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Guest Post: Has Housing Bottomed? Here's How To Tell

Tyler Durden's picture




 

Submitted by Charles Hugh Smith from Of Two Minds

Has Housing Bottomed? Here's How to Tell

Housing has been propped up by Central State intervention. As that ends, Phase II of the retrace to pre-bubble valuations is at hand.

Has housing bottomed? Here is the sure-fire way to tell:

Stories titled "Has housing bottomed? Here's how to tell" have vanished for lack of interest.

The absence of stories about the bottom in housing will mark the final nadir, because the real bottom can only be reached when everyone has abandoned housing as a pathway to easy money. Only when the public and investor class alike have completely lost interest in real estate as a "sure-fire" investment can the real trough be reached.

This destruction of long-held habits and beliefs takes a long time
. The closest analogy might be the stock market in the last secular Bear market. Stocks topped out in 1966, though the economy lumbered on until 1969 before faltering. Stocks then meandered for 13 years of stagflation, losing 66% of their inflation adjusted value in 1966 by 1982.

People gave up on stocks. I call this loss of faith "when belief in the system fades:" note how household participation in stocks topped out in 1969, three years after the peak in the market. Participants clung to their belief in stocks for about four years after 1969, at which point participation cratered as they finally abandoned their faith in a "permanent Bull market."

Household participation fell by two-thirds and remained low for years.




In August 2006, near the top of the housing bubble, I suggested a three-part scenario for the housing bust: it would take eight more years to play out, and the declines would occur in sharp downlegs following a phase-shift model.

Phase Transitions, Symmetry and Post-Bubble Declines (August 2, 2006)

Here is the chart I presented at that time as a possible time model:

Here we see the first phase shift decline and the Central State engineered "recovery," which has now rolled over.


Here is CoreLogic's snapshot of housing (via Calculated Risk). There is still a long way to go down before the market retraces the entire bubble.

 



 

The Federal Reserve has bet that housing valuations can be propped up by lowering the interest rate on mortgages. To the degree that a few fence-sitters might be tempted to take the plunge, lower rates have a modest follow-through--but the real determinant of housing is employment, which as we all know, has tanked.

Here's the civilian employment ratio, which reflects the percentage of the labor force that has a job:



Perhaps even more telling is the per capita rate of employment:



By this broad measure, employment has declined to levels last seen thirty years ago. We can also look for clues to housing's future by looking at wages, which have dropped steeply:



These charts pose a simple yet profound question: how can people buy a still-expensive house if they don't have a job, or their income is plummeting?

The proximate triggers for the next phase-shift down include a decline in Central State intervention in the housing market and a return to official "recession" as the "soft patch" turns into a quagmire.

In an era where "market sentiment" swings wildly from day to day and the nation awaits every quarterly report from Apple as the "definitive" bellwether not just on stocks but the entire Galactic Mood, then the notion that trends can take years to play out doesn't sit well with our impatient demands for a "bottom." But long-term trends take years to play out, whether we like it or not.

 

 

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Wed, 07/20/2011 - 11:20 | 1473800 camaro68ss
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Housing has not bottomed. you have 4.1 million familys not paying there house payments. Thats 4.1 million homes that need to be forclosed on but the banks arnt doing it because it will bankrupt them if they do so. 4.1 million homes times the average home cost of $300,000 = $1.2 Trillion that still needs to fall on the bankers books.

These are the numbers a insider banker told me, he says this will dwarf 08

Its far from over

Wed, 07/20/2011 - 11:22 | 1473814 Azannoth
Azannoth's picture

It's hard to imagine how they will dig them selves out of this without causing hyperinflation

After-all when the only tool you have is a hammer everything else looks like a nail

Wed, 07/20/2011 - 11:24 | 1473822 whatsinaname
whatsinaname's picture

How do you account for 20 million boomer homes that will hit the market - most of which still have unpaid mortgage balances and underwater since boomers tended to buy Boom Mansions anyways..?

