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Why Are "Economists" Saying Things Are Turning Around?


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2009 Aug 26, 6:11am   5,154 views  22 comments

by markw51   ➕follow (0)   💰tip   ignore  

ECONOMIST HUGH JOHNSON SAYS INVESTORS ARE ALSO ENCOURAGED BY AN INCREASE IN NEW HOME SALES.

VERBATIM: PRICES EVEN THOUGH THEY'RE GOING DOWN ARE STARTING TO STABILIZING. THIS IS A REAL SIGN THAT THE HOUSING SECTOR OF THE U.S. ECONOMY IS STARTING TO STABILIZE IF NOT IMPROVE.

CARY LEAHY, SENIOR ECONOMIST AT DECISION ECONOMICS SAYS IT'S GOOD NEWS FOR BUYERS, SELLERS, AND HOME BUILDERS.

VERBATIM: PRICES OF HOMES, THE PRODUCTION OF HOMES, AND THE SALES OF NEW HOMES...ALL THE METERS ARE FLASHING GREEN AND THE MARKET HAS RECOVERED AND IS TURNING UP.

#housing

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1   ch_tah2   2009 Aug 26, 7:24am  

Are these the same economists that said everything was fine in 2006-2007?

2   pinnacle   2009 Aug 26, 7:27am  

Well the median home price is only up by about 5,000 dollars from the level it was at before the 8,000
dollar tax refund was put in place, so that really means we have a price decrease of about 3,000
dollars. Somehow this proves that we have "turned around"???
Why is good for buyers if prices "stabilize" when their interest is in getting a house for a lot less than current prices?
Today I got notices of more price reductions in areas I have been tracking and more "back on the market"
propeties from failed sales deals.
Obvious proof that everything is improving.
Another sign of an improving economy is that all of the former college friends I keep in touch with are
out of work and about to run out of unemployment money in the next few weeks.

3   Huntington Moneyworth III, Esq   2009 Aug 26, 8:10am  

Sales have increased (banks are unloading toxic assets and foreclosures). It IS good news for buyers. Comps are coming in low, low, low.

If you are looking to buy, immediatly fire any Realtard that says you should discount comps because "those homes are just foreclosures and are priced too low".

Sadly, I don't know of a single economist who lost their job for saying the economy was fantastic in 2006-2007. These are the same bunch of morons saying things are good now. Even a broken clock is right twice a day.

Price "stabilization" can only happen when Interest Rates can be bumped up without tanking the entire economy.

4   Austinhousingbubble   2009 Aug 26, 11:06am  

Of course sales are up. It's because there's cheap money again, thanks to the FED manipulating the interest rate, the free 8K tax credit, and of course, the expanded FHA - which is running on empty, by the way, along with the FDIC.

http://www.examiner.com/x-14171-Tulsa-Real-Estate-Examiner~y2009m8d24-FHA-meltdownwhy-arent-things-improving-part-3

http://www.realestateeconomywatch.com/2009/06/can-fha-dodge-the-bullet/

5   Serpentor   2009 Aug 26, 11:42am  

LOL Hugh Johnson... nice name.

6   bob2356   2009 Aug 26, 11:45am  

Home sales always go up in May, June, July. Duh. They did it last year also. Year over year the difference is almost within the tracking error range.

7   marko   2009 Aug 26, 5:36pm  

Looks like Hugh Johnson got himself a Huge Johnson over all the happy investors. Got the green light baby...

8   d3   2009 Aug 26, 10:54pm  

"I would think that prices will not be stable until they are based 100% on the buyers wages and ability to repay the loan. No programs for downpayments will ever allow that to happen."
I do not think homes should or will every be based soly on wages. Wages do not take in to consideration what people are willing to pay for comp, ie a short commute or being in a safe area. They also do not take into consideration supply in demand. For example, more people work in a lot of the major cities then live in them. If wages was the only consideration for price in theory every one should be able to live in the city. The problem with this statement is is not enough homes in most downtown areas for every one who worked down town to also live down town. If prices were soly on income the demand would far exceed supply in many locations. The only way to keep prices down in this senario would be to make laws regulating what people were alloud to charge which would completely contradict having a free market.
Also goverment programs do not prevent prices from going down. When the government subsidizes something, that is considered part of the price. In the grand scheme of things there is not much difference in affordability between a $100k home or a $108k home with a $8k goverment refund.

