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That would assume illegal immigrants own homes
I know they rent, but that's still potentially about a million empty rental homes.
"high employment"
I think this is largely a fiction. These numbers are highly fudged as people who are no longer looking for work are not counted among the unemployed.
154 million Americans working, 43 year low in unemployment claims and the 2 months ago we had the highest job opening print ever recorded in human history at 5,845,000
After 8 years in this cycle if you're not working like most Americans, it's you... certainly not anyone who is looking to buy a home
I know they rent, but that's still potentially about a million empty rental homes.
Not sure that thesis works with what I am talking about. roughly 11-12 million renting people in the start of the century and now there is almost 17-18 million now.
I don't see deportation being a housing supply factor for ownership
We had the biggest build of new homes 2002-2006 and it did nothing for housing affordability what so ever
This is simply not true. Home prices collapsed below 100K in states with large overbuilding, like Florida.
The building was not evenly spread. There was never overbuilding in California.
Now the population caught up with the oversupply of 2006.
If you want to take the King... Toll Brothers is between 850K-900K for a median price home
3-2 sell for $1.5 in many places in California.
This clearly shows housing demand result in prices being bid up way higher than costs.
Look at this way
In a few years demographics for ownership will be positive, this is the light cycle from 2008-2019
The question is, do the builders keep on building bigger and bigger homes into that strong demographics where median sq ft. is then 2,700- 3,100
Or do they start pushing and I mean really pushing smaller sized homes for the young demographic that will be more of a proper age
So, why don't you move to Florida so you can buy your own house?
Maybe I don't want to be underwater in 15yrs?
You're going to have a lot renters right in that sweet age spot ages 28-42 come years 2020-2024 we have been renting for some time
The question is, do the builders keep on building bigger and bigger homes
As long as the market is supply constrained, they should build only big homes. Lots of them. Housing is fungible and rich people buying new houses are not competing for 1600 sqft 3-2s. So it benefits everyone.
Or do they start pushing and I mean really pushing smaller sized homes for the young demographic that will be more of a proper age
There is a lot of demand for cheaper housing, and if they can make money on basic smaller houses sold cheaper, why would no one address this demand. The real question remains, why in a capitalist system, is an entire industry not answering a demand, and this year after year for 3, 5, 8 yrs?
You're going to have a lot renters right in that sweet age spot ages 28-42 come years 2020-2024 we have been renting for some time
Considering the price of renting, these people won't be able to save much for a down payment. This just postpones the current problem.
You can't extort an entire generation by refusing to build. The current system is a con job based on nothing.
Considering the price of renting, these people won't be able to save much for a down payment.
This issue still doesn't get enough attention
LTI factor of rent inflation in areas where you have a high population density factor
(Tiffany Effect)
This issue still doesn't get enough attention
LTI factor of rent inflation in areas where you have a high population density factor
Same cause. Not enough supply.
Same cause. Not enough supply.
Rate of rental growth supply has peaked
We have permanent inflation on both fronts and all that can be done is to cool it down, ( Outside) a recession, this inflation will stick...
Until the builders make a push to build smaller homes national on a long term basis .. not just a few builders here or there
154 million Americans working, 43 year low in unemployment claims
That may be, but are they working in jobs in which they'll still be employed five or ten years from now unless they want to quit, which have great benefits and can ensure 40 hours a week and two weeks of vacation after the first year?
That may be, but are they working in jobs in which they'll still be employed five or ten years from now
Not only yes, but in 5-10 years you will see some more older Americans leave the work force as they simply become to old to work
Out of 250 Million available..
This is probably the worst false narrative and fallacy of logic thesis on economics in general I have ever seen in my life
We have the highest job openings ever record in human history and we have never had more than 15 million people fired from the great recession. We are showing a demand labor curve of over 100 million people and yet still
The Anti American Bears, who clearly never took a course in economics or finished college even are trying to make a thesis that 98 million Americans lost their jobs in a 19 month period.
Its remarkable not even the Russians or Islamic terrorist are this naive ... ;-)
Sure it is....
From the Census:
anyone who took a course in economics would know what this means
This is the Anti American Zero Hedge model which is directly focused toward the Anti American bears and those who never finished college or high school.
