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Guest Post: Has Housing Bottomed?

Tyler Durden's picture




 

From Simon Black of Sovereign Man

Has Housing Bottomed?

After an almost uninterrupted period of decline over the last few years, US home prices now have some positive momentum.

For one, the S&P/Case-Shiller index of property values in 20 cities has seen its highest increase in more than two years. In addition, JP Morgan CEO Jamie Dimon recently stated that his bank was seeing a surge in mortgage applications.

And perhaps most importantly, the National Association of Realtors has reported that the nation’s inventory of homes on the market has dropped to its lowest level since March 2006, while the median home price is 11.3% higher than a year ago.

These are definitely good signs for housing. But remember, nothing goes up or down in a straight line. Just like a stock market that suffers a serious crash, housing has been due for an upward correction.

But it is a false premise to conflate ‘rebound’ with full blown ‘recovery’. The market could just as easily improve, then decline once again in a few months’ time. Positive data is great, but doesn’t necessarily portend long-term growth.

Here in LA, the median asking price of a home is now $361,390. This is 12.2% higher than in January 2012. Good news. But over the last few years, the LA market has gone through similar periods of growth, followed by more declines.

Between February 2009 and January 2010, for example, the median asking price in LA increased 14.0% from $369,125 to $420,975. Home prices then reversed this trend and declined 20%.

People readily accept that stock markets can turn on a dime and move in the other direction. Fact is, housing can do the same. Over the long-term, it’s fundamentals that count. That means demand, supply, and policy:

1) Demand is ultimately about population and income levels. If the number of households is increasing, demand will increase. If income levels are high, demand will increase. Yet the long-term trend for both of these in the US is negative.

- Unemployment is still high (and surging in the northeast). This typically portends fewer households as people ‘bunch up’ during times of financial difficulty. In fact, the number of adults aged 25-34 living with their parents has exploded to over 40% according to the US Census Bureau.

- Census data further show that population growth in the US is tepid; the nation’s fertility rate hit an all-time low in 2011, continuing a four-year trend. Not to mention, America’s strict immigration policy tends to keep wealthy foreigners away.

- US median household income continues its 4-year slide and is back to 1996 levels.

2) Supply of homes in the United States continues to increase. Since 2002, housing inventory in the US grew 10.7%, far outpacing population growth. As further evidence, the Census Bureau reported that 18.15 million homes in the US are vacant– 13.6%.

By way of comparison, this vacancy rate was about 8.5% during the peak recession years of the 1970s. Bottom line, there’s still a lot of inventory out there.

3) Interest rates are at all time lows, currently around 3.5%; this helps people afford higher priced home for the same monthly payment. At 3.5%, for example, $2,000 per month buys you a $441,000 home. At 7%, it only buys you a $298,000 home.

Consequently, when mortgage rates rise to their historic norms, housing prices could fall drastically.

In the meantime, while low rates make principal and interest payments more affordable, the Fed’s loose monetary policy is pushing up the ‘other’ costs of home ownership– HOA dues, insurance premiums, property taxes, etc.

So in a way, Bernanke is lowering one cost of home ownership, but simultaneously inflating others.

This means that it may be too early to uncork the champagne bottle and declare an end to the housing crisis in the US.

It only takes a few years so build millions of new homes, but it can take decades for demographic shifts to mop up all that supply. It’s foolish to believe that the crisis has abated simply because the Fed has printed a ton of new paper.

No doubt, it makes sense to refinance a home at 3.5% (possibly the best way to bet against the dollar). As does buying high quality, well-located properties at today’s prices. The general rule is if you can buy it for less than construction cost, it’s very hard to get hurt.

But these deals are few and far between. So before writing big checks for mid-grade investment properties, it’s definitely worth taking a long-term view of the fundamentals. On an inflation-adjusted basis, the market still has major headwinds.

 

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Thu, 11/01/2012 - 14:05 | 2938190 jomama
jomama's picture

no, bitchez.

 

Thu, 11/01/2012 - 14:07 | 2938197 francis_sawyer
francis_sawyer's picture

Only "monkeys" pick bottoms... Oh wait ~ It's a Simon Black article... Nevermind...

Thu, 11/01/2012 - 14:09 | 2938209 maxmad
maxmad's picture

Inflation and Hyper-Inflation will ensure this is the bottom... Wait, what's that... My rent just went up another $150/month this year.... Why not buy a house when my rent is $1500 for sh** townhouse!

Thu, 11/01/2012 - 14:22 | 2938271 redpill
redpill's picture

Yes it has bottomed, the Fed has seen to that.  And actually it was last year when it happened.  But really that's not the point, the point is that it simply cannot grow rapidly from here, so if one is anticipating an explosion in prices or transaction volumes you'll be sorely disappointed.  Public home builder stocks are a foolish buy, and if you're buying an investment property to rent, you better be cashflow positive on day 1 by a very healthy amount.

 

Thu, 11/01/2012 - 14:27 | 2938294 maxmad
maxmad's picture

Always bet on the side of the banks and the Fed.... Until its over...

Thu, 11/01/2012 - 15:15 | 2938481 AldousHuxley
AldousHuxley's picture

you don't need wage increase to have housing values go up.

Lower interests effectively increase asset values.

 

High asset values is what banksters want. make shitty homes worth more so they can buy real assets

Thu, 11/01/2012 - 16:00 | 2938687 icanhasbailout
icanhasbailout's picture

meow bounce splat

Thu, 11/01/2012 - 17:20 | 2938944 Citxmech
Citxmech's picture

The other critical issue is access to financing at those lower rates.  While I doubt the Fed will allow rates to climb very much, the bank can restrict to whom the give the sweetheart deals too.  In other words, effective average loan rate can (and I think will) go up in the future - effectively capping RE appreciation.  Having said that, a good property that allows you to do what you need that can be had for less than rent is hard to argue against.

Thu, 11/01/2012 - 14:59 | 2938393 MachoMan
MachoMan's picture

How has the FED seen to a bottom in housing?  Unless wages increase, I fail to see the mechanism to prop up houses...  there isn't much room to decrease interest rates for mortgages... 

Inflation can run rampant while housing prices continue to decline... 

Thu, 11/01/2012 - 15:10 | 2938439 redpill
redpill's picture

1) They've made mortgage money near-free

2) They are buying all of the toxic mortgage backed securities so the banks don't have to worry about foreclosing

3) They've enriched the banks themselves so there is no pressure to dump seized properties at below-market prices.

 

I'm not saying I agree with their actions, rather just that they've pulled out all the stops to try to re-inflate the housing bubble.  They've failed to do that, but they have put in a bottom.

 

Really adds some perspective when people say Sandy is the worst disaster since Katrina and will cost $40 billion....hell the Fed prints that EVERY TWO WEEKS!

Thu, 11/01/2012 - 15:17 | 2938489 MachoMan
MachoMan's picture

This is not the bottom based on any fundamental analysis (the only analysis).  All you're saying is that the FED has induced a temporary plateau on a declining chart.  THAT IS NOT A BOTTOM.  More like eye of the hurricane.

Thu, 11/01/2012 - 15:43 | 2938598 DeadFred
DeadFred's picture

There is NO inventory on the market now. The inventory in my town is ten percent of peak levels. Is that because no one wants to sell? Not likely, how about there are very few buyers. Next spring when the foreclosures come on the market again we will see further drops. Anyone who thinks this blip means the bottom is in should contact me because I have an even better deal on this certain bridge.

Thu, 11/01/2012 - 16:04 | 2938702 redpill
redpill's picture

Inventory is tight because:

1) Home builders are building only what they can sell immediately

2) Resale prices haven't risen enough for most homeowners to be above water and even be able to consider selling

 

There are buyers out there at the moment, still heavily investor driven, but slightly less so this year than in 2011.

Thu, 11/01/2012 - 17:20 | 2938942 MachoMan
MachoMan's picture

Are these investors actually solvent or solvent but for temporary monetary and/or fiscal policies?

Fri, 11/02/2012 - 01:41 | 2940146 redpill
redpill's picture

Given current interest rates, it's nothing short of astounding the number of cash buyers in the marketplace.  There is a lot of foreign investment, people from growing economies that are looking for a store of value, and many of them believe that is the US real estate market.

