patrick.net

The X mayor of L.A.

Ha, he was riot, slept with a Hot reporter and from what I was told had a lavish spending habit but was really broke for years form what I remember

Backing during the bubble years in CA you had a 80/10/10 stated income option Arm loan which allowed a lot high end buyers into the market place paying the 1.25% teaser rate until the rate recast ed on you

Here is one dynamic that I wish the housing pundits on the national media would talk about more

We had a debt leverage bubble in the housing cycle which means that we couldn’t even get a property inventory market for at least 8-12 years from the crash. Myself I was looking at this happening in 8 or 9 year but it’s taking a bit longer than I thought

We had less inventory on the market as an annual basis on months inventory for a year in years

1999
2000
2001
2002
2003 – bubble years
2004- bubble years
2005 – bubble years

Then, we had an excess supply rush due to the bubble starting to pop
2006-2011 all above 6 months inventory

Now, with how long it took to get distress sales onto the market and the massive price gains we have seen from 2012-2015. The normal inventory curve won’t look the same because 45% if all homes bought in this cycle were done by the Rich and a lot are looking for yield return so it’s staying put

Those who have a reason to sell or want sell can. However, if you’re selling to move up then adjusting to the affordability index you need about 28%-33% equity to sell and put 20% down to move up without any cash injected into the equation

So, inventory coming on to the market will be spotty in this cycle, not normal at all.

Also, some people are sitting on a home with a long term rate at 3.25%-4.25% that home is a nice financial asset long term if you want to rent it out.

We are no longer in a housing cycle where rates drop 2% ever few years, that cycle has ran it’s limit

Logan,

Are you saying, inventory would continue to be low for a few more years? Prices will also stay elevated.

hanera says

Logan,

Are you saying, inventory would continue to be low for a few more years? Prices will also stay elevated.

It's working itself out slowly, as the YoY increases are becoming less.

However, at some point there will be a recession which will add new supply that is considered "distress" which will impact pricing.

However, a recession isn't in the cards for 2015 so there will be price growth again .

Another factor in this cycle, is that 45% of the homes are bought by the rich so they can handle paying cash or getting a mortgage. This runs right into the mortgage demand data which adjusting to living population and working population have been dreadful for years no matter how low rates got the demand profile was been soft and in year 6 of the economic cycle got worse even with lower rates and higher inventory

One item data line that is interesting with the Jan & Feb data.
Both first time home buyers and cash buyers are under 30% of the market place. This is the first time I believe in this cycle that has happened in the starting months. That is something that should be kept an eye on throughout the year