patrick.net

domara says

Prices are going up, supply is contricting and the unseen hand is buying what little supply makes it to the market.

Ok. We know that. Spill the details. Who is manipulating the housing market?

I do not know.

The banks all pulling back on REOs, the hedge funds funded and ready to go would lead me to believe this was concieved in 2011 and implemented in 2012.

domara says

I do not know.

:-) Thanks. I'll agree with that. You're theory is as good as anyone's.

David,

I commented because the majority of contributors were waiting for the onslaught of shadow inventory and lower prices. I think the game has fundementally changed with the banking strategy and with policy from the federal level. Just thought I'd share a new persepctive.

Domara,

And you may be correct! That is why I asked for details.

For the market to linger in this quasi state for this many years certainly means something.

David9 says

For the market to linger in this quasi state for this many years certainly means something.

I have posted this paper before, but here it is again -- since we are talking about another huge price dip which IMO is unlikely.

Why Credit Deflation is more likley than mass inflation

the Federal Reserve’s most likely course of action is to keep the mortgage market, in which most of the losses are concentrated, in a sort of stasis, where losses are acknowledged slowly over time. Such a policy, which might well be called “controlled deflation,” would lead to a prolonged period of
high unemployment and slow growth, as capital was only slowly reallocated to satisfy consumer preferences. Further, the insufficient or barely sufficient creation of new credit to make up for debt paid down, or defaulted on, would cause a low growth in aggregate prices, which might occasionally become
negative. Not until the losses of the housing boom are fully cleared—which might takes years under a policy of controlled deflation—should we expect an inflationary credit expansion and a significant rise in prices.

uomo_senza_nome says

the Federal Reserve’s most likely course of action is to keep the mortgage market, in which most of the losses are concentrated, in a sort of stasis, where losses are acknowledged slowly over time. Such a policy, which might well be called “controlled deflation,” would lead to a prolonged period of
high unemployment and slow growth, as capital was only slowly reallocated to satisfy consumer preferences. Further, the insufficient or barely sufficient creation of new credit to make up for debt paid down, or defaulted on, would cause a low growth in aggregate prices, which might occasionally become
negative. Not until the losses of the housing boom are fully cleared—which might takes years under a policy of controlled deflation—should we expect an inflationary credit expansion and a significant rise in prices.

uomo,

That's exactly the state we're in right now. Very well written and articulated. I can see another 5 years of this going on. I just came back from the bank, and the interest rate for a conforming purchase money loan is 3.375% for a 30-year fixed with no points and $2,500 in closing costs. 2.875% for a 15-year fixed.

Thanks for sharing.

Darrell In Phoenix says

In the meantime, prices continue to fall and inventory is larger than ever.

Why buy now with prices grossly inflated and falling? Buy later after prices crater for 65% less.

I cannot disagree with that. Thanks for the tips.

robertoaribas says

If all those papers prove that housing can't recover given this scenario, care to comment on why prices are increasing in so many markets?

Election year for one. Easy money and relaxing standards for credit are the culprits. Add to it the flight by the Chinese to take money out of the falling Shanghai Stock Exchange and put it outside the country. It has fallen from 6000 to 2000 since the collapse.

http://finance.yahoo.com/echarts?s=000001.SS+Interactive#symbol=000001.ss;range=20051003,20120831;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

Also, I am starting to get the checks again in the mail to extract home equity. Here we go again, as if the consumer wasn't sucked dry enough.

The shadow buyers are out there, they just can't afford to buy until the prices drop more.

robertoaribas says

If all those papers prove that housing can't recover given this scenario, care to comment on why prices are increasing in so many markets?

Roberto - I think you are referring to price increases in phoenix and stating that as a housing recovery. Given it came at the expense of ultra low interest rates, Fed buying mortgage bonds and increasing the monetary base exponentially -- the best you can say is they did not allow the prices to crater.

I think that there is plenty of factual data showing that there have been price increases MoM/YoY in many locales. Why easily verifiable facts are so objectionable to people is beyond me. I mean, I get that many are still angry about the RE insanity that occurred for the better part of a decade and want to be able to buy a house in their preferred area for change they found under their couch.

Prices have risen in many areas. Is it sustainable? I have no idea. Much of it seems to be driven by constricting inventory and the fact that RE seems to be one of the only investments with a return that beats inflation (I am not convinced that new-comers to this investment scheme will be successful though, the herd is fully on the move to THAT pasture).

