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Why the Economy/Housing Market Won't Pick up in the Second Half


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2015 May 31, 3:56pm   4,369 views  19 comments

by smaulgld   ➕follow (4)   💰tip   ignore  

Economists expecting that second quarter and second half 2015 U.S. GDP will get a boost from increased consumer spending or a rise in home sales, should note that the U.S. consumer, while seemingly better able to keep the collection man at bay and is no longer filing for bankruptcy at record rates, is over loaded with debt and tapped out.

https://smaulgld.com/bankruptcy-in-america/

While bankruptcy rates are falling

Consumer credit has exploded

https://smaulgld.com/bankruptcy-in-america/

#housing

Comments 1 - 19 of 19        Search these comments

1   mell   2015 May 31, 4:03pm  

While supply has certainly been tight and still is, the For Sale signs have been picking up steam even here in SF lately (today there were one or more signs literally at every intersection of sunset boulevard. Smart time to sell, dumb time to buy. Not sure how much higher the market can go, DOW 20k is still a possibility, albeit chances are getting slimmer by the day with this sideways action and the poor economic data. This won't be as easy as 2007/2008 where the market actually started dropping slowly, it will be more like 1999/2000 where you wake up and it's 10%-20% down. Don't think we're that close yet though for 2015.

2   smaulgld   2015 May 31, 4:13pm  

mell says

This won't be as easy as 2007/2008 where the market actually started dropping slowly,

Mell its not so much a matter of prices but volume of sales. Cash buyers are a good portion of the market because "regular" buyers either already own, are underwater, have outstanding HELOCS or cant afford a home. Sales have been very poor during this housing "recovery"

3   mell   2015 May 31, 4:18pm  

smaulgld says

Mell its not so much a matter of prices but volume of sales. Cash buyers are a good portion of the market because "regular" buyers either already own, are underwater, have outstanding HELOCS or cant afford a home. Sales have been very poor during this housing "recovery"

Yeah. but to be fair part of the tight supply is also the ZIRP environment. A lot of people have locked in great rates and think they are golden with that fixed rate. Some are and will be, however quite a few will at some point not be able to make their payments (HELOCs make this only worse) or watch their value suddenly sink again and then they will sell. It will be interesting for sure.

4   smaulgld   2015 May 31, 5:06pm  

mell says

tight supply is also the ZIRP environment

ZIRP is responsible for all the distortions in the economy

5   Strategist   2015 May 31, 5:29pm  

smaulgld says

Mell its not so much a matter of prices but volume of sales. Cash buyers are a good portion of the market because "regular" buyers either already own, are underwater, have outstanding HELOCS or cant afford a home. Sales have been very poor during this housing "recovery"

Cash buyers are a good portion of the market because sellers and agents don't want to bother with people getting their loans denied all the time.

6   smaulgld   2015 May 31, 5:48pm  

Strategist says

Cash buyers are a good portion of the market because sellers and agents don't want to bother with people getting their loans denied all the time.

Absolutely true and it highlights that people either don't have the money or the credit or both to buy the ever expensive houses

Contrast the charts in the blog post re the massive increase in new car sales where credit is easy to get or look here https://smaulgld.com/new-home-sales-vs-new-car-sales/

7   smaulgld   2015 May 31, 5:56pm  

bgamall4 says

And cash buyers cannot sustain the market. Once the stock market stops going up watch out.

Cash buyers are sustaining the price portion of the market but sales are still very low

8   Strategist   2015 May 31, 9:58pm  

smaulgld says

bgamall4 says

And cash buyers cannot sustain the market. Once the stock market stops going up watch out.

Cash buyers are sustaining the price portion of the market but sales are still very low

It's not so much an abundance of cash buyers, but a lack of first time buyers. It's just a matter of time before the first time buyers start buying in hordes, and when that happens....OMG. All hell will break lose.

9   smaulgld   2015 Jun 1, 5:59am  

The flat consumer spending #s released today during a period of good weather highlight that consumers are tapped out

10   HEY YOU   2015 Jun 1, 7:14am  

We need another Constitutional Amendment requiring that buyers overpay for shacks. Because a value is placed on a property by someone who doesn't care about the buyer,then the property must be worth at least that amount.
"A sucker is born every minute."

11   Strategist   2015 Jun 1, 7:50am  

HEY YOU says

Because a value is placed on a property by someone who doesn't care about the buyer,then the property must be worth at least that amount.

"A sucker is born every minute."

Let me wake you up. No home seller gives a damn about a buyer. All they want is the maximum dollars for their property.

12   Strategist   2015 Jun 1, 7:51am  

smaulgld says

The flat consumer spending #s released today during a period of good weather highlight that consumers are tapped out

Cough Cough!
"U.S. construction spending surged in April to the highest level in nearly 6-1/2 years"

13   smaulgld   2015 Jun 1, 9:06am  

HEY YOU says

We need another Constitutional Amendment requiring that buyers overpay for shacks.

or at least an executive order

14   smaulgld   2015 Jun 1, 9:07am  

Strategist says

Cough Cough!

"U.S. construction spending surged in April to the highest level in nearly 6-1/2 years"

ahem-construction spending is not consumer spending

16   Strategist   2015 Jun 1, 9:57am  

smaulgld says

Consumer spending stalled

http://www.bloomberg.com/news/articles/2015-06-01/consumer-spending-stalled-in-april-as-americans-saved-more

What could they be saving for? Homes, my friend, their dream home.
Americans are spenders, not savers.

Call it Crazy says

The majority of that rise was on non-residential, public construction... Sorry, no additional residential housing for you!!

Housing is like a spring. The more you compress it, the higher it jumps.

17   smaulgld   2015 Jun 1, 10:12am  

Strategist says

What could they be saving for? Homes, my friend, their dream home.

Americans are spenders, not savers.

I don't think they are saving at all- they are blowing their money on rent and healthcare insurance and some on student loans and car payment

Home sales have been well below 2004-8 levels since 2009-its not just tighter credit standards, its lack of income and savings and higher prices

18   Entitlemented   2015 Jun 1, 11:10am  

smaulgld says

ZIRP is responsible for all the distortions in the economy

Sir ZIRP is not responsible for all the conditions in the economy. The severe outsourcing of jobs, manufacturing and R&D has caused a collapse of the middle class, and has imploded the Economy. In much as the companion NINJA loans copying the CRA at the same time cause a collapse in the real estate, because Clinton and team tried to use Real Estate ownership to invigorate the economy in place of real growth with real jobs. Because of the willful offshoring of jobs, the CRA and its companions were exactly the wrong medicine - it would have been better to spend 5 Trillion on jobs, manufacturing and ways to get the government out of the way.

ZIRP is an effect of Malivestment started at the Federal Level, and the destructive policies of NAFTA, CRA, Subprime, and all the other bad decisions.

19   smaulgld   2015 Jun 1, 1:53pm  

Entitlemented says

Sir ZIRP is not responsible for all the conditions in the economy.

Correct

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