patrick.net

bgamall4 says

Logan, Germany ownership rate is 42 percent. Germany is looked upon as the model for how to run a nation. Germany does not allow toxic loans to its citizens, although it does to PIIGS nations. That is why Greece is in trouble, bad loans from German banksters. But I digress. The PIIGS nations look at the Germans and say they are poor because the PIIGS nations' citizens have a much higher home ownership rate!

So, which model is better, Logan? Lots of home ownership and hurtful loans, or no toxic loans and low home ownership?

Lots of home ownership without the toxic loans is better. Germany having a 42% home ownership rate equates to 58% have landlords.
What do you think people want? Their own homes or landlords that get rich off the rents?

Logan Mohtashami says

I call it pent up demand, and home builders as the best stocks to buy.
What do you guys call it?

Strategist says

I call it pent up demand, and home builders as the best stocks to buy.

What do you guys call it?

Shifting demographics. There is going to be a lots of people in apartments for a long time. Millenials are moving to the cities, boomers are downsizing.

Yep, buy lots of home builders stock.

Remember

Pent Up Demand Thesis itself has been used since 2010 and which transpired has been the weakest recovery post WWII ever at the lowest rate ever in American economics since 1941-1945

2013 "Housing is in Nirvana"

2014 "Nirvana is just around the corner

41 days later from Nirvana around the corner this happened

(Miss Housing Nirvana Cries Uncle)

http://loganmohtashami.com/2014/04/11/miss-housing-nirvana-crys-uncle/

Builders just out of population growth should be booming in starts years ago, not now, years ago

but adjust everything to population you got this demand curve

It's like we forgot that math,facts and data matter, that deviation from the norm was going to lead to Nirvana

bgamall4 says

So, how much toxic is allowable

As long as incomes are verified and liquid assets are verified with a down payment we should be fine. The Debt structure of the old have been outlawed in America and there are no whispers of people doing them.

This is why I am always fighting to not ease standards, the sickness of men will allow greed to take over leading to economic damage. That sickness and darkness must be fought at all times forever

Call it Crazy says

bgamall4 says

Strategist says

I call it pent up demand, and home builders as the best stocks to buy.



What do you guys call it?

If you can't afford a house, your demand can be pent up a long time.

See, once and a while, he makes sense!!

It's not one of those times.
According to this article 26% of listed homes in LA are affordable to millennials. 80% of listed homes are affordable to them in some parts of the country.
Logan, check it out thoroughly.

http://www.latimes.com/business/realestate/la-fi-young-home-buyers-face-tough-market-in-southern-california-20150429-story.html

Logan Mohtashami says

bgamall4 says

So, how much toxic is allowable

As long as incomes are verified and liquid assets are verified with a down payment we should be fine. The Debt structure of the old have been outlawed in America and there are no whispers of people doing them.

This is why I am always fighting to not ease standards, the sickness of men will allow greed to take over leading to economic damage. That sickness and darkness must be fought at all times forever

There is no such thing as toxic loans. Just toxic people who should never be given loans.

Strategist says

According to this article 26% of listed homes in LA are affordable to millennials.

Based on what?

20% down loan with a 740 fico score model
and a starting 25% DTI level

This has been the flaw in home affordability awlays

I don't know how else to explain this

We have even this year, year 7 of the economic cycle with 3.75% the worst demand ever recorded in American history from mortgage demand!

It's scary to me that some people are trying to even spin this in any positive light what so ever

Logan Mohtashami says

Builders just out of population growth should be booming in starts years ago, not now, years ago

but adjust everything to population you got this demand curve

Wow. We have never built this few homes in the last 50 years. The pent up demand is like pressure on a dam being built up by a rising ocean behind it. Eventually the dam will burst, and it won't be pretty. The leaks in the dam have already begun as can be seen with record high rents. Those who don't buy now will drown in the coming flood, because they will have no roof to climb on.

Strategist says

Those who don't buy now will drown in the coming flood, because they will have no roof to climb on.

This was never about should but always about could, the reason why Ivy Zelman the #1 housing analyst blew it in this cycle. Economic Vision of Math against Economic assumption thesis of Spin

Logan Mohtashami says

don't know how else to explain this

We have even this year, year 7 of the economic cycle with 3.75% the worst demand ever recorded in American history from mortgage demand!