Thu, 11/01/2012 - 16:14 | 2938736 Hayabusa
Hayabusa's picture

MachoMan is right.  I work for a school system and this year my take-home pay changed by less than 1/2 of 1% due to increased medical insurance, etc.  When you factor in inflation for food, gas, etc., my take-home pay and in particular disposable income is DECREASING.  Some of you just can't think with any depth.  Wages are falling and inflation increasing... comon folks, you can do the math and extrapolate to the housing market!

Thu, 11/01/2012 - 14:10 | 2938211 flacon
flacon's picture

Housing will bottom when people can afford to PURCHASE their home without debt. 

Thu, 11/01/2012 - 14:14 | 2938228 maxmad
maxmad's picture

Just keep paying your rent Flacon, cause its never gonna happen!  That would bankrupt the greedy banks and the Baby Boomers..

Thu, 11/01/2012 - 14:23 | 2938277 CH1
CH1's picture

Things denominated in "never" have a funny way of coming to pass.

Thu, 11/01/2012 - 14:46 | 2938350 mmanvil74
mmanvil74's picture

Pretty much everyone is afraid to call a bottom for any market on this web site, since it is full of bears for just about everything.  I am just as bearish as the next ZHer, but when I analyze US Housing for investment, it still looks pretty damn good from most angles.  I've voiced my views by commenting on US Housing related posts on this site for months so I don't want to repeat myself.  

Let's put it this way.... housing has bottomed relative to most asset classes (including US dollars, but that's not necessarily the one that matters the most).  If you measure US housing vs. US home rental rates, US Housing vs. Oil prices, US housing vs. Gold, US housing vs. the S & P 500, US housing vs. real US average wages, and probably several other asset classes, you will find an intriguing fact - US housing is at or near all time lows in every case, that's ALL time for as far back as I can find records, not just since the '90s.  These are the types of metrics I like to use when evaluating investments... is an asset currently high or low in historical terms relative to other asset classes?  Does the P/E (or in housing's case the Price/Rent) ratio look attractive?  Is an asset priced at or near its book value (in the case of housing, its cost of construction)?  

When you factor in all time historical low interest rates, all of these metrics make housing looking even more attractively priced.  Compare US Housing to Canadian Housing, or Mexican Housing or Housing anywhere, once again, all time lows.  So, I don't really give a shit if housing has bottomed, it will revert to the mean compared to every other asset class and earn positive cash flow in the mean time, what more do you expect from your investments?

In most every way, US housing is one of the least worst investments out there.  Certainly you have to buy right, in the right places and take into account housing trends such as retirees downsizing, moving to southern climates, etc.  But a smart investor who has the time to wait (as all smart investors ought to), could scoop up 10 homes with $200,000 down and own them outright in 20 years, all the while earning positive cash flow, including the cost of professional property management.  What's not to like?  

Or, tell us Mr. Simon, why we should pay more for a house in rural Chile, than one in central Phoenix, or Atlanta?  How do real Chilean wages stack up against Chilean house prices compared to that same ratio in US?

The only possible reason to avoid US housing is if you believe we are headed for a full blown deflationary depression, or world war, where unemployment doubles from here, and the Fed can't ignite inflation no matter how hard they try.  But, in that case, what should you own besides gold and guns that pays rent?  Bonds?  Not for me, thanks.  I'll take housing over bonds any day.  Sure, get your guns and gold and food, but housing is a solid fourth choice once you have your bomb shelter assets covered.

Thu, 11/01/2012 - 15:02 | 2938400 Vincent Vega
Vincent Vega's picture

Moe Veissi is that you?

Thu, 11/01/2012 - 15:02 | 2938404 Panafrican Funk...
Panafrican Funktron Robot's picture

New home sales are currently projected to hit 389K by the end of the year.

In 1982, in the middle of another significant recession, with interest rates at 18%+, there were 412K new home sales.  That was with 82 million less people living in the U.S.

Facts.

Thu, 11/01/2012 - 15:04 | 2938417 CharlieSDT
CharlieSDT's picture

Damn!

Thu, 11/01/2012 - 16:49 | 2938842 Just Ice
Just Ice's picture

And more sales occurred at that time with less people and despite recession and killer interest rates because homes were affordable to average people with average incomes.  That is not the case now.  Houses remain substantially overpriced for average families with average incomes.  Comparing one overinflated market to another overinflated market, so that traditional metrics may look appealing, does not change that.

 

Thu, 11/01/2012 - 17:28 | 2938961 Omen IV
Omen IV's picture

that period was front end of baby boom acquisition of Stuff - they believed in the future - very few believe today anything - the kids have been raped by Student Loans and offshore jobs - cant be dupilicated unless you change the WTO terms

Thu, 11/01/2012 - 15:06 | 2938426 MachoMan
MachoMan's picture

The only thing you've made a case for is that housing is the best horse at the glue factory.  The thing about our present situation is that ALL the chips are on the table...  as a result, all asset classes are subject to complete and total revaluation, but for their respective utilities.  One might say that housing has a lot of utility...  and, it can, however one might have thought that about Detroit too...

In the end, I think investors in housing will take giant haircuts, but probably not as much as some other asset classes.  Presently, if you're patient and have plenty of discipline (and cash), you can find solid buys and net 8%+ on rental property...  However, rents will follow wages down (just like housing values will continue to decrease despite low and decreasing rates...  although, when rates do finally increase, housing will simply decline faster in price).  At the end of the day, some assets have a salvage value, while others do not...

Thu, 11/01/2012 - 19:38 | 2939333 Snoopy the Economist
Snoopy the Economist's picture

Eventually, all market revert to the long term mean line/trend. Housing has not dropped to that point yet.

Wages are decreasing (with increasing inflation = stagflation) and most fear for their jobs - how does that induce buyers?

Foreclosures will flood the market and drive prices lower along with these other fundamentals.

As phil grande says - "no one is bigger than the market" and market forces will come back to their senses at some point - the fed does not want to kill the dollar - it's their only game in town

Fri, 11/02/2012 - 05:09 | 2940317 JamesBond
JamesBond's picture

cash buyers are snapping up prime properties, but they too will get their fingers burned.

 

-jb

Fri, 11/02/2012 - 06:14 | 2940357 Offthebeach
Offthebeach's picture

Housing market?

The Fed is the market.
Where would it be with out the The Fed/Washington buying 90%+ of the mortgages?

Devaluation of the dollar is making people poorer faster then economic growth. In the north, Kalifornia, towns, cities,counties and states have long since been broke and need to massively cut labor costs, reduce pensions, and expenditures to local contractors and suppliers. But local gov expenditures ARE the local economy. Further, taxes, fees, fines, permits must be raised on fewer business until those massive windmill, battery, solar plants start flooding the economy.
Young people are not having families or kids. Houses are too big. Storm insurance is going up. Local taxes are not going to. Be paid by detox centers, environment set asides, closed commercial business. The taxes will be paid by tax hostage homes.
There are tens of thousands of nice towns, cities with massive amounts of houses in the north. And year by year, people can't afford them. Detroit is the future. Declining income/profitable business, high taxes, broke give, houses once grand.
I see houses either being squared in, or abandoned, everywhere. In New England I see blue tarp camps . Ask any cop. People live in cars, RV. Go down the east intercostal, people living in 25' boats.
The debt/tax/ finance papershuffling economy is omnipotent. So long as the paper clears. The uber baes economy is steady. Local gov is hanging in and will for a long time. Detroit cities show that local blood sucking gov hangs on until the last drop of taxes can be farmed, and more. They manage vote buying g/poverty pimp farms and are incentivised to grow,nurture local poverty. Crime and poverty are the last gov racket left. Although I see Mayor Bing is doing local bulldozer cleanup of the economic crime scene. Even on Cape Cod there is more and more town bulldozing.

The US will only learn through experience. Repeated experience. Socialist/ Keynesian pap is rewarding for many still, and appealing for the gooberment edgamakted Ritilen Pot NFL masses.
We are just at the beginning.

Thu, 11/01/2012 - 20:13 | 2939416 cranky-old-geezer
cranky-old-geezer's picture

 

 

The only possible reason to avoid US housing is if you believe we are headed for a full blown deflationary depression,

We are, and it's full blown INflationary depression. 

