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Home prices won’t slow down, stumping the experts and shutting out buyers
invite response
2018 Jun 1, 7:49pm 3,973 views 12 comments
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1
Strategist
2018 Jun 1, 7:50pm
Strategist
2018 Jun 1, 7:50pm
https://www.marketwatch.com/story/why-its-so-hard-to-forecast-home-prices-for-2018-and-why-that-should-worry-you-2017-12-19
Why it’s so hard to forecast home prices for 2018 — and why that should worry you
Why it’s so hard to forecast home prices for 2018 — and why that should worry you
2
Strategist
2018 Jun 1, 8:14pm
Strategist
2018 Jun 1, 8:14pm
Economists love to use multi variate forecasting models. The problem is, most variables they use does not have the same effect on predictability as it did in the past. The world is constantly changing, and these variables change with it. e.g. Who knew 30 years ago that the Chinese would be buying so many properties with cash? Who knew the FANG stocks would be worth more than countries, and Sears would become worthless?
Economies are constantly expanding. The third world led by China and India are becoming the new giants. The net worth of the world keeps shooting as the billions of people start becoming educated and productive.
The one thing that does not change are the desirable regions on the planet people want to live in. They are not making more of coastal California, or Tokyo, or London, or Paris, or Manhattan or Hawaii. We are in an international market now where local wages are irrelevant. It's the wealth chasing the desirable regions that are the most influencing variables.
Nothing can stop it. Either adapt or become a dinosaur.
Economies are constantly expanding. The third world led by China and India are becoming the new giants. The net worth of the world keeps shooting as the billions of people start becoming educated and productive.
The one thing that does not change are the desirable regions on the planet people want to live in. They are not making more of coastal California, or Tokyo, or London, or Paris, or Manhattan or Hawaii. We are in an international market now where local wages are irrelevant. It's the wealth chasing the desirable regions that are the most influencing variables.
Nothing can stop it. Either adapt or become a dinosaur.
4
Strategist
2018 Jun 1, 8:20pm
Strategist
2018 Jun 1, 8:20pm
Hassan_Rouhani says
I thought you wanted $3M just last week?
It's different this time!
I now want $4M for my shack!
I thought you wanted $3M just last week?
5
RWSGFY
2018 Jun 2, 7:35am
RWSGFY
2018 Jun 2, 7:35am
Strategist says
And now I want $4M.
Hassan_Rouhani saysIt's different this time!
I now want $4M for my shack!
I thought you wanted $3M just last week?
And now I want $4M.
6
clambo
2018 Jun 3, 5:59am
I have a visitor from Santa Cruz County and he inherited a house which is worth today about $1 million.
After swimming in the ocean 77F and seeing random females in bikinis here and there, we returned to the free parking nearby. Then we took a drive to a little area near Tiger Wood's place.
We saw nice ranch houses on quiet streets and were curious what they cost these days.
He was intrigued; he could sell the house in CA and buy there and have about $700,000 in change to buy investments for his retirement income.
The fly in the ointment was how much the California and Obamacare taxes would reduce his profit from the sale of the CA house.
My other friend lives in Santa Cruz county in an even more valuable place. He said he would like to sell and leave if it hits $2 million in price. His wife says "NO".
I looked at median income and median price of a house in Santa Cruz; it looks like the median house costs 18 times the median wage in Santa Cruz.
After swimming in the ocean 77F and seeing random females in bikinis here and there, we returned to the free parking nearby. Then we took a drive to a little area near Tiger Wood's place.
We saw nice ranch houses on quiet streets and were curious what they cost these days.
He was intrigued; he could sell the house in CA and buy there and have about $700,000 in change to buy investments for his retirement income.
The fly in the ointment was how much the California and Obamacare taxes would reduce his profit from the sale of the CA house.
My other friend lives in Santa Cruz county in an even more valuable place. He said he would like to sell and leave if it hits $2 million in price. His wife says "NO".
