patrick.net

Thanks for posting this. I have tended to believe the things you are talking about - that without better wages and perhaps a healthier middle class, housing cannot recover. I have also started to wonder if maybe we are entering a different world where the1% owns all the houses and the rest of us just pay rent. Maybe we aren't ever going back to a healthy housing market because we aren't ever going back to an economy where people outside the 1% make much money or own much.

For me, this has meant that I aggressively fund my retirement. I keep money in the stock market and it has done pretty well. If I had had the perspective to buy a house in 2009-2011, well that might have been smart, but I didn't.

Do you think we are in a new reality now? Do you think the rate of homeownership among first time buyers in the future will reflect historical norms? Do you think we will ever have a middle class again in our lifetime?

bg says

Do you think we will ever have a middle class again in our lifetime?

You get what you fight for. Whining and hoping gets you zippo.

Noted Back In April 2014

The Housing Inventory Shortage Myth

"The second biggest real estate myth is the oft repeated refrain that a lack of housing inventory has held back the real estate recovery. The biggest real estate myth, one that has also been peddled incessantly, is that there is a housing recovery in the first place.

It’s a lack of demand holding back the housing market, not a lack of inventory."

http://smaulgld.com/housing-inventory-myth-shortage/

Go Straight to Logan! https://www.youtube.com/watch?v=o9O_FDLPdgA&t=10m35s

bg says

Do you think we are in a new reality now?

This is a question I am trying to grapple with for 2 years now because we are in year 6 now with rates below 5% since early 2011 but the mortgage buyer hasn't really made any % gains and if it wasn't for the Rich buying homes 20 above normal levels you're looking at at least 15%-20% less total sales for EHS

For 2014 what have we seen

Cash buyer % has increase but the volumes are lower even with the higher inventory levels. Which shows me that the demand driven for yield in housing has it limits

For the Rich to buy 30-40% of all homes for lets say the next 30 years, they would have to believe that housing is going to be a good investment for their capital.

Historically cash buyers are 10% of the market.

So, it's a interesting long term thesis. However, we need the cycle to mature more to have better data on this to make that thesis that the Rich are going to buy 30%-40% of all homes

Blurtman says

You get what you fight for. Whining and hoping gets you zippo.

Are you directing this at me? It seems to imply that you might be saying that I whine about things and don' t take action, but I thought I would double check that.

bg says

Do you think the rate of homeownership among first time buyers in the future will reflect historical norms?

This thesis is actually has some good data to support a longer term thesis on the young not participating for a while

First time home buyers what is there issue

-jobs
- wages
-student loan debt
- holding off marriage ( Dual income very important to capacity)

All these things have to get better for them for them to make a move.
Historically they are 40% of all mortgage buyers and they are now at the low point of this cycle at 28%

2014 was the worst first time home buyers % involvement for EHS I believe on record. For new homes it's about 15% which is an all time low I believe as well.

You would need to see household formation numbers get a lot better, at first stage they will be renters and when they settle down, get married and have dual incomes then you will some better capacity to own numbers.

A lot of the first time home buyers I have worked with when you get into the 30-34 age group with dual incomes they can do it.

Demographics look good ages 20-35 for 2 decades but they will be natural renters first before they buy so we will need to household formation get better first

Logan Mohtashami says

So, it's a interesting long term thesis. However, we need the cycle to mature more to have better data on this to make that thesis that the Rich are going to buy 30%-40% of all homes

I like how you are framing the question. It provides an index that can measure the problem. It isn't just the lack of wage growth, but also the rate of cash buyers in the market.

I have heard people here say that it was pointless to wait for prices to go down, 1. because they won't, 2. if they did, the cash buyers would flood back in, 3. because by they time prices drop, they would just be dropping to something near current prices because of the inflation that would have taken place in the mean time.

Logan Mohtashami says

First time home buyers what is there issue

-jobs

- wages

-student loan debt

- holding off marriage ( Dual income very important to capacity)

We are a family that makes good money (married with two careers), has good credit, have very minimal debt, and isn't interested in being enslaved in debt for an overpriced asset. For now we rent and watch.

bg says

Do you think we will ever have a middle class again in our lifetime?

For this to happen we would need to see wage growth really kick off, not this 2% YoY action we have been saying but 2.7%-3.3% growth.

Base salaries also have to rise

The problem we have here is that we are dealing with

-Globalization

- Technology

-Debt

- Demographics

These are 4 issues that are hard to solve. At least we have energy capacity here in the U.S.

bg says

Blurtman says

You get what you fight for. Whining and hoping gets you zippo.

