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Guest Post: Housing Recovery: What Has Been Forgotten?

Tyler Durden's picture




 

Via Lance Roberts of Street Talk Live,

 

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Thu, 11/29/2012 - 12:04 | 3020586 Snidley Whipsnae
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The big money buying/renovating/renting homes in the Phoenix area drove the rental price profits from 15% down to 6% and then they headed to Atlanta... where they are proceeding to do the same thing.

Thu, 11/29/2012 - 12:15 | 3020627 LawsofPhysics
LawsofPhysics's picture

You are spot on Snidley.  Now about those wages...

Thu, 11/29/2012 - 12:25 | 3020640 Zer0head
Zer0head's picture

the very big money is in with both feet e.g. Blackstone's inviatation homes

http://www.blackstone.com/news-views/blackstone-blog/blackstone-creates-...

 

in the article the author muses:

More importantly, why are economists, and analysts, not asking the question of "What happens to the housing market when the various support programs end?"

Answer: why would you think the support programs will ever end?

 

and as for the author's comment on historic norms - he needs to understand that revisionists are in control of both the government and the media such that metrics will be adjusted just wait until the Bernank announces his unemployment targets in this nwo world they will be seet somewhere between 6.5 and 6.8 notwithstanding the socalled historic norms of sub 5%

Thu, 11/29/2012 - 12:27 | 3020667 Cognitive Dissonance
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Cus....cus......cus this can't go on much longer..........can it? I mean, where's the collapse for crying out loud?

<The insanity can exisit far longer than your sanity can.>

Thu, 11/29/2012 - 13:23 | 3020960 Apocalicious
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CD, the best quote I've heard in a while was "The market can remain solvent longer than you can remain rational."

Thu, 11/29/2012 - 13:26 | 3020975 dbomb12
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Happening here in Tampa FL.

Blackstone to buy $1 billion worth of Tampa Bay homes for rentals

By Drew Harwell, Times Staff Writer
In Print: Friday, September 21, 2012

Thu, 11/29/2012 - 15:06 | 3021446 kaiserhoff
kaiserhoff's picture

The more you know about Tampa, the funnier that is.

Thu, 11/29/2012 - 12:16 | 3020634 Lin S
Lin S's picture

Here in SoCal they are still building.  I watched as some of the last, unmolested hills in the Brea/Diamond Bar area were reduced from their natural state to a bulldozed and backfilled plateau, then covered with boring, overpriced, mediocre-quality, stick-built McMansions.

Who the f%ck is buying these houses right now!?

  

Thu, 11/29/2012 - 12:41 | 3020721 Silver Bug
Silver Bug's picture

Theres a sucker born every minute.

 

http://ericsprott.blogspot.ca/

Thu, 11/29/2012 - 12:05 | 3020589 Tsar Pointless
Tsar Pointless's picture

Off-topic: KC Fed Manufacturing Index huge miss.

http://mam.econoday.com/byshoweventfull.asp?fid=451647&cust=mam&year=2012&lid=0#top

On topic: No housing recovery. Period. End of story.

Thu, 11/29/2012 - 12:17 | 3020635 HelluvaEngineer
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On the North side of Atlanta, it appears that everything is selling quickly now.

A neighbor just sold a 3000 sq ft place for $600k.  The interesting part is that the house on the other side of the street, about the same size, is currently listed for $240k.

Thu, 11/29/2012 - 12:50 | 3020771 GottaBKiddn
GottaBKiddn's picture

Exactly. Housing doesn't recover because someone wants it to, it is always driven by jobs. Housing hasn't dropped anywhere near a normal market pricing. In the last 30 or so years the banksters pumped the housing prices right under our noses by every trick in the book. When houses go from $30,000 to $1,000,000 there is something very wrong, but nobody complained when they got their home equity loan. In fact, we believed it would never end.

Sorry, Lance. Dream on. No jobs, no housing.

Thu, 11/29/2012 - 14:09 | 3021181 Pool Shark
Pool Shark's picture

 

 

What's driving this so-called "recovery" is cheap easy money (isn't that what got us into this mess originally?)

EVERYONE can afford a house when the federal government will back your 100% LTV mortgage with a mere $2.5k down and low monthly payments at a mere 3% interest.

