patrick.net

Look, you are describing low demand, low mortgage origination and at the same time high and rising prices. With no explanation.
In what market does it make sense? It doesn't.
You just can't explain it, unless there is a lid on the supply.

Logan Mohtashami says

Those aren't homeowners they aren't paying for their mortgage, A lot of them haven't paid on a mortgages for 2-4 years and 1 million of those homes are empty

There is no way I can ignore that information, that is creating a false narrative

But you ignore they will need a roof if they hit the curb, and this is not a false narrative?

Logan Mohtashami says

Every year I talk about this number and showing why rental demand will be strong because these Americans will be renters not homeowners when they finally lose their homes

I'm talking of the mismatch between the number of people needing a roof and the number of roofs available.
You are talking of things that do not affect this mismatch.
You are not answering my point.

Heraclitusstudent says

With no explanation.

In what market does it make sense? It doesn't.

I have explained this 11 times on this thread, so I am going to explain one last time

You have an unreal supply and demand market place

1. 100% plus inventory which would equal 10 months of supply has been kept off the housing market due to legal constraits

2. You have near 50% demand from the Richest Americans and foreign buyers creating a false sense of pricing power which is ok with them but for main street
it has priced a lot Americans out of the housing market

Causation
Correlation
Representation

Causation

Correlation

That is as clear as I can make it

Lowest purchase application demand this century
Lowest first time home buyer demand this century

Logan Mohtashami says

1. 100% plus inventory which would equal 10 months of supply has been kept off the housing market due to legal constraits

2. You have near 50% demand from the Richest Americans and foreign buyers creating a false sense of pricing power which is ok with them but for main street

it has priced a lot Americans out of the housing market

Again you are assuming rich Americans grab houses, wall them off, and generally make them unavailable for people to live in. This isn't the case.
Again you are assuming distressed properties are a miracle supply of empty homes that will fall from the sky. They aren't.

I'm talking of the mismatch between who needs a roof and what roofs are available to live under. This mismatch is what results in high prices, both rents and sales.
You are talking of things that DO NOT AFFECT this mismatch.

This is a mute conversation. I'm going to stop there.

Heraclitusstudent says

This is a mute conversation. I'm going to stop there.

This I can agree with it :-)

Good talk though! It shows people can have a civil economic discussion on the net

Call it Crazy says

Hey Logan, after yesterday with Tat and now this discussion, do you ever feel like this with them?

The best clue that one is on the wrong side of a discussion is if you and Indigenous back him/her up.

Herc brings up good points actually, but I really think Logan is so wrapped up in the details that he can't see the big picture.

The bottom line is that prices are rising even with low demand. Obviously that points to a supply issue. There is absolutely no other way to frame it.

I'll just add a note on the kind of non-sense that passes as journalism nowadays:
http://news.yahoo.com/u-home-sales-dip-remain-near-multi-highs-150413476--business.html
Let's forget the title referring to "multi-year highs" but conveniently doesn't mention we were already at this level more than 50 years ago, with 120 millions less people.

There is more reason to be optimistic on housing. The labor market is gaining steam and housing activity should be boosted as more people get a paycheck.
In addition, home prices are showing signs of reaccelerating after slowing for much of 2014. That should lift more homeowners out of "underwater mortgages," giving them more equity in their properties and allowing some to put their houses on the market.
"Housing sales may be going nowhere, but with prices rising it looks like the deceleration in prices that had occurred for most of 2014 is largely over," said Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pennsylvania.
"That is important as the sector is suffering from a shortage of inventory, which may be due, at least in part, to a lack of equity. The better the price gains, the more homes that can be brought to market."

Get that? : prices are going up faster which is good news because it will bring more inventory, which is good because we lack of inventory, even though demand is down due to prices being too high.
Or said differently: We are going back to the bubble levels where idiots bought their homes, which is good so they will be able to get rid of the over-priced properties by passing them to the next generation bag holders.

