patrick.net

Strategist says

I call it affordable housing no one wants. Everyone wants what they cannot afford.

Sept. #housing starts +6.5%mm, all on #apartments. SF starts +0.3% mm, multifamily +17%mm

Building permits, a future indicator, -5%mm, +4.7%yy seasonally adjusted. Both sf and multi down for the month.

This is a factor why your index isn't at $50 not tight lending

Ironman says

Chew on that for a while...

Single Family Starts: Only up 0.3%

Multi Family Starts (Apartments): Up 17%

Single Family Permits: -0.3%

Multi Family Permits: -14.6%

Housing "Recovery"????

Slow and steady, rental demand very strong this cycle, single family working from a very low bar

Besides demographics were more for renting in this cycle, you had millions of previous homeowners who became renters and still we have near a million 90 day delinquents in the system which provides more rental demand.

This will change but in a bigger fashion in years 2020-2024

Strong renting demand has boosted permits, which is still a positive, just slow and steady

Logan Mohtashami says

Strong renting demand has boosted permits, which is still a positive, just slow and steady

People have to live somewhere. Every single day the home shortage is getting worse.
No matter what, we will build, and build like crazy. We have a lot of catching up to do.

Ironman says

Strategist says

There is no doubt that present conditions have created the strongest foundations ever for real estate. We pretty much have homeowners with lots of equity, highly qualified if they don't have equity, and not willing to default if they have negative equity. There are very few in foreclosure.


Home values will never ever ever ever be lower.

Maybe in your neck of the woods, but come over here... Everything you just typed is the opposite here...

Home prices have been flat for the last two years and are trending downward since the middle of the year. There are zombie houses on every street that have been sitting for years empty. and this is the state that's suppose to be the wealthiest in the country.

The US has always been a migrating country. Today you have millions migrating from the frost belt to the sun belt. Every region is unique and different. You are probably in a region where the preference is to move further South towards Florida.

Strategist says

People have to live somewhere. Every single day the home shortage is getting worse.

No matter what, we will build, and build like crazy. We have a lot of catching up to do.

Hence why slow and steady was the right call in this cycle, but as always, profit margins matter with builders

Strategist says

People have to live somewhere.

What I wrote back in 2010 ( more than one variable factor that lead to the massive renting boom in this cycle)

“The longer term consequences of an unstable residential real estate market may be more serious than just the destruction of individual wealth. The ideal of middle class home ownership may be at stake. The census bureau reported a 7% decline in national rental vacancy rates in 2010, along with an overall decline of 0.7% in home ownership rates compared to a year ago. There were fewer “organic” buyers, more renters and more investment buyers in the market in 2010 and I expect this trend to continue into 2011. Are we at the beginning of a sociological movement away from middle class home ownership and towards a cultural split between the investment property landlords and their renters both of whom may have less personal investment in neighborhood security, local schools and shared public facilities compared to primary homeowners.”

3 real time factors that have caused the boom in renting and why renting inflation is at a cycle peak looking at the CPI numbers
1. Demographics
Ages 12-29 are big in America today and young are renting for longer period due to
- Lack of down payment
- Rent inflation making the down payment to obtain ( Only 3%-5%) harder and harder
- Marriage and having kids later in life
- Affordability with a lot cheaper homes already bought with cash
2. Rental demand surge from foreclosure
Millions of Americans who lost their homes go straight into the rental demand curve metric. A lot of people who were able to stay in their homes for 2-4 years, still when they finally lost their home, went into the rental demand curve. This process just strung out the rental demand curve from this group longer
3. Lack of rental supply
If you can look at the charts between multifamily and single family construction from 1993-2007 you can see the big gap in construction for rentals
All these factors lead to a rental boom in demand and rental inflation. Just look at the data it speaks for itself

Logan Mohtashami says

Slow and steady, rental demand very strong this cycle, single family working from a very low bar

If they build a 10 units structure, it still count as 1 on this graph?
Any graph showing UNITS start?

Heraclitusstudent says

Any graph showing UNITS start?

I think you're looking for this chart

On another note because I love commodities and currencies

Look at this demographic destruction data line

Logan Mohtashami says

I think you're looking for this chart

No, this looks like 5+ units STRUCTURES.
I'm looking for total # of units independent of structures.

Heraclitusstudent says

I'm looking for total # of units independent of structures.

Let me see what I can find for you, that might be a tricky data line to show on a chart

Heraclitusstudent says

If they build a 10 units structure, it still count as 1 on this graph?