Wed, 07/20/2011 - 11:55 | 1474001 Dr. Richard Head
Dr. Richard Head's picture

My neighbor and I were just talking about housing yesterday and he said there is enough blood in the water to jump in now.  I tried to explain shadow bank inventory to him, as well as Alt-A and Option Only resets peaking late this year.  His response, "I am sure it will go down a bit more, but sometimes you have to zig when everyone else is zagging." 

His blood will soon join the water.  Nevermind the facts, those just get in the way of decisions that need to be made.

Wed, 07/20/2011 - 16:00 | 1474941 you enjoy myself
you enjoy myself's picture

not to mention that there's about 20M less people in the generation below the boomers.  and they have record student loan debt, with no real job prospects.  and you have to pledge your first-born in order to get a loan.  and interest rates are only going up from here...

Wed, 07/20/2011 - 11:33 | 1473859 chopper read
chopper read's picture

nicely put, camaro68ss.

Wed, 07/20/2011 - 11:33 | 1473861 IQ 145
IQ 145's picture

 reply to the post itself. Yes. This is the way I look at things; it takes many years for a huge number of people to change their opinion. Similarly, if you're going to look at price charts; be sure and look at weekly and monthly charts. Sometimes market tops and reversals are obvious on a longer term chart and completely buried in the short term noise.

Wed, 07/20/2011 - 11:38 | 1473899 IQ 145
IQ 145's picture

 reply to the post itself. Yes. This is the way I look at things; it takes many years for a huge number of people to change their opinion. Similarly, if you're going to look at price charts; be sure and look at weekly and monthly charts. Sometimes market tops and reversals are obvious on a longer term chart and completely buried in the short term noise.

Wed, 07/20/2011 - 12:12 | 1474090 Woodyg
Woodyg's picture

It's not 1.2 trillion - not when they leveraged those mortgages 100's to 1 with derivitives - if it was 1.2 trillion we'd be fine as we've given the banks 10 times that amount. Heck the Fed has given out more than enough to pay off every single mortgage in America - in default or not. Too bad it was all stolen and moved overseas to unmarked swiss bank accounts.

Wed, 07/20/2011 - 12:12 | 1474091 Woodyg
Woodyg's picture

It's not 1.2 trillion - not when they leveraged those mortgages 100's to 1 with derivitives - if it was 1.2 trillion we'd be fine as we've given the banks 10 times that amount. Heck the Fed has given out more than enough to pay off every single mortgage in America - in default or not. Too bad it was all stolen and moved overseas to unmarked swiss bank accounts.

Wed, 07/20/2011 - 11:21 | 1473804 I am Jobe
I am Jobe's picture

The Bull shit keeps on coming.

Wed, 07/20/2011 - 11:22 | 1473815 Transitory Disi...
Transitory Disinflation's picture

...if APPLE started to sell house's?

iHomes with iDrives and iLawns.... iDunno

Wed, 07/20/2011 - 13:18 | 1474328 Oh regional Indian
Oh regional Indian's picture

Haaaa! Awesome! :-)

ORI

Thu, 07/21/2011 - 09:26 | 1476748 FEDbuster
FEDbuster's picture

iDunno about houses, but I bet there is an iCar in the future.  Electric, thin and lightweight, and made in China by $10/day workers.

Wed, 07/20/2011 - 11:23 | 1473817 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Deletion of the mortgage interest deduction will do wonders for the housing industry "and" the economy!  --Tuco Benedicto Pacifico Juan Maria Ramirez

Wed, 07/20/2011 - 11:28 | 1473834 Silver Dreamer
Silver Dreamer's picture

The answer is both simple and easy: The goverment buys all of the mortgages, right?  Housing market? What market??

Wed, 07/20/2011 - 11:29 | 1473838 packman
packman's picture

One key problem with this analysis - it doesn't take into account inflation in the housing prices.

