -3% under 5 million which estimates were as high as 5.8 million

2014 was the biggest miss on total demand sales for existing homes and new home sales in a up cycle that I can ever remember

especially for new home sales which were estimated to grow by 20%-30% year over and year and after revisions most likely will be negative demand

There is no way to cut around it, housing is being hit on the demand side of the curve even with new homes which were working of a very low 429K level and lead to the biggest missed estimates ever in the 21 st century in an up cycle

Clearly see why new homes are having a problem because this market place is 90% mortgage based primarily for the high end mortgage buyers as cash buyers are less than 10% and first time home buyers less than 15% of the market place

9

Strategist 2015 Feb 23, 2:15pm

Hey Logan, I heard your name get mentioned on CNBC last week. A couple of more times they mention you, and I will be asking for your autograph.

10

_ 2015 Feb 23, 2:20pm

http://www.housingwire.com/blogs/1-rewired/post/32816-tweets-show-everything-wrong-with-cnbc-housing-optimism

CNBC

I am trying to get someone to debate me on housing from the other side of the spectrum on CNBC. I have got to know the players now after a few years of doing all this financial writing. I have been to a few economic conferences and have talked in person to these economist. However, still a live one on one debate hasn't happened yet!
That is more my specialty than writing and charting because debate has always been my strong point

I do get some credit on my twitter game,

11

Strategist 2015 Feb 23, 2:24pm

Strategist says

CNBC

I am trying to get someone to debate me on housing from the other side of the spectrum on CNBC.

Hope you make it. Post a video here if that happens. :)

That is more my specialty than writing and charting

That I believe.

12

_ 2015 Feb 23, 2:25pm

https://www.youtube.com/watch?v=o9O_FDLPdgA&t=10m35s

Post a video here if that happens. :)

This is the only video I got so far from CNBC

13

tatupu70 2015 Feb 23, 3:57pm

Tat, you're lack of understanding of the housing market is astounding...

It's funny--my lack of understanding has been correct over the last 3 years while you have been consistently wrong. I can't even recall how many times you posted how stupid I was for buying and how many preforeclosures were waiting in the wings in my neighborhood. Yet somehow I was able to make a very nice return on my purchase after 2 years...

If the problem with housing was a lack of demand, I would expect prices to be falling and inventory to be over 6 months (stable market).

14

_ 2015 Feb 23, 4:10pm

I would expect prices to be falling

6 months is considered to be balance, we had only 1 month of the year where we had 6 months of inventory. This is all a national level outlook, not so much for local markets

The reason why the Fed and others are concern by the housing demand is that their models showed much stronger growth by 2014 and it turned negative on all of them. This is a housing affordability issue more main street.

The strong middle class and rich can buy without a hitch. However the demographics behind housing isn't there yet to create a new set of buyers that would promote growth.

It's not a doomsday situation but clearly those who thought housing net demand was very strong was really talking about the fact that really the cash buyer, rental demand and rental construction has been strong in cycle

The only issue on the rental side is that rental inflation has been rising faster than wage growth for a while, making it harder to save for a down payment

15

tatupu70 2015 Feb 23, 4:11pm

Did you post that to prove my point? Prices stable and inventory falling and less than 6 months.

16

tatupu70 2015 Feb 23, 4:13pm

http://news.yahoo.com/u-existing-home-sales-hit-nine-month-low-150341481--business.html

Inventory was up in 2014 for both new and existing homes

Not according to this article:

Last month, the inventory of unsold homes on the market slipped 0.5 percent from a year ago to 1.87 million. It was the second straight year-on-year decline. According to the Realtors group, supply should be rising by at least 10 percent.

17

Oilwelldoctor 2015 Feb 23, 4:14pm

Wow, someone telling the truth in Real Estate ! How quaint. Easy to understand... no jobs, no income, no mortgage.

18

_ 2015 Feb 23, 4:18pm

Not according to this article:

Trust me on this I this I follow the data daily

There isn't one person I know in America that said in 2014 total net inventory was lower than 2013, there is no stat to show that because it isn't true.

What you're talking about is Jan 2015 vs Jan 2014 and I am talking complete Year over Year data on a national trend.
Inventory was up not only for existing homes but for new homes as well. This was the core root thesis for many housing bulls who kept on saying we don't have a demand
issue it's a inventory one and it backfired on them badly in 2014

19

_ 2015 Feb 23, 4:22pm

You had more net demand in 2013 with on par and slightly higher interest rates, so the we don't have a demand problem housing pundits got stuck in a bad call because inventory rose and rates fell in 2014.. so the why factors were positive for 2014 and it didn't even create a flat sale year even with 30% net cash buyers

There is simply no where to run to anymore, no more polar vortex, no interest rate spike, nothing to curve the demand trend except pure net demand.

