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Logan, I have a question, if you are so smart why do you argue with idiots?
You have to know what the other side thinks, it preps you always for any economic discussion
Causation
Correlation
Representation
Math, Facts, Data... the final number is what matters but there is a story behind those numbers ( Why) factor is really what separates economic analysis
Dealing with professors, economist, housing pundits and others. I have learned one thing that they all have in common. None of them have a financial lending background
so their model of affordability is outdated in relationship to this economic cycle. This has been the case for 12 years now and their frustration on why demand has been soft comes from this area of not understanding why Americans aren't buying homes like their model would have shown
Breakdown
MI2MP then add PITI inflation tagged to a DTI factor model, with a representation of LTI metrics against real median income. Once I have shown them this then it makes sense to them why demand is soft even with rates this low
That was the main confusion with the housing community and why they didn't account for the weakness in demand
If I am clueless and you just told me you use the price to rent model then why are you debating your own self saying you were a housing bull from 2003-2006
This is what we call economic slippage the story gets in a crossfire you forget what your original thesis.
Honestly do you think this works on someone like me? Do I give that impression that I am real estate agent
Listen--this isn't that hard to understand. I said that inventory is the best predictor of future housing prices. And I think you agree with that statement.
As to a housing bull--my statement was that using inventory as a guide, one would have been a bull until inventory started rising then they would have turned bearish before the bubble popped. As someone who wanted to buy more long term--I wouldn't have been able nor wanted to time the market, so I sat it out. No slippage or difference from my original thesis.
See--this is my problem with you. You can't just state your point without trying to puff yourself up. If you would have simply said that you use other measures to try to gauge demand because supply can change quickly and you wanted a longer term gauge of the direction of housing prices, then you might have had a point. But, for some reason, you cannot do that. After all this, you have yet to give a simple explanation for why you look at sales volume. It's as if you are incapable of understanding and explaining your thought process.
See--this is my problem with you. You can't just state your point without trying to puff yourself up
2. Housing internals are weak
Second, those housing pundits tend not to consider the “internals†of the housing market. The internals tell the story for those who care to look.
In a normal cycle we would see the following:
90% mortgage buyers
40% of that first time home buyers
10% cash buyers
In this cycle, however we see the following:
67-70% mortgage buyers
27-30% first time home buyer
30% plus cash buyers for the past several years
The internals show weakness in demand, not strength. What if the number of cash buyers returned to a normal 10% level of the market place? 2014 has a high percentage of cash buyers but the volume of sales are going down. With a lower percentage of cash buyers expected in the future, the number of mortgage buyers will need to increase just to maintain the current level of sales.
"A key emphasis this year."
If cash buyers went back to their normal historic %, then both 2013 & 2014 existing home sales would be at the lowest level of this economic cycle.
We are talking about year 5 & 6 in this economic cycle not the first few years coming out of the recession. This troubling trend is why mortgage demand needs to grow to keep sales from falling more as total cash volumes continue to dwindle slowly.
It was written pretty clear in the article too, I could have added 2012 but it was year 2013 and 2014 that people started to raise their sales estimates and they missed badly
I mean ouch some as high as 30% sales miss in 2014
Dealing with professors, economist, housing pundits and others. I have learned one thing that they all have in common. None of them have a financial lending background
so their model of affordability is outdated in relationship to this economic cycle. This has been the case for 12 years now and their frustration on why demand has been soft comes from this area of not understanding why Americans aren't buying homes like their model would have shown
Weak demand meets weak building. Things balance out. Where's the problem?
Overwhelmingly people care about prices more than anything else.
Politicians, banksters, retirees... they don't care if volume is drowned into the bathtub as long as prices are up.
Weak demand meets weak building. Things balance out. Where's the problem?
Overwhelmingly people care about prices more than anything else.
If that was the case then why did sales drop in a year where pricing where increasing
Not to mention we did it 21st century.... Hold... let me repeat this again.... 21st century lows in 2014 for
Mortgage purchase applications
&
First time home buyers
So in 2013 where we saw massive price gains sales barely grew
In 2014 where we saw another year of price gains sales went negative
Not sure if that is a valid economic thesis with the last 2 years if all that matters is price
If that was the case then why did sales drop in a year where pricing where increasing
What is your point? I said they don't care if sales drop as long as prices are up.