This doesn't work on the educated class
You can't have 250 million people out of work if only 15 million Americans lost their jobs and more jobs have been recovered. Under no metric possible can 250 Million Americans have lost their jobs
Unemployment claims are at 43 year lows, job openings are at world historical highs
There is nothing even in the charts going back to 1939 that would show 250 Million Americans lost their jobs, we never even had 250 Million Americans working ever
Duh...
See, even Zero Hedge Readers, Pro Russian Anti America, Islamic terrorist have limits on how much B.S. they can push
154 million working
43 year low in unemployment claims
Highest Job openings ever recorded in world history
No, 24-98 million Americans out of work.. they were never working in the first place
You're missing 2.7 Million Prime age labor force Americans, a lot of them are women who said they don't want to work full time jobs because of kids.
They ever created a prime age labor force age group so people wouldn't get confused
Respectfully, I think you are looking at national data when real estate is always local. Also, the correlation between cost and value is always imperfect. Housing in flyover states might be getting bigger, which might cost more to build, but making a Mississippi house bigger does not make it more valuable to someone who wants to live in the SFBA.
Recessions don't build supply. They can reduce demand, and they can free up some existing local supply as people move away, but ultimately the only way to increase supply is to build at rates above the rate of depreciation/replacement.
Some cities have zoning and planning rules that have cannibalized supply. For example, in Manhattan, smaller older units get replaced by premium luxury buildings designed by celebrity architects and featuring Italian marble tubs to attract the TV cameras of Robin Leach. In that scenario, they are replacing more units with fewer units, reducing supply rather than increasing it, due to zoning and planning.
Cost does not determine value. If somebody tells me that an analog CRT television was handmade, with each winding carefully done by artisans trained in Bhutan, that doesn't make me want to pay more for it than I would pay for a better TV made at a fraction of the cost. Likewise houses: a palatial mansion might cost more to build than a tiny apartment, but if the mansion stands in northern Kamchatka, I'm not buying.
1996-2016
The only time we had over 6 months supply in both new and existing homes together was due to the housing bust and the recession, outside of that we have been under 6 months. New homes can be controlled to a degree by the builders, but the existing home market is simply too big
Housing bust really started late 2005 with the first waive of sub prime delinquencies and the rest followed
But we had a major build up in home construction from 2002-2006... none of that made housing more affordable in either both new and existing homes
Since 2012... existing home inventory has never breached over 6 months annual months inventory and it has never been close either
As I wrote above, recessions "can free up some existing local supply as people move away," and your charts add a good point that recessions can have the same effect nationally if people shed second homes or downsize and double up. The OP headline is, however, about building. Building more units than depreciation/replacement would result in more supply and thus lower prices, at least if you can build them in the places where there is demand. Cities are becoming less affordable because they restrict the number of new units below the level of supply that would make prices affordable. Flyover areas might be affordable to retired people, but not to people who need to work where their employers are.
we had a major build up in home construction from 2002-2006... none of that made housing more affordable
I think that resulted from excess demand created by the subprime mortgage bubble. When that bubble burst, the various bailouts (by whatever alphabet soup acronym, TARP+ZIRP+QE+HAMP) propped up prices that would otherwise have become affordable.
I think that resulted from excess demand created by the subprime mortgage bubble
Sub prime buyers weren't really buyers of new homes, they were more existing homes. However, exotic A paper loans did boost new home purchases as they were very expensive back then.
A good example was the 80/10/10 option arm stated income loan up to 1.5 and 2 million here in CA
At 2003, thats when I saw personally more and more exotic loans added into the supply chain of loans because that kept the fuel burning and then you had the mass cash out boom but you saw a big expansion on home building from 2002-2006
That didn't necessarily impact existing homes prices but again the supply of homes were bigger and bigger thus leaving the market place to the existing inventory with bigger homes to work from
It really went hay wire in 2000.. the the trend to build bigger homes started decades ago...
Check out this interactive graph on a regular basis:
Exactly what I am talking about... annual months of inventory 6 months has never happened in America post 1996 outside a recession it won't happen next year either
The ability to move up in American and release 1st time home supply is limited as you're chasing a higher velocity priced home
That is where I came up with that conservative model of needing 28%-33% equity to sell and move up based on the affordable index
Clap clap
I think you guys are now getting what I am saying here
Why Building More Homes Won't Help Housing Affordability
You haven't convinced me. What you're saying is that it's all about land prices being bid up as high as they are.