I looked at median income and median price of a house in Santa Cruz; it looks like the median house costs 18 times the median wage in Santa Cruz.
7
everything
2018 Jun 3, 7:13am
everything
2018 Jun 3, 7:13am
I'm in one those cheapies that got a little more expensive. My taxes are assessed every year, going up, condo dues have gone up $75/month in 4 years, outside the special assessments to keep the condo dues from going up, they do anyway as service prices increase. It's kind of a money creation thing as I've been asked to cash out by quicken loans for equity that didn't exist 4 years ago.
8
_
2018 Jun 3, 7:17am
_
2018 Jun 3, 7:17am
This is because real home prices aren't back to 2006 levels.
People always make this mistake on looking at nominal home prices and not accounting for interest rates as well
People always make this mistake on looking at nominal home prices and not accounting for interest rates as well
9
_
2018 Jun 3, 7:18am
_
2018 Jun 3, 7:18am
The best I try to show why prices have legs and why people shouldn't use 2006 as a barometer
1. Real Home Prices on a YoY basis from 2012-2018 look nothing like what we saw from 2002- 2005
1. Real Home Prices on a YoY basis from 2012-2018 look nothing like what we saw from 2002- 2005
10
_
2018 Jun 3, 7:20am
_
2018 Jun 3, 7:20am
2. We have no speculation demand curve from mortgage buyers in this cycle, but unlike 2006, where prime age labor force growth peaked and declined, we are running into a better demographic patch for housing years 2020-2024
This is why I have always said, years 2008-2019 is a light demographic patch for housing demand
Even today, even with over 155,000,000 people working, soon to be the longest economic expansion ever, mortgage demand is only at 1998 levels
This is why I have always said, years 2008-2019 is a light demographic patch for housing demand
Even today, even with over 155,000,000 people working, soon to be the longest economic expansion ever, mortgage demand is only at 1998 levels
11
_
2018 Jun 3, 7:22am
_
2018 Jun 3, 7:22am
3. Housing tenure has doubled
- Lack of selling equity
- Lack of a reason to move
- Lack of kids
- Builders building bigger and bigger homes so that you don't need to move up
Host of factors on this thesis not only starting to grow in this cycle but could have legs to grow for some time
- Lack of selling equity
- Lack of a reason to move
- Lack of kids
- Builders building bigger and bigger homes so that you don't need to move up
Host of factors on this thesis not only starting to grow in this cycle but could have legs to grow for some time
12
Shaman
2018 Jun 3, 8:13am
Shaman
2018 Jun 3, 8:13am
Strategist says
This is because housing isn’t just an asset or an investment strategy. It’s a necessity that people have to have. And in a climate where landlords enjoy raising rents every few months to truly epic levels of unaffordability, people are going to try to own if they possibly can. When they get priced out of the nicer houses in the nicer areas, they will see what the hood has to offer, and colonize the ghetto out of necessity.
Lower-priced homes are appreciating much faster than higher-priced properties, making the affordability crisis even worse,”
This is because housing isn’t just an asset or an investment strategy. It’s a necessity that people have to have. And in a climate where landlords enjoy raising rents every few months to truly epic levels of unaffordability, people are going to try to own if they possibly can. When they get priced out of the nicer houses in the nicer areas, they will see what the hood has to offer, and colonize the ghetto out of necessity.
Home-price gains accelerated in March, defying predictions that lofty prices will eventually return to earth, and raising questions about how sustainable such a heated market can be.
The home-price index from real estate data provider CoreLogic showed national yearly price growth of 7% in March. That’s up from 6.4% in February. Annual price gains have averaged 6.5% so far in 2018, up from an average of 5.9% last year.
CoreLogic said lopsided supply-demand dynamics are to blame. “Lower-priced homes are appreciating much faster than higher-priced properties, making the affordability crisis even worse,” the company said. What’s worse, CoreLogic said half the nation’s housing markets are now “overvalued” — a metric it created by comparing current prices in a metro area to its long-run sustainable levels.