Fed keeps printing to keep govt and Wall Street going.  It debases the dollar.  That's the inflation part. 

But people's wages aren't rising.  Wages are actually falling (in constant dollars).  So housing won't go up with other prices.  That's the depression part.

Demand for big ticket things like home ownership is way more elastic than food and gas. People must have food and gas.  They don't have to buy a home. They can rent, room with someone, live with parents, etc.

If wages don't rise in real terms, home prices won't either.  Just the way it is.

or world war, where unemployment doubles from here,

Unemployment WILL double from here and it won't take a war to do it.  Govt policies already in place will do it.  Simply maintaining the status quo will do it.

and the Fed can't ignite inflation no matter how hard they try. 

We already have inflation, about 15% / yr.

You're talking about Fed pushing home prices up.  Fed doesn't care about home prices, just prices of MBS and such.  Fed has done pretty good keeping MBS prices up by creating artificial demand for them, while home prices keep falling from lack of demand.

We might reach a point where home prices stabilize if the opposing forces of demand collapse (pulling prices down) and currency debasement (pulling prices up) reach equilibrium.

I tend to believe currency debasement will win out and home prices might float up some.  But not near as much as food and gas. 

Thu, 11/01/2012 - 14:33 | 2938310 Larry Dallas
Larry Dallas's picture

Its the wages, stupid! The wages! No increase in wages, you could have 0.5% mortgage rates and perhaps it would be the same!

Thu, 11/01/2012 - 14:39 | 2938330 exi1ed0ne
exi1ed0ne's picture

Since wages have been loosing ground for years, inflation gaining momentum, and taxes eating the guts otta your paycheck that is not likely to happen in my lifetime.  Average house price would have to be in line with average wages at least.  There is just too much disconnect there to have much more than 10% ownership without some form of debt, if that.

Thu, 11/01/2012 - 15:16 | 2938485 MachoMan
MachoMan's picture

Around here, median housing is approximately 3x median household income.  I'd say the issue with housing prices coming into conformity with wages is probably going to be an issue for non-flyover states...

Thu, 11/01/2012 - 15:25 | 2938512 exi1ed0ne
exi1ed0ne's picture

Even in the flyover states where I am it will be challenging.  Lower average cost of housing, but also lower prevailing wages too.

Thu, 11/01/2012 - 15:48 | 2938622 MachoMan
MachoMan's picture

Yes, housing prices are ultimately tied to wage levels (although not necessarily domestic wage levels).  However, the areas that have the most room to decline are not the areas with 3x home to gross household income.....  don't see the boom, but don't see the bust as much either.

Thu, 11/01/2012 - 16:45 | 2938833 MeBizarro
MeBizarro's picture

How did this stupid comment get this many thumbs up?

Thu, 11/01/2012 - 14:11 | 2938217 walküre
walküre's picture

Depends. Housing in the Northeast will need replacement at 2012 prices of materials. Cost of building materials hasn't gone down, cost of labor has.

Thu, 11/01/2012 - 14:20 | 2938265 LongSoupLine
LongSoupLine's picture

 

 

Housing will find a bottom when TBTF's, and Fannie Fredie book cooking hits a top.

 

Thu, 11/01/2012 - 15:16 | 2938487 masterinchancery
masterinchancery's picture

lies, damn lies, and government statistics--you don't actually believe this crap do you Simon?

Thu, 11/01/2012 - 15:56 | 2938666 Bicycle Repairman
Bicycle Repairman's picture

No.  Come back in 2030.

Thu, 11/01/2012 - 14:05 | 2938191 sangell
sangell's picture

Just wait till the insurers send the new premiums to homeowners along the Mid Atlantic from Cape Cod to Virginia Beach!

Thu, 11/01/2012 - 14:28 | 2938297 CH1
CH1's picture

You mean there is a cost associated with broken windows???

Can't be true.

Thu, 11/01/2012 - 15:38 | 2938586 yogibear
yogibear's picture

Ouch! The insurance rates skyrocket and property taxes increase. The home leaser (Not an owner, just leases it from the government) will be srcaping to make ends meet.

 

 

Thu, 11/01/2012 - 14:05 | 2938192 Frank N. Beans
Frank N. Beans's picture

is it a round bottom or a flat bottom?

 

Thu, 11/01/2012 - 14:05 | 2938193 NotApplicable
NotApplicable's picture

Just another manipulated, dead-cat bounce. "The housing market" numbers are every bit as relevant as ADP/BLS employment numbers.

Thu, 11/01/2012 - 14:11 | 2938218 maxmad
maxmad's picture

You may be right, BUT, nothing is more manipulated than the management company for my townhouse... They raised my rent again!!

Thu, 11/01/2012 - 15:44 | 2938599 yogibear
yogibear's picture

And they will keep raising the rent. Bloated public labor costs and pensions will keep sticking it to the landlord. The landlord then sticks it to the renter. The renter will just eat it.

Now many townships license landlords and inspect yearly along with fees.

It's cheaper to live in a camper or trailer and flip off the townships. Pay almost nothing in taxes and move if they start getting carried away with taxing.

 

Thu, 11/01/2012 - 15:57 | 2938670 exi1ed0ne
exi1ed0ne's picture

Mobility is the new black.  RV is a good choice as an alternative to home ownership.  Some of them are unbelievably gorgeous, even opulent, inside.

Thu, 11/01/2012 - 16:03 | 2938694 northerngirl
northerngirl's picture

I've been telling my children that is what I'm going to do, buy an RV to live in.  They think I"m crazy.

Thu, 11/01/2012 - 19:42 | 2939347 Snoopy the Economist
Snoopy the Economist's picture

At least no property taxes to contend with.

Thu, 11/01/2012 - 14:10 | 2938199 hedgeless_horseman
hedgeless_horseman's picture

 

 

Location, location, location.

Unless you can walk or ride a bike to a train station, you better sell your house in the suburbs now...

Thu, 11/01/2012 - 14:10 | 2938214 thomasincincy
thomasincincy's picture

What if there is no train? fucking pisses me off

Thu, 11/01/2012 - 14:13 | 2938219 hedgeless_horseman
hedgeless_horseman's picture

 

 

Don't get angry, use your head.  Buy a home close enough to your job so you can walk or ride a bike, or get a job close to your home.

Thu, 11/01/2012 - 14:15 | 2938235 francis_sawyer
francis_sawyer's picture

Job???

Thu, 11/01/2012 - 14:26 | 2938261 hedgeless_horseman
hedgeless_horseman's picture

 

 

Psycho, there are plenty of jobs in Houston or San Antonio right now, but the rail is almost non-existant, and the driving distances are mind-numbing. 

  1. Move
  2. Job
  3. Home (close to job)
  4. Sell car
Thu, 11/01/2012 - 14:37 | 2938322 Vincent Vega
Vincent Vega's picture

Using one's head...hmmmmm, sounds like a quaint notion my parent's use to tell me about when I was a young pup. Something about personal responsibility. HH, have you cleared this idea with TSA, NDAA, FEMA.....sounds radical.

Thu, 11/01/2012 - 15:15 | 2938482 francis_sawyer
francis_sawyer's picture

Maybe I could start a McDonald's franchise in my mom's basement...

Thu, 11/01/2012 - 18:04 | 2939069 viahj
viahj's picture

you'd probably do better with a VD clinic with the constant flow of customers...oh wait that MDB's mom, sorry.

Thu, 11/01/2012 - 14:16 | 2938240 thomasincincy
thomasincincy's picture

yeah, just like mounting your bike to the back of your fucking car. see people doing everywhere. driving 10 miles to the county park. insane

Thu, 11/01/2012 - 14:18 | 2938253 thomasincincy
thomasincincy's picture

many "jobs" have moved outside of city limits and the only way to get there is by car. freaking blackhole cities have become

Thu, 11/01/2012 - 14:26 | 2938285 Intoxicologist
Intoxicologist's picture

I was out riding my bike one day, and a coyote darted out from the weeds alongside the road right in front of me.  I crashed.  I've been charged by a buck in my own driveway and chased by a bear on more than one occasion.  I'll stick to driving my car to work.