The question becomes: how long can the feds continue to backstop these loans, and how long can 30-year mortgage rates stay at 3%?

Good luck with that...

 

Thu, 11/29/2012 - 14:40 | 3021325 Ayr Rand
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The Federal Reserve reported last month that for every house for sale in the US, there are 2.5 houses that should be for sale (i.e., they are vacant but not second homes, vacation homes, or have any other reason to be vacant) but are not for sale. This means that about 4M homes are being kept off the market to maintain price stability. This is being underwritten by the banks who own those homes, and  they are being underwritten, implicitly, by the Federal Reserve or the taxpayers or both. 

These houses have already been vacant for years on average. Likely they will begin to seroiusly deteriorate before too long, and will no longer pose a threat to the housing recovery. Instead, $Ts worth of MBS will be worthless because the underlying houses no longer exist as such. More bailouts on the way...

Thu, 11/29/2012 - 22:44 | 3022646 Ayr Rand
Ayr Rand's picture

ditto

Thu, 11/29/2012 - 12:07 | 3020590 Sudden Debt
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If a boxer gets 10 uppercuts and drops to the floor, and he's able to lift his head for 1/10th of a inch, he's already in the recovery progress.

If he's able to stand up...

and still wants to fight...

it's okay... but his chances of winning... not so good... not so good...

but he recovered for a while and the crowd loves that shit because more blood will flow and the game isn't over yet.

MORE BANG FOR YOUR BUCKS!

 

Thu, 11/29/2012 - 12:06 | 3020593 mrktwtch2
mrktwtch2's picture

we dont sell houses here!!..lol

Thu, 11/29/2012 - 12:06 | 3020595 mrktwtch2
mrktwtch2's picture

we dont sell houses here!!..lol

Thu, 11/29/2012 - 12:07 | 3020596 Snidley Whipsnae
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Off Topic: Indians hoard 20K tons of gold worth a record 1.16 trillion dollars.

http://www.financialexpress.com/news/indians-hoard-20k-tonnes-gold-worth-record-1.16-trn/1037761

Thu, 11/29/2012 - 12:14 | 3020615 francis_sawyer
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Damn good thing for them that they have nukes already ~ otherwise, the Israelis would probably want to bomb the shit out of them...

Thu, 11/29/2012 - 12:09 | 3020602 Yen Cross
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 Buy moar xau on this dip! I said the F/X risk wasn't priced in/ Gold is getting pummeled.  Buy this dip/

Thu, 11/29/2012 - 12:09 | 3020605 redpill
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The housing market's best chance is the ongoing distrust of equity markets driving people into tangible assets.

Thu, 11/29/2012 - 12:13 | 3020619 Snidley Whipsnae
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All the delusional are talking of a housing recovery.

Why are they not commenting about jobs/wage growth to support a real housing recovery?

 

Thu, 11/29/2012 - 13:05 | 3020859 XitSam
XitSam's picture

That wouldn't fit the narrative. Duh. (I'm being serious, not sarcastic.)

Thu, 11/29/2012 - 13:24 | 3020969 Bob
Bob's picture

Why are (insolvent) banks not marking to market?

Thu, 11/29/2012 - 16:50 | 3021805 A Nanny Moose
A Nanny Moose's picture

What wage/job growth? Who is John Galt?

Thu, 11/29/2012 - 12:15 | 3020625 Kreditanstalt
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It is true that the revival in the housing market is a positive thing and is certainly something that everyone wants.

We DO?  Who wants higher and higher housing costs...?

 

It is true that the revival in the CABBAGE market is a positive thing and is certainly something that everyone wants.

We wouldn't want high food prices, either, would we?

Thu, 11/29/2012 - 12:15 | 3020628 Orly
Orly's picture

Love me some Lance!

:D

Thu, 11/29/2012 - 12:15 | 3020629 Dr. Engali
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25 years later and Japan's real estate prices are still deflating. There have been fits and starts but they are still on the decline. We will go through the same process.