Hey, if the NAr is as powerful as some say that it is, they should be able to lobby for higher inventories somehow, right? Mama needs a new pair if shoes, and low inventories just cramp her style.

Wake up people with 90% of the ocean's depleted of first 75% of the rivers in the world polluted, losing millions of acres per year to fire and logging,thousands of tons of top soil blowing away and the majority of crops are grown by the use of chemicals and fertalizers, animals,reptiles,and birds going extinct by the thousands and wars spreading around the world spreading nuclear waste and chemicals like phosphorus and agent orange. i have to say with 7 billion people eating and shiting everyday while we are running out of everything you must realize that they plan to take many of us out.So there will be lots of homes if your lucky enough to live.

robertoaribas says

If prices increased seasonally, then on a year over year basis, this year's higher summer prices would be compared to last year's higher summer prices, and the year over year increase would be zero.

Well, are we talking about nominal price or real price? If inflation is 3%, and home prices went up 3%, then it's a wash. However, we have been experiencing deflation (eyes rolling) on the magnitude of 3% annually. So a 3% increase in nominal home prices is equivalent to a 6% YoY increase.

So are we having inflation or deflation here? You can't have it both ways. Well, I guess we can. LOL!!!

robertoaribas says

hey the august data for phoenix is out!

median sale price went up another $2000 from 145,000 to 147,000....

what do you know?

average days on market continued downwards too...

incredible gains! cash out now while your still smiling.

robertoaribas says

Election year for one.

care to show when an election has ever made a damn bit of difference to real estate prices? holy crimminey, I know you can't think, but seriously, blame it on global warming or the fact that it is only 61 years till Haley's commet returns... that would make as much sense... halfabrain...

nah, i won't even try to explain it to you. Some people listen to facts others just hear what they want. You are in the later group and a time waister on everyone. I hope you make out okay all the same.

dodgerfanjohn says

Prices would have to drop to around 10% below rental partity to appreciable increase the population of buyers, and even then the overall number is limited to those that can qualify for loans or have cash at the lower price point.

Patrick, do we know how much prices would need to drop before we reach 10% below rental parity, in say your neighborhood of Menlo Park?

robertoaribas says

because elections mean nothing to the prices of homes, coffee, cotton, or anything else

Elections mean nothing. But gov't stimulus means a lot. Gone elections, gone the stimulus, and, alas, the willy coyote moment!

RentingForHalfTheCost says

20% up means a 20% correction is coming when the lies come to roost. Wait for it...

I think you are being too optimistic. Interest rates can still go lower, and you can bet your ass that the 40-year mortgage will become the new normal in the next decade.

Darrell In Phoenix says

Nonsense.

A seasonal bump in the median isn't "rising prices". Secondly, REO and foreclosures are EXCLUDED from any data.

Also, clearly what isn't being looked at are the many single multi-million dollar listings and shady deals that pop up that bump many of the "price indicator/rating/market etc." sites off the charts. It isn't real by a long shot. That shite in my opinion should be illegal. I have seem many that are so misleading they are providing to me outright fraudulent information.

E-man says

That's exactly the state we're in right now.

And are going to continue to be in for a very long time.

Darrell In Phoenix says

bmwman91 says

RentingForHalfTheCost says

20% up means a 20% correction is coming when the lies come to roost. Wait for it...

I think you are being too optimistic. Interest rates can still go lower, and you can bet your ass that the 40-year mortgage will become the new normal in the next decade.

If you think a 20% decline is optimistic, you're going to think you died and went to heaven as prices crater over the coming years and decades.

JAPAN but here it is going to be far worse. I knew a major property owner and developer in Tokyo in the late 1980s. They lost their shirt/s and pants, property NEVER went anywhere but down 20 plus years later still dead in the water.

robertoaribas says

Phoenix metro Jul-12 Jul-11

average list price 320902 259628

median list price 169900 133000

average sale price 196837 154812

median sale price 145000 109000

I have hope, that even the person with the least thinking ability can learn something. So, even though darrell has never shown any ability to think, I've generously provided some data for the poor weak man. Please, if you know darrel, get him some crayons and draw some graphs or something for him to try to get a clue...