Sorry, but no matter how bad things get, houses will come nowhere near their 1994 values in nominal terms.  In inflation-adjusted yes.  Definitely not in nominal terms.  They may get down to 2000-levels.

Charles is usually spot-on with his analysis.  I'm aware of his Bubble Symmetry chart,  however always assumed it was inflation-adjusted.  However his newer charts make it clear that's not the case.  As such, IMO the analysis may be correct in its premise, but bad in its scale.

(Another wrong thing - the Bubble Symmetry chart is specifically for California, which did have a pause in 2002, due to the tech bubble burst.  However nationwide there was no pause in 2002.  E.g. see the CoreLogic HPI chart (from Case/Shiller data presumably))

 

Wed, 07/20/2011 - 11:49 | 1473965 Max Hunter
Max Hunter's picture

Wrong.. Housing prices will reflect the amount people are able to pay as a monthly payment.  I don't care what year you attach to your number, prices will fall as long as the labor market (and wages) fail to sustain housing prices.

It's pretty simple math actually.. You don't even need to be an economist to figure this one out.. All the charts in the world will not tell you what a house is worth. The income of Americans will dictate what is paid for houses.

Wed, 07/20/2011 - 13:32 | 1474369 packman
packman's picture

Wage and salary disbursments:

1994: $3.0 Trillion

2000: $4.8 Trillion

2008 peak: $6.6 Trillion

2009 bottom: $6.3 Trillion

Now: $6.6 Trillion

Are you seriously suggesting that in this monetary-inflation-crazy environment that wages will go back to 1994 levels?

The only way that happens is if we get to 60% unemployment.  The U.S. will simply cease to exist long before then.   However home prices in nominal terms will still not be at 1994 levels - because these prices are denominated in US dollars.  The US dollar will have ceased to exist.  Thus there will be no more home price index.

 

Thu, 07/21/2011 - 07:37 | 1476421 BlackholeDivestment
BlackholeDivestment's picture

Perfect tune, fits the time frame now. lol http://www.youtube.com/watch?v=vGbK_H1O8PI

Imagine that, it was a prophetic tune.

...reminds me of the time of sealing and the time of judgment. The time of sealing comes before the revelation upon the day of judgment

Wed, 07/20/2011 - 12:37 | 1474200 alangreedspank
alangreedspank's picture

A house is not a commodity. It follows inflation as long as maintenance is done and that people can actually afford it.

 

Wed, 07/20/2011 - 15:25 | 1474787 Salah
Salah's picture

Maybe not a true commodity, but it's simply the biggest consumer durable of them all.  It's not entitled to anymore mythic US worship, like apple pie, motherhood, and baseball. 

Strip away its deified status, courtesy of those criminal bozos at the NAR ("it's that weather!"), and reliquify with mandatory paperless transactions, and retail "house dealers", who adjust their inventories quickly with uber-fast transparent pricing, via localized "wholesale real estate auctions" (similar to car dealers)...and the whole mess will clean itself up within 18 months.

Of course, any reform is now caught up in the signing scandal & the "ultimate masters of friction" (i.e. lawyers) have gotten involved.  But sooner or later, this brave new world of liquified real estate will emerge, and those ditzy divorcees or school teacher won't be making 6-7-10% on the gross for a transaction they have absolutely, positively ZERO equity risk in.

Thu, 07/21/2011 - 18:29 | 1478916 BigJim
BigJim's picture

I disagree. Housing in high- or hyper- inflationary scenarios loses value relative to things lower down Exter's pyramid... for the same reason everything else does that is essentially a derivative; yes, houses are real things, but they are bought on credit, the price of which is a derivative of base money and interest rates (and government intervention like the CRA).

Considering the relative lack of volatility in supply and demand compared with commodities, this explains why house prices are surprisingly inconstant.

Wed, 07/20/2011 - 17:06 | 1475205 Praetorian Guard
Praetorian Guard's picture

I agree completely!! With inflated dollars I do not believe we will see ACTUAL prices at or near 1994 values. I think the best way to calculate this is to take the inflation adjusted dollar value since 1994, YOY, and correlate this to the actual 1994 house prices for a more realistic 2011 nominal value.