9   jturner   2009 Aug 26, 11:39pm  

Very good point about most economists working in the FIRE areas. The incentives are not properly aligned for them to give an honest assessment of the situation. And because housing still has so many problems with it, the Fed is going to have to maintain its easy monetary policies for quite some time still. So for investors, this means more currency debasement and a lower dollar, so one of the main areas that should benefit from this is gold. Here is a further discussion on the gold price and the Fed's programs.

10   thr33   2009 Aug 27, 2:22am  

"I would think that prices will not be stable until they are based 100% on the buyers wages and ability to repay the loan. No programs for downpayments will ever allow that to happen."

I do not think homes should or will every be based soly on wages. Wages do not take in to consideration what people are willing to pay for comp, ie a short commute or being in a safe area. They also do not take into consideration supply in demand. For example, more people work in a lot of the major cities then live in them. If wages was the only consideration for price in theory every one should be able to live in the city. The problem with this statement is is not enough homes in most downtown areas for every one who worked down town to also live down town. If prices were soly on income the demand would far exceed supply in many locations. The only way to keep prices down in this senario would be to make laws regulating what people were alloud to charge which would completely contradict having a free market.

Also goverment programs do not prevent prices from going down. Then the government subsidizes something, that is considered part of the price. In the grand scheme of things there is not much difference in affordability between a $100k home or a $108k home with a $8k goverment refund.

11   HeadSet   2009 Aug 27, 2:29am  

d3 says

Wages do not take in to consideration what people are willing to pay for comp, ie a short commute or being in a safe area.

Just what will these people pay for the home with? If they will not take a home loan that is affordable with thier wages, then they are buying with some kind of scheme that passes on the cost to the future. And when that future arrives, there will be a default. Once these phoney affordablility programs are removed, you will see the Bapp33 effect of house prices falling to what wages will support. That does not means a in-city house will be the same price as a outlying house, it just means that even the in-city house must fall in price enough to have a steady payment supportable by wages.

12   The Little Guy Lobby   2009 Aug 27, 2:38am  

What is going to happen when older people start retiring and selling everything- stocks, 2nd homes, big houses, cars, etc etc in order to buy food and health care. Exactly. So much for any recovery.

thelittleguylobby.org

13   nbwcabs   2009 Aug 27, 6:33am  

d3 says

Wages do not take in to consideration what people are willing to pay for comp, ie a short commute or being in a safe area.

Just what will these people pay for the home with? If they will not take a home loan that is affordable with thier wages, then they are buying with some kind of scheme that passes on the cost to the future. And when that future arrives, there will be a default. Once these phoney affordablility programs are removed, you will see the Bapp33 effect of house prices falling to what wages will support. That does not means a in-city house will be the same price as a outlying house, it just means that even the in-city house must fall in price enough to have a steady payment supportable by wages.

14   Tomrisk   2009 Aug 27, 8:40am  

Yes, another good example of how good the so-called “Economists” are.

Toyota to halt production at Nummi Fremont, CA, ...4,700 jobs will be eliminated.

"...Union trustee Ron Lopez, whose wife also works at the plant, said the couple had been taking steps to sell their home in preparation of just such news...."

Good luck for house hunter in BayArea, of course whoever still have a job.

15   justme   2009 Aug 27, 10:39am  

Not to worry, as I said on the other thread, Tesla Motors will take over the NUMMI auto plant and save us all (sarcasm alert).

By the way, some people estimate 50k jobs lost by nummi:

"Friends of Nummi, a group that has been fighting to keep Nummi open, said the plant receives supplies from about 1,000 companies throughout California. The group estimates about 50,000 California jobs are tied to the plant."

16   homeowner_for ever_san jose   2009 Aug 27, 10:47am  

Jobs/ california population = (50,000/36000,000) *100 =0.14 %
its like a fart in a forest...for california. fremont is the only place which will temporarily get affected.

