patrick.net

Paradoxically lower inventory means higher prices. Maybe they will equalize or more likely 'not go up much' or 'not go down much'.

There's no such concept as "rolling back prices" on housing, the prices are set by the market, subject to the iron clad laws of supply and demand.

People being trapped in their homes reduces supply, increases prices on homes which are in the market if the demand is the same. Also, these people who are trapped aren't flipping their homes or trading up, which also reduces demand.

So, to restate your assertion; housing gridlock comes first, prices comes second, and right now, they're basically stable to dropping. Look to Tokyo for an example of how this will play out; slowly declining prices probably for decades, unless the government prints more money, in which case housing will drop in real terms, but get more expensive in nominal terms.

That's a great read on things. However, the farther back in years you go, the more equity a homeowner will have in their house. For example ->

$300,000 house, 3% down payment, %5 interest, 30 years.
Principal paid -
$23,778.39 after 5 years.
$54,294.59 after 10 years

So I think we can say, that in 2002, a house that was sold for $300,000 can be re-sold at $245,705.41 at little to no cash up front from the seller to the bank.

FloridaBill says

So I think we can say, that in 2002, a house that was sold for $300,000 can be re-sold at $245,705.41 at little to no cash up front from the seller to the bank.

Fair enough... throw in the the realtors 4% cut of the sale and their is less wiggle room. (another reason i think Realtor cuts of real estate is going to have continued downward pressure... LONG GONE are the days of 6% commissions).

But most people aren't going to sell for "break even" after 10-15 years of owning unless they absolutely HAVE TO MOVE.

So gridlock continues... A swift drop may induce some panic selling... but that won't last long when they find out a rental will be more than the mortgage they are leaving.

Margaret Has A HorseFace says

"Get what you can get for your house today because it's gong to be much less tomorrow for many years to come." -Charlie Muunger

way to hide behind a quote instead of logic and basic math.

FloridaBill says

So I think we can say, that in 2002, a house that was sold for $300,000 can be re-sold at $245,705.41 at little to no cash up front from the seller to the bank.

This is also assuming that the home was not treated like an ATM during the boom years.

Yep, so inventory will only keep getting smaller the further home prices fall.

The entire theory that the majority of people stay in there homes for only 6 years will change. I predict the avg length people stay in there first homes bloats to 15 years or more. And with builders building less homes than is needed for our population growth.... The gridlock will get even worse.

So with gridlock and low inventory -- prices will have to stabilize or go up due to existing demand. Right? Builders will need to build more housing then.

Margaret Has A HorseFace says

BoomAndBustCycle says

And with builders building less homes than is needed for our population growth....

Hey JackAss,

US population growth is at the lowest levels in history. Immigration is flat to negative.

Why are you lying about housing?

Even though the population, itself, is still growing, household formation has started to come down. Couple that with a lower family income, and retiring baby boomers, makes for very bleak future for the house market.

Everywhere I look in California, prices are up. You can blame a lot of overseas money from all cash buyers scarfing up whatever limited inventory there is left. Re household formations... aren't we grabbing at straws here? Demand is not just national, it's international now. Good neighborhoods and areas will always have demand from somewhere. And bad areas will continue to suck.

Yay, another tool.

House Sheriff says

aren't we grabbing at straws here? Demand is not just national, it's international now.

No, you are the one grabbing at straws, my friend. "Foreigners buying up all of California RE" schpiel, is just as bogus as "Oklahomans buying up all the California RE" back in the last RE bust, here. And who might these foreigners be? Are they Greek or Spanish, or Chinese, perhaps. Have you checked the average household income in China, lately? Even the Chinese wealthy are sitting on negative equity from the RE crash in China. Do you think they are going to be thinking about buying anything out here? You sure are right about the "international demand" though. It all comes down to the US consumer who needs to be buying all that Chinese junk, to keep the Chinese rich happy. Problem is, US consumer isn't in the mood to buy much junk, lately, since his housing ATM is depleted.

You guys are funny. I've been hunting around the more affordable areas in California, and the rich Chinese are doing exactly that... gobbling everything up in cash. You mentioned "average household income"... .well we aren't talking about average here, but RICH. There will always be rich/astute/shrewd folks who will come out and buy where they think there is value. Don't know why you continue to stay deluded about what is happening in the here and now. Sure, things can change sometime down the road, but right now, it's a frustrating place to be if you are a home buyer or investor.

Oh, and before anyone calls me names, I'll be happy to see a cratering in price. It would only benefit me. I'd give anything for the market to tank right now.

This point only makes sense if banks aren't willing to take back homes and allow underwater people to squat. Otherwise, there is lots of inventory out there. The "gridlock" is being caused by the banks, but even they have a breaking point:
http://money.cnn.com/2012/06/14/real_estate/foreclosures/index.htm?hpt=hp_t2

The point I'm making here is that certain areas are seeing upticks/recovery/low inventory. That can't be denied. Will it last? Who knows. Banks seem perfectly happy to trickle out their properties ever so gradually. Now saying "buy later when prices crater..." -- not sure that will apply to certain areas anymore. If there's a frenzy here at fairly "affordable" prices, I doubt there will be room to go down a lot further.

