patrick.net

tatupu70 says

cause price increases and falling inventory.

I thought I have made that point very clear over the years

but here you again for 2016

5. Home Prices

Home prices still have the legs to run higher in 2016, like they did in 2015, because inventory is high enough nationally to provide choice but not so high to cause price declines. In fact, from 2012 -2015 the annual months of inventory were higher than at any point from 1999 – 2005.
We would need 6 months of inventory and a job loss recession creating a fresh wave of distressed sales, in order for any meaningful national downturn in prices to occur. Inventory is nowhere close to 6 months and only states dependent on oil and mining are seeing recessionary type job losses.

Selling equity is something that doesn't get enough attention. If you work off affordability metrics that means you would need at least 28%-33% equity on the conservative thesis to have enough equity to sell and move up and then have a 20% down payment to buy a home.

The Price gaps higher form 1996 to now has created that model to be more and more difficult, so you have people who can't really move up keeping a lid on inventory below that 6 months level

Only had that happen from 2006-2011, which means a housing bust or recession thesis has been the only way to get inventory over 6 months in America in the last 20 years since the big price gains from 1996 or the demographic push from then as well

A lot of the inventory is going to be higher leading to more demand crowd of 2015 was surprised that inventory didn't grow and not much is happening this year either

Logan Mohtashami says

I thought I have made that point very clear over the years

but here you again for 2016

5. Home Prices

Home prices still have the legs to run higher in 2016, like they did in 2015, because inventory is high enough nationally to provide choice but not so high to cause price declines. In fact, from 2012 -2015 the annual months of inventory were higher than at any point from 1999 – 2005.

We would need 6 months of inventory and a job loss recession creating a fresh wave of distressed sales, in order for any meaningful national downturn in prices to occur. Inventory is nowhere close to 6 months and only states dependent on oil and mining are seeing recessionary type job losses.

No--you say two very different things. Low demand causes low sales. Low inventory causes price gains.

How do you reconcile those two seemingly opposite statements. If we've had low demand for several years now, why hasn't supply been rising?

Today's EHS report, still have a 25% level cash buyer, but first time home buyers are at 30% still near historical lows, demographics for this will get better but cash buyers aren't going to be 25% plus of the market forever, as the distress supply falls down they should be less and less of the market place, meaning mortgage buyers are going to have to go back to their 90% of the market level.

tatupu70 says

why hasn't supply been rising?

Logan Mohtashami says

Selling equity

and no new distress sales, or a recession to create it

Logan Mohtashami says

and no new distress sales, or a recession to create it

So, we're getting large price gains under a low demand market because there are no distressed sales? That's your theory?

tatupu70 says

So, we're getting large price gains under a low demand market because there are no distressed sales? That's your theory?

The only way to get to 6 months for existing homes in a annual amount .. meaning the entire year

Basically a recession to create distress home supply, we don't have the capacity to allow non distress housing inventory to grow to get high enough, sales gets hit but keeps prices from falling

Again, in the last 20 years, we have never had 6 months annual inventory outside the housing bubble crash and recession

Prices nationally moved higher in 2012 as inventory collapsed that that year allowing for the first time in this cycle to get under 6 months..

Now 4 years on national price gains and even though we have higher inventory than 1999-2005... we don't have 6 months and no new distress inventory as part of the variable equation

As you can see we had a lot more mortgage demand from 1996-2007.... this cycle not so much,

But we have had the strongest demand from cash buyers ever on record, typically they're 10% ... this cycle 25%-30% this entire cycle and higher in the early stages due to big supply of distress homes in this cycle

OK--I give. It's very difficult to have a discussion with you Logan because you always go off on tangents.

Like I tell you that I don't think that sales, mortgage apps adequately represent demand. And you post chart after chart showing low sales and low apps. I don't care--I've already told you that I don't think they are necessarily a good representation of demand.

tatupu70 says

OK--I give. It's very difficult to have a discussion with you Logan because you always go off on tangents.

My wife would agree with you my lady

Thank you for the conversation and have a wonderful day

Logan Mohtashami says

My wife would agree with you my lady

By the way--I'm not a lady. No big deal as I'm not offended, but just fyi.

tatupu70 says

By the way--I'm not a lady. No big deal as I'm not offended, but just fyi.

My apologies

tatupu70 says

Like I tell you that I don't think that sales, mortgage apps adequately represent demand. And you post chart after chart showing low sales and low apps. I don't care--I've already told you that I don't think they are necessarily a good representation of demand.

Come back to the thread this morning to graph after graph after graph. (laughing) I share the above sentiment.

Logan, take your first two graphs in this recent section of the thread: "Raise the Roof" and "US Median New Home Sale Price vs Median Household Income". These two combined say that homes being built today (NEW) are bigger and more expensive than ever before.

You agree, correct?