Logan Mohtashami says

Good talk though! It shows people can have a civil economic discussion on the net

Boring...

anonymous says

John R. Talbott

What happened in 2003-2006 was very unique you had net peak SAARS at 7 million and new home sales at 1 million driving up prices well beyond the historical averages of the MI2MP model

You had an excess of homes at high prices with debt leverage which created a whole mess because unlike the stock market bubble margin debt falls 1 to 1 with a down turn in the economy

Many of us from 2003-2006 where trying to point out that debt leverage taken from housing not only created a distorted housing market but helped fueled consumption spending in the cycle as well

There is a professor in Chicago Booth names Amir Sufi who wrote a book the House of Debt and we have spoken twice at economic conferences about these debt leverage consumption levels during the housing crisis

Here is a clip of the San Francisco economic conference where he goes over that

https://www.youtube.com/watch?v=ns4bxXfqOow

He comes to me the private sector views of things because he was very skeptical of the demand growth thesis

So I broken down a lot models for him to show him why the demand growth curve is really held up by rich Americans using this model

PITI inflation rate
Adjusted to a more real DTI factor model
Against real median incomes with LTI factor base

It's very complicated but after that he totally got why housing demand was the worst we had on record in terms of mortgage but the best we have in terms of cash.

When we talk about housing economics we have to use many variable factor models and then counter them to what is going with the U.S. economy as well. This is a daily break down of 43 different economic metrics to come to a conclusion which is then broken down line by line to see where the demand can come from.

So, after 6 years of data the core thesis of my main thesis has vindicated due to the fact that economy has produced 10 million new jobs but with demographics and the model above it hasn't create the net demand that economist and housing pundits have thought it would

Logan Mohtashami says

anonymous

I break down the economic charts daily here in my facebook page https://www.facebook.com/Logan.Mohtashami

Consumer Confidence
Unemployment claims
Real median incomes
Retail sales
Industrial production
GDP per capita

and every single report out there with a look at what is going on outside the U.S.

I have to look at all variables and update them daily with the new economic data

Call it Crazy says

The bottom line is that prices are rising even with low demand. Obviously that points to a supply issue. There is absolutely no other way to frame it.

This is actually a funny statement

Logan Mohtashami has said for years 2013, 2014 and 2015 home prices will increase because supply is low and demand is strong from the Rich who aren't price point constraint because they are rich

Now I am supposed to debate against my own-self because "There is absolutely no other way to frame it"

So in theory I have to ask myself why am I debating my own self even though I have been clear on that thesis for years

I can't make this stuff up, this is truly priceless

2014 prediction

2. As much as I hate to say this, in 2014 home prices will continue to rise. I predicted 2-5% rise in home prices for 2013, but the market, driven by very low inventory, rose between 5-12% depending on whose metrics one uses (Zillow, Corelogic, Case Schiller and others). Inventory will improve in 2014 — I believe we can get to 6 months on sale inventory for the nation—but that still won’t be enough to prevent home prices from rising. I predict a 2-5% increase in home prices.

2015 prediction

6. For home prices – I predict a modest increase of 1-4%. The low supply of homes on the market gives pricing power to sellers even with the soft demand. I expect inventory of available homes to reach a balance point of 6 months at some point in the year. Year over year price gains are cooling down and this is a good thing as the housing inflation in terms of price gains was simply too much for main street America.

Even when it's written down, I still in theory or in the mind of others have to debate my own-self

Orange County will be going up 15% in 2015. Wait and see
San Francisco 20%

Strategist says

Orange County will be going up 15% in 2015.

My folks put there home on the market to sell asking for 2 million
interesting process it has been

Strategist says

Orange County will be going up 15%

peak 2006 prices was 2.5 million. I have had clients with homes over 1 million get their homes appraised over their peak 2006 prices but that is only on the upper end of the market place and closer to water

Logan says
"My folks put there home on the market to sell asking for 2 million
interesting process it has been"

Did it sell?

Strategist says

Did it sell?

They just put it in the market place 10 days ago.

Strategist says

Did it sell?

Another selling item. Literally all my attached neighbors sold their homes in the last 6 months
1 bedroom condo below me went for $379,000
2 bedroom condo non distress went for $506,000
2 bedroom condo sold in Auction for $492,000 that buyer listed it at $564,000 sold it for $537,000

Call it Crazy says

What, 10 days ago and it's not had multiple offers???

They put the home in the market last September and got no offers and took it off in December
and just put it back on.

For bigger homes not going to get much action after the summer but they didn't listen to me!

We did sell our commercial building and that did get multiple offers because the Chinese need commercial buildings in Irvine.

Irvine is really 2nd home destination for the Chinese when you look at the commercial lots near the new homes

Call it Crazy says

There is another way to frame it, the way Logan does, you just want to keep your blinders on and not see the trends due to your "price only" focus.