Fri, 11/02/2012 - 02:37 | 2940224 Dr. Sandi
Dr. Sandi's picture

Please don't tell me you live on the Lower East Side of New York.

Thu, 11/01/2012 - 14:35 | 2938312 j0nx
j0nx's picture

GTF out of here. In my area, houses near my work are $600k-$1m. The split level ranchers are $600k and the 3500 sq foot townhomes are $770k. The houses right up the street from work are all approaching $1m. 5 miles from here the newly built 2000 sq foot townhomes just like the one I live in are starting at $450k. Starting. Mine is currently selling for $170k maybe in a section 8/ illegal alien infested area 28 miles from work because frankly it's what I could afford comfortably without feeling housebroke. I could pay $350k for a townhouse 2/3 the size of mine, 20 years older and still infested with section 8 /illegal alien losers in the neighborhood and be 15 miles closer but I'd rather have the nicer place if I'm going to live in the ghetto. It is IMPOSSIBLE to live in a nice area in the DC area unless both partners are making $100k or more or have at least $250k to put down. Since my wife stays at home with the baby and I don't have $250k laying around, it stands to reason that I have to live where I can afford which aint NOWHERE near where I work.

Thu, 11/01/2012 - 14:43 | 2938318 hedgeless_horseman
hedgeless_horseman's picture

 

 

D.C. has good rail.  Can you take advantage of it where you are now? 

Are you going to be able to afford private schools, or elect to put your kids in ghetto schools where you live?

Maybe you do need to GTF out of there?

Thu, 11/01/2012 - 14:58 | 2938385 Orly
Orly's picture

J0nx got it right.  Unless both partners are making a good to very good income and living on a budget, there is no way they could afford a $520,000 condo.  Okay, so you're all about your low interest rates and there's a train station in my backyard.  How am I going to come up with the $100,000 down payment just to look at the place?

Not only that but I don't think anyone's fuel bill commuting to work is going to be that much higher whether you're ten miles closer or not.  There's no way that fuel costs will make up the difference in cost from living in a $120,000 house to living in the same-sized house closer to the city.

Sorry, it just doesn't add up.

Thu, 11/01/2012 - 15:09 | 2938431 hedgeless_horseman
hedgeless_horseman's picture

 

 

You think the math is bad, now, just extrapolate those two oil production graphs.  The houses in the suburbs you seem to recommend are only going to get less and less expensive, and for a good reason.  Wheras homes near work centers or mass transit are going to get more and more expensive.  Thus, my original point.

Unless you can walk or ride a bike to a train station, you better sell your house in the suburbs now

Think way ahead.

Thu, 11/01/2012 - 15:13 | 2938475 j0nx
j0nx's picture

The time for getting on that boat was a looong time ago HH and that ship already sailed. As was already mentioned, there is no way to afford a house NOW, any house, close to work when you work in a metropolis unless you have a couple hundred thou to drop down and still want a $3500 a month mortgage on top of that. Sorry. A buddy of mine was looking to buy about 6 months ago about 10 miles from work and was showing me pictures of $400+k townhouses. These places were shitholes in questionable hoods that are like the $60k shitholes 2 miles from my house where the extra poor illegals and section 8 losers live. I was like $400k for that?? I told him to run far and fast from that shit. Thankfully he came to his senses and shelved his plans to buy a place.

Thu, 11/01/2012 - 15:33 | 2938498 hedgeless_horseman
hedgeless_horseman's picture

 

 

Either enjoy raising your family in an absolute shithole, or move. 

How about the state with the best economy in the nation, and no state income tax.  Here is a home that is near a metric buttload of good jobs, across the park from Orly's workplace, and very close to a rail stop...

Stunning contemporary 3 story townhome in the heart of the museum district. Open second floor includes family room featuring gas log fireplace & glossy wood floors. Large entertainers kitchen with granite countertops, glass tile backsplash & stainless appliances. Spacious third floor includes grand master retreat, secondary bedroom and access to private rooftop deck with gorgeous city views. Third bedroom is conveniently located on the first level. This is a must see!!

 

$350,000

http://www.trulia.com/property/3097199877-4804-Chenevert-St-Houston-TX-77004

 

Sort 77004 by walkability...

http://www.trulia.com/for_sale/77004_zip/2p_beds/walk;d_sort#for_sale/77004_zip/2p_beds/100000p_price/price;a_sort

Thu, 11/01/2012 - 15:58 | 2938663 Orly
Orly's picture

Well, you are apparently not too read-up on Houston.  The museum district is in the Montrose, which is south  of downtown, adjacent to Hermann Park and the Texas Medical Center, the largest medical center in the entire world.  Fine place.  I used to work there.

So, if you're a nurse, making $32/hr., that would be a great place for you because you can take the Metro bus, or even walk on a nice day, to work.  Oh, wait a minute.  A nurse?  $350,000.  Ermmm...maybe not so much.  A doctor, then.  Yes, a doctor; he could afford it.  But, wait, maybe not again because most of the doctors in the teaching institutions of the TMC are residents with over $120,000 of student loans to their name and making a stipend of $820/week to treat the sick and injured in 24 hour shifts.  Hmmm.  Maybe not there, either.

Well, what about an attorney.  Lots of law downtown in Houston...but, there's the rub again.  You see, Houston is actually four or five what other people would call "downtown"s all spread out.  There's the Texas Medical Center, Downtown, The Galleria, Greenspoint and now the Oil and Gas district in far west Houston.  A job Downtown from the TMC is still fourteen miles away.  So, you say, how about some mass transit...

http://www.ridemetro.org/SchedulesMaps/Pdfs/700-redline.pdf

On the left of the PDF document, you will find the entire map of Houston rail.  Yes, the entire map.  Extensive, isn't it?  Okay, maybe not so much.  I am afraid that your argument falls short on many levels.

The main level is to not understand that housing has to keep up with wages and vice versa.  There is simply no way a nurse or resident physician can afford the place you pointed out and they are the only ones who would benefit from your "mass-transit" theory.  Housing prices must be no more than three times average income in order for there to be equilibrium.

If I have to pay $350,000 and still have to drive to work, I would move either to The Heights or to Cinco Ranch- even the Woodlands.  At least I would have a nice yard and some greenbelts and could feed the ducks in the lake at night.

:D

Thu, 11/01/2012 - 16:21 | 2938714 hedgeless_horseman
hedgeless_horseman's picture

 

 

So it is, "near a metric buttload of good jobs (downtown and TMC), across the park  from Orly's former workplace (with lake and ducks to feed), and very close to a rail stop!

Sounds like I am read-up on Houston.

There is simply no way a nurse or resident physician can afford the place you pointed out and they are the only ones who would benefit from your "mass-transit" theory.

There is, "no way a nurse or physician can afford," a $350,000 home?  That is poor analysis and argument on your part.  We both know there are plenty of energy sector jobs in downtown Houston, at the north end of the rail.

Thu, 11/01/2012 - 16:32 | 2938769 Orly
Orly's picture

Oh, Hedgie!  I understand what you're getting at, I really do, but it is just not practical at all.  The place will sell, no doubt, but it will sell to a high-level oil and gas exec who needs a place to...you know.

It's unfortunate that people simply can't afford your idea.  Now, if we allowed housing prices to come down to what the real market would bear, then it would make perfect sense.  That $520,000 condo near mass-transit in DC should be probably selling for $280,000.

The point is, with low interest rates, which could get lower but won't because JPM and Wells have essentially put a floor underneath which the mortgage rate will not go- even if the US10YT does go below 1% (which I think it will...)- normal, regular people still cannot afford the place comfortably.  Until people are comfortable in their mortgage again, there is no floor in housing.  With static interest rates, the only thing to do is lower prices considerably.  Deflation: let's get it done and over with so we don't become Japan 25 years later.

It really is that simple.

:D

Addo:  Please read carefully: a nurse or resident physician.  The other doctors who work there are employed as professors at either U of Texas or Baylor University.  Some have a practice but most do research.  Eggheads, you might say.