Any graph showing UNITS start?

A 10 unit single structure is counted as 10. Otherwise this indicator would have little meaning.

https://en.wikipedia.org/wiki/Housing_starts
Housing starts is an economic indicator that reflects the number of privately owned new houses (technically housing units) on which construction has been started in a given period. This data is divided into three types: single-family houses, townhouses or small condos, and apartment buildings with five or more units.

Each apartment unit is considered a single start. The construction of a 30-unit apartment building is counted as 30 housing starts.

Logan Mohtashami says

Should not have much of an impact on the monthly figure

"We expect that application volume will remain volatile over the next few weeks as the industry continues to implement TILA-RESPA integrated disclosures," said Mike Fratantoni, the MBA's chief economist, referring to the the Truth in Lending Act and the Real Estate Settlement Procedures Act of 1974.

Refinance volume increased 9 percent from the previous week on a seasonally adjusted basis. Purchase applications increased 16 percent from a week earlier and are now 9 percent higher than the same week one year ago.

It's still running off the TRID impact, none of this is pre TRID data lines, we actually were having a much better YoY print before TRID and weekly purchase index doesn't really move double digit.

One more week should clear it back to the normal pre TRID trend

Logan Mohtashami says

"We expect that application volume will remain volatile over the next few weeks as the industry continues to implement TILA-RESPA integrated disclosures," said Mike Fratantoni, the MBA's chief economist, referring to the the Truth in Lending Act and the Real Estate Settlement Procedures Act of 1974.

Why would integrating disclosures create application volatility? They are just a bunch of disclosures that no one reads, but everyone signs.

Hey Logan......((Wed, 21 Oct 2015, 4:25am PDT ))

You are in the Pacific time zone, not the Eastern time zone. It's OK to get some sleep.

Strategist says

Hey Logan......((Wed, 21 Oct 2015, 4:25am PDT ))

You are in the Pacific time zone, not the Eastern time zone. It's OK to get some sleep.

Mortgage purchase application data comes out at 4:00

Strategist says

Why would integrating disclosures create application volatility? They are just a bunch of disclosures that no one reads, but everyone signs

What happened was that everyone and anyone that had a deal coming up in 30-60 days got their applications signed before the October 3rd date for TRID.

If you did that then you're not on the Hook for the new regulations. So, there are possible delays and even a subject loan decline at closing due to this new regulation.

So, if you had anything in the pipeline you made sure to get the application in.

Hence the biggest jump in history for the month of October with the biggest decline in history in October as well, most of the action happened in that 2 week time frame due to the massive jump the week before TRID.

I was drinking the koolaid right up to the last two syllables....

Logan Mohtashami says

Have to remember this is for existing homes, forward demand curve of 30-60 days on closing, which means you might see another negative week because it's been a 3 week period and deviation take off happened in a 1 week data line set.

So, normally would say 2 week because the 2nd week was much lower than the uptick, but since it's October you could have maybe 1 or 2 more negative data spreads, maybe.

SoftShell says

So, normally would say 2 week because the 2nd week was much lower than the uptick, but since it's October you could have maybe 1 or 2 more negative data spreads, maybe.

It's week 3 now, still working off the TRID run up and run down, purchase applications have been trending above 10% for months now

This week 9% YoY
Last week -1% YoY
First Week 49% YoY

Best example for the TRID impact is really this chart.

No time ever in U.S. economic history we have had a spike in the month of October this big since the day has been kept, this was the week where you had to get the applications in before the TRID deadline

This was the 49 percent year over year increase in the data

Once that impact was in the system, then we had a negative year over year print in applications which is not the norm as we have been posting positive YoY prints all year long and a lot 15%-20% numbers

Strategist says

People have to live somewhere. Every single day the home shortage is getting worse

Here is a chart of both for you S, Permits and Starts adjusting to population, this can easily been shown as a bullish chart for forward demand because it's simply so low

Better chart to show TRID

You are the chart guru here Logan.

Logan Mohtashami says

So, there are possible delays and even a subject loan decline at closing due to this new regulation.

What kind of delays? And how is TRID more likely to have a possible loan decline at closing?

Indiana Jones says

What kind of delays? And how is TRID more likely to have a possible loan decline at closing?

I don't find TRID a big deal, but as always the industry will complain about any new regulation.