And that leads to things like this ...
http://www.jaxdailyrecord.com/showstory.php?Story_id=547415

From the article ...
"On the supply side, the picture also is skewed.
In the recovery, homebuilding has lagged. Labor shortages and the high cost of developed lots sit at the top of builders’ issues.
Normally there are 5.5 existing home sales for every one new home sale. Today, it’s up to eight existing home sales for every one new home sale.
Also, the types of homes being built don’t correspond to where demand is being created, Duncan said.
New household formation is driving most of the growth in demand. But building has focused on homes at higher price points.
“If you look at construction of new homes by square footage — the average home built post-crisis is larger than it was pre-crisis,” Duncan said
The greatest growth in the last three years has been in homes with 3,000 square feet or more.
The problem also is appearing in multifamily markets.
“You see all Class A properties being built,” Duncan said. “Or people are upgrading Class B properties into Class A properties. Nobody’s constructing Class C properties.”."

Let me repeat one thing for you:
"In the recovery, homebuilding has lagged. Labor shortages and the high cost of developed lots sit at the top of builders’ issues."

The belief that there is an overabundance of homes, or weak demand, is false. This is simply why you see higher prices in the past few years, and less homes on the market.

http://www.bankerandtradesman.com/2016/04/us-existing-home-sales-surge-supply-improves/

"Housing is being supported by a buoyant labor market, which has resulted in an acceleration in household formation. Sales, however, remain constrained by a dearth of homes available for sale, which is limiting choices for buyers. The number of unsold homes on the market in March rose 5.9 percent from February to 1.98 million units. Supply was, however, down 1.5 percent from a year ago."

Logan Mohtashami says

Again, in the last 20 years, we have never had 6 months annual inventory outside the housing bubble crash and recession

Building the Bubble = buying frenzy. Homes wouldn't stay on the market long. Supply cannot keep up with demand. Builders trying to keep up with demand.

Bubble Pop = buying weakens, home prices crashing. Supply builds. Builders stop filing for new homes.

Post Bubble = builders begin to rebuild, cautiously, and housing DOESN'T lead us out of the recession. Home prices rebound to bubble levels, due to low supply and tight lending conditions. Low sales volumes seen across the nation and beginning to pick up steam. This represents the actual state of the market now.

Logan, if you really think there is not a supply problem, but a demand issue, what magical chart are you going to invest in and why?

Graybox says

Good decision, perfect actually.

Half of my holding left, but I know they're going to have to have a secondary soon, those purchases sold were between 0.62 - 0.77

Can't get greedy with spec plays but this has legs to $3

Rew says

In the recovery, homebuilding has lagged. Labor shortages and the high cost of developed lots sit at the top of builders’ issues

If you really believe labor shortage are the reason why Builders aren't building single family homes then why the boom in mutilfamily housing where the demand was heavy on that

Over investment thesis in one cycle and then an adjustment... but they're still pushing big homes

Which is right in line with new home sales

Duncan and I have talked 3 times over the years.

“Demand weakness [for home buying] has trumped credit tightness,” Duncan

Come on really, is that the game you want to run on me, I can bring out a lot more goodies if you like

:Housing is being supported by a buoyant labor market, which has resulted in an acceleration in household formation. Sales, however, remain constrained by a dearth of homes available for sale, which is limiting choices for buyers."

Dearth of homes... Shocking how more inventory in this cycle doesn't = the same demand in a strong Demographic cycle

Dearth of homes...

Dearth of homes thesis again

Logan Mohtashami says

Strategist says

Strategist says

UNXL is up again another Double Digits

That's 100% plus return, taking some off the table here :-) at 2.19

Can't say I didn't give some stocks now anymore

CCGI up 100% in just 4 days. 50% jump today.

The one area that has been strong in this cycle has been the demand from cash buyers, that has been a 25%-30% cash buyer metric this entire cycle, something that we have never seen with this long duration time frame. And if that metric went back to normal %, the demand would be actually below 5 million handle every month.

This with all the full time Jobs recovered and then some in this cycle

With 2% lower rates and higher nominal wages

But no velocity in growth

#Demographics
Too much debt over hang

It's like the big 4 in the U.S. Economy

Ren you do a good job running this web site :-)

Strategist says

CCGI up 100% in just 4 days. 50% jump today.

You're buying at the Yardhouse

Logan Mohtashami says

Strategist says

CCGI up 100% in just 4 days. 50% jump today.

You're buying at the Yardhouse

One of my favorite bars. Tilted Kilt is pretty good too.

Strategist says

One of my favorite bars.

Just pick a time

Logan Mohtashami says

Strategist says

One of my favorite bars.

Just pick a time

I would love to have a drink with you. I'm just maintaining net privacy.

Strategist says

I'm just maintaining net privacy.

I take it you're not a snap chat or Instagram person then! :-)

Logan Mohtashami says

Strategist says

I'm just maintaining net privacy.

I take it you're not a snap chat or Instagram person then! :-)

You are right on.

You are showing graphs which show low supply and a low sales volume of expensive homes. So how is it that "Low Housing Inventory Lie Still Lives On"? Isn't it actually a fact there is low inventory and that it is a primary contributing factor to the high price of homes? (not the only factor, but a good contributor)

Are you trying to say : "low home supply not the key factor to the current housing market"?