You just left New Jersey, a state with over 8 million people with wide ranging economic conditions. Do these charts support YOUR assertion of "rising prices" and "low demand" and point to a "supply issue" when you have 7.5 months of supply and higher sales while prices have flat-lined?

*

First off----as I said on multiple occasions, I watch more than just price. But, the purpose of watching other data points and trends is to try to predict where prices will go. Somehow that point eluded Logan. And obviously you as well.

I'm not making any assertions about rising prices. I'm simply telling you the facts. Prices are rising and have been for almost 3 years running now. Further, if prices are rising that means demand > supply. And if Logan is saying demand is at historic lows, that means supply is at even more historic lows.

Logan Mohtashami says

This is actually a funny statement

Logan Mohtashami has said for years 2013, 2014 and 2015 home prices will increase because supply is low and demand is strong from the Rich who aren't price point constraint because they are rich

Now I am supposed to debate against my own-self because "There is absolutely no other way to frame it"

So in theory I have to ask myself why am I debating my own self even though I have been clear on that thesis for years

I can't make this stuff up, this is truly priceless

I agree. Why in the hell did you spend the better part of a day disagreeing with Herc then??

Logan Mohtashami says

This is actually a funny statement

Logan Mohtashami has said for years 2013, 2014 and 2015 home prices will increase because supply is low and demand is strong from the Rich who aren't price point constraint because they are rich

and--you refer to yourself in the 3rd person now?

tatupu70 says

And if Logan is saying demand is at historic lows, that means supply is at even more historic lows.

No Logan didn't say that

Logan said first time home buyer% hit a 21st century low in 2014 & purchase application hit a 21st century low.
However, cash buyers are very strong still 20% above historical levels and they have to be counted as demand

Supply is low but higher than it was from 1999-2005 but back then you had mad demand because anyone could get a mortgage

This is why back then you had a 7 million print on SAARS for E.homes
and a 1.2 million print on new homes

Today, much different story, total sales for E homes below 5 million and new homes 440K total sales

2 entire different market place

We have a more real market place now, it's just that the cash buyers volumes are coming slowly and that demand hasn't been replaced on par with mortgage demand hence why we saw demand turn negative in a year where estimated sales demand was looking at 5.5 -5.8 million

tatupu70 says

and--you refer to yourself in the 3rd person now?

I have to if you're forcing me to debate myself?

Logan Mohtashami says

I have to if you're forcing me to debate myself?

I think you managed to do that on your own.

tatupu70 says

I think you managed to do that on your own.

exactly my point!

kudos... see in time all non coherent discussion format themselves to a clear point which can be countered but if you had just read what I wrote you would realize we where in complete agreement but for some reason you wanted me to debate myself

Logan Mohtashami says

This is actually a funny statement

Logan Mohtashami has said for years 2013, 2014 and 2015 home prices will increase because supply is low and demand is strong from the Rich who aren't price point constraint because they are rich

You said above, I quote "There is no extra demand out there for existing homes".
You are telling us, again and again that there is no organic demand from the people who would normally buy, but that the rich are buying massively at whatever price.
The demand from these rich people is extra demand.
It comes IN ADDITION to demand from average Americans.
Whereas you are assuming it REPLACED the demand from average Americans.
You seem to be assuming people don't want housing just because they cannot afford the ask price.
Of course they do want houses.
30 yrs old don't live with their parents because they like it.
They just want it at the normal price, aligned with wages, at which houses are traditionally sold.
i.e. The demand depends on the price. And the price depends on the supply.

But there just isn't any supply for houses at normal prices
Clearly only part of the demand is fulfilled.
You seem to be totally blind to this fact.

Heraclitusstudent says

But there just isn't any supply for houses at normal prices

Clearly only part of the demand is fulfilled.

You seem to be totally blind to this fact.

Back in 2003-2006 it was impossible to convince housing bulls that demand wasn't real, they would never listen

Even today when we have data line like this, they still say it's a supply problem.

It's like there is a hatred for math, facts, and data. Probably don't believe in climate change either.

I never understood that loyalty to an economic assumption theory but for some reason housing breeds this type of behavior.
It would be a great test case study

Demand year 7 of this cycle now with rates at 4%

Demand year 7 of this cycle now with rates at 4%

Causation of demand problems

Supply which is higher in 2013 and 2014 than it was in 1999, 2000, 2001, 2002, 2003, 2004, 2005

Bless your hearts all of you. You would have killed Galileo because of his factual nature of numbers

But now even with all this data that you can see, it still doesn't even ring a bell, Great stuff, good for you guys, you have done nothing but put a smile on my face!
That's what makes a market place

Call Crazy says
"What, 10 days ago and it's not had multiple offers??? What the heck...