It's scary to me that some people are trying to even spin this in any positive light what so ever

Well, for one, low interest rates aren't really a bullish sign for the economy. Having rates remaining this low in year 7 of the economic cycle shows that there are still big problems in the economy. There is low supply and low demand right now. Not sure that's better or worse than lots of people moving from one house to a different house.

tatupu70 says

Well, for one, low interest rates aren't really a bullish sign for the economy.

10 year was at 15.84 percent in 1981 and now today is 2.03%tatupu70 says

Having rates remaining this low in year 7 of the economic cycle shows that there are still big problems in the economy

This I agree with especially on the short term side of equation because the FED can't even move from Emergecny Interest Rate policy even when trail growth 4 quarter average is at 3% and we are at a 15 year low on claims. >>>>>> HOLY ^&*(^ storm.. those are the data lines I use when people talk smack on how good things are, it always brings a silence to the discussion

CPI is almost at the Fed's 2% level but that index is 42.2% all rent inflation without that it's soft

While it's growing, it's not strong enough to get more velocity in the economy and with rent inflation and PITI inflation rising strong in this cycle, it just makes consumption harder hence the soft expansion of credit

Change since 2005 in one unit homes
Owner-occupied: -1.97 million
Renter-occupied: +4.35 million

Logan Mohtashami says

Change since 2005 in one unit homes

Owner-occupied: -1.97 million

Renter-occupied: +4.35 million

We did go through the Great Recession, which would screw up a lot of trends. The number one factor to influence home purchases is employment rates.
Bottom line...we will fully recover and go higher, because we have always fully recovered and gone higher.

Strategist says

employment rates

12 millions job recovered - Check

Unemployment claims are at a 15 year low - Check

Unemployment rate near in theory ( full employment) - Check

Interest rates below 5% and the lowest rate curve for the longest period in our life time - Check

this was the result after 7 years

Forget about the peak of 2005, we don't want to use that, just look at the trail demand from 2010 -2015

The next recession/recovery will have a better demand profile but it just wasn't this cycle no matter how much was pushed to make housing work

We have a housing inflation on both fronts now

11 million American families can barely make rent. http://www.makeroomusa.org

Logan Mohtashami says

12 millions job recovered - Check

Unemployment claims are at a 15 year low - Check

Unemployment rate near in theory ( full employment) - Check

Interest rates below 5% and the lowest rate curve for the longest period in our life time - Check

this was the result after 7 years

Forget about the peak of 2005, we don't want to use that, just look at the trail demand from 2010 -2015

The next recession/recovery will have a better demand profile but it just wasn't this cycle no matter how much was pushed to make housing work

Good morning!
It is a pathetic recovery where a double dip is still possible. But then we were on the verge of a depression, which was evaded. :)

Strategist says

double dip is still possible

Double dip recessions are very rare in American economics, I do track many models to see if there is any chance and not much here

Strategist says

the verge of a depression,

In reality once we got the capital market working and started the De leveraging of a housing excess debt things started to recovery

Logan Mohtashami says

We have a housing inflation on both fronts now

11 million American families can barely make rent. http://www.makeroomusa.org

Population growth > new construction for the past 8 years, and continues today. It will take years to get back to equilibrium. My guess - there will be a shift towards trailer homes and sub standard housing in the next 10years. The affects of the 2008 housing crash will continue to echo for many years. :(

It's just the cycle exposed a flaw, that without some type of bubble factor model creating extra demand this is kind of who we are until the next demographic cycle picks up with wage inflation going on

Strategist says

sub standard housing in the next 10years.

( This) is what I get a sense from talking to housing community groups

Logan Mohtashami says

Strategist says

sub standard housing in the next 10years.

( This) is what I get a sense from talking to housing community groups

I've been speaking to a few folks, everyone expects a crash by 2017. To be completely fair, I've thought it wouldn't be as inflated as it is now, feels so like late 90's before the speculation and eventual bust.

With rents and home prices increasing, the traditional pathway of saving for downpayment while renting may get scrapped in favor of living with parents while saving for downpayment. For some people it may literally mean the difference between being able to buy or being on the sidelines forever. Sometimes, it's necessary to abandon established methods to achieve desired results.

