patrick.net

Well, I have said consistently that banks need to be pretty comfortable lending money(in line with income) to people with good credit. However someone here is arguing that investors will take care of inventory with their cash. Recovery or not?

I think in terms of Price stability in relation to the inventory. Historically there's a 3 month supply, at any given time, that's if no other houses were to come on the market. It would take 3 months to sell the existing available houses.
It's not the pace of one or the other that creates the jeopardy. It's how one puts pressure on the other, that puts a wrench in the "Recovery".

If the market can sustain 300K Median houses as they come on the market, or 75K, the numbers don't care.
It's up to the supply and demand. As long as their is an over supply and a limited demand, then the numbers will continue to fall. More or less Victim to the economic era, than victim to devaluation on its own merit or lack there of.

If the last year was 1998, along with the interest rates we had, sales and perhaps prices(as I really doubt we've learned one damn thing) would have gone through the roof.

"Home values need to come down so that people can afford them again. Maybe we should be looking to set the target for recovery somewhere lower than we are now. That’s where I’m expecting things to end up."

You are very much correct. Recovery would be the actual decline in prices to managable reasonable level for consumers to afford/maintain.

Well if McDonald's wasn't the hottest job in America that level could be now, but it's not.

Tenouncetrout says

I think in terms of Price stability in relation to the inventory. Historically there’s a 3 month supply, at any given time, that’s if no other houses were to come on the market. It would take 3 months to sell the existing available houses.
It’s not the pace of one or the other that creates the jeopardy. It’s how one puts pressure on the other, that puts a wrench in the “Recovery”.
If the market can sustain 300K Median houses as they come on the market, or 75K, the numbers don’t care.
It’s up to the supply and demand. As long as their is an over supply and a limited demand, then the numbers will continue to fall. More or less Victim to the economic era, than victim to devaluation on its own merit or lack there of.
If the last year was 1998, along with the interest rates we had, sales and perhaps prices(as I really doubt we’ve learned one damn thing) would have gone through the roof.

There are other fundamental measurements that are still out of wack as well. Price to income ratios still have a ways to go, particularly where I am in California.
thomas.wong1986 says

“Home values need to come down so that people can afford them again. Maybe we should be looking to set the target for recovery somewhere lower than we are now. That’s where I’m expecting things to end up.”
You are very much correct. Recovery would be the actual decline in prices to managable reasonable level for consumers to afford/maintain.

This is the idea that I think a most people don't see coming. It goes along with their misconception of what the problem is in the first place. You hear the question asked "why did home prices fall," when it should be asked "why did home prices get out of control?"

"The prices and sales volumes we had during the bubble are not coming back."

That's an abusrd comment. Inflation will pretty much mandate that peak prices will return. Every single time housing prices have fallen throughout American history, prices ALWAYS returned to their peak and then surpassed it. And on top of that, population growth will return us to peak sales volume. People love to compare the US housing bubble to the Japanese one, but one thing those people leave otu is that Japan has a shrinking population. The U.S. has an increasing population. Big difference.

HousingWatcher says

“The prices and sales volumes we had during the bubble are not coming back.”
That’s an abusrd comment. Inflation will pretty much mandate that peak prices will return. Every single time housing prices have fallen throughout American history, prices ALWAYS returned to their peak and then surpassed it. And on top of that, population growth will return us to peak sales volume. People love to compare the US housing bubble to the Japanese one, but one thing those people leave otu is that Japan has a shrinking population. The U.S. has an increasing population. Big difference.

So nominal prices will "recover", or are you suggesting that prices will again far exceed rents and incomes? If it's the latter, then why?

HousingWatcher says

“The prices and sales volumes we had during the bubble are not coming back.”
That’s an abusrd comment. Inflation will pretty much mandate that peak prices will return. Every single time housing prices have fallen throughout American history, prices ALWAYS returned to their peak and then surpassed it. And on top of that, population growth will return us to peak sales volume

I take Shawn to mean that we won't be in an environment where prices and volume are as exuberantly irrational as they were then. Sure, a house you bought in 2006 will eventually get back to that price, historically speaking, but that's after inflation, rising wages, and/or looser lending standards, which we are decidedly not seeing any of those for the last two+ years. I would be interested to know if anybody here thinks any other period in real estate compares even nominally to the bubble we saw in 2003-07.

The population growth theory is not all that convincing to me. Where are the jobs for all this increasing population? I'm seeing more people move back in with parents or shack up with friends/roommates, i.e. the Concentrating of the Camp, in order to continue reducing costs of housing. If we all did that, we'd have 40% unoccupied housing right now, or 3x the months-of-supply that is already burdening our market (to say nothing of bank-tempered phantom REO and foreclosure properties).