E-man, agreed. Any buyer wants to see depressed prices. We want to believe that the market will cool or slump sometime in the future. I'm looking for opportunities.

Here's a question: How many talking heads here are actually pushing out offers and doing the work to try to secure a house at this time? I'm reporting what's going on in the field as a buyer right now in California.

Call It Crazy, I'm waiting....

Margaret Has A HorseFace says

House Sheriff says

The point I'm making here is that certain areas are seeing upticks/recovery/low inventory.

And you're lying.

Lying about low inventory? Now you're terribly misinformed and your responses are frankly, terribly juvenile.

Margaret Has A HorseFace says

House Sheriff says

Lying about low inventory? Now you're terribly misinformed.

And you're lying about prices too.

Why are you lying?

Whenever you are pushed into a corner and have lost an argument, you always resort to the same replies. It's rather amusing, really. Nobody here has a handle on ALL local markets, and neither do you. So chances are, you won't know that prices are up in certain neighborhoods where inventory is very tight. Simple supply/demand right? Now if that inventory increases, then prices will decrease, which is what I'm hoping will happen.

House Sheriff says

I'm reporting what's going on in the field as a buyer right now in California.

There are lots of delusional sellers right now, thinking they can get inflated prices. Asking prices are, indeed, up. Selling prices are still going down, as reflected by the C-S index. Besides, the uptick is due to high season, and the uptick this year, is no bigger than what we saw last year. In my area of Almaden, selling prices are, at best, flat. But the summer selling season is winding down, and, come fall, lots of these investors buying now, are going to be heavily disappointed. The next leg down in housing, we are going to see a major paradigm shift in investors' attitudes.

dunnross, I'm *really*, *really* hoping (cross my fingers) that you are right. And when you say:

The next leg down in housing, we are going to see a major paradigm shift in investors' attitudes.

you are referring to investors who bought right now? Well if this happens, investors in the sidelines who keep their powder dry will be absolutely enthralled.

Many realtors are increasing staff in anticipation of a surge in underwater sellers. The end of the debt foregiveness act in December is the main reason for this. Together with yesterdays dataquick report that SFR prices are still falling and todays news that mortgage rates have risen it is all looking very good for buyers watching and waiting.

Strategic Renter says

Many realtors are increasing staff in anticipation of a surge in underwater sellers.

Sorry, if you haven't listed your short sale by now.. it's highly doubtful you'll close on a new short sale listing by December.

It's far more likely the deb forgiveness act will be extended than any significant surge in short sales by years end.

BoomAndBustCycle says

Strategic Renter says

Many realtors are increasing staff in anticipation of a surge in underwater sellers.

Sorry, if you haven't listed your short sale by now.. it's highly doubtful you'll close on a new short sale listing by December.

It's far more likely the deb forgiveness act will be extended than any significant surge in short sales by years end.

The goverment do not want to extend it because it forces loan owners to stay in their houses. The act is an easy out for them. Also with the new short sale regulations coming in requiring an answer in 30 days then there is still plenty of time. Realtors know this. That is why they are increasing staff.

Call it Crazy says

Look at Dunnross's chart above... look closely at the RED line!! Everyone is chanting that sales and prices are up! But guess, what it's the normal Spring bounce!!

I dont' think sales prices are up or going up much if at all... But i also don't see a sharp 20%+ drops on the horizon like so many bears predict. I think it's going to be all about rental parity... and monthly payments from here on out will continue teetering around whatever median rents are in the area.

I also don't see interest rates rising anytime soon. (If something causes rents to crash, then all bets are off for the housing market though.. one concession I will make). I think we'll risk massive inflation with ultra-low rates.. before risking massive deflation by raising interest rates.

And yes, i think the whole market is rigged... and the FED and global banking system can keep rates as low as they want for as long as they want.

dunnross says

Selling prices are still going down, as reflected by the C-S index.

The latest CS index list reflects sales for about ~6 months ago. Selling prices were going down then, but the CS index says nothing about what is happening now.

Call it Crazy says

It should be the Spring time bounce here, but sales volume is way down..

Why do you keep perpetuating this lie. I've already proven it to be factually incorrect.

I see a lot of downside to housing. I can be bearish or bullish on housing depending on the market factors, and right now they are all bearish.

Even with 1/4 to 1/2 the inventory, the Spring bounce is one of the weakest in years. The banks tried to create a false bottom by restricting supply but if there is no DEMAND, then their strategy fails, which is what is happening now. No one is dumb enough to just hop into a $700,000 mortgage these days, the bubble implosion happened only a few years ago and it's fresh in people's memories.

Now the banks have a tough choice; let people continue to squat creating more moral hazard, or start foreclosing again and pass this giant kidney stone. It looks like recent news says they are doing the latter.

tatupu70 says

Call it Crazy says

It should be the Spring time bounce here, but sales volume is way down..

Why do you keep perpetuating this lie. I've already proven it to be factually incorrect.