Rew says

"Low Housing Inventory Lie Still Lives On"

For many years, the thesis is that

Weak Demand for housing is primarily due to lack on inventory

The thesis of the article was that... No.. it's a lack of demand due to economic factors not inventory

Inventory is higher from 2012-2016 than any period from 1999-2005 when demand for housing was a lot stronger with sales from mortgage buyers

I wrote this article after the CEO of Zillow said, home sales are weak because there simply no homes to buy out there... 2 weeks ago ...

Here is the Irony here

I am debating a group of people who are saying sales are weak because of inventory and then you guys are saying sales isn't weak.. so in a twist you don't agree with them either..

Because... all of your a price only investment people... it's different out there with economics, analyst and housing shops, they had a lot higher sales metrics for years and all are lagging badly

They're learning, in fact the NAR has a lower high end sales number than I do this, I think everyone got the memo over the last few years.

Last year there was 24%-41% sales estimates for new homes because 2014 was the biggest missed sales estimate year ever on record, low bar thesis for 2015 and even with that they still missed by double digits..

That's the world I am going against... that group of people :-)

First some nomenclature and definitions

MOI = months of inventory
AI = absolute inventory
MS = monthly sales

MOI = AI / MS

I did not read the whole thread, but I agree with the main thrust of it; that MOI is often not a good measure of anything significant, and also that the current MOI is about the same (nationally) as in the peak bubble year of ~2006.

Should there not be a graph that shows AI, the unadulterated numbers of houses listed for sale over time? Dividing the AI by some ill-defined count of monthly sales (MS) is a problem with the MOI data. The MS has probably been additionally massaged with seasonal adjustments and multi-month averages in some undefined/unknown way, which is what makes the MOI so useless.

To sum up: one should carefully study both the numerator and the denominator of MOI = AI/MS, when trying to ascertain whether "it is different now than at time X". MOI surely has its uses, but Realtor/insider claims that MOI are at exceptionally low levels should be met with considerable skepticism.

Thanks to Logan for posting some graphs of historical MOI levels, as well as getting under the hood of the hidden MS numbers by posting sales volume graphs. But I would still like to see the exact MS data that the realtors use when publishing MOI, and shown over 30-40-50 years, and compare it with unadulterated raw sales count data.

justme says

I did not read the whole thread, but I agree with the main thrust of it; that MOI is often not a good measure of anything significant, and also that the current MOI is about the same (nationally) as in the peak bubble year of ~2006.

wrong on both accounts.

In 2006, in Phoenix, there were over 60,000 homes for sale on the mls, and 3000 sold in July. 20 months of inventory. Today, there are 25,000 roughly for sale and 7500 sold in the past 30 days. If you can't see a difference, and think about how different a buying experience a ratio of over 20 homes for sale compared to sold in 30 days, and 3.5 makes, you have serious critical thinking issues.

justme says

The MS has probably been additionally massaged with seasonal adjustments a

nope. straight data. Though, since sales actually are seasonal, a higher ratio in winter wouldn't be that bad as 75% of contracts are written between march and july.

In my zip code, there are 85 single family homes for sale, and 65 sold in the past 30 days. Anything decent gets a contract in a couple weeks, only crap sits around. Prices are going up quickly, and will continue to do so all this year.

justme says

but Realtor/insider claims that MOI are at exceptionally low levels should be met with considerable skepticism.

It is real, you are just either paranoid or stupid. Don't buy, watch prices go up, come back to this thread in a year, let me know how it worked out.

Strategist says

CCGI up 100% in just 4 days. 50% jump today.

IF UNXL ends up $3 I will buy drinks and Dinner that's a 200% bagger

Just for starters, what was it about the word "nationally" that went over your head?

Your zip code (what is it?) and national number are two different things.

justme says

Just for starters, what was it about the word "nationally" that went over your head?

there is no "national" real estate market, there are thousands of local markets.

MANY areas are showing low inventory, and all that needs to matter to you, is your area.

Miami condos on the other hand , are up at like 13 months inventory, and prices are likely to soften over the next year. Either that number will come down, or prices will enter a sustained fall.

Don't worry, logjam will be along to post some graphs and charts and thesis that look negative for the market, and you can stay in your delusional bubble. I will continue making shitloads of money from houses.

Demographic economics is getting better, in time these kids will come, still way to young.

Ages 21-26 are the biggest in America, ------> this is the best thesis for pent up demand... not this cycle but in a few years

Supply of properly aged buyers

Just like 1996-2007 demographics with prime age labor force growth

blowmeironvagina says

MANY areas are showing low inventory, and all that needs to matter to you

This is true, many areas have low inventory, especially higher priced areas,

= Selling Equity Thesis is in those areas...

Move up buyer is chasing a higher priced home so you run models on how much equity is baseline needed, if you want to use the outdated affordabity index

Then their is Trump

Trump: If I win, Yellen's days at the Fed will be numbered ....... #NeverTrump

http://www.housingwire.com/articles/36844-trump-if-i-win-yellens-days-at-the-fed-will-be-numbered?utm_source=dlvr.it&utm_medium=facebook&utm_campaign=housingwire