Thu, 07/21/2011 - 09:46 | 1476818 FEDbuster
FEDbuster's picture

Sorry to burst everyones "we won't see 1994 prices" bubble, but here in AZ we are seeing 1994 prices.  Not everywhere, but in some areas (fairly new, but overbuilt) the pricing is mid-1990's. 

I moved to the Prescott area in 1997, and a new 3 bed, 2 bath home could be bought in Prescott Valley for $80K.  Over the past three years there have been many sales of that type of home for under $100K.  Those same homes peaked in price at about $200K in 2006.  They went up about 150% over 10 years and dropped 50% in 3 years.  The current cost of construction on those same houses would be about $140K.  The current market price for those homes is about $125K, foreclosures are still showing up for under $100K (they sell fast).  That is just a quick snapshot of one small AZ "boom" town.

Wed, 07/20/2011 - 11:30 | 1473841 Hobbleknee
Hobbleknee's picture

Bottoms, bitches!

 

Am I doing it right?

Wed, 07/20/2011 - 11:46 | 1473943 Andy_Jackson_Jihad
Andy_Jackson_Jihad's picture

No.

Bitches' bottoms!

There you go.

Wed, 07/20/2011 - 12:15 | 1474103 carbonmutant
carbonmutant's picture

You're missing a 'z'...

Thu, 07/21/2011 - 08:28 | 1476489 BlackholeDivestment
BlackholeDivestment's picture

...bottomless pit Bitchez!!!  

http://www.youtube.com/watch?v=YnZ8ZQ8Puos

Wed, 07/20/2011 - 11:30 | 1473842 blunderdog
blunderdog's picture

I think housing's bottomed when everyone in the world knows reflexively it's a lousy "investment."

I'd say at least 12 years.

Wed, 07/20/2011 - 11:31 | 1473849 packman
packman's picture

One key problem with this analysis - it doesn't take into account inflation in the housing prices.

Sorry, but no matter how bad things get, houses will come nowhere near their 1994 values in nominal terms.  In inflation-adjusted yes.  Definitely not in nominal terms.  They may get down to 2000-levels.

Charles is usually spot-on with his analysis.  I'm aware of his Bubble Symmetry chart,  however always assumed it was inflation-adjusted.  However his newer charts make it clear that's not the case.  As such, IMO the analysis may be correct in its premise, but bad in its scale.

(Another wrong thing - the Bubble Symmetry chart is specifically for California, which did have a pause in 2002, due to the tech bubble burst.  However nationwide there was no pause in 2002.  E.g. see the CoreLogic HPI chart (from Case/Shiller data presumably))

 

Wed, 07/20/2011 - 11:50 | 1473974 packman
packman's picture

Well - sorry for the duplicates.  I kept getting an error when attempting to post, and assumed the posts weren't getting through.

 

Wed, 07/20/2011 - 11:32 | 1473852 foxmuldar
foxmuldar's picture

I live in a Mobile home so my home price always drops from year to year. But unlike those who wanted more then they can afford, I don't worry about making my next mortgage payment. I don't care if my home continues to drop in value. I don't pay property taxes cause the value of my home is so little. the chickens have come home to roost for so many who lived beyond their means. I don't feel sorry for them. Shit happens. lol

Wed, 07/20/2011 - 11:34 | 1473865 foxmuldar
foxmuldar's picture

I live in a Mobile home so my home price always drops from year to year. But unlike those who wanted more then they can afford, I don't worry about making my next mortgage payment. I don't care if my home continues to drop in value. I don't pay property taxes cause the value of my home is so little. the chickens have come home to roost for so many who lived beyond their means. I don't feel sorry for them. Shit happens. lol

Wed, 07/20/2011 - 11:34 | 1473870 packman
packman's picture

One key problem with this analysis - it doesn't take into account inflation in the housing prices.