This data is incomplete. What's the transaction volume for those prices? If you can come up with that I will post a chart, and a template in Google Docs, and together we can set the bar for charts ;)

roberto, I think when the other side says "REO's are not in the data", they might mean the actual amount that the home was offered for, and not purchaced, at the court house steps (assuming Az in like Ca). Resulting in the bank taking ownership for $XXX (not always the full mortgage amount).

everyone that is disagreeing with roberto, when a house is listed in the local MLS - it's data is counted - no mattter from whence it comes to the market (bank, owner, ect). When an MLS sales happens the data is counted -- BUT ... the truth behind any conssesions, repairs, addendums, agent price reductions, loan type, and all the other VERY important data from a sale are not shared by the REturds or MLS. Meaning the sales price may be $XXX, but there was also a new driveway, carpet, paint, sinks, grass, $4000 Home Depot card, 2% RE comession instead of 3%, and owner is holding the note for 6 months so the buyer can make repairs, get it rented, and then start making payments. The details matter.

realestate is loco

Shadow buyers only exist because they have been able to save up the vast 3.5% of the purchase price from personal loans, theft, insurance scams, inheritance, bottle returns, and what not. In an intelligent economy of asset sales, the buyer would actually need to show abstinence and means. Here we still have the free home program. Keep adding to the plot. When, even the gardeners are back to being home owners that need gardeners, where is the next wave of buyers? Ask yourself that question.

robertoaribas says

This data is incomplete. What's the transaction volume for those prices? If you can come up with that I will post a chart, and a template in Google Docs, and together we can set the bar for charts ;)

if the transaction volume was low, prices wouldn't be increasing. I suggest you go on over to half.com and buy a cheap used economics book.. come back after you finish the first few chapters. If you took econ before, I don't care, you didn't learn anything real or you wouldn't have made that post.

What if your median prices were really taken from a multimodal distribution. Let's say for [an exaggerated, pedantic] example that houses that last sold for $3M stopped selling for a while, as houses that last sold for $1M were selling for $700K. Then the market for $1M houses selling for $700K dried up, and $3M houses started selling for $2.1M. In that hypothetical situation the median price would have risen from $700K to $2.1M, making it look like boom times were back, right?

Can you demonstrate how the numbers you posted could not be a similar situation? Please refrain from insinuating that I'm stupid or that I need to review basic economics. Trust me, it just makes *you* look bad.

robertoaribas says

RentingForHalfTheCost says

Shadow buyers only exist because they have been able to save up the vast 3.5%

oh, so first you argue that the market is doing bad... when you are PROVEN wrong, you argue that it "should be doing bad, but because of blah blah blah... it isn't..."

Or, you could just say, you were completely full of crap all along?

When did the straw man enter the argument. Might want to look in the mirror there Phoenix boy. I never said it was doing good. Month-over-Month defaults are up. Go back and catch me saying anything else. Do it without the straw-man standing between us. ;)

bmwman91 says

RentingForHalfTheCost says

20% up means a 20% correction is coming when the lies come to roost. Wait for it...

I think you are being too optimistic. Interest rates can still go lower, and you can bet your ass that the 40-year mortgage will become the new normal in the next decade.

That is a valid argument and one of my fears. The free money train speeds up even more. There are two ways this train stops. Fiscal responsibility creeps into the minds of the average person in this country, or we go to war again. Either will be very painful. War sucks, so I hope we get the first, but I wouldn't hold my breath. It hasn't happened in my lifetime yet. This country is still living on borrowed money even after we have seen a hint of the damage it can cause.

100 year mortgages might be a possibility in order to keep Phoenix prices from falling in 2013.

robertoaribas says

Please refrain from insinuating that I'm stupid or that I need to review basic economics. Trust me, it just makes *you* look bad.

your question doesn't imply your stupid, so need to worry about that!!!

There must be a clinical diagnosis for this type of behavior from our always predictable Phoenix Billionaire. I'm no doctor, but I think we have a wild one here. His insults on anyone talking to him seem to match him much better than the intended victim. Sometimes, I have to wonder about his mental stability. Very questionable. Any doctors in the house?

robertoaribas says

Whenever you develop the ability to not be a blithering idiot, I'll be happy to quit insulting your intellect.

Predictable response from you. Hope you find what your after. Pump yourself up and put others down. Still doesn't change a thing about the sorry state of the real estate market in this country. Your insults are old and don't do you any help in credibility. An intelligent person would get that connection.