Perhaps we're in a new paradigm and history matters not. Or perhaps we're going back to an archetypical paradigm and *ancient* history matters *only*: aristocrats and peasants. If all-cash investors and foreign wealth are the shape of things to come. . . .

Here's something interesting. I've been hearing that loans are hard to get, but the truth is. They've been saying that since 2007, even though there were no shortage of people claiming they could get you approved, and every MLS site had a quote app that always gave out quotes like water. Nor did I have a problem getting a loan in September.

How ever lately I've been toying with buying some investment income property, and or even some vacant land lots. For the last two weeks, I haven't found one single mortgage rate quote app, return a quote.
I just keep getting 0 results found.

High credit score,
20% down
nada nothing zip!

Perhaps I was lucky I bought when I did. But this wont bode well for a "Recovery".

Tenouncetrout says

Here’s something interesting. I’ve been hearing that loans are hard to get, but the truth is. They’ve been saying that since 2007, even though there were no shortage of people claiming they could get you approved, and every MLS site had a quote app that always gave out quotes like water. Nor did I have a problem getting a loan in September.
How ever lately I’ve been toying with buying some investment income property, and or even some vacant land lots. For the last two weeks, I haven’t found one single mortgage rate quote app, return a quote.

I just keep getting 0 results found.
High credit score,

20% down

nada nothing zip!
Perhaps I was lucky I bought when I did. But this wont bode well for a “Recovery”.

So what is banks business nowadays?

There is a huge demand for apartments in the MD area to the point where our rents have risen 10-20%. Lots of competition from out of state prospects because they are coming here due to the jobs and that includes government jobs.

As an investor, it is still hard to get a mortgage or refinance an apartment building, but the increase in rental income is making the banks more interested. It is all about the cash flow.

Everything is cyclical and I see a recovery for multi family investments. Duplexes, triplexes and the like can be better values for homebuyers instead of single family homes in today's environment.

The massive volume of 'shadow inventory' has to affect prices. Price (can I afford it?) and credit (Do I qualify to afford it?) are the two biggest factors affecting the "recovery." I don't see how there can be any price stability until the shadow is gone. Good article at dr. housing bubble on the shadow picture:

http://www.doctorhousingbubble.com/never-ending-pipeline-of-shadow-inventory-homes-in-foreclosure-while-another-2000000-are-underwater-by-50-percent/

We're lucky to have the dotcom bubble to use as reference since it just happened recently ... sadly not many do it since 10-15yrs seems like forever ago.

Take YHOO for example. Plenty bought it around the $100/sh area, even after the initial crash thinking it's bargain hunting time. Many thought it was a given YHOO would easily come back. Fast forward 10+ yrs to today and where are they now?...... still holding the bag.

And remember YHOO is instantly liquid....yet still plenty of bagholders out there.

HousingWatcher says

“The prices and sales volumes we had during the bubble are not coming back.”
That’s an abusrd comment. Inflation will pretty much mandate that peak prices will return. Every single time housing prices have fallen throughout American history, prices ALWAYS returned to their peak and then surpassed it. And on top of that, population growth will return us to peak sales volume. People love to compare the US housing bubble to the Japanese one, but one thing those people leave otu is that Japan has a shrinking population. The U.S. has an increasing population. Big difference.

You're right, I should have said "valuations and sales volumes" aren't coming back. Because it's true, unless we have drastic change in Federal Reserve policies inflation is going to raise prices and eventually they'll be back to bubble peaks. But I hardly see that as an arguement to support the idea of a price rebound.

And as far as volumes, that's arguable. The population is growing but other factors are changing as well. College students are graduating with more debt than ever, the average family is waiting longer to have kids, people are making the choice to rent rather than own. It's making more sense to do so and people are realizing that. So while the population increases sales volumes can still decline. At least for the next 5-10 years I don't see those numbers coming back.

HousingWatcher says

“The prices and sales volumes we had during the bubble are not coming back.”

Sigh! those 0% down, teaser rate, negative amortization,sub prime loans... are not coming back either. :)

1) CA UE rate =5% and
2) 30 year fixed rate = 7%

If this two happens then home prices will reach the bottom(way below 2009 bottom :))

"So what is banks business nowadays(?)"

Same as always; organized crime, bankstering.

To me housing recovery means: "When an average American can afford to buy one comfortably and pay it off within 3 to 5 years." It used to be that way before this government sponsored massive speculative stupidity kicked in.

monkframe says

“So what is banks business nowadays(?)”
Same as always; organized crime, bankstering.

Haha, and still nothing illegal. :)

Price stability with people buying from organic demand (basically 20% down for nearly all morgages).