patrick.net

Heraclitusstudent says

But there just isn't any supply for houses at normal prices

Clearly only part of the demand is fulfilled.

You seem to be totally blind to this fact.

Back in 2003-2006 it was impossible to convince housing bulls that demand wasn't real, they would never listen

Even today when we have data line like this, they still say it's a supply problem.

It's like there is a hatred for math, facts, and data. Probably don't believe in climate change either.

I never understood that loyalty to an economic assumption theory but for some reason housing breeds this type of behavior.
It would be a great test case study

Demand year 7 of this cycle now with rates at 4%

Demand year 7 of this cycle now with rates at 4%

Causation of demand problems

Supply which is higher in 2013 and 2014 than it was in 1999, 2000, 2001, 2002, 2003, 2004, 2005

Bless your hearts all of you. You would have killed Galileo because of his factual nature of numbers

But now even with all this data that you can see, it still doesn't even ring a bell, Great stuff, good for you guys, you have done nothing but put a smile on my face!
That's what makes a market place

Call Crazy says
"What, 10 days ago and it's not had multiple offers??? What the heck...

I thought we had a "supply issue" according to a few people in the thread...."

He is right Logan. That property is grossly over priced.
You need to reduce the price by a hundred dollars.

Logan Mohtashami says

Bless your hearts all of you. You would have killed Galileo because of his factual nature of numbers

But now even with all this data that you can see, it still doesn't even ring a bell, Great stuff, good for you guys, you have done nothing but put a smile on my face!

That's what makes a market place

lol--you're back on this kick again? Rest assured that no one here is afraid of numbers. The key point you're missing is that anyone can recite a bunch of numbers--the real trick is knowing which numbers are important and what they are telling you.. That's where you seem to be a bit lacking.

tatupu70 says

lol--you're back on this kick again? Rest assured that no one here is afraid of numbers. The key point you're missing is that anyone can recite a bunch of numbers--the real trick is knowing which numbers are important and what they are telling you.. That's where you seem to be a bit lacking.

Again priceless... honestly don't ever stop being yourself and once again you're just asking me to debate myself because if you truly read what I wrote you would be in 100% agreement with me because it's similar to your thinking.

Logan Mohtashami says

Again priceless... honestly don't ever stop being yourself and once again you're just asking me to debate myself because if you truly read what I wrote you would be in 100% agreement with me because it's similar to your thinking.

Which time? I think you may have multiple personalities. Maybe that explains the 3rd person writing...

tatupu70 says

Which time? I think you may have multiple personalities. Maybe that explains the 3rd person writing...

See, even when I point the flaw in the thesis you actually can't agree with yourself. This is what happens with people who don't either read the statement or have a emotional vested belief is just making stuff up for the sake entertainment.

You're arguing against a similar thesis that you and I agree on and yet now to dismiss your thesis while you're at it.

Seriously I can't make this stuff up! This thread has been spectacular!

Logan Mohtashami says

See, even when I point the flaw in the thesis you actually can't agree with yourself. This is what happens with people who don't either read the statement or have a emotional vested belief is just making stuff up for the sake entertainment.

You're arguing against a similar thesis that you and I agree on and yet now to dismiss your thesis while you're at it.

Seriously I can't make this stuff up! This thread has been spectacular!

Wow--it was a joke. Relax Logan. We're in agreement.

tatupu70 says

Wow--it was a joke. Relax Logan. We're in agreement.

Dude, I have been smiling this entire time! Seriously any of you guys come to the O.C.
Drinks are on me! 949-291-8293
Let me know when you're in town
It will be a fun conversation!

Back to work for me. Take care guys

Logan Mohtashami says

Dude, I have been smiling this entire time! Seriously any of you guys come to the O.C.

Drinks are on me! 949-291-8293

Let me know when you're in town

It will be a fun conversation!

What a coincidence. I just happen to be in town. I'll see you at the Spectrum Yard House.