I thought we had a "supply issue" according to a few people in the thread...."

He is right Logan. That property is grossly over priced.
You need to reduce the price by a hundred dollars.

Logan Mohtashami says

Bless your hearts all of you. You would have killed Galileo because of his factual nature of numbers

But now even with all this data that you can see, it still doesn't even ring a bell, Great stuff, good for you guys, you have done nothing but put a smile on my face!

That's what makes a market place

lol--you're back on this kick again? Rest assured that no one here is afraid of numbers. The key point you're missing is that anyone can recite a bunch of numbers--the real trick is knowing which numbers are important and what they are telling you.. That's where you seem to be a bit lacking.

tatupu70 says

lol--you're back on this kick again? Rest assured that no one here is afraid of numbers. The key point you're missing is that anyone can recite a bunch of numbers--the real trick is knowing which numbers are important and what they are telling you.. That's where you seem to be a bit lacking.

Again priceless... honestly don't ever stop being yourself and once again you're just asking me to debate myself because if you truly read what I wrote you would be in 100% agreement with me because it's similar to your thinking.

Logan Mohtashami says

Again priceless... honestly don't ever stop being yourself and once again you're just asking me to debate myself because if you truly read what I wrote you would be in 100% agreement with me because it's similar to your thinking.

Which time? I think you may have multiple personalities. Maybe that explains the 3rd person writing...

tatupu70 says

Which time? I think you may have multiple personalities. Maybe that explains the 3rd person writing...

See, even when I point the flaw in the thesis you actually can't agree with yourself. This is what happens with people who don't either read the statement or have a emotional vested belief is just making stuff up for the sake entertainment.

You're arguing against a similar thesis that you and I agree on and yet now to dismiss your thesis while you're at it.

Seriously I can't make this stuff up! This thread has been spectacular!

Logan Mohtashami says

See, even when I point the flaw in the thesis you actually can't agree with yourself. This is what happens with people who don't either read the statement or have a emotional vested belief is just making stuff up for the sake entertainment.

You're arguing against a similar thesis that you and I agree on and yet now to dismiss your thesis while you're at it.

Seriously I can't make this stuff up! This thread has been spectacular!

Wow--it was a joke. Relax Logan. We're in agreement.

tatupu70 says

Wow--it was a joke. Relax Logan. We're in agreement.

Dude, I have been smiling this entire time! Seriously any of you guys come to the O.C.
Drinks are on me! 949-291-8293
Let me know when you're in town
It will be a fun conversation!

Back to work for me. Take care guys

Logan Mohtashami says

Dude, I have been smiling this entire time! Seriously any of you guys come to the O.C.

Drinks are on me! 949-291-8293

Let me know when you're in town

It will be a fun conversation!

What a coincidence. I just happen to be in town. I'll see you at the Spectrum Yard House.

Strategist says

What a coincidence. I just happen to be in town. I'll see you at the Spectrum Yard House.

I live 5 mins away from the Spectrum

Logan Mohtashami says

So, after 6 years of data the core thesis of my main thesis has vindicated due to the fact that economy has produced 10 million new jobs but with demographics and the model above it hasn't create the net demand that economist and housing pundits have thought it would

How come?

indigenous says

How come?

I looked at their affordability index models on how they based their capacity to own the debt of housing was and their affordability index models are very off with this cycle

baseline assumption is off everyone having 20% down a starting DTI of 25% debt to income and they don't account for PITI inflation nor add any LTI factor model.
Liability to income

To be honest they wouldn't even know how to get proper data on that

I tried to explain this to Ivy Zelman last year ( Top rated U.S. housing analyst) when she said new home sales would rise 25% in 2014 and it grew at 1.9%

Have to account for this economic cycle and how unique it is in terms of it's internal net demand from mortgage buyers.

Also almost none of them have any financial lending experience and get their data points from surveys and bad ones at that. Some of the stuff I read was really funny actually. It's just things that aren't factual true but people who answered these surveys were just off.

So they were led astray, that's the problem when you get your data from 3rd party people and don't do any internal work yourself