It's more paperwork and it's coming at closing now as much as in the start of the deal. I look at it as a double disclosure process and the closing disclosure must be received by the borrower or nothing gets done. Some lenders have a final C.D. can't be a penny different than disclosed, if something isn't correct at that stage they will cancel the loan and you have to start over again.

After a few months everyone will have a rhythm with the disclosure process and this will be forgotten

As you can see here, everyone wanted to avoid this, since it's October it's not that big of deal because it's not a heat month, but you can see in the data everyone wanted to get their October and November closing in before the TRID deadline. Look for mid November or December closing to see if any issues come about

Logan Mohtashami says

Strategist says

People have to live somewhere. Every single day the home shortage is getting worse

Here is a chart of both for you S, Permits and Starts adjusting to population, this can easily been shown as a bullish chart for forward demand because it's simply so low

The longer it takes to catch up, the greater will be the price explosion.

Strategist says

The longer it takes to catch up, the greater will be the price explosion.

It's not that easy! :-)

Look for a beat in existing home sales tomorrow, the last number was a bit too negative, trend wasn't that bad

Strategist says

People have to live somewhere. Every single day the home shortage is getting worse

They interviewed the Chief Economist of NAR & Redfin and myself on housing going into the fall

Low inventory is only in context that it's really not that low compared to the years 1999-2005, Hence why housing starts have legs on both fronts, however, it's a slow and steady move due to the price inflation factor model

http://www.abqjournal.com/663841/biz/real-estate/what-to-expect-from-the-housing-market-this-fall.html

Nice article. That was pretty good.
It seems tight mortgage requirements have loosened only a little bit.

"– Credit standards may begin loosening: Lending standards will loosen but will do so at a “glacial pace,” Yun said.

“Those people who are getting approved (for) mortgages, their credit scores have been exceptionally high, but now (they) may begin to slide down,” he said.

Richardson agreed. She doesn’t expect credit standards to significantly loosen until 2016.

“Even (for) FHA loans, if you have something lower than a 680 credit score, you still don’t see a lot of mortgages being originated to the lower end of the credit spectrum.”

Mortgage credit availability has increased, meaning that lending standards have somewhat loosened for most of 2015, according to the Mortgage Bankers Association’s Mortgage Credit Availability Index."

Strategist says

"– Credit standards may begin loosening: Lending standards will loosen but will do so at a “glacial pace,” Yun said.

Can't ease much from easy to start off

Strategist says

“Those people who are getting approved (for) mortgages, their credit scores have been exceptionally high, but now (they) may begin to slide down,” he said.

This right is what I tell people is the single worst housing economic thesis ever in this cycle

- Poor fico score Americans have cash flow problems, they're struggling to pay rent outside of debt obligation, of course they aren't buying homes in this cycle without exotic sub prime financing

I have certain data points and financial information I show people on how silly this argument was, it was my main take against Mark Zandi and why I knew he never had any financial lending background when he was shocked that high fico score Americans were buying in this cycle

Strategist says

“Even (for) FHA loans, if you have something lower than a 680 credit score, you still don’t see a lot of mortgages being originated to the lower end of the credit spectrum.”

Another Lie, FICO scores can go as low as 560, but if you're under 660 as a middle fico score, you have cash flow problems, which means most likely you're struggling with rent.

Strategist says

Mortgage credit availability has increased, meaning that lending standards have somewhat loosened for most of 2015, according to the Mortgage Bankers Association’s Mortgage Credit Availability Index."

Only on marginal items, over lays that only impact a very small group of people.

The easing of lending standards that you want for housing would need congressional approval and a repeal of Dodd Frank and CFPB, not going to happen

Ironman says

I heard this morning, last month was revised down 5% and this month it was up 4.7%...

Last month was down almost 5% it was a deep miss, today's number was just back to trend, it was an odd miss last month.

Here is chart for existing homes and mind the headline number is soft even with a heavy cash buyer presence

Why are they moving up if they can't afford it?

FortWayne says

Why are they moving up if they can't afford it?

They can afford it, it's just that in this cycle, it's just the volume of that group wasn't as big as many have thought.

All my primary resident buyers this year are move up buyers

If we take just the extra cash buyers out of the equation, not all of them, basically housing demand is really not that much higher than the great recession lows

Strategist says

Sandbagging. I would just average the 2 data points.

Now we finally got TRID out of the system

Even though purchase applications were down 3% weekly, the YoY print is at 23%, we were trending 15%-20% YoY before TRID, last week's 8.9% YoY was too soft to pre TRID trend

Now we are back to Pre Trid Levels YoY