Strategist says

What a coincidence. I just happen to be in town. I'll see you at the Spectrum Yard House.

I live 5 mins away from the Spectrum

Logan Mohtashami says

So, after 6 years of data the core thesis of my main thesis has vindicated due to the fact that economy has produced 10 million new jobs but with demographics and the model above it hasn't create the net demand that economist and housing pundits have thought it would

How come?

indigenous says

How come?

I looked at their affordability index models on how they based their capacity to own the debt of housing was and their affordability index models are very off with this cycle

baseline assumption is off everyone having 20% down a starting DTI of 25% debt to income and they don't account for PITI inflation nor add any LTI factor model.
Liability to income

To be honest they wouldn't even know how to get proper data on that

I tried to explain this to Ivy Zelman last year ( Top rated U.S. housing analyst) when she said new home sales would rise 25% in 2014 and it grew at 1.9%

Have to account for this economic cycle and how unique it is in terms of it's internal net demand from mortgage buyers.

Also almost none of them have any financial lending experience and get their data points from surveys and bad ones at that. Some of the stuff I read was really funny actually. It's just things that aren't factual true but people who answered these surveys were just off.

So they were led astray, that's the problem when you get your data from 3rd party people and don't do any internal work yourself

If young Americans aren't getting married in high levels and you have a low wage job factor in an economic sales... it makes sense why new home sales would be a market place for the wealthy buyers.

This doesn't mean a complete negative trend, it's just the growth isn't there. I believe new homes can have at least 8%-12% growth because of the low bar set in 2014 which is really only a 440K number

I don't blame the builders at all for only selling on the high end and expanding rental construction demand like they have

RT @WSJecon: For the first time, builders have sold more homes priced above $400K than those below $200K

Do you look at a more macro answer to this problem? IOW you are saying that houses are too expensive, to which I'm saying how come?

indigenous says

to which I'm saying how come?

#globalization
#Technology
#debt
#demographics

Something University of Chicago Booth and I discuss on technology is that
It has boosted incomes on the higher end side of the latter
- medical industry
- Financial industry
- Engineers

But it has done a number on manual labor incomes over the decades, so over time as the cost of shelter rise this group has a more difficult time getting the debt even with the cost of debt falling for 34 years

Logan Mohtashami says

Strategist says

What a coincidence. I just happen to be in town. I'll see you at the Spectrum Yard House.

I live 5 mins away from the Spectrum

Yes, I know. I live in your neck of the woods.

Strategist says

Yes, I know. I live in your neck of the woods.

Irvine?

I live in Quail Hill off Sand Canyon

I will give you that demographics has something to do with it, however the US is projected to grow to well over 400 million by 2050 so that doesn't jive with the demographics answer.

Over 90% of the population of the US were farmers 100 yr ago. Today less than 5% of the population is in farming, so that doesn't jive with the technology answer.

Globalization is a factor but consider that China would not have done nearly as well if not for them devaluing their currency. I agree with this point as the floating exchange rate created by the MMT's Milton Friedman and targeted a 2-3% inflation rate and this coupled with the US reserve currency status it left the US at the mercy of Japan and China to mercantilism. For sure no matter what jobs were going to be off shored. But it did not have to be as devastating as it was. Besides by comparative advantage this should create more jobs not fewer.

I agree on debt but considering that at this point in time it takes what 200 - 300 billion to service the debt that does not seem like that is the problem either.

So I still have to ask how come?

Logan Mohtashami says

Strategist says

Yes, I know. I live in your neck of the woods.

Irvine?

I live in Quail Hill off Sand Canyon

Logan, I am heavily invested in home builder stocks. ITB, LEN, TOL. And residential lots.
Am I going to make money in 2015? What does the analysis you use, says?

Strategist says

Logan, I am heavily invested in home builder stocks. ITB, LEN, TOL. And residential lots.

Am I going to make money in 2015? What does the analysis you use, says?

It should be a better year than 2014,
Expectation that Ivy Zelman put for the builders lead to the disappointment and surprise in weakness of sales.
They are still boosting prices to make their margin.