Yes, there are plenty of jobs in the oil and gas industry.  For nurse and doctors, maybe not so much.  National Oilwell Varco, like my neighbour across the street, has tons of them.  If you want to ditch your nursing degree and go work in the field, you can have this one:

Warehouser

 
Job Summary:   Receipt, identification, storage, disbursement and inventory of materials, supplies and equipment in most efficient manner.  Has knowledge and ability to perform multiple warehousing functions.    Major Responsibilities:   Use scale to check and verify counts when appropriate.   Assist in conducting physical inventories and cycle counts.   Check parts for identification numbers...

Sounds like a square trade to me!

:/

Thu, 11/01/2012 - 16:26 | 2938775 Cathartes Aura
Cathartes Aura's picture

well argued.

so wages matter?  and given the globalisation of wages, most likely the rentier class will continue to buy up the short sales, flip 'em into monthly payments for multiple family occupancy, combined wage-slaves. . . just like those "other" nationstates. . .

Thu, 11/01/2012 - 15:34 | 2938549 MachoMan
MachoMan's picture

The math constantly changes based upon technological advancement.  I understand the case that there is no substitute for oil, however sinking that much money into homes is simply irresponsible given jobs are not remotely guaranteed.  The modern american workforce is going to become perfectly mobile.  The notion of finding a job for 2 wage earners per household in the same place for 50 someodd years in the highest field each wage earner can possibly achieve is the exception, not the rule.  With prices requiring 2 wage earners kicking total ass for 50 years, good luck keeping that house.

I would propose that you actually get a house FARTHER out...  and use the money saved from self sufficiency (energy, food, cheaper housing, etc.) to pay for the costs of commuting as well as inflationary hedges (e.g., precious metals).

For an anecdotal note, I live on the edge of town in a 100k+ person metropolitan area.  My commute is approximately 12 miles.  The houses closest to where I work are actually complete and total shit (patchwork good and bad at best).  I'm sorry, but if we're to the point where commuting is prohibitively expensive, then a substantial portion of the world will be back at the dark ages.  You're essentially asking people to hedge for Armageddon.  I recall a similar sales pitch with sovereign derivatives...

Thu, 11/01/2012 - 16:04 | 2938698 hedgeless_horseman
hedgeless_horseman's picture

 

 

You're essentially asking people to hedge for Armageddon.

Selling a home in the suburbs 50 miles from work, or selling a shack in the ghetto, to buy a nice new $350,000 home in the middle of a major city is hardly my definition of hedging for Armageddon.  No, I am just posting a couple charts and saying, "Plan accordingly."

Thu, 11/01/2012 - 16:58 | 2938874 MachoMan
MachoMan's picture

Well, way to go out on a limb there...  much appreciated.

 

 

Thu, 11/01/2012 - 14:20 | 2938262 catacl1sm
catacl1sm's picture

Its not that there isn't enough energy, its that there is no more CHEAP energy. Peak EVERYTHING, bitchez!

Thu, 11/01/2012 - 14:27 | 2938288 walküre
walküre's picture

Why wasn't NY shut down for at least the week? Is having the Marathon this weekend really helping anybody? The mayor is a complete failure.

Thu, 11/01/2012 - 18:00 | 2939056 Orly
Orly's picture

I think it should be run, personally.  The sooner all can get back to normal, the better.  Plus, it will give NYC a sense of civic pride and allow residents to be hopeful and take their minds off their troubles, if only for a little while.

:D

Thu, 11/01/2012 - 14:28 | 2938289 walküre
walküre's picture

zzzzzzzzzzzz

Thu, 11/01/2012 - 14:07 | 2938201 Gringo Viejo
Gringo Viejo's picture

Given that my local paper averages 3 full pages of forclosures a day, that a substantial segment of available inventory is being kept off market......I kinda fuckin' doubt it.

Thu, 11/01/2012 - 14:13 | 2938226 Skateboarder
Skateboarder's picture

Well, wherever Simon's writing this from, it's not here, on the ground, so it's hard to actually gauge what the housing market looks like if you're not actually here to live it and experience it. Macro data alone does not offer the complete picture. Hasn't bottomed out yet, and it's got a long way to go before it does.

Thu, 11/01/2012 - 15:17 | 2938491 Offthebeach
Offthebeach's picture

I work foreclosure. I go to fc'd houses and clean them out, the stuff, pictures, crap and trash, carpets all goes in a dumpster. We call these jobs, " dumpers ". Then we patch paint and minor repair them. Maybe do a butcher roofover. Usually to modified ghetto standards. We never bother with permits. The banks or the flippers want it cheap and that's thats they get. I've found guns, watches, lots of nice cloths, boats..
The sad parts are the pictures, I don't know what happened, where the people went. They, the middle school awards, all that goes in the dumpster. You hear the glass break. One time old lady came days after we had the dumpster taken and she just wanted the photo albums.

I can smell the decay. I see houses slowly decaying. They weren't built well and with cheap materials. Further, people don't or can't maintain them. And they can't afford those that can. If you are barely able to make payments, might lose the house in a year, and the prices you could get keeps decreasing, why dump money you don't have.
I don't see a recovery. I see a report, flip and dump and renter economy. Everyone wants Section 8 renters. Lots of working stiff strangers just moving in together just to make rent and crappy, part time jobs. More and more people on bicycles as they can't afford a car and its costs.
Some of the dumper houses haven't been occupied for years, but people were living/existing in them.
I live on Cape Cod, Massachusetts.

Thu, 11/01/2012 - 16:56 | 2938807 Orly
Orly's picture

Thanks for the on-the-ground report and helping us keep it real.

It's a sad state of affairs for this country.

:(...

Thu, 11/01/2012 - 16:44 | 2938826 Cathartes Aura
Cathartes Aura's picture

this.

Thu, 11/01/2012 - 17:44 | 2939010 Omen IV
Omen IV's picture

the real sleeper issue is the maintanance both for the bank shadow inventory steadily getting worse condition but also for owner occupied - they cant afford to keep the places maintained - roofs etc deteriorate -

i think there will be massive move to rental in about ten years as interest rates go back to 6% + people who think the prices can recover are way too optimistic - banks will not be there - lower LTV will be the new normal and they will keep ratching down

yields are climbing because the banks are not there - return on equity is now synonomous with  return on assets

Thu, 11/01/2012 - 14:08 | 2938202 mrktwtch2
mrktwtch2's picture

i have been trying to sell my condo that i bought in 03 for 227k for 170k..its been on the market for 4 months have had 10 showings but no offers and i owe 160k on the mortgage so if it sells i will walk away with nothing..lol..and when it does everyone should go long real estate because my timing is teriible (bought it when the naz was bottoming and sold my tech stocks to put 30k down on it)...oh well at least i got 9 yrs of shelter out of it..

Thu, 11/01/2012 - 14:09 | 2938210 azzhatter
azzhatter's picture

I sold one last year that I paid $280K for in 2004. Sold it last year for $130K

Thu, 11/01/2012 - 15:53 | 2938657 MachoMan
MachoMan's picture

Repeat after me: BUYING A HOUSE ON CREDIT IS A SPECULATIVE ENDEAVOR NOT GUARANTEED TO PERPETUALLY APPRECIATE IN VALUE.

Thu, 11/01/2012 - 14:08 | 2938203 azzhatter
azzhatter's picture

Was at an estate sale Saturday and chatting with a realtor. She said the banks were sitting on a "ton" of inventory in foreclosure. Waiting for a rebound but she said they will have to flood the market soon. Not convinced of bottom yet

Thu, 11/01/2012 - 14:21 | 2938267 Karlus
Karlus's picture

Banks are also waiting to see what is going to happen with the election. They need to understand if they are going to be forced to "buy back" mortgages that were packaged and sold.

 

It is also true that they are sitting on inventory in the sense of letting people grossly past due pay property taxes, maintenance (and hopefully) homeowners insurance. Otherwise these sit empty and lose value rapidly. Once the flag is thrown that the inventory is moving and interest rates tick up then the squatters will be booted and there will be an explosion in home "make ready" companies.

Thu, 11/01/2012 - 14:25 | 2938282 maxmad
maxmad's picture

Or at least you hope so... Otherwise your kicking yourself for selling at the low!