C.A.R.’s Pending Home Sales Index (PHSI)* declined from a revised 138.9 in March to 128.0 in April, based on signed contracts
C.A.R.’s Pending Home Sales Index (PHSI)*. The index was 118.3 in May

June and July's completed sales are going to be very bad. Also Dataquick reporting SFR still falling and mortgage rates rising then the only way for prices is down

Goran_K says

Even with 1/4 to 1/2 the inventory, the Spring bounce is one of the weakest in years.

Why do you think the spring bounce is over? The last reports we've gotten were from April, right? That's closer to winter than to summer...

Pending sales dropped drastically from April to May. That's what happens when you cut inventory artificially.

All this to keep bad assets on the books as good, and letting people squat for free.

Strategic Renter says

C.A.R.’s Pending Home Sales Index (PHSI)* declined from a revised 138.9 in March to 128.0 in April, based on signed contracts
C.A.R.’s Pending Home Sales Index (PHSI)*. The index was 118.3 in May
June and July's completed sales are going to be very bad. Also Dataquick reporting SFR still falling and mortgage rates rising then the only way for prices is down

I hadn't seen that data-I was just looking at actual sales volumes. While part of that could be due to the low inventory, I agree that pending home index is a pretty good indicator of future sales and prices.

How could dataquick be reporting mortgage rates rising?? That is obviously false. Rates declined quite a bit from last week and are at pretty much all time lows.

1st rise in mortgage rates in 7 weeks

http://lansner.ocregister.com/2012/06/14/1st-rise-in-mortgage-rates-in-7-weeks/163651/

Strategic Renter says

1st rise in mortgage rates in 7 weeks
http://lansner.ocregister.com/2012/06/14/1st-rise-in-mortgage-rates-in-7-weeks/163651/

OK--I don't call a slight rise for 1 week out of 7 to be a trend...

Strategic Renter says

C.A.R.’s Pending Home Sales Index (PHSI)* declined from a revised 138.9 in March to 128.0 in April, based on signed contracts
C.A.R.’s Pending Home Sales Index (PHSI)*. The index was 118.3 in May

OK--looked up the CAR index. Didn't know it was California only. Nationwide pending homes sales were down in April 2012 from March 2012, but up from April 2011.

I'd be careful to draw too many conclusions from that yet. Still seems like this year is stronger than last year IMO. Even with the lower inventory.

tatupu70 says

Strategic Renter says

C.A.R.’s Pending Home Sales Index (PHSI)* declined from a revised 138.9 in March to 128.0 in April, based on signed contracts

C.A.R.’s Pending Home Sales Index (PHSI)*. The index was 118.3 in May

OK--looked up the CAR index. Didn't know it was California only. Nationwide pending homes sales were down in April 2012 from March 2012, but up from April 2011.

I'd be careful to draw too many conclusions from that yet. Still seems like this year is stronger than last year IMO. Even with the lower inventory.

Because they do the old trick of revising down April. Next month they will revise down May. so they can report June up etc etc

BoomAndBustCycle says

I dont' think sales prices are up or going up much if at all... But i also don't see a sharp 20%+ drops on the horizon like so many bears predict. I think it's going to be all about rental parity... and monthly payments from here on out will continue teetering around whatever median rents are in the area.

THIS.

Laws of supply and demand (fundamentals) will still be in effect. The only question is what will underwater buyers will be willing to bear. I think you'll see a lot of short sales this year due to the buyers who are walking away while tremendously upside down.

Those who are comfortable and are underwater will probably not care and just accept to live with a certain loss ratio.

Call it Crazy says

I look around all the time and what I'm seeing ain't good!!! The sheer amount of "shadow inventory" is amazing. I have never seen this many vacant and empty houses since I've been around this planet

Me, too. Anecdotal, to be sure, but there are a lot of vacancies where nothing is happening.

My own former home just sits there growing weeds while the grass dies.

FortWayne says

Laws of supply and demand (fundamentals) will still be in effect. The only question is what will underwater buyers will be willing to bear. I think you'll see a lot of short sales this year due to the buyers who are walking away while tremendously upside down.

Those who are comfortable and are underwater will probably not care and just accept to live with a certain loss ratio.

Quality Auto Repair Since 1979

If they don't they will be bankrupted by the IRS.

Call it Crazy says

I've given you chart after chart of data, all you have done is to be a keyboard commando.... step up to the plate and produce some facts or charts to support your keyboard!!!

lol. You post charts of zillow home values. Which are pretty much meaningless. I've posted link after link showing actual sales. Yet you continue to say home sales are down.

Here you go again:

http://www.nasdaq.com/article/us-april-existing-home-sales-up-34-20120522-00914

Oh yeah, I forgot, you don't like NAR numbers. Unless they agree with you, of course. Then they are OK.

And I just posted the pending home sales, which are down from March, but up from April 2011.

Goran_K says

Pending sales dropped drastically from April to May. That's what happens when you cut inventory artificially.

Why do you think banks dropped the inventory so much? They knew that prices were about to crater, so, they figured, they could take advantage of these stupid investors and sell a little more inventory (albeit very little) at over-inflated prices. Once the current pool of fools dries up (and there are less and less of them by the hour), it's Willy Coyote time, again!