They should have at least 8%-12% sales growth coming for new homes rather than 1.9% sales growth

The problem the builders have is the increase inventory of existing homes which are so much cheaper and have a geographical advantage over a new homes.
That's the key tug of war that could happen in 2015 because they clearly lost prime mortgage buyers to the existing home market last year

indigenous says

I will give you that demographics has something to do with it, however the US is projected to grow to well over 400 million by 2050 so that doesn't jive with the demographics answer.

Prime working population grew well in the 1980's and 1990's not so much in the last decade, but we are about to embark on a young workforce again which is bullish as it will lead to household formation

indigenous says

I agree on debt but considering that at this point in time it takes what 200 - 300 billion to service the debt that does not seem like that is the problem either.

I was talking more on private debt than public debt. Public debt is going to expand in a big way after 2022-2052 so look for politics to come then.

Private debt, especially student loan debt has been a issue for household formation as the break down is more like this

70% of all SLD is under 14K
13% is over 50K
3% is over 100K
30% of all SLD are owned by college drop outs

This impacts household formation, but we are slowly working through this but that 30% college drop out SLD number is an issue

The amount of debt needed to be taken out on a mortgage impact the after tax/expense consumption model of those who can buy a home

Car loan debt is very cheap but 30-40% sub prime buyers show that there is still some quality stress in the system

Once rates rise it will be a good test for the U.S. economy to see if it can handle it

indigenous says

So I still have to ask how come?

Is this what you're looking for?

Logan Mohtashami says

So I still have to ask how come?

Logan Mohtashami says

Back in 2003-2006 it was impossible to convince housing bulls that demand wasn't real, they would never listen

Even today when we have data line like this, they still say it's a supply problem.

It's like there is a hatred for math, facts, and data. Probably don't believe in climate change either.

If anything, it's you who are failing to follow a logical thread. All you do is producing charts which have nothing to do with what I said.
You show data for demand at 1 price level, and ignore demand at other prices.
You call that respect for maths, facts and data? I call that a joke.

Logan Mohtashami says

I don't blame the builders at all for only selling on the high end and expanding rental construction demand like they have

You produced a chart showing an historical linear relation between wages a housing prices.
Do you even believe that young buyers would buy houses if prices today were on this line?
It's not clear at all.

Heraclitusstudent says

You call that respect for maths, facts and data? I call that a joke.

I agree with you 100% that you sir believe that is a joke and then some. Trust me on this you will not find a disagreement on me on that

p=1278311&c=1178670#comment-1178670">Heraclitusstudent says

You produced a chart showing an historical linear relation between wages a housing prices.

Do you even believe that young buyers would buy houses if prices today were on this line?

It's not clear at all.

This is more for existing new homes as they are still roughly 27%-30% of the entire housing market mortgage demand

For new homes not that much it's less than 15% of all new home demand

Heraclitusstudent says

Heraclitusstudent  

"To do the same thing over and over again is not only boredom: it is to be controlled by rather than to control what you do"

Ephesus was a beautiful city back in the day, history major here, your name has deep meaning to those who remember the old days

Logan Mohtashami says

Private debt, especially student loan debt has been a issue for household formation as the break down is more like this

Your graphs would indicate that this situation is correcting itself with the exception of SLD, however based off of what you said previously the largest age group is 23-25 yr olds, seems like that would be a contributor to the rise on your graph? Especially the drop outs.

But considering that the total SLD is what 1 trillion? and 70% seems quite manageable that leaves 300 billion that is questionable debt.

But in the scheme of things that does not seem to be the answer either. I still have to wonder how come?

Is this really the reason for the lack of household formation?

It seems to me the overarching problem is a dearth of good jobs. To which I still have to say how come?

indigenous says

It seems to me the overarching problem is a dearth of good jobs. To which I still have to say how come?