Thu, 11/29/2012 - 19:19 | 3022214 neidermeyer
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We're going to see a big drop next year .. here's a Bloomberg article from earlier this year about the huge number of illegally foreclosed upon houses (faked paperwork) that have been held off the market and will be sold in 2013 http://www.bloomberg.com/news/2012-04-03/home-prices-seen-dropping-10-in-u-s-on-foreclosures-mortgages.html

Thu, 11/29/2012 - 12:16 | 3020633 RiotActing
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"Much of the current buying in the housing market has come from speculators and investors turning housing into rentals."

Yeah? Check the Bay Area... this couldnt be further from the truth...

Thu, 11/29/2012 - 12:22 | 3020646 Kreditanstalt
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So what?   Fools rush in...

There's a fairly large but naive segment of the population that considers housing to be some kind of "investment" and a license to print money.  They are eternally, constantly, ridiculously optimistic about this, and only this, sector, ALL the time...

Thu, 11/29/2012 - 12:25 | 3020662 otto skorzeny
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you see these shows on HGTV etc. about these shitboxes in CA that are in desireable areas that are "fixups" (2000 sq ft of rotting stucco and linoleum)for $700k and they look like they should be condemned

Thu, 11/29/2012 - 13:20 | 3020939 RiotActing
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My point is these houses are not being turned into rentals. Fools arent rushing in anywhere in the Bay. Its over built. There is no new inventory. There is nothing to "rush in" to. The "fools" as you say it are already here. Very few are moving to the Bay unless their job is moving them there, its just too damn expensive. Jobs are still paying high dollar out here. We all know the shit is going to hit the fan but Silicon Valley will be insulated by much of it.

Thu, 11/29/2012 - 13:26 | 3020978 Kreditanstalt
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I suspect anything "paying top dollar" had better have demand (and customers) behind their product who are willing to fund these jobs...and I don't see it.

Thu, 11/29/2012 - 13:31 | 3021000 RiotActing
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Yeah ok, all customers will die when the next crash comes and there will be demand for nothing... right.... money will problably ceast to exist as well....

 

Thu, 11/29/2012 - 12:23 | 3020647 otto skorzeny
otto skorzeny's picture

sodomites must make a good buck. also-what you say must be true-it is in BOLDFACE

Thu, 11/29/2012 - 13:22 | 3020954 RiotActing
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Hey dumb fuck.... I copied and pasted the boldface in the post... the formating was carried over.

Thu, 11/29/2012 - 16:31 | 3021739 Next to Arch Stanton
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I know of investors buying up single family homes for rentals in the East Bay markets, specifically, in eastern Contra Costa County where median prices are now below $300K.  It is happening here, just not to extent it does in Las Vegas or Phoenix or Modesto.  And sure, the closer you get to San Francisco, the less you have investor buyers relative to other markets. 

SF Bay area is experiencing its own housing bubble in a way on the rental side.  Rents for many decent apartments in San Francisco have reached painful levels - a friend is moving out of his 2 bedroom apartment and going over to East Bay because in the past 2 years, the rent has gone from $3200 to $4000 and next month (if he stayed) to $5000.  This is a guy who is single and makes more than $150K per year and was splitting the rent with another roommate.  How many affluent renters can you count on in any market for any extended period of time?  These are not sustainable levels when compared with median income levels.  That's not the only example - have many more from developer clients who are building apartments on the Peninsula and Mountain View.  Rents average $3000 at least for any well-located, reasonably clean place.  Best properties command rents of $4000 to $5000, thanks to well-paid Apple and Google engineers.

From my perspective as a lender (yeah, don't get me started on the irony), many deals and markets are starting to look "priced to perfection".  Capital is coming at this market furiously and being deployed at very low yields thanks to ZIRP.  If job growth ever slows down just a fraction, this market will see a quick reversal in my opinion - the construction has predictably increased to cash in, but now I see it at a precarious point.  To keep this real estate market steady (both commercial and residential), you need Facebook, Google, Zynga, Twitter, as well as many other non-"brand" name companies we don't hear about, etc to keep hiring.  All the tech companies that have been doing well in the prior few years, sell their products outside of the Bay area.  At some point, there has to be a reconciliation of the economic reality in the rest of the nation/world with the SF Bay area economy.  I think that has started to happen with the lower revenue guidance many tech companies provided during 3Q earnings calls.