Housing internals are weak
Second, those housing pundits tend not to consider the “internals†of the housing market. The internals tell the story for those who care to look.In a normal cycle we would see the following:
90% mortgage buyers
40% of that first time home buyers
10% cash buyersIn this cycle, however we see the following:
67-70% mortgage buyers
27-30% first time home buyer
30% plus cash buyers for the past several yearsThe internals show weakness in demand, not strength. What if the number of cash buyers returned to a normal 10% level of the market place? 2014 has a high percentage of cash buyers but the volume of sales are going down. With a lower percentage of cash buyers expected in the future, the number of mortgage buyers will need to increase just to maintain the current level of sales.
I fail to see how a different spread of buyer types = weakness. Different doesn't equal weak. Maybe cash buyers are drowning out mortgage buyers. I just have a hard time with someone saying the housing market is weak after 3 years of very good gains, price/rent ratios in normal ranges, and low supply. By definition it's not weak.
If you want to say it's unsustainable, then you might have a point.
What is your point? I said they don't care if sales drop as long as prices are up.
Seriously it's amazing that we have hit 21st century lows in demand metrics from main street America but the richest 1% have been buying more homes as a % of the market than anytime in recent history and some people find nothing wrong with that at all
You don't get charts like this if there isn't a demand problem
Have you not been paying attention with all the charts and graphs he put up with all the different metrics he uses besides prices??
And the question I asked was why does he use those.
Anyone reading this thread can see that's YOUR problem, since the ONLY thing you focus on is prices, and every other data point, fact or math goes completely over your head!
Well, obviously I focus on prices as do 99% of people in the world. But I can assure that nothing goes over my head.
Seriously it's amazing that we have hit 21st century lows in demand metrics from main street America but the richest 1% have been buying more homes as a % of the market than anytime in recent history and some people find nothing wrong with that at all
If we've hit 21st century lows in demand--why are prices rising???? Doesn't that strike you as a contradictory statement??
If you want to say it's unsustainable, then you might have a point.
2013 & 2014 were supposed to be the best year homes net overall demand
2013 barely grew
2014 went negative
Even with higher inventory and lower rates plus 30% cash buyers in the system
Like I said, there is no way to cut around it, the price inflation we have seen since 2012 has brought the U.S housing to demand metrics that are at
21st century lows in terms of % buyers
You don't get charts like this if there isn't a demand problem
Ok, there is a demand problem. Ah, but there is also a supply problem. As a result the entire housing market is restricted to its upscale part.
So it is a market in balance, more than it looks like.
I guess we shouldn't care so much about the market [taken purely as a market] and more about what it means socially when this happens.
If we've hit 21st century lows in demand--why are prices rising???? Doesn't that strike you as a contradictory statement??
I tried my best to make the point but like I said you're that guy that didn't care about the prices rising during the housing bubble and your own metrics that you quoted
even showed you that there was an issue in mid 2003
Not sure what else I can say. People like yourself only care about price and nothing else. That is not how I would look at it because the last time that metric was used
2003-2006 and it failed miserably and we are already seeing net negative demand trend.
Ok, there is a demand problem. Ah, but there is also a supply problem
Supply was up in 2014, we had more demand in 2013 with less homes on the market and on par and higher rates
If we've hit 21st century lows in demand--why are prices rising???? Doesn't that strike you as a contradictory statement??
I tried my best to make the point but like I said you're that guy that didn't care about the prices rising during the housing bubble and your own metrics that you quoted
even showed you that there was an issue in mid 2003Not sure what else I can say. People like yourself only care about price and nothing else. That is not how I would look at it because the last time that metric was used
2003-2006 and it failed miserably and we are already seeing net negative demand trend.
So you have no answer then?