#globalization
#Technology
#debt
#demographics

These 4 together will always be my answer, we are no longer in a situation where we are the capital production kings of the world, so we consume more than we produce and there is limits to that type of expansion when incomes don't rise in a meaningful way

Logan Mohtashami says

These 4 together will always be my answer, we are no longer in a situation where we are the capital production kings of the world, so we consume more than we produce and there is limits to that type of expansion when incomes don't rise in a meaningful way

That just doesn't reconcile with our situation.

The main thing I see as a problem and people complaining about is the dearth of jobs. But what you point to does not explain this, if it does it is ambiguous. How come the dearth in jobs?

indigenous says

How come the dearth in jobs?

Do you believe in the thesis that we simply have too many humans around the world and that their simply isn't enough jobs for them, that the equilibrium of economics and mankind is hitting a rough patch for more mature countries

Logan Mohtashami says

Do you believe in the thesis that we simply have too many humans around the world and that their simply isn't enough jobs for them, that the equilibrium of economics and mankind is hitting a rough patch for more mature countries

That would be akin to Malthusian thinking which clearly is specious. By virtue of comparative advantage the opposite should be true.

Not to worry dan sez the police are working on that
Logan Mohtashami says

Do you believe in the thesis that we simply have too many humans around the world and that their simply isn't enough jobs for them, that the equilibrium of economics and mankind is hitting a rough patch for more mature countries

Besides that would only apply to countries whose demographics are not favorable like Japan or Germany or China in a bit, but not the US

SoftShell says

Not to worry dan sez the police are working on that

That's right he was saying that economic opportunity was best right after the Black Plague because there was so much less competition. You have to admit that is some incredible thinking?

indigenous says

By virtue of comparative advantage the opposite should be true.

Look at it this way, the lower end skill jobs and manual labor jobs have been hit on the wage side of the equation but the upper income high wealth
sector simply don't need that many workers

Difference in 2 tech companies

IBM 200 billion market cap 431K workers

Facebook 200 billion market cap 7,500 workers

indigenous says

Japan or Germany

Japan is in demographic hell

Germany demographics are about to hit them

indigenous says

Black Plague

Black Plague did create a lot of wage inflation in the aftermath

Logan Mohtashami says

Ephesus was a beautiful city back in the day, history major here

Really? What else did you study?

Logan Mohtashami says

Look at it this way, the lower end skill jobs and manual labor jobs have been hit on the wage side of the equation but the upper income high wealth

sector simply don't need that many workers

Difference in 2 tech companies

IBM 200 billion market cap 431K workers

Facebook 200 billion market cap 7,500 workers

I hear you, but that still looks like a correlation but not a causation. Again farms need a lot less farmers now, the jobs that were created were not even dreamed up when 90% of the population were farmers.

Logan Mohtashami says

Black Plague

Black Plague did create a lot of wage inflation in the aftermath

That is the economic broken window theory. Not the one involved with policing. But certainly not something to shoot for.

[on second thought that is not really broken window theory]

My thinking is that the driver of 100% of the new jobs is small business, jobs are created by big business are a wash as the one growing are offset by the ones shrinking.

The thing that drives small business into big business is investment. Investment in small business is fraught with peril. So it is preferable to invest in RE or the stock market or even buy backs.

The QE has driven investment capital towards this and away from small business.

Additionally a big part of investing is confidence this was at an all time low under FDR as no one knew what was going to happen next, E.G. gold was confiscated by the government only to be revalued by 50% a short time after the confiscation, they never knew how the interstate commerce law was going to be tortured into a centralized format, they never knew how price fixing was going to change their business, etc etc. The current president instills a similiar amount of confidence certainty, with Obama care and how it will affect business or Frank Dodd and how it will affect business not to mention the wars and executive orders and the ever increasing spending.

So I think that aside from demographics the primary driver is the lack of investment in small business.

Additionally investment in producer goods by business is over half of the economy, not the advertised consumer spending. With manufacturing off shoring I have to think a lot of spending on producer good spending went with manufacturing.