Thu, 11/01/2012 - 14:29 | 2938302 Dan Conway
Dan Conway's picture

And don't forget about 20 years of boomer inventory sitting on the sidelines to be sold starting very soon.  When their underemployed children are living in the basement drawning in college debt, I just don't see how the general housing market can increase.  Maybe high-inflation but that probably won't do it either because there is too much supply in the wrong markets.  The only markets that will see an increase over the next decade are those states where the jobs are moving to (i.e. ND, TX) and not MD, IL, NJ, etc.  I bet many of those soon to be rebuilt homes in NJ and NYC will have for sales signs on them as soon as the paint dries.   

Thu, 11/01/2012 - 14:36 | 2938321 NotApplicable
NotApplicable's picture

They'll all get reverse mortgages from Benron. That way, when they die, their kids are not only lacking inheritance, but shelter as well.

Then the FEMA camps open...

Thu, 11/01/2012 - 14:38 | 2938324 azzhatter
azzhatter's picture

That's what I have noticed. As soon as there is an uptick in sales in my area, a lot more go on the market. Pent up demand to sell must be huge

Thu, 11/01/2012 - 15:25 | 2938514 Panafrican Funk...
Panafrican Funktron Robot's picture

Yes, the following = a permadrag on home prices (in real terms; nominal, who the fuck knows) and home sales volume.

http://data.bls.gov/timeseries/LNS11300000

Shit that also matters:

http://www.bls.gov/news.release/realer.t01.htm

http://www.bls.gov/news.release/empsit.t08.htm

 

Thu, 11/01/2012 - 15:02 | 2938407 Orly
Orly's picture

Someone here posted the other day (sorry, too many posts, not enough memory...) that, as an insider in the mortgage biz, the buzz was that next spring and summer was when the banks were going to start dumping houses on the market.

Bad news for those trying to sell.  Thankfully, there are very few foreclosures in my area, so when we do decide to move, it shouldn't hurt that bad.  In fact, I would fully expect my home values to increase significantly by that time because the oil and gas people are moving in droves to west Houston.  Great schools, easy commute: straight-shot I-10 east.

I hope...

:D

Thu, 11/01/2012 - 17:19 | 2938939 Chupacabra-322
Chupacabra-322's picture

@ asshatter,

Absolutely!  Imagine the outrage from The American People if actual foreclosure and unemployment numbers were reported and not cooked.  This Criminal Administration/Banksters are holding massive foreclosure inventories in the Shadow Market. 

The market will be flooded after the election. 

Thu, 11/01/2012 - 14:09 | 2938206 TeamDepends
TeamDepends's picture

Memo to U.S. ambassadors abroad:  In case you haven't been keeping up with current events, you might want to flee the fourth-rate third world hellhole you call home because the White House may not break a date with Jay Z to save your azz.

Thu, 11/01/2012 - 14:09 | 2938207 Rustysilver
Rustysilver's picture

To paraphrase Lewis  Black; what bottom, where?

Thu, 11/01/2012 - 14:09 | 2938208 catacl1sm
catacl1sm's picture

Does a bear wipe its ass with a rabbit after shitting in the woods?

Thu, 11/01/2012 - 15:22 | 2938502 krispkritter
krispkritter's picture

Does a ZH Bear wipe it's ass with a Bankster after shitting in the woods?

Thu, 11/01/2012 - 14:10 | 2938213 devo
devo's picture

People need to forget about housing, you are not getting rich or even beating inflation by owning a house (unless you rent it). After depreciation and all the maint costs you're taking a loss (in depreciating dollars). Renting a house, you could break even or make a small gain if you get lucky.

Thu, 11/01/2012 - 15:10 | 2938454 AldousHuxley
AldousHuxley's picture

That's the "wealth effect"

 

making wage slaves think they are getting richer with cheap chinese goods and housing "wealth" meanwhile college, healthcare, and job security is gone.

Thu, 11/01/2012 - 15:21 | 2938501 devo
devo's picture

Yeah, I think people buying right now and becoming landlords are in for a rude awakening. Not long before we have "rent forgiveness", "rent stamps", etc. There simply won't be enough viable tenants to get a good, stable rent. I was thinking this would take 5-7 years to play out, but given the corporate earning picture it might be sooner. There's a very good chance the government will tax property more if it does ever recover, so there is that, too. I think this is a time where you want to stay off the radar and protect as much as you can until the dust settles. e.g. I'd rather buy something like timberland than a house because it's a derivative (wood) of housing yet also a scare resource with low property tax. Trade the timber once housing finds a true bottom and there are actual viable tenants.

Thu, 11/01/2012 - 16:05 | 2938709 MachoMan
MachoMan's picture

It's a total crapshoot, but I won't touch anything I'm not willing to take a 50% haircut on...  or, alternatively, that won't cash flow with a 50% haircut.   In my neck of the woods, it's virtually impossible to get a good tenant now for the average starter home.  With our monetary and fiscal policies, anyone that can afford the rent can qualify to buy and WILL choose to do so [because "I necessarily just throw my money away renting"]...   The funny thing is, rents are starting to get to the point where I would rather rent than own (the difference isn't enough to take the risk on a home loan)...  hopefully the wheels stay on til the summer buying season so I can sell my house...

The thing about being a solid renter at this point...  you can dictate ALL of the terms...  Yes, I'm going to dig up your pretty landscaping so that I can plant a garden and some fruit trees...  yes, I am going to have a dog...  No, I am not going to give you a pet deposit to steal from me...  No, you do not have the right to inspect whenever you want... 

There aren't any bad assets, only bad prices.  Many landlords are going to have a very rude awakening soon.  Any credit worthy renters are going to cut margins to the bone because they can...  simple as that.

Thu, 11/01/2012 - 17:06 | 2938902 pursueliberty
pursueliberty's picture

You shouldn't speak in broad terms with housing/rents.vs.owning.  Markets are local.  My market is not ideal for certain price buyers to purchase a home.  Our cheap homes need so much work they won't get approval for a lot of loans, thus they are investor properties.  Investors would rather rent than flip, so you run into the issue of lack of affordable homes for buyers.

My home is paid for by the rents on my first home, completely, like, I still have $20 to pay utilities on my home, after paying insurance, property taxes, and water on the the rental/primary.

 

I've got another home that is bringing in double the mortgage/property tax/insurance on a 12 year loan.  I could go up $100 and still rent it to a good tenant in 2 weeks.

I've had one late pay in the last three years.  Eviction in my area is incredibly easy and renters know this.  I've invested in other things but this has been the best for me and my abilities.  I'm actually in works to start a new construction rental unit, single story 4 plexes.  I should cash flow enough to build the 4th phase out of pocket.

Thu, 11/01/2012 - 17:46 | 2939015 devo
devo's picture

Markets are local until they aren't. The problem with this financial musical chairs (i.e. misallocation) is you don't know when the music will stop. When it stops, it doesn't matter what is happening in your local market.

People will pick at this false bottom because they're being pushed in that direction, but they'll get sheered (people in 2008 got fleeced). The gold bull chugs along until the big collapse. At that point you pick at the carcase.

Thu, 11/01/2012 - 14:12 | 2938215 ilovefreedom
ilovefreedom's picture

Maybe the $40Billion a month the federal reserve is buying in MBS and the wholesale investors buying lots of dozens or hundreds of properties has something to do with the "positive momentum" in housing prices?

When in reality these are misallocated resources.

Median income going down. Fewer households. Artificially constrained inventory through trickle-release of foreclosures.

 

I want to buy a house, but I won't. It's frustrating, but why buy a house worth $200k for $400k? Regardless of interest rate.

Thu, 11/01/2012 - 14:15 | 2938233 Bay of Pigs
Bay of Pigs's picture

Hopefully Mr Black will read your comment and get his head out of his ass next time he writes on housing.

Thu, 11/01/2012 - 14:18 | 2938241 Threeggg
Threeggg's picture

Obviously Sovereign Man didnt bother to read the quote out from Robert Shiller this morning so I will post it for him !

Despite the onslaught of positive indicators for the housing market, Shiller told CNBC's "Futures Now" it's possible for the housing market to return to full strength, but it will take a while.