So you have no answer then?
for the 3th time
As long as inventory stays below 6 months and you trend sales growth ( this is possible still) because cash buyers have never been this high as a % of market place
They key is having both 6 months and lower inventory and trend sales growth, this is only possible if cash buyers are still 17%-22% above their historical norms because if it wasn't we would be below the lowest level of total home sales in this cycle
Which means actually 2012-2015 would have the lowest level of total sales in the Great Recession
2013 & 2014 were supposed to be the best year homes net overall demand
See this what you're missing. Supply and demand in housing are related. A buyer is usually also a seller. So the net effect is zero.
What you really care about is net demand (intuitively think of demand - supply). Or new buyers - sellers that aren't buying.
If prices are rising, then net demand > 0. If prices are falling then net demand is less than zero
for the 3th time
As long as inventory stays below 6 months and you trend sales growth ( this is possible still) because cash buyers have never been this high as a % of market place
They key is having both 6 months and lower inventory and trend sales growth, this is only possible if cash buyers are still 17%-22% above their historical norms because if it wasn't we would be below the lowest level of total home sales in this cycle
Which means actually 2012-2015 would have the lowest level of total sales in the Great Recession
But it's incorrect. Cash buyers are still demand. And sales volume doesn't equal demand.
See this what you're missing. Supply and demand in housing are related. A buyer is usually also a seller. So the net effect is zero.
What you really care about is net demand (intuitively think of demand - supply). Or new buyers - sellers that aren't buying.
If prices are rising, then net demand > 0. If prices are falling then net demand
Not if 45% of the buying is done by cash and 1%
That group doesn't really need to worry about the cost of shelter so much
Again this is also why we are seeing declines in YoY price gains since 2013 even with inventory below 6 months
Without the net carry over the price gains are becoming less and less each month
Surprise! Rent Control and Government Directed Middle+Working Class Housing Programs disappear, and, shock of shocks! Housing stock is overpriced and sales faltering.
Obviously we need more NINJA loans and Tax Cuts to help the Free Market!
This is truly been fun! Honestly
Good--hopefully you'll be better equipped for your next interview.
Supply was up in 2014,
Not really. Supply is at a pathetically low level. Moreover, not reflected in inventory for sale is how many housing units we have compared to the population we have.
People are doubling up, living in closets and garages. Where does that show in your numbers?
If we had an appropriate number of units, there would be a huge inventory or large vacancy rate for rentals.
we had more demand in 2013 with less homes on the market and on par and higher rates
Yes. So?
Good--hopefully you'll be better equipped for your next interview.
It just confirms what I have always thought, people who only look a price don't look at internal demand drivers
2003-2006 = Exotic Loans
2012-2015 = High levels of cash buyers
Nothing new here
Not if 45% of the buying is done by cash and 1%
That group doesn't really need to worry about the cost of shelter so much
Again this is also why we are seeing declines in YoY price gains since 2013 even with inventory below 6 months
Without the net carry over the price gains are becoming less and less each month
Logan, Logan, Logan. Surely you know the difference between rising prices and rising change in prices.
And if it's just the 1% buying, why are prices rising at all? Are there that many folks in the 1% bidding against each other?
Not really. Supply is at a pathetically low level.
The math was that supply was higher in 2014 than in 2013. That was one of the core thesis in thinking of the housing demand bulls that sales would be
20%-30% higher in 2014 and for new homes went negative
Sales would get as high as 5.7 - 5.8 million for EHS and they went negative too
It just confirms what I have always thought, people who only look a price don't look at internal demand drivers
2003-2006 = Exotic Loans
2012-2015 = High levels of cash buyersNothing new here
I bet you find that everything confirms to what you already thought, don't you? No matter what the truth is, you misconstrue it to say what you expected it to say.
Most rational people look at other metrics--like price/rent, for example. But they do so to understand about future prices. Nobody cares what sales volume will be in 2017 unless they can use that information to determine what prices will be doing. I can't believe you fail to grasp such a simple concept.
Most rational people look at other metrics--like price/rent, for example.
If you truly believe in that then you would have stopped being a bull in 2003? correct?
Not really. Supply is at a pathetically low level.