This is Math, Facts, Data and Numbers going against an economic assumption thesis and math won

20

tatupu70 2015 Feb 23, 4:22pm

This was the core root thesis for many housing bulls who kept on saying we don't have a demand

issue it's a inventory one and it backfired on them badly in 2014

How did it backfire exactly?

21

tatupu70 2015 Feb 23, 4:31pm

Sure you did..... at $468K, after paying commissions, transfer fees and closing costs, you lost money. Plus, you sold it for 4% more then you paid for it after 2-1/2 years... Not what I would call a very nice return... That's like a 1.6% annual return.. You should have rented and put your money elsewhere...

After you back out any upgrades you did while there plus closing costs going in, you LOST money, big time...

,
Wow, you're wrong on so many fronts. First, as I told you earlier, I was transferred out of NJ so my employer paid all the closing costs, commissions, transfer fees, etc. Second, you must have the wrong house because it didn't sell for $468K. We made ~8% on the full price of the house, which is closer to 33% on the actual investment (down payment). Then factor in that we paid down ~5% of principal over the life of the loan and saved about 3% over renting. As you can see it adds up pretty quickly, and it's much, much, much more than 1.6%. And that's not even considering the tax savings.

22

_ 2015 Feb 23, 4:35pm

http://www.cnbc.com/id/100533720

How did it backfire exactly?

Because when you estimate 20%-30% sales growth and it comes negative year over year your value as a economist or housing analyst. See it wasn't hard for me to calculate my models because we have been doing this for 30 years as family

I just don't think these bulls have the sophisticated background to do real analytically work

Great example, is Ivy Zelman considered to be the top analyst in Housing for America

2013 Housing is In Nirvana

Logan Mohtashami

May 7, 2013

http://loganmohtashami.com/2013/05/07/housing-mammoth-stuck-in-tar-has-bigger-problems-to-worry-about/

( 2nd hand of housing inflation) will impact demand, from this date of the article started the bear market for purchase applications

In 2014

Housing Nirvana is just around the corner Ivy Zelman

http://www.cnbc.com/id/101449024

April 11, 2014 Miss Housing Nirvana cries uncle

http://loganmohtashami.com/2014/04/11/miss-housing-nirvana-crys-uncle/

Causation Correlation and Representation

Housing bulls to me are great story tellers and this has been happening for 15 years not just with this cycle.

Housing bulls are people that would have discounted Galileo, Leonardo da Vinci, and other brilliant men and women who simply says you can't deviate from math, numbers and facts

They are professional story tellers and even with 6 years of data right in front of them, it doesn't matter. I have come to accept this economic narcissism as part of the system we live in

23

tatupu70 2015 Feb 23, 4:41pm

So, the numbers on the deed are fictitious??

Or you are looking at the wrong deed, obviously.

24

tatupu70 2015 Feb 23, 4:43pm

Housing bulls to me are great story tellers and this has been happening for 15 years not just with this cycle.

Housing bulls are people that would have discounted Galileo, Leonardo da Vinci, and other brilliant men and women who simply says you can't deviate from math, numbers and facts

They are professional story tellers and even with 6 years of data right in front of them, it doesn't matter. I have come to accept this economic narcissism as part of the system we live in

You must have a different definition of housing bull than me. I've always assumed they were bullish on price, not sales volume. Because bulls have been correct for the last 3 years as far as I can tell.

25

_ 2015 Feb 23, 4:45pm

You must have a different definition of housing bull than me.

You're not a economist, housing pundit or analyst my work is directed more against them

but to your other point.... ;-) tatupu70 says

Because bulls have been correct for the last 3 years as far as I can tell.

26

_ 2015 Feb 23, 4:46pm

It's the nature of the beast for housing bulls to discount real data, I know this, I have seen this for 15 years, internal demand reads are something they don't want to talk about.

I get it but I will never believe in that because if I do I am committing a crimes against real math, data and facts

27

tatupu70 2015 Feb 23, 4:51pm

Because bulls have been correct for the last 3 years as far as I can tell.

And yet prices have continued to go up despite all this. To me it shows you need to reevaluate your theories.

Have you considered that supply and demand are interrelated in housing? And the sales volumes are misleading? When person A moves, person B buys his home, person C buys B's home, etc. But that's really only one first time buyer (at most).

And speaking of first time buyers--the housing bubble obviously pulled forward a LOT of first time buyers. It's not surprising that they have declined as a percentage of buyers after the bubble popped.