"It can get big as it was again maybe in 50 years. This housing bubble was a once-in-a-lifetime thing, I imagine," Shiller said. "Although, you know, the market might be more volatile, so the future is always unknown."

http://finance.yahoo.com/news/shiller-housing-recovery-could-50-125741773.html;_ylt=Aj3mdrF9KB1rx5ss9FmQG82iuYdG;_ylu=X3oDMTQ4dTBzNTNjBG1pdANDTkJDIFRvcCBTdG9yaWVzBHBrZwM0ZGNkZDE2Yi0yZDM3LTMzNjQtYTI2NS1iYzExYzU0MjQ5YTcEcG9zAzUEc2VjA01lZGlhQkxpc3RNaXhlZExQQ0FUZW1wBHZlcgMwNWMyZWFiOC0yNDJiLTExZTItYmNmNy1iZDNkZDk5NjNmMDk-;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3

Thu, 11/01/2012 - 14:17 | 2938246 KidHorn
KidHorn's picture

The bounces are the kind of bounces you would get from a terminally ill patient after injecting them with adrenilin. It's not based off a healthy recovery. It's based off games the banks are playing to fool people into believing.

Thu, 11/01/2012 - 14:18 | 2938250 PUD
PUD's picture

Homes were never intended to be an asset class or a financial instrument. They are homes. Shelters. A mans castle. Not another vehicle for trading, derivatives, leverage or phony "wealth" extraction.

Thu, 11/01/2012 - 14:18 | 2938251 adr
adr's picture

No, and median pricing means jack fucking squat. If one drug dealer uses a realtor to help launder money and buys a house for $2 million during a month where the other 10 homes sold for $100k, it will send the average up dramtically, even if the 10 $100k homes actually went down in value.

My latest appraiser put a value on my home down 18% since 2009. Even with $10k in improvements done to the house since I have been in it. Some recovery there. I live in a middle class white community listed as one of the top 100 places to live in the USA.

I guess that doesn't mean anythiing for home values anymore. There isn't enough room for Pulte to "start" a bunch of McMansions to drive up property values.

So if this is the bottom, my house has to go up 18% just to get where I was three years ago, supposedly the bottom for the economy. Stock market up 100%, my house down 18%, makes sense right?

The kicker is I bought my home in 2009 after it had already lost 30% of its 2006 value. I did buy it for the same price as it sold in 2001, which I believe to be a proper price. My neighbor trying to sell his home for $145k with less square footage than mine is in for a nasty surprise.

Thu, 11/01/2012 - 15:13 | 2938472 object_orient
object_orient's picture

You are confusing mean and median. Determining the median price corrects for outliers like in your example.

Thu, 11/01/2012 - 14:22 | 2938257 Dre4dwolf
Dre4dwolf's picture

I would say another 10 ~ 15% down national level.

Some places will have declines of 20 ~ 30%

others

Maybe will rise 5%~10%

I think homes that are already dirt cheap (places where you can buy a house like 15,000~20,000) will probably see a 10,000$ rise in value over the next few years and places where homes once cost 700,000~5,000,000 will see another 10~30% reduction.

People who are currently in those very expensive homes will eventually need to down-size as the socialism kicks in, and people in lower home value areas already have no reason to sell their home at 5~10 grand to anyone, so as the people move out of the ritz and into the gutter, the gutter homes will rise in value because they are already so cheap that no one that owns one has any reason to sell(10grand doesn't buy shit) other than escaping crazy local realestate taxes, at which point no one will buy those homes because of the taxes/local costs and fees like local shool tax or something.

The best homes to buy if your looking to flip IMO: Low Priced homes in areas with very low taxes, homes atleast 100 Feet above sea level and access to a main - road.

People will be fleeing cities very soon during the systemic deterioration that is going to take place.

Farmland is a good investement for your own security and the security of your family and friends, but if you don't know how to manage that land it could be a big mistake, especially if you have a nagging wife saying shit like "bla bla bla wtf you gona do with a farm? you know nothing about farming!" and women are the reason nothing gets done in the world.

Thu, 11/01/2012 - 14:30 | 2938304 walküre
walküre's picture

especially if you have a nagging wife saying shit like "bla bla bla wtf you gona do with a farm? you know nothing about farming!" and women are the reason nothing gets done in the world.

are we related?

Thu, 11/01/2012 - 14:52 | 2938372 Intoxicologist
Intoxicologist's picture

Maybe you two should ditch the nagging wives.  I'm a woman, and I have my own farm.  Its nothing fancy but, for the most part, I live off the land.  Breakfast this morning was venison chops from the deer I recently harvested, and eggs plucked straight from the coop (which I built myself).

Half my breakfast was alive and kickin', the other half came out my chicken!

 

Thu, 11/01/2012 - 18:30 | 2939149 rhinoblitzing
rhinoblitzing's picture

<=== "Eggs from the coop (which I built myself)"

Everybody - Repeat After Me... "You didn't Build That!"

Yeah... 4 more years , and you won't own it either!

 

 

Thu, 11/01/2012 - 15:11 | 2938464 Abitdodgie
Abitdodgie's picture

Do not listen to them and do it anyway, its a win win , you ethier get the farm and she shuts up or you get the farm and she wants a divorce .

Thu, 11/01/2012 - 14:19 | 2938259 explodinghead
explodinghead's picture

I would have said no way in hell but this article gave me pause because I respect her opinion.  http://solari.com/articles/quantitative_easing/

from the article on the right column of the page...

What this means is that the $27 Trillion plus dollars that have been pulled out of the economy are now free to flow back into the U.S. economy and start to accumulate in large amounts of real estate, which I think has already begun to happen, particularly with respect to farmland. 

Thu, 11/01/2012 - 14:27 | 2938291 Threeggg
Threeggg's picture

I do not agree as the $27 Trillion must remain on the financial institutions balance sheets, so that they 'look' solvent preventing the triggering of the CDS tsunami. That CDS tsunami would create an avalanche of printing never seen in human history; because the money to honor them does not even exist yet.

Thu, 11/01/2012 - 16:10 | 2938719 explodinghead
explodinghead's picture

I think her point was more that illegally gained profits were sitting offshore and once the fraud paper was mopped up by the fed and the threat of having illegitimate profits siezed they could be repatriated.

Thu, 11/01/2012 - 17:11 | 2938911 MachoMan
MachoMan's picture

I can say for certain that quite a few foreigners (e.g. China) have been purchasing local farm land...  either repatriated gains or the buildup of decades of trade deficits coming home to roost...  or both.

Of course, keeping that property after the yokels get a bit froggy will be another story... 

Thu, 11/01/2012 - 15:46 | 2938615 bigluck
bigluck's picture

I read that article too, and was referred to her site by my bro, so in my eyes has a lot of credibility.

Really not sure what to think.  Ive been a bear for so long, but have come to the conclusion that the market is just so manipulated and they can carry this on for so long that we may not see a "bottom" in our lifetimes.

Thu, 11/01/2012 - 17:15 | 2938928 MachoMan
MachoMan's picture

Unless some of that funny money starts hitting the hands of J6P, then housing will continue to decline...  what is the FED going to do, lower rates more?

Thu, 11/01/2012 - 14:22 | 2938268 Poofter Priest
Poofter Priest's picture

Some easy math for us all.

Take the average family income.

Then take the average sale price of a house (in that same area)

At least (bare minimum) 30% of the families in that area should  be able to buy the average priced home.

If not....then the market is over valued.

And given that the average family income is a moving target (downwards) this does not look nor smell like a rose.

Prices are going up because interest rates are way down. They really can't go any lower. (I'm hearing 3.5% with no points on 30 year and 2.5% on a 7 year).

But funds for this market is like a bowl (finite) of money. A certain percentage goes to interest, some to taxes, some to principle. Raise one of those and there is less for the other two so......either taxes will get raised to bail out the fucked up munis or interest rates will be raised (not likely as that would kill everything) or BOTH will happen. But somebody is gonna be getting squeezed. The best rule of thumb is if you are going to buy, you have to be able to rent it out for more than your payments. So either get a good deal or put a lot down. Otherwise you too will get a visit from the Sheriff.

Thu, 11/01/2012 - 14:24 | 2938276 JLee2027
JLee2027's picture

10 cents on the dollar after the crash. That'll be the bottom.