Sorry, but no matter how bad things get, houses will come nowhere near their 1994 values in nominal terms.  In inflation-adjusted yes.  Definitely not in nominal terms.  They may get down to 2000-levels.

Charles is usually spot-on with his analysis.  I'm aware of his Bubble Symmetry chart,  however always assumed it was inflation-adjusted.  However his newer charts make it clear that's not the case.  As such, IMO the analysis may be correct in its premise, but bad in its scale.

(Another wrong thing - the Bubble Symmetry chart is specifically for California, which did have a pause in 2002, due to the tech bubble burst.  However nationwide there was no pause in 2002.  E.g. see the CoreLogic HPI chart (from Case/Shiller data presumably))

 

Wed, 07/20/2011 - 11:51 | 1473976 packman
packman's picture

Duplicate of above - ignore.

Wed, 07/20/2011 - 15:35 | 1474823 V in PA
V in PA's picture

click edit. delete post content and replace with " . "

Wed, 07/20/2011 - 11:34 | 1473874 Shameful
Shameful's picture

Wait till they try and smoke the housing interest deduction.  That aught to be good for the employed to pile out and tie them down to a location.  If the dollar was more stable I would think housing still has a long way to plummet (hello shadow inventory and people not paying), but never know how much Zimbabwe Ben will wizard into existence.

Wed, 07/20/2011 - 12:38 | 1474205 Bear
Bear's picture

And don't forget the 3.8% tax for selling any home ... part of Obamacare

Wed, 07/20/2011 - 11:35 | 1473876 foxmuldar
foxmuldar's picture

I live in a Mobile home so my home price always drops from year to year. But unlike those who wanted more then they can afford, I don't worry about making my next mortgage payment. I don't care if my home continues to drop in value. I don't pay property taxes cause the value of my home is so little. the chickens have come home to roost for so many who lived beyond their means. I don't feel sorry for them. Shit happens. lol

Wed, 07/20/2011 - 11:36 | 1473885 packman
packman's picture

One key problem with this analysis - it doesn't take into account inflation in the housing prices.

Sorry, but no matter how bad things get, houses will come nowhere near their 1994 values in nominal terms.  In inflation-adjusted yes.  Definitely not in nominal terms.  They may get down to 2000-levels.

Charles is usually spot-on with his analysis.  I'm aware of his Bubble Symmetry chart,  however always assumed it was inflation-adjusted.  However his newer charts make it clear that's not the case.  As such, IMO the analysis may be correct in its premise, but bad in its scale.

(Another wrong thing - the Bubble Symmetry chart is specifically for California, which did have a pause in 2002, due to the tech bubble burst.  However nationwide there was no pause in 2002.  E.g. see the CoreLogic HPI chart (from Case/Shiller data presumably))

 

Wed, 07/20/2011 - 11:51 | 1473978 packman
packman's picture

Duplicate of above - ignore.

 

Wed, 07/20/2011 - 11:59 | 1474024 Cvillian
Cvillian's picture

I agree with you. I generally like his work but the trend lines for HPI make a case that we are much closer than he suggests. Factor in the rent/mortgage payment arb and my area, at least, is at equilibrium if not oversold already. Guys are buying 1/2BR entry level condos here and renting out in just a few weeks for an annual return north of 10% (with rent bump potential)

Wed, 07/20/2011 - 12:57 | 1474282 ghostfaceinvestah
ghostfaceinvestah's picture

You are on the right track better than the author.  To take the housing and stock market analogy futher, housing was in a speculative bubble, but is now closer to being priced based on fundamentals - price/rent, etc all matter.

From that perspective housing is near a bottom.  In fact if you pull out distressed sales (which are often in some state of neglect) house prices have been stabilizing for months.

As for all the delinquencies, where are they going to go?  Rentals?  Rents are rising, which further sets a floor on housing.  You are going to see more of what we are seeing now: many distressed sales being sold (usually for cash) to investors.