28

_ 2015 Feb 23, 5:02pm

And yet prices have continued to go up despite all this. To me it shows you need to reevaluate your theories.

See this is what I mean, you can't help your self, you have to always believe.

See where I am coming from
I had home price increasing
2013, 2014 and 2015 and you don't ever hear me sounding like you

It's your nature to discount math, data and facts. This isn't your fault, that's just how it operates for you

I mean look at all this data and yet your don't care about it. History has show us that men who believe in science, math, and numbers have been fought against over time.
It's the nature of mankind

This is what makes a market place

I can show you 10,000 economic charts... and I know 100% it wouldn't change your mind

29

tatupu70 2015 Feb 23, 5:21pm

I mean look at all this data and yet your don't care about it. History has show us that men who believe in science, math, and numbers have been fought against over time.

It's the nature of mankind

This is what makes a market place

I care about it but where on those graphs is their data and math that shows that house prices would go up for the last 3 years.

30

Strategist 2015 Feb 23, 5:32pm

Logan, Tatu, Crazy....Some of you say the problem is affordability, income, inventory, and demand. I say the problem is the lack of a wide range of loans available to home buyers. Stated Income and Sub Prime with large down payments were always available well before the Great Housing Bubble, but no longer are.
Logan, do you know the percent of the total loans issued in a given year that comprised of Stated Income and Sub Prime? The ones that used to require 20% down or more?
Our answer as to why housing is so stagnant might lie here.

31

_ 2015 Feb 23, 5:42pm

I care about it but where on those graphs is their data and math that shows that house prices would go up for the last 3 years.

Question question one that can be easily explained with the data above

Case in point.

Why have I said home prices will rise in 2013, 2014 and 2015

Inventory, as long as trend demand stays the same and inventory is 6 months and below home prices can rise

So how does the market keep trend demand with mortgage buyers being so weak?

Because you have 20% above historical norms cash buyers in play for years now and that comes to roughly 1 million home sales a year in a 6 month and lower inventory cycle that applies pricing power to housing

Inventory levels and non distress sales are key, inventory has been low and distress sales have been declining every year

This allows pricing power to stay in the market place because we don't have a new distress market coming anytime soo, that would require a job loss recession to happen.

So the YoY price gains have been cooling down since 2013, but the inventory is still to low to have a change in the prices. Now maybe, just maybe if demand gets so weak we have a flat year in prices but that would require higher inventory than 5.5 months at least.

However, the key thing to remember is inventory that will always give you clue with prices and how the economic cycle is looking and for 2015 it gives another year for prices gains and I have at least 1%-4% growth in prices for 2015

32

_ 2015 Feb 23, 5:53pm

I say the problem is the lack of a wide range of loans available to home buyers. Stated Income

We have had stated income loans here in CA for a few years now and the issue is having that big down payment 20% and more. It's just hard for Americans, outside the Rich to have 20% down these days with home prices where there are at

3% down loans now but they would never ever make those stated income loans

33

Strategist 2015 Feb 23, 6:12pm

Strategist says

I say the problem is the lack of a wide range of loans available to home buyers. Stated Income

We have had stated income loans here in CA for a few years now and the issue is having that big down payment 20% and more. It's just hard for Americans, outside the Rich to have 20% down these days with home prices where there are at

3% down loans now but they would never ever make those stated income loans

That does not answer my question. Lots of business owners have 20% down for a home.
My daughter graduated and has had a good job with a major corporation for the last 16 months. She lives at home to save money, and plans on getting her own 2 bed Ladera Ranch condo for $400,000. She has $40,000 saved up, and I will gift her another $40,000 for a 20% down. She is debt free, with perfect credit. Because a large part of her wages are in the form of a bonus, she has to be on the job for 2 years to get a conventional loan, which means she has to wait until September. Now isn't that silly?

34

Strategist 2015 Feb 23, 6:13pm

We have had stated income loans here in CA for a few years now

At a bizarre rate from the Chinese Mafia.

35

Strategist 2015 Feb 23, 6:18pm

Strategist says

Lots of business owners have 20% down for a home.

While the majority of the general population can't scrape up 3%...

I find that hard to believe. First time buyers, yes, but not those who are moving up.

36

_ 2015 Feb 23, 6:18pm

That does not answer my question. Lots of business owners have 20% down for a home.

Remember self employed Americans only make 8.9 million of all working Americans ( Well over 140 million and many S.E. have homes already)
I believe you're over estimating the self employed stated income buyer in the market place

37

Strategist 2015 Feb 23, 6:19pm