patrick.net

Higher prices with a DECREASE in sale is not a sustainable market

My understanding of bubbles is that they end in a complete revulsion of the asset class. Retail purchase of stocks was nonexistent for 25 years after '29.
I have much trouble with the idea of the bubble that burst in 2006 ending in this absurd echo bubble.
Where is the fear that should have been created by the very recent wealth destruction?

If employment is weak it doesn’t matter how low rates are and it certainly doesn’t help if rates are rising!

Robert Sproul-"Where is the fear that should have been created by the very recent wealth destruction?"

It is there-That was one of the points of the article. Home prices are rising but sales are not-this bubblet is not producing an increase in homeownership-indeed it is going down.

This is not like 2004/05 when everyone was getting a loan and buying a home.

Volume is low.

Robert Sproul-this echo bubble doesn't sound anything like the last one. Also stocks are experience a similar increase -not based on greater volume, but less inventory based on share buybacks

Donjumpsuit- good thoughts

there has to be a point where home prices become unaffordable in relation to wages.

There may always be superrich enclaves like NYC and San Francisco but for the rest of the country where jobs are not plentiful and don't pay that much, there really cant be a surge in home sales or prices

you can make up lack of income with leveraged buying by lowering rates and allowing for bigger loans
We have seen that with car financing. People used to pay cash for cars in the 60's-they would save up and buy one.
Now cars are sold on the basis of financing-the average car in 1970 cost about 2500-3000 and the average wage was about $15K or 5X less than annual income

Now a car costs about 20K but the average income is not $100K
but people still have cars-the difference is they finance them now.

How much longer? Anybody's guess. According to this article President Obama wants to make some changes in housing:

http://nbcpolitics.nbcnews.com/_news/2013/08/06/19897574-obama-warns-on-housing-we-cant-just-re-inflate-a-housing-bubble?lite

1.) Wind down Fannie and Freddie
2.) Lenders become mostly private not government
3.) "As home prices rise, we can’t just re-inflate a housing bubble,"
4.) Ensure a bailout never happens again

Certainly is different in not contradictory rhetoric.

In my opinion, there wasn't a lot of specifics in the article, a very nice speech if you will. Not going to hold my breath, we may just end up flipping houses with tiny inventory for the next decade.

David9-Zillow is actually having an event with OBama on this:http://patrick.net/?p=1227874

smaulgld-Thanks, I prefer to remain anonymous. Besides, I would be too inflamatory. I'm glad he is reaching out for information.

David9-some of the comments appear to come from people using their real names and are inflammatory. It seems Zillow is reaching out to those that are asking more pedestrian questions to ask the President.
What's odd is that housing should not be a federal issue or one that the executive branch should deal with. What is interesting is it seems as if the president is advocating for less govt involvement in housing.

smaulgld says

What is interesting is it seems as if the president is advocating for less govt involvement in housing.

That's only because they've exausted evey resource there is to prop up housing in which will turn out to be a complete failure when the smoke finally clears

Is the term for this behavior called backpaddeling or is he just peeing all over himself !

smaulgld-I didn't look that closely at the screen to read/view some of the already posted videos.

"What's odd is that housing should not be a federal issue or one that the executive branch should deal with."
One would think.

I just don't think it's the best idea to possibly undermine the President even on a Zillow video. Ever heard of Marilyn Monroe? One of my questions would be "How long is the suspension of Mark to Market accounting going to last? It has already been since 2009." It is my understanding that in past real estate markets this was an effective market stabilizing tool to limit the number of 'foreclosures', 'lis pendens' etc on a banks books that they can list as an asset.

Bubbabear "That's only because they've exausted evey resource there is to prop up housing in which will turn out to be a complete failure when the smoke finally clears"
You could be right-running from failure

David9 "I just don't think it's the best idea to possibly undermine the President even on a Zillow video. Ever heard of Marilyn Monroe? "
it is surprising the out right vehemence of some of the posts.

smaulgld-"it is surprising the out right vehemence of some of the posts."

Great, yes, even at a short glance I saw 'Quantitative Easing', 'Bank Greed', 'Underwater' etc.

Easy to miss in a blink from the article I posted:
"He argued for projects that would put construction workers on jobs repairing rundown homes or clearing vacant properties, and called for policies to ensure affordable housing."

Does this mean they are going to hire the unemployed to bull doze the Lis Pendens?

You said yourself, 'Why is the Executive Branch involved in this at all?"

I see three possibilities:
1.) They are fishing just to see how much people do know.
2.) It is good PR
3.) It is a public opinion poll. (I do hope they are not looking for information themselves.)

smaulgld says

How Much Longer Can The Real Estate Market Recovery Last?

To be fair there was never a recovery just a transition from Recession to GREAT DEPRESSION!

I think its more of an opportunity to look like he is addressing an issue.

The housing market has far too many tentacles of the federal government and federal reserve to be"fixed" Indeed any fix would involve even more government involvement and would only make it worse.

This is why I find it intriguing that the president would talk about eliminating fannie mae with out (yet) naming another federal agency to take its place

smaulgld says

This is why I find it intriguing that the president would talk about eliminating fannie mae with out (yet) naming another federal agency to take its place

This way he can "DELETE" 1 TRILLION in LOSES!

Just move a few numbers about and will be like it never existed.

What FHA DEBT!

smaulgld- Don't you also find it intriguing that after having to endure over a year and a half of housing cheerleading articles lauding the phenomenal, extraordinary housing market recovery, now, after 6 years, very quietly and gently it is suggested a few things are broken.

Without QE Real Estate "Worldwide" will now CRASH!