The math was that supply was higher in 2014 than in 2013. That was one of the core thesis in thinking of the housing demand bulls that sales would be
20%-30% higher in 2014 and for new homes went negative
I'm not sure who is saying sales would be 20%-30% higher, based on a marginally higher supply / still at an extremely low level. In any case this is not what I want to talk about. My point is demand for housing is there. It's just not there at the price level that we are seeing.
It seems you translate that into a demand problem which is one way to look at it.... but look, if supply was much higher, prices would go down and sales volume would go up.
So the real problem we are facing is a large number of missing housing units relative to population. Period.
Since you are all about numbers: I'm asking which data you have about housing units availability compared to population.
If we've hit 21st century lows in demand--why are prices rising???? Doesn't that strike you as a contradictory statement??
Not all prices are rising. It doesn't take many high end home sales to skew the averages. Housing in areas where land isn't in short supply have been flat. Rich folk churning their houses back and forth to one another, with higher prices, pull up averages. Higher prices, in this context, with less people working, and crap wages, means less demand.
In horse wagering, there's a term "at a price" where value bettors will take a stab at a horse, at favorable enough odds. There's plenty of demand lurking for houses,,,,,,at a price. I can't imagine what idiots are buying at these price levels. Overpriced housing is also why investors are buying less houses
There currently is approx. 5 months of inventory with low vacancy rates on rentals and multi-family rental unit construction higher than single family construction...
Does that sound like we need MORE available units for sale? What else is wrong with the picture?
4.7-month supply at the current sales pace.
We absolutely need more units for sale, to bring prices down to historic levels relative to wages.
Not only that but this sales pace is extremely weak - drowned by absurdly high prices.
This sales pace doesn't reflect at all the need for housing.
Since you are all about numbers: I'm asking which data you have about housing units availability compared to population.
Civilian Labor force is over 156 Million
What we have seen is just soft household formation numbers up until the last report.
This why rental demand has been so strong and first time home buyers has hit it's lowest level ever recorded
In terms of on sale inventory this for EH
In terms of on sale for NH inventory there is a reason why you haven't seen mass production of Single family Residence, it's because the builders know the demand curve isn't there to make their margins, so they want to keep some pricing power.
However, rental demand has been booming and this has been their bright point for them in this cycle
I'm not sure who is saying sales would be 20%-30%
The number 1 housing analyst in America did for 2014 even though she revised all her E.H. sales to negative trend growth for 3 years
She still kept her 25% sales growth for 2014 even in April
http://loganmohtashami.com/2014/04/11/miss-housing-nirvana-crys-uncle/
We don't have a housing shortage we had on sale shortage we did hit 6 months inventory last year but only for 1 month and then inventory fell back. There were some sellers who didn't get want they wanted and pushed back from the market place
However, for the first time we did hit the 6 month mark last year
If you truly believe in that then you would have stopped being a bull in 2003? correct?
I think I was confused about your question. I wasn't a long term bull in RE in 2003. Like I said, I rented rather than buying because I felt housing was overpriced.
But using inventory as a guide, it was clear that housing prices would continue to rise until some point in 2006.
Like I said, I rented rather than buying because I felt housing was overpriced.
So I assume you must have bought a home past 2006.
However, why does what you're talking about have anything to do with housing economics. You're just one man, my data points are a reflection of an entire housing market and the economic cycle we are in.
So I assume you must have bought a home past 2006.
Yep.
However, why does what you're talking about have anything to do with housing economics. You're just one man, my data points are a reflection of an entire housing market and the economic cycle we are in.
Huh? You asked if I was a housing bull, so I answered. Why do you think I am trying to imply that I represent the entire market? What are you talking about?
And they aren't your data points. They are data points. You have used them to arrive at a conclusion. The data is fact. Your conclusion is opinion.
The data is fact. Your conclusion is opinion.
The conclusion is fact the data points is to show why housing is soft in terms of demand. It's the other way around
Just like Janet Yellen said in her testimony today U.S. economy is growing but housing is the biggest disappointment
to be honest I don't know many people in the world right now that don't agree with this even some of the more active housing bulls have kind of thrown in the towel in terms of
demand because we should have had much stronger in total sales.
Actually in fact every single housing analyst and economist got it wrong in 2014 there wasn't anyone that had negative trend demand sales, not one on record.
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