FortWayne says

crash by 2017.

I am not a big crash thesis guy on home prices unless you get a massive spike on the 10 year for 5 reasons

1. Crash to me is a 30% plus decline which means in real terms we have to go below bubble crash pricing by 2017

2. This would require a massive amount of loans going delinquent ( which isn't going to happen like the housing bubble years)

3. Equity set up from buyers 2010-2014 gives a mass cushion of equity for anyone being in distress

4. 1/3rd are cash buyers from the Rich and 45% plus of all homes have been bought by the Rich, so outside of leaving their rental yield investment they would need to bailout in big numbers

5. Because lending standards are back to normal liberal stage the quality of homeowners are the best I have ever seen in my life

dublin hillz says

With rents and home prices increasing, the traditional pathway of saving for downpayment while renting may get scrapped in favor of living with parents while saving for downpayment. For some people it may literally mean the difference between being able to buy or being on the sidelines forever. Sometimes, it's necessary to abandon established methods to achieve desired results.

Or, Gasp, having multigen households like most of the world.

bgamall4 says

But aren't prices also determined by the last sale? So, if people are forced to lower their prices,

Lower pricing power and a full blow crash thesis to me are 2 different things.

Housing is back to it's normal relationship in a cycle where major price declines need a job loss recession and you run the variable intangibles with each cycle.
If 45% of the buyers in a cycle are cash and rich people how much down turn in real net demand would we see.

I think the bears missed that one in this cycle, how much wealth can go into a housing market because net mortgage demand from man street is even this year at Great Recession low and the next cycle curve will have much better demographics that this last year

A lot goes into the equation and timing of economic cycles it's not so cut and dry, the housing bubble had major debt on debt leverage form non capacity owning debt, this is not the case in this cycle

Also, the lack of mega cash out refinancing cycle ( 2004- 2006) model which put a lot homes for RIP model isn't happening in this cycle either

bgamall4 says

QE has become monopoly money.

If the 10 year spike and stayed to where rates were 5.875% and higher that is where a lot of demand hit to my own MI2MP model for E. homes gets hit. This is why I knew back in May of 2013 that people were going to be shocked when the 2nd hand of inflation comes into play with price inflation demand would take a hit and 2014 even when rates when down the entire year, sales were negative in 2014

May 7, 2013 is when I wrote that article and it was then that we started the bear market in the short term sense of purchase applications

http://loganmohtashami.com/2013/05/07/housing-mammoth-stuck-in-tar-has-bigger-problems-to-worry-about/

More Americans who don't own a home say they're unlikely to own in the "foreseeable future" http://www.gallup.com/poll/182897/fewer-non-homeowners-expect-buy-home.aspx?utm_source=Economy&utm_medium=newsfeed&utm_campaign=tiles …

Shocking how the real world works ;-)

bgamall4 says

Logan Mohtashami says

I think the bears missed that one in this cycle, how much wealth can go into a housing market because net mortgage demand from man street is even this year at Great Recession low and the next cycle curve will have much better demographics that this last year

QE has become monopoly money.

It's not that bad Gary. As compared to GDP we are still OK, unlike most other countries.

http://data.worldbank.org/indicator/FM.LBL.MQMY.GD.ZS

bgamall4 says

Strategist says

It's not that bad Gary. As compared to GDP we are still OK, unlike most other countries.

http://data.worldbank.org/indicator/FM.LBL.MQMY.GD.ZS

So, what is good and what is bad in that chart? Is the UK bad because the money supply is swollen? Please clarify.

The amount of debt and Money Supply we have generated is affordable based on our income, the GDP. Japan has a much higher debt load, as do most other developed countries.

Government debt I am not worried at all, there is a list of countries that would fail before us and they're still borrowing debt at cheap rates. Special situation's like Russia and Greece show their cards but we have the biggest economy and biggest military in the world and most of the debt is our own

Inn regard to Japan, demographics are hitting them hard, data is few months old, but you get the drift

Super Size nation having a weight problem

Logan Mohtashami says

The median sq footage took off right after interest rates started their long term downtrend. Can we expect a reversal after they start building more homes for the first time buyers.
Hey Logan, what does the chart on the median lot size show. :(