Puhum:"To be fair there was never a recovery just a transition from Recession to GREAT DEPRESSION!"
True but there has been a recovery in the price of the relatively few homes that have been sold in the last year.
That is the "recovery" that is at risk.

David"Don't you also find it intriguing that after having to endure over a year and a half of housing cheerleading articles lauding the phenomenal, extraordinary housing market recovery, now, after 6 years, very quietly and gently it is suggested a few things are broken."

there isnt a problem when it suits them and there is a problem when then can be the hero and fix it or look like they are fixing it or if they need to blame someone

robertoaribas "see you on here, a year from now, when home prices are even higher, and you are even more shrill and disconnected from reality."

home prices will be higher next year if the employment market picks up tremendously or if the Fed backpedals and doubles down on QE
otherwise there isn't enough demand in the system.

California job growth accelerates-but in the service sector-and how many of these jobs are part time.

http://www.centralvalleybusinesstimes.com/stories/001/?ID=23955

If we see growth of full time jobs across all sectors, home prices could increase- we aren't see that yet

Unfortunately too much of the economy and housing market depends on the Fed.
But having said that I'll go with home prices on the national level flat to slightly down YOY in August 2014.

To me what is more important is not home prices but increased sales of homes and higher home ownership rates-that would reflect a true recovery

" I'd postulate that with so many homes financed with ultra low rates, as rates rise, lots of owners like me will say, "screw it, my mortgage is 4%. I'm keeping this home forever."

Great point. And that is what will happen.
The low interest rates were a gift to the wealthy creating a greater wealth disparity.

The Fed's policies favor the propertied and those with access to credit.

Had the fed done nothing, home prices would have fallen and we would have the "affordable housing" the Fed government claims to favor

smaulgld says

Great point. And that is what will happen.

The low interest rates were a gift to the wealthy creating a greater wealth disparity.

Huh? How do you figure that?

Low interest rates favor borrowers and penalize savers. Wealthy are savers. Poor are borrowers.

tatupu70 "Low interest rates favor borrowers and penalize savers. Wealthy are savers. Poor are borrowers."

Agree 100% with your statement- here is how.
the "poor" savers can't save because there is no place to earn a decent return. With no real savings and perhaps poor to ok credit they can't buy homes.

The wealthy already have assets saved and credit good enough to take advantage of the record low interest rates so they were able to buy homes cheaply the past few years and lock in 30 year long term rates thus locking in low shelter costs and perhaps asset appreciation.

The wealthy also own the greatest amount of stocks as they have the most disposable income and extra cash to invest.
The stock market has done extremely well these past few years.

So the wealthy don't mind parking some of their cash in a no interest bank account while they invest the rest in stocks and borrow money at low rates to buy homes.

smaulgld says

Agree 100% with your statement- here is how.

the "poor" savers can't save because there is no place to earn a decent return. With no real savings and perhaps poor to ok credit they can't buy homes.

Come on now. You don't really think this. The poor can't save because they spend all their money just on necessities.

smaulgld says

on another board someone noted that all cash buyers don't need jobs-this is true but how many all cash buyers are there?

I'm an all cash buyer, but I will only buy close to where I live and work, where the jobs are.

tatupu70 "Come on now. You don't really think this. The poor can't save because they spend all their money just on necessities."

that's true and my point - low interest rates don't help them participate on the upside -ie buying houses on credit and buying stocks.
And if they managed to have a little left over-they can't save because the interest rates offered by banks pay less than the rate of inflation.

So the point remains the same-the wealthy benefit from this low interest rate environment and the poor don't

Dan8267"I'm an all cash buyer, but I will only buy close to where I live and work, where the jobs are."

Makes total sense. The number of people in your good circumstance, however, are not enough to sustain higher prices

The real estate "recovery" ended with the Fed's massive intervention.. they made sure of that.. they next "recovery" phase will start when all the easy money has been made again after this interruption.. not too far in the future IMO.. it won't be a cliff like the last one as the factors are different this time.. a slow bleed .. similar to Japan..

Everyone I talk to says bubble, bubble, bubble, and they're right, but yet prices keep going up and homes sell before they're listed.

Throw away all of your economic textbooks. Normal has just been normalized.

exfatguy says

Everyone I talk to says bubble, bubble, bubble, and they're right, but yet prices keep going up and homes sell before they're listed.

Throw away all of your economic textbooks. Normal has just been normalized.

that happened in 2006 as well.. I'm not following any one market, but all the national news I've read lately points to a slowdown in sales.. the culprit, according to the RE industry, of course, is higher interest rates and not the cost of the product itself, which can only and forever go up.. or maybe not..

kmo722 "the culprit, according to the RE industry, of course, is higher interest rates and not the cost of the product itself, which can only and forever go up.. or maybe not..

What if its all three-rising interest rates,rising prices and no jobs that will bring down the market?

It will last until tomorrow morning, then it will be over.

you could be right! the jobs report is tomorrow

BS on the BS. The price increases are due to speculation, again. People and organizations who dont live in the houses in question. All cash buyers will be the first to dump their properties regardless of increasing interest rates, simply because they aren't making enough per year on the investment. There will be better places to put the money. 10 percent will look lame. To hell with mortgage rates. The money could go anywhere overnight. Forget the length of a mortgage.

There is also the Bastille Factor. You are assuming the McDonald's manager will be content forever to live in smaller and smaller and more increasingly filthy living conditions for the same or rising rents. Sorry, the weather isn't that nice anywhere. Screw California entirely.

Oh, and do not EVER, I repeat EVER, come asking the Feds to bail out the California disaster areas. All of the QE has already been your bail-out money.
You're welcome. Kiss my ring. Never ask again