Are you directing this at me? It seems to imply that you might be saying that I whine about things and don' t take action, but I thought I would double check that.

No, I am not directing this to you. Conditions for the middle class will not improve until they fight to improve their situation. I think what is going on is causing folks to become more educated about the power that banks hold over their lives, the influence they exert over the government, and the amount of crime they get away with and the two-tiered justice system in place in the USA.

Blurtman says

No, I am not directing this to you. Conditions for the middle class will not improve until they fight to improve their situation. I think what is going on is causing folks to become more educated about the power that banks hold over their lives, the influence they exert over the government, and the amount of crime they get away with and the two-tiered justice system in place in the USA.

It is scary that people aren't more alarmed about the financial and political power of the small number of people and institutions that have large amounts of money.

bg says

pointless to wait for prices to go down,

I don't believe we will see a massive crash in pricing for home for 2 factors and when I say crash in prices I am talking about 35-50% in a short time frame

1. The home buyers in this cycle do have the capacity to own the debt. We don't have a market place of owners in the new cycle that can't own the debt in mass. We still have 3 million delinquent loans from the housing bubble to work off. So housing back to normal where you need a job loss recession or some type of financial event for a person to lose a home

2. Also, it will be difficult to create a mass distress sales market. A lot homeowners have equity cushion to make the sale non sitress if they needed too. It will be the buyers who bought last and first to lose their jobs that will be impacted the most. So, when the recession comes you will see a distress market but not as bad as the housing bubble.

bg says

Blurtman says

No, I am not directing this to you. Conditions for the middle class will not improve until they fight to improve their situation. I think what is going on is causing folks to become more educated about the power that banks hold over their lives, the influence they exert over the government, and the amount of crime they get away with and the two-tiered justice system in place in the USA.

It is scary that people aren't more alarmed about the financial and political power of the small number of people and institutions that have large amounts of money.

And also who law enforcement is active in controlling. Sell drugs for the cartels, go to jail for life. Launder their money, and pay a little of the profits in a fine. Sell loose cigarettes on the street, die in a choke hold. Sell millions of cigarettes and lie to Congress about their toxicity, keep your money and do no jail time.

I might buy a house, with cash, that I believe to be overpriced. It's 17 yo. I could build the same house brand new for the same price. It sucks.

One item about the YoY demand weakness

We are only talking about 200K-250K less in sales as total
sales are roughly going to be 4.89 - 4.95 million ( That's what the trend is like so far) So, it's not a huge drop off

However, it's the internal demand numbers that are showing more weakness. If mortgage buyers had risen and there were less cash buyers it wouldn't be that bad to have a slow down in total sales.

However, demand from the long term sustainable driver of housing got worse.

With lower rates, with rising inventory, with the Fed loan survery showing a decrease in lending standards

So, what this has done now is that for 2015 it has created a path to where we would need to see

17%-27% YoY increase in mortgage purchase applications ( First 5 months of the year) just to get back to 2013 sales number of 5.09 million, assuming that cash volumes continue their lower total volume trend

Now I thought we could see 5.14-5.21 SAARS number coming out next week with existing home sales because we had a massive rise in inventory the last 2 months. However, I believe I might have been too bullish with that assessment

it's hard for patnet users to NOT miss out on good deals if they base their decisions on charts and numbers posted on this site.

the chart says 4-6 months of supplies for certain months in 2012 but if you tried to buy one during that period you would know how difficult it was find a decent one. perhaps the banks held back? doesn't matter, there's nothing the buyers can do about it.

the best time to buy is when the rich buy it. sell when the poor start buying (2006).

Call it Crazy says

The ONLY thing that matters is HIGHER PRICES!!! How many times do you need to be told this?

Because... Higher prices create demand- everybody wants one!

(so say the housing "recovery" fanatics)

>At some point, main street America has to step up, but that can only happen when wages and household formation grow

APOCALYPSEFUCKisShostikovitch says

To put it all in cinematic terms, we're halfway between Les Mis and The Purge and well on the way to The Road.

Long yams!

Do long yams taste better than short yams?

I believe I am going to be wrong with EHS existing home sales peak SAARS number

I thought we could reach 5.14 -5.21 million peak SAARS for 2014. It's looking like 4.98-5.11 million number coming out next week. We shall see

smaulgld says

It’s a lack of demand holding back the housing market, not a lack of inventory

Then shouldn't prices plummet?

APOCALYPSEFUCKisShostikovitch says

To put it all in cinematic terms, we're halfway between Les Mis and The Purge and well on the way to The Road.

Long yams!

Where does Mad Max , A Boy and His Dog and Damnation Alley fit into this cinematic model?