That's not to say the banks don't have huge losses ahead - someone will have to take the hit on all that underwater debt.  But that doesn't mean house prices will drop further.

Wed, 07/20/2011 - 11:40 | 1473891 Quintus
Quintus's picture


Has Housing Bottomed? Here's How To Tell

Won't we be able to tell pretty accurately when house prices have bottomed by, er, looking at house prices and checking to see whether they have stopped falling?  Seems like that might work, but what do I know.

Wed, 07/20/2011 - 15:39 | 1474846 V in PA
V in PA's picture

How long do you look? What if it starts going up after 6 months? Is that the dead cat bouncing or recovery?

I like the idea that when everyone stops talking about it, it has bottomed.

Wed, 07/20/2011 - 19:41 | 1475612 Quintus
Quintus's picture

A vaild point.  Forgive my factiousness.  T'was meant in jest.

Wed, 07/20/2011 - 11:37 | 1473892 DiveGerl
DiveGerl's picture

As a well qualified home buyer here in centreal NY I can tell you, everything in the median price range is either in a foreclosure or short sale position - period! We tried to deal with banks on several occassions...they WILL NOT deal, they want at least .85 on the dollar for homes that will NEVER reasonably appraise for 60% of the asking price. This assumes no further decline in the housing market. This is a downright disaster, and it has not even come to full fruition...Yet!

Wed, 07/20/2011 - 11:39 | 1473900 foxmuldar
foxmuldar's picture

I live in a Mobile home so my home price always drops from year to year. But unlike those who wanted more then they can afford, I don't worry about making my next mortgage payment. I don't care if my home continues to drop in value. I don't pay property taxes cause the value of my home is so little. the chickens have come home to roost for so many who lived beyond their means. I don't feel sorry for them. Shit happens. lol

Wed, 07/20/2011 - 11:40 | 1473908 ChiefJohnRutledge
ChiefJohnRutledge's picture

The average post-war real estate recession has lasted 6 years from peak to trough, so in temporal terms we should be at a bottom.  But with TARP, QE1, QE2, tax credit, ZIRP, etc. the necessary price falls haven't come yet even with the fairly dramatic declines we've seen.  In most markets on the east coast, sellers are still asking prices of 15-18x annual rents when at the bottom of a recession the prices are more like 10-12x annual rents.

And when you factor in the fact that the Classes of 1968 (Clinton, Bush, Henry Paulson, Bill Ayers) through 1975 (Tom Friedman, Ben Bernanke) are going to be net sellers of ALL types of property for the next 20 years, you have a real demographic clusterfuck still in the making.

Wed, 07/20/2011 - 11:42 | 1473925 gaoptimize
gaoptimize's picture

I like this kind of macro analysis.  But I still believe it is market dependent and dependent on the direction of the collapse (in nominal terms).  For example, if and when the Federal bureaucracy and their contractors in the Washington DC / Maryland / Northern VA area are substantially cut, the relative stability in that market will drop below the losses seen in the other markets in the Case Shiller index.  This will probably mean ~40% drop (given the secondary effects of a large number of forclosures) but at least a 25% drop.

If the collapse come in the form of hyperinflation, we may not see any nominal decline in real estate prices, but rather a freezing up in the volume of transactions, as old sub-6% fixed mortgages become relatively affordable, but new mortgages are prohibitively expensive.  All boats will run aground in a deflationary collapse with unforseen consequences.

 

Wed, 07/20/2011 - 11:42 | 1473926 foxmuldar
foxmuldar's picture

sorry for the duplicate posts. My browser froze up so I kept refreshing not knowing each time it would post again. So sorry charlie.

Wed, 07/20/2011 - 11:46 | 1473944 flacorps
flacorps's picture

Go to the Pasco County Florida property appraiser's website. Look up Chelsea Meadows. You will see that what sold for $130k in '07 could be bought for under $10k in '09 and now is hovering around $16k.

