patrick.net

If any of you like economic charts updated daily my facebook page has almost every economic data updated on the wall with other charts as well.

https://www.facebook.com/Logan.Mohtashami

We got back all the jobs loss on the private sector side from the Great Recession, but........ #DTI #LTI even with the 10 year at 2.76% and ZIRP in play, it's a different cycle for sure and capacity consumption isn't a strong as many as thought. Hence why we don't have top line revenue growth and CAP X spending is light

Where do you see it going from here?

hrhjuliet says

Where do you see it going from here?

Which sector

Housing market, tech stocks and first time home buyers?

hrhjuliet says

Housing market, tech stocks and first time home buyers?

Housing market
Exisiting home sales most likely will end the year between 4.9-5 million so flat market would be the best case but slightly negative most likely

New home sales will likely be up 8-12% in total sales

First time home buyers will be soft this year 26-30% of the market place which is very low on historical standards

Tech stocks are getting spanked, stock market will be ok Up 3-7% this year because ZIRP is in play and the 10 year note is still very low to help demand.

Thank you. I really appreciate your input; always intelligent and practical.

>

As you can see here, we clearly overbuilt for housing and the even new home sales and starts got impacted when housing inflation rose on both fronts

http://www.businessinsider.com/jpmorgans-q2-complete-guide-to-markets-2014-4#jp-morgan-funds-q2-guide-to-the-markets-16

Take all affordability indexes the media and financial companies like Zillow and the NAR promote with a grain of salt because they thesis is based on the fact that everyone has a 20% down payment. Comical with this cycle I know .... and yet they never add an * to their metrics

http://www.businessinsider.com/jpmorgans-q2-complete-guide-to-markets-2014-4#jp-morgan-funds-q2-guide-to-the-markets-18

Hence rental nation, if this much can't create liquidity through liquid assets

Mind that census always counts delinquent homeowners as homeowners, so with 3 million loan still in delinquency and many in California still, these numbers need to have an * to it because it's slightly worse

Come on, Logan, gives some hint on upcoming inventory situation!

bubblesitter says

Come on, Logan, gives some hint on upcoming inventory situation!

Logan, good graph, but I have yet to see that inventory here in North OC.

bubblesitter says

North OC.

Lower end market would be lighter than the upper end areas in California in general. More transaction are higher end homes rather than lower end homes.

still for pure demand we need this chart to look a lot better

Logan Mohtashami says

Lower end market would be lighter than the upper end areas in California in general. More transaction are higher end homes rather than lower end homes.

That simply amazes me. I can't think of logical explanation. It seems as though investors would be more interested in those low end market for rental purposes and high end would be move up or first time live-in buyers. Confused.

bubblesitter says

That simply amazes me

What I see once the Robo signing settlement was signed and California homeowners act law was put into motion the process of putting lower end homes into the market was simply just delayed because there is now a legal process on trying to make a loan modification work for these type of homeowners

Logan Mohtashami says

there is now a legal process on trying to make a loan modification work for these type of homeowners

Won't it apply to both low and high end?

bubblesitter says

Won't it apply to both low and high end?

There more financial struggle is on the lower end side. If you remember the sub prime credit cycle it was the lower end scale of income that took on that massive amount of capacity debt that can't be own.

There are plenty of people in California who have no problem making their mortgage payments before, during and after the housing bubble. So the higher end homes that went to distress are small in nature but they are still out there. Now the lower end homes it's another story and that is why lower end sales home are down like over 40% because they simply aren't to market

The Professor says

Scary chart. How do we fix the transmission?

Pay better wages and get better income growth

One item to remember with this chart and many other economic charts. When you have constant bubble economics going, these highs in income and wealth aren't really supported by true supply and demand economics

So, even though home prices are back to mid 2004 levels median incomes aren't for the many factors in this cycle.

However, in world economy where

Globalization
Techonology
Debt
Demographics

Are 4 forces that are very strong can we really see income growth in areas where we don't have supply and pricing power.

We have tech boom ... that's a small workforce

Facebook 150 Billion Dollar Market Value only employs 5,000 people

JC Penny 2.7 Billion market cap employs 120K people

So the wealth is created in such few industries in terms of incomes and liquid asset wealth ( Stock Option)

Energy is a plus for us, we have that going for us and charts there are good to look at. So that is one area where we can expand and we have a decent jobs recently.

However, it's tough to fix this with those 4 items above.

Not to say everything is gloom and doom, but I believe naturally we are a 2-3% GDP country at best case nothing more than that and wage growth is going to weak in many sectors because those jobs.. the manual labor services just doesn't demand strong incomes

http://www.businessinsider.com/the-most-important-charts-in-the-world-2014-4#paul-diggle-capital-economics-43

This goes into my article that I worked with Bloomberg with on the lack of first time home buyers on any metric

http://loganmohtashami.com/2014/03/05/first-time-home-buyer-whats-that/

Logan, You make some great points on the economic struggle, Maybe if government gets out of the .50 of every dollar we make earn and spend it might make a difference, do the math on it.
Thanks for your work...

beershrine says

government gets out of the

You're asking the impossible as in 10-13 years all mandatory payouts will exceed even the bullish government revenue estimates

http://t.co/8fsr5nIxgF

Hey Logan,

Can you specifically comment on what you see in the Anaheim Hills, Yorba Linda, Tustin markets? Specifically interested in inventory and prices and what your forecast for these areas in the next 6-12 months.