It seems unlikely to me the following two facts are coincidental:
1) Banks and the Fed have a lot of bad mortgages on their balance sheets (they need values to be high to support these questionable mortgages)
2) There isn't a lot of lending going on for new construction.
1) Banks and the Fed have a lot of bad mortgages on their balance sheets
Supply of distress homes and home that are foreclosed on and not in the market are at cycle lows today as we speak
2) There isn't a lot of lending going on for new construction.
Nor should they.. this is where I give the builders great credit, they always knew the demand curve in this cycle was going to be terrible so they had to make their $$$ on the high end to meet their numbers because they weren't going to make it on volume.
Even today in year 8 of the cycle after 3 straight years of missed new home sale estimate in a later economic cycle period, we are still at headline recessionary levels and adjusting to population we are 45.8% below the levels of set in 1963
This is fine for now, our demographics are for renting anyway.. but in a few years this won't the be case anymore ... we are going to have a massive ages 28-42 demographic profile and they need someone to live
Just want to remind everyone
It was June 5th when I went on CNBC and warned that the builders were over valued and it was in Jan of 2016 that I said this was the better entry point because sales aren't going to collapse ;-)
Just want to remind everyone
It was June 5th when I went on CNBC and warned that the builders were over valued and it was in Jan of 2016 that I said this was the better entry point because sales aren't going to collapse ;-)
Good call. What was the reasoning?
Just want to remind everyone
It was June 5th when I went on CNBC and warned that the builders were over valued and it was in Jan of 2016 that I said this was the better entry point because sales aren't going to collapse ;-)
Good call. What was the reasoning?
Sales weren't going to collapse.
Maybe if they made more, their stocks would go up even more.
Good call. What was the reasoning?
Jan- June.. way too much public hype on the builders, in fact all my wall street friends who were pushing the builder trades had 26%-41% sales growth on their data lines
First 2 months led them a stray... it was showing 20% growth YoY but that was a low comp... then the 10 year made its move from 1.64%-2.47%
But the key in tracking new home sales is revisions, revision trends are the best follow through for new homes and they were all negative even though the headline was decent...
That lead them to go into June being way too bullish... Because 4-5 months negative trend and we were looking at low double digit growth... that wasn't what they were looking for at it was TOLL brothers that was being hyped
Never had a new home sales year beat when the first half of the year had 4 plus negative revisions..
Correction came and of course certain stocks got way beat up too much...
Once Jan came... The 2016 numbers weren't so off... and people were negative on the builders in Jan.. that was a nasty price correction.. but working from a 500K level we can easily get at least 4%-8% growth with upside if median price cooled and it did... we have slow and steady growth
Reason for the concern and reason for the bullish take in Jan...
Very Very hard to call peak housing with 500K sales and I remember that was the thesis being throw out on T.V. have we hit peak housing... impossible with sales around 500K
@Logan - doesn't this graph insinuate that we're in a housing bubble now? The pre-bubble trendline is way down below where we're at today. Or, are you saying that we're building bigger homes, therefore, the ratio of house price to income will naturally go up?
@Logan - doesn't this graph insinuate that we're in a housing bubble now?
I suppose everyone has their own definition of what a bubble is.
To me a bubble needs speculation demand, this is the worst demand curve ever in U.S. history, so .... no boom.. no bubble and majority of the heat is coming from the fact that there has been a disproportional level of home sales coming from bigger homes.
So, no bubble in my eye, the demand has been weak and there is no speculation happening in housing, especially in new homes
@Logan - doesn't this graph insinuate that we're in a housing bubble now?
If you define a bubble as an irrational bidding up of prices, this is not what is happening now.
What we are seeing is a deliberately maintained scarcity. Housing gets more and more expensive. Only rich people can afford to participate in the market and they compete for what is available. Young and poor people live with parents or roommates. Those who can rent, and even that is expensive.
Prices are not irrational: they reflect the underlying scarcity of housing.
At the same time builders build less than the demand is and focus on the upscale segment. This is what this chart shows.
At the same time builders build less than the demand is and focus on the upscale segment. This is what this chart shows.
I am perplexed by the lack of building new homes by the builders. I don't buy the usual excuses of "land shortage" "bureaucracy"
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