The question of whether housing has bottomed is highly dependent on location and which end of the price spectrum.

Wed, 07/20/2011 - 11:52 | 1473979 slewie the pi-rat
slewie the pi-rat's picture
Guest Post: Has Housing Bottomed?

unlike the simple being who penned this, a basic pi-rat has at least a thousand minds.

we are legion.  still, when confronted by this big question, it's unan-i-mouse:  the answer is "maybe"

Wed, 07/20/2011 - 12:26 | 1474146 cosmictrainwreck
cosmictrainwreck's picture

is that your final answer? and, BTW, you must stipulate whether that's a definite "maybe"

Wed, 07/20/2011 - 12:38 | 1474208 blunderdog
blunderdog's picture

It's definitely, unquestionably, incontrovertibly NOWHERE NEAR bottom.  No frickin' way.  There cannot be a bottom until demand recovers, and demand cannot recover until people are working.

We still haven't even started the second leg down.

Wed, 07/20/2011 - 11:52 | 1473983 Oh regional Indian
Oh regional Indian's picture

McMansions = Rotting Tulips.

Enough Said.

ORI

http://aadivaahan.wordpress.com/2010/07/24/value-vs-price/

Wed, 07/20/2011 - 12:26 | 1474145 Taint Boil
Taint Boil's picture

What's with all the duplicate posts?

Wed, 07/20/2011 - 12:27 | 1474152 cosmictrainwreck
cosmictrainwreck's picture

I got hit for dupe on other thread.... and I did NOT hit "save" twice

Wed, 07/20/2011 - 12:27 | 1474149 Taint Boil
Taint Boil's picture

What's with all the duplicate posts?

Wed, 07/20/2011 - 12:28 | 1474160 cosmictrainwreck
cosmictrainwreck's picture

is there an echo in here?

Wed, 07/20/2011 - 15:42 | 1474868 V in PA
V in PA's picture

+1

Wed, 07/20/2011 - 12:35 | 1474191 mccoyspace
mccoyspace's picture

What a self-defeating post.

The first rule of the housing bottom is don't talk about the housing bottom.

Sheesh, now we have to wait another 6 months.

Wed, 07/20/2011 - 12:43 | 1474197 Mercury
Mercury's picture

Housing will have bottomed when the government gets the fuck out of the way of market forces.

You'll notice that in places where the housing market is stable (or even robust) - basically the high end right now - the government's hand is a much smaller factor.

Wed, 07/20/2011 - 12:42 | 1474225 HungrySeagull
HungrySeagull's picture

Also what they think a house is not the same where you buy it.

The little trailer home here in the Deep South for 25K with your land deed is probably going to cost you 500,000 dollars in one of the Coastal cities in terms of square footage.

Wed, 07/20/2011 - 13:38 | 1474388 mayhem_korner
mayhem_korner's picture

If the Gang of Six proposal goes through, we can take another notch down in the housing death spiral as doing away with the mortgage interest exemption would be a de facto housting tax.

We're no where near bottom.  Too much inventory to clear out and too much debt weighing things down.  Rising property taxes and additional foreclosures will only boost the supply further.  Plus anyone in the "first time buyer" age cohort is too jittery to buy.

Wed, 07/20/2011 - 13:39 | 1474390 Poofter Priest
Poofter Priest's picture

Real Estate is 'regional' so to prevent overly broad statements just look at the affordability index rate for your area. (the average family income to the average priced property)

If it is 30% or less, it is still over priced. Ideally it should be 35-40%.

Of course the 'average family income' is now a moving target (downwards) so aim low.

Wed, 07/20/2011 - 14:16 | 1474523 Mad Cow
Mad Cow's picture

The bottom will be when loaves of bread reach parity with the real estate market. Or they'll just nationalize private property and tell you where you can live. Probably close to rail lines.