Thanks

Doing a transaction right now in North Tustin
Orange County inventory is up
Pricing is stable but really it all depends on the seller and asking price.
Some homes go right away and some just stay on the market for days. If you can't get an offer with in 30 days you're priced to high in this market.
Pricing should stay strong in that market place.
Cash buyers slowly leaving the O.C. Irvine has flooded the market with new homes and the Chinese will be picking those up. Had an agent said she has a Chinese cash buyer in Y.L. 2 weeks ago

Orange County is the same of So Cal market
- More inventory
- YOY sales will down
- Pricing have staying power though ( unrealistic sellers) getting a dose of reality

There shouldn't be a 1% rate spike like it was last year that slapped the market place around so those areas of the OC should be stable. However, I see a big difference from real sellers and sellers who are too aggressive on their pricing

hanhvu02 says

Logan, do you think some day housing price will go down again - I know it will not be like 2009-2011.

A real drastic declines needs 2 things

1. A lot inventory 7-9 months on sale

2. Job loss recession to where you get distressed sales

- The people who are getting mortgages now do have the capacity to own the debt. So, unless they get some type of economic event to where they can't own the debt, they will be staying put. So, its back to a normal housing market where a recession is needed to get drastic home price declines.

- Investors especially looking for yield aren't going to flood the market place with there homes. However, some will look to take the capital gains but not looking for a lot inventory from them this year.

While ZIRP is in play and the 10 year yield is so low, there isn't a lot others places to park money for return. However, due the massive price gains you can see cash buyers aren't willing shell out the money like they have had before in terms of pure volume

Logan Mohtashami says

Had an agent said she has a Chinese cash buyer in Y.L. 2 weeks ago

Funny you say that cuz it seems like there are TONS of chinese buying in YL right now. Had one co-worker tell me his neighborhood near black gold is ALL chinese. Went to look at new homes in that area and they had signs in chinese with all chinese sales people.
I was bored one day and looked at all the 1.3M and over homes that sold in YL last year. Majority were with some chinese buying agent. I know this isnt proof that these were all sold to chinese, but I suspect that many were.

Miike says

Funny you say that cuz it seems like there are TONS of chinese buying in YL right now

Here in Irvine agents are making presentation in China for the homes here in Irvine. I believe 85% of the net new buyers in Irvine are Asian. I got that stat from the UCLA Anderson Economic conference last year. It's a different market for sure. My 2 bedroom condo with 4 attached neighbors is going for 585,000 and 1 bedroom 824Sq foot home below me went for $375,000 and got 2 offers in the first week.

hanhvu02 says

and I believe something may happen when we have anything - not normal.

Crash.

hanhvu02 says

I believe something may happen when we have anything - not normal.

When I speak to economist this is what I say

Since April of 2012 home prices have gone up 15%-45% depending on where you live. Now in a good economy where incomes are rising and more people are working better pay jobs that would still be considered to be a high % increase

However, in this cycle, you have a lot jobs recovered low wage paying jobs, you have a parabolic chart on student loan debt, record amount of cash buyers, record low interest rates for a long period of time, and a housing bubble hangover on the inventory side rising prices way beyond the reality of this economic cycle.

"Blank Look or Blank Answers" their model is broken, they believe since demographic trends favorite housing that it assumes people will buy... well that didn't happen

The government may be corrupt, but they're not stupid. They have been smart enough to set up a system to where nothing they're involved with can crash.

When you need some extra money, just add a few extra zeroes to your bank balance. It's really that simple.

exfatguy says

few extra zeroes to your bank

http://www.businessinsider.com/jpmorgans-q2-complete-guide-to-markets-2014-4#jp-morgan-funds-q2-guide-to-the-markets-42

They can just "re-normalize" those numbers such that the 22% number goes back to 5%.

When you have a credit card with no limit and no penalty for never paying it back, you can charge forever.

Logan Mohtashami says

When I speak to economist this is what I say

Since April of 2012 home prices have gone up 15%-45% depending on where you live. Now in a good economy where incomes are rising and more people are working better pay jobs that would still be considered to be a high % increase

However, in this cycle, you have a lot jobs recovered low wage paying jobs, you have a parabolic chart on student loan debt, record amount of cash buyers, record low interest rates for a long period of time, and a housing bubble hangover on the inventory side rising prices way beyond the reality of this economic cycle.

"Blank Look or Blank Answers" their model is broken, they believe since demographic trends favorite housing that it assumes people will buy... well that didn't happen

Exactly.

The housing market is like beanie babies, in that everyone thinks they're rare and snaps them up at any price so as not to miss out on something that's sure to skyrocket in value as time goes on.

The only difference is that this time they're right.

Mandy Lifeboats says

Walking Dead! She's turned hardcore.

I had to use this against Joe from BusinessInsider because he always claims that unemployment claims and the stock market are a great correlation and today Claims got to it's best level in this cycle and the market tanked even with the dovish comments from the Fed yesterday. However, that is a different discussion than housing