17   justme   2009 Aug 27, 10:50am  

Try and tell that to the 50,000 that lost their jobs.

Added: I don't know the size of the California workforce, but if we say 1/4 population is employed, 50k jobs lost would then be about 0.6% increase in unemployment, which is a big jump.

18   d3   2009 Aug 28, 7:27am  

"If Area X has always cost twice as much as Area Y, and prices inflate to 10 times normal in the bubble, we wouldn’t expect Area Y to come back down to normal, but Area X to still cost 10 times more. We would expect it to come down to where Area X again costs twice as much as Area Y. What has changed in California that would account for the premium for nice areas to suddenly shoot up 10 times? Answer: nothing.
"
No what I am saying is that unless there are other demiographic changes taking places area X will most likely always cost much more then area Y, ie 2x.

My argument was that wages do not need to be twice has high in area X for prices to be twice as high. To live in a nicer area that is closer to work people are more willing to give up on other luxuries (ie daily trip to starbucks, a new car or a big house). Peoples willingness to make these tradeoffs enable some areas to sustain a much higher price to income ratio then other area. A lot of people are willing to dedicate a higher % of their income to the cost of their home if it means they will not spend 2 hours a day commuting. For example afford to live in the city I was willing to give up having a car to lower my expenses because one was not needed. By giving up on having a car, I was able to dedicate a higher % of my income on my home because I no longer had to pay $20 a day to park, car insurance and other expenses are involved in owning a car. A lot of people make tradeoffs like this every day to live in a more convenient area which is one of the reasons why a price to income ratios can be justifiable.

The point I agree with is the fact that people have to have the ability to repay the loans. I just don’t think price to wage ratio by themself can be determine who can afford to repay the loan

19   LowlySmartRenter   2009 Aug 28, 8:55am  

chrisborden - You are hilarious. I remember my first visit to Milpitas. It stunk. Literally. I later learned (not from the Milpitian I was visiting btw) of a nearby dump. In later years, they cordoned off a section and deemed it Alviso. Most of the houses there were the condos-without-a-yard types, where the asphalt of the driveway borders the front entry and the streets are super narrow with no sidewalk, etc...get the picture? Sorry, I don't know the realtor-speak for what you call those things, but we'll go with "houses".

I later discovered (again, not from the Alvisian I knew there) that the land on which these "houses" were built was not part of the deal; the mortgages for these 400k+ boxes was only for the structures themselves, not the land.

How's that for the land of milk-n-honey? Just what we've all dreamt of...a stinky box on land that is unfit for sale. Yippee!

20   homeowner_for ever_san jose   2009 Aug 28, 3:32pm  

With the share prices into hundreds of dollars like Exodus, Ariba, etc etc in the market, employees cashed out and paid what ever the sellers wanted. The money came from others domestic and international savers who lost the value of their own wealth.

That is how prices doubled from 1998 to 2000.

In addition the new prices created ‘comps’ for all forward sales. After 2001, the low rates and ‘creative payment loans” only prolonged the bubble

Price is a function of affordability only and not how the prices reached to that value in history . If people can afford homes at certain prices today and BEYOND for many years, the prices are sustainable.
If there no ARM resets and drop in median salary in future, i don't see why prices will go down, if people are buying the homes at that prices with 30 year fixed rates.

21   homeowner_for ever_san jose   2009 Aug 28, 7:30pm  

zetabeos1 : no matter what you say, home prices cannot go down so much that the motgage is

22   justme   2009 Aug 29, 5:28am  

Zetabeos1,

>>Many realtors just confirmed what the buyer had in their brokerage account and conjured up multiple offers, pushing prices even higher, draining the brokerage accounts. So much for the great wealth transfer of dot.com.

The fact that the buyers went along with this never made any sense to me.

If you strike it rich on stock options, why would you want to spend all the gains on creating inflation in the local property market? To me that is a really stupid thing to do. You end up getting nothing out of all your hard work.

What you should do is to by something in a different location that would be useful for retirement or otherwise.

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