Wed, 07/20/2011 - 14:51 | 1474605 rosiescenario
rosiescenario's picture

Interesting how long it takes for a belief system to fade....there are actually those that still believe that you buy and hold stocks or that if you see a doughnut company with a sweet product you should run out and buy the stock irregardless of its value...or a yoga clothing company. After the market crashes, you'd think some of these 'beliefs' might have  gone away....but in looking at the market today, it is the same bs...that is, 'belief system'.

...and when companies 'beat' their engineered projected earnings, that is believed to be a good omen....no one says, "Jeesh, those stupid phuquing analysts got it wrong, again."

My primary belief today is that our government will continue printing money hand over fist which (despite certain banks best efforts) will eventually drive pm's to multiples of where they are today.

Wed, 07/20/2011 - 14:58 | 1474637 rosiescenario
rosiescenario's picture

"I call this loss of faith "when belief in the system fades:" note how household participation in stocks topped out in 1969, three years after the peak in the market. Participants clung to their belief in stocks for about four years after 1969, at which point participation cratered as they finally abandoned their faith in a "permanent Bull market."

 

Another way to frame this is to recognize how powerful denial can be....it will keep a practicing alcoholic going right up until the liver fails....after the car wrecks, divorces, financial ruin, etc. Denial blinds us to the road signs which are always posted in plain sight.

In looking at Ben and what QE1 and QE2 has wrought, I'd say denial is doing its job.

Wed, 07/20/2011 - 15:18 | 1474736 MobBarley
MobBarley's picture

So the postulation of this retard is that when people stop talking

about housing as a pathway to easy money we've reached the

bottom. Ok, so that's now. Go out and invest all your money

in property. Eventually, the rate of inflation WILL outpace

the fall in demand ratio and the price of houses will go back up!

It's magik, mate. Hyperinflation is a good thing, especially

if you're a real turd.

 

Wed, 07/20/2011 - 16:59 | 1475178 Anonymouse
Anonymouse's picture

If the article is right, the housing market (and every other metric) will never bottom.  Not so long as we have (not at all self-serving, oh-no) pundits on CNBC who have mastered the art of extrapolating upward from one data point.  Every slightly positive data point is proof we have "bottomed out" or "turned the corner" or are "seeing green shoots" or proof that [insert any negative metric here] is "transitory"

Wed, 07/20/2011 - 17:11 | 1475223 Praetorian Guard
Praetorian Guard's picture

House values list:

http://www.census.gov/const/uspricemon.pdf

 

Median for 1994 is 126K average is 153K is todays inflated dollar this is:

2010 inflation adjusted value for a 1994 median house of 126K is $182,933.00

2010 inflation adjusted value for a 1994 average house of 153K is $222,133.00

 

http://www.westegg.com/inflation/

 

Wed, 07/20/2011 - 17:32 | 1475286 michael.suede
Wed, 07/20/2011 - 18:10 | 1475384 Youri Carma
Youri Carma's picture

Good read. I stick with what Rickards has said about “Bubble Dynamics” applied to Housing: First an overshoot, which is the housing bubble, then an undershoot when prices go too pesimistic and it can stay there for years until houses are finaly priced to their actual market value years later.

Rickards: "The characteristic behaviour of a bubble is well known across many disciplines. It is very difficult to know when a bubble will break – but the dynamics imply that a bubble will return to where they began, roughly speaking. House prices will probably go all the way back to 1995 levels."

Wed, 07/20/2011 - 18:33 | 1475454 Praetorian Guard
Praetorian Guard's picture

...but what is the undershoot VALUE in INFLATIONARY dollars??? We may very well return to 1995 home values but I believe this will be in inflationary dominated money - so in reality don't hold your breath for average home prices to fall to $100,000.00 in 1994 real term values, more likely $200,000.00 in 1994 - 2011 progressive inflationary money. 

Wed, 07/20/2011 - 20:14 | 1475695 Bicycle Repairman
Bicycle Repairman's picture

Housing will not bottom for a generation, so stop talking about it.

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