Thu, 11/01/2012 - 14:25 | 2938281 Dr. Engali
Dr. Engali's picture

You're kidding right? How can you si=uggest that housing has bottomed when the banks shadow inventory is still at astronomical records and the fed is buying 40 billion a month in MBSs? The housing market will never bottom until the feds get the hell out and let it clear. We keep throwing money at a bad situation and making it worse. 

Thu, 11/01/2012 - 16:24 | 2938771 trip kitchen
trip kitchen's picture

 

Agreed.  I'm not buying any BS data from any source until I see some changes with my own eyes.

 

For a couple years, '09 to '11, I worked for a company hired by the banks to take care of forclosured / abandoned houses.  Mostly western Oregon and Washington.  The banks did as little as possible to get these homes back on the market.  

 

First a lock change and winterize, then many months later cut the grass, then many months later remove exterior debris,  then maybe months or YEARS later remove the inside debris and or belongings, and get it ready for market.  And then still not put on the market.

 

Towards the end of my employment in late 2011, there was 700 - 800 houses I was personally aware of that were empty but not on the market.  I've been making it a point to periodically check on their status if I'm in the area, and I'd say well over half of them are STILL shadow homes.  House being somewhat maintained, grass being cut, but no occupant and no for sale sign.  Just the lockbox and 'no authorized entry' sticker on the door.  And some of these are houses I did in 2009, and others I maintained that were in the system long before that. 

 

I mean what the hell, 4-5 years in some weird dormant state, with no end in sight. 

 

Thu, 11/01/2012 - 14:30 | 2938303 Piranhanoia
Piranhanoia's picture

He may have been right about Chile?  

But your future in the major leagues is in jeopardy at .086 BA.

Thu, 11/01/2012 - 14:35 | 2938313 dolph9
dolph9's picture

Housing is nowhere close to bottoming.  Not only that, but it will never rebound in our or anybody's lifetime.

Having said, it might make sense to take on mortgage debt if you genuinely believe in the hyperinflation / currency collapse scenario.  In this case possession will be 9/10ths of the law.

I just don't see anything like debtors prisons in the future.  If anything, events that has transpired so far seems to suggest that debtors are constantly being bailed out and creditors (savers who decide to loan money) are about to be screwed big time.

It may not be a bad idea to take on mortgage debt, create as much of a self sustaining compound as you can, and keep the metals hidden away for when the time comes.

I'm not sure I would do it, just saying.

Thu, 11/01/2012 - 14:37 | 2938323 Peter Pan
Peter Pan's picture

So many houses and yet so much homelessness. Perhaps this might be part of the problem with crappy wages and unemployment being the main culprits.

Thu, 11/01/2012 - 14:38 | 2938325 JailBank
JailBank's picture

Have salaries bottomed? Has unemployment for people ages 24-32 bottomed? Do people leaving university have more thousands in student loan debt? Who are the buyers Baby Boomers down sizing? Who is going to purcahse that 5 bedroom 3 bath house from them when they do downsize?

No it has not hit the bottom.

Thu, 11/01/2012 - 14:41 | 2938335 youngman
youngman's picture

Just got back from Denver....I saw lots of out of state plates.....the unit next to mine sold....so I should be next I hope...a Penthouse in downtown Denver...but the lemings are building thousands of apartments because that is HOT right now..they will be overbuilt in a couple of years...and that will depress the housing market because they will drop the rentals so much...cheaper to rent than own..right now people are afraid to buy anything...housing is location though...Aspen is doing well..

Thu, 11/01/2012 - 14:44 | 2938342 SheepDog-One
SheepDog-One's picture

I wouldnt even go to Aspen these days even if it was an all expense paid trip.

Thu, 11/01/2012 - 14:42 | 2938336 SheepDog-One
SheepDog-One's picture

Housing has a bit of an up-blip after the FED has been buying MBS hand over fist, and just announced $85 billion a month more? Gee amazing.

Thu, 11/01/2012 - 18:32 | 2939156 Bay of Pigs
Bay of Pigs's picture

Funny how it all looks "normal" to some people (with blinders on).

Those purchases arent going to stop anytime soon either (years).

Thu, 11/01/2012 - 15:34 | 2938357 Ham-bone
Ham-bone's picture

Actually - housing may have bottomed for all the wrong reasons but bottomed anyway

1- 30%+ all cash buyers primarily for cash flow...weak 0% down hands to strong 100% down hands...

2- as of last April, Fed has agreed to let distressed REO inventory sit on Fred, Fan, and bank books for up to 5yrs (10yrs if they want it) while they rent these out. 

3- due to #2...distressed inventory pipeline has been cut off causing very low inventories of natural sellers...so prices are rising due to very low inventories combined w/ record low rates and some amount of pent up buyers who were waiting to buy.

None of this resolves any long term supply issues but Fed kicks the can down the road for a bit longer...seems I've heard that one somewhere before

Thu, 11/01/2012 - 16:14 | 2938358 Ham-bone
Ham-bone's picture

We can all agree stock market has bottomed since '09...doesn't mean it may not dive again but intervention, manipulation, a twist of this dial, step on that pedal over there...and VOILA, stock market is "fixed".  Bond market, check.  FX crosses, check.  Libor, check.  PM manipulation, check.

So why should we expect a different outcome in housing???  By hook, by crook, and with a wink...housing will bottom. 

Doesn't mean any of these are "resolved" or the economy is improving...just means TPTB are really good at fucking with shit until they have the result they want and that they care not one shit the collateral damage that may undo all their fine work...eventually.

Thu, 11/01/2012 - 14:51 | 2938368 maximin thrax
maximin thrax's picture

Bullwinkle: "Wanna see me pull a rabbit outta my hat?"

Rocky: "AGAIN?!?"

Thu, 11/01/2012 - 15:01 | 2938394 ebworthen
ebworthen's picture

LOL- yup, housing bubble part two (or is it three?)

Thu, 11/01/2012 - 14:52 | 2938371 surf0766
surf0766's picture

As long as real wages continue to fall housing will continue to fall and become further and further out of reach for the middle class.

Thu, 11/01/2012 - 14:58 | 2938387 slackrabbit
slackrabbit's picture

hang on, you're making perfect sense.

(ok where is the camera)

;-)

 

Thu, 11/01/2012 - 14:54 | 2938378 tooriskytoinvest
tooriskytoinvest's picture

News Not Revealing Real Reasons For Economic Collapse – Interview with Paul Craig Roberts

http://investmentwatchblog.com/news-not-revealing-real-reasons-for-economic-collapse-interview-with-paul-craig-roberts/

Treasury sees debt limit reached near end of year

http://www.marketwatch.com/story/treasury-sees-debt-limit-reached-near-end-of-year-2012-10-31-99100

Portugal to introduce higher taxes to meet EU bailout terms ("Biggest tax hike in democratic history")

http://www.guardian.co.uk/world/2012/oct/31/portugal-tax-rises

Thu, 11/01/2012 - 15:09 | 2938380 slackrabbit
slackrabbit's picture

YEA SIMON ITS ALL FIXED!

Check the top of the housing bubble in the 1980's as we are now only level with that top!

Thu, 11/01/2012 - 14:56 | 2938381 fijisailor
fijisailor's picture

I call bullshit on this article.  The banks/investors are just holding onto the housing inventory and not releasing onto the market.  In my area of Florida there are massive numbers of empty houses whcih are just plain not being sold to anyone at any price.  The plan is to trickle this inventory into the market thereby boosting value.  This is what bailing out lenders got us.  The ability to not have to unload inventory.  It's win win for them and to hell with the average Joe looking for a good deal on a house. AKA crony capitalism.

Thu, 11/01/2012 - 15:02 | 2938406 SilverMoneyBags
SilverMoneyBags's picture

Bottom...LOL!!!!

Thu, 11/01/2012 - 15:05 | 2938419 ebworthen
ebworthen's picture

NO, housing has not bottomed.

Upward blip in decades long decline in values.

Propped by the FED and irrational exuberance amongst those with jobs and "investment" money.

Thu, 11/01/2012 - 15:09 | 2938448 GottaBKiddn
GottaBKiddn's picture

 

It's always been Jobs, then Housing. No bottom.

 

 

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