Thu, 11/29/2012 - 19:22 | 3022225 neidermeyer
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The Bay area is a special case ,, the homes are too pricey to attract big money to scoop them up for rentals ,, besides the legal environment there is CRAZY ,, It's absurdly easy there to rent a house , default on payment #1 and for minimal money in legal filings remain in the house for 2-3 years.

Thu, 11/29/2012 - 12:18 | 3020638 Cognitive Dissonance
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"It's a housing recovery because I said it's a housing recovery." - The Wizard of the Fed aka Ben Bernanke

Thu, 11/29/2012 - 12:19 | 3020641 otto skorzeny
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i know why construction employment hasn't gone up- the homebuilders are hiring illegals off of the books to build the shitty houses with shitty workmanship at a shitty wage so the employment #s may not reflect the (slight) uptick in homebuilding . and from what i have seen the only people getting loans are fairly(!) secure in their employment-like teachers and cops(read-guaranteed govt $)

Thu, 11/29/2012 - 12:28 | 3020676 Kreditanstalt
Kreditanstalt's picture

I'll agree with you on the (overpaid) government employee getting loans bit, but "hiring illegals" is just the free market in action and they probably can do just as good as job as anyne else.

Thu, 11/29/2012 - 12:44 | 3020731 otto skorzeny
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So I guess the "free market" includes you paying 60%+ of your income in various taxes so the illegals can enjoy all of the stuff like paved roads, education, healthcare(they go to the emergency room for ANYTHING and can't be turned away) at none of the cost(other than a little sales tax) to them. wake up bud-we're all getting fucked

Thu, 11/29/2012 - 12:58 | 3020833 Kreditanstalt
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Agreed.  Don't blame the "illegals" themselves for that - or their employers (who might be you or I): BLAME GOVERNMENT!

Thu, 11/29/2012 - 12:23 | 3020655 RationalPrepper
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Serious questions I have for people smarter than I:  (1) If you own undeveloped land, if and when will building a house be most favorable/advantageous/affordable?  (2) Is it possible or even likely that existing home prices will fall, but new construction costs would rise due to inflation of materials (lumber, etc.) costs.?  (3)  If resale and equity are not a concern because a person intends to stay there a long time, is it better to build now at cheap rates, build later at a potentially lower cost and pay cash, or buy existing later and pay cash [becuase construction costs may remain high?]

 

 

Thu, 11/29/2012 - 13:02 | 3020845 GottaBKiddn
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Not to worry, Agenda 21 already has a sustainable use for your property.

Thu, 11/29/2012 - 13:17 | 3020903 RationalPrepper
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Gee, that's great!  I'm sure I'll be fairly compensated...But honestly, I don't think anybody is "coming for" my property.  Not in my lifetime, anyway.

Thu, 11/29/2012 - 14:52 | 3021378 edifice
edifice's picture

That's what the Jews said, in 1932.

Thu, 11/29/2012 - 13:09 | 3020878 De minimus
De minimus's picture

Why would you build or invest in anything when the government is going to take it away from you because they can and want to and none of their appointed judges will disagree with them?

Somewhere in the background I heard someone say "...they wouldn't do that!...."

Thu, 11/29/2012 - 13:17 | 3020916 RationalPrepper
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I hear your point, but that's kind of fatalistic.  Bad things are coming, but I'd rather try and be proactive and plan the best I can than just lie down in the road waiting to be ran over.  You really think they're going to use eminent domain to take everyone's rural land and then ship people to gov't owned housing in the city?  There are too many gun owners for them to try and pull that.

Thu, 11/29/2012 - 13:26 | 3020979 Urban Redneck
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New construction costs have been rising for years.  Today, you can't build shitty for the same price you can buy shitty.  And if you're not a 1%er, don't even ask about the cost of building quality, which will at least hold up physically over time.

The question of now or later shouldn't be one of nominal costs, but rather opportunity costs, as once you build the house- IT OWNS YOU.

Thu, 11/29/2012 - 13:58 | 3021115 RationalPrepper
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So you recommend renting?  You do have to live somewhere (and so do the other 300 million people in this country).

Thu, 11/29/2012 - 14:28 | 3021257 gaf12
gaf12's picture

RP,
I hear you and I sympathize - I'm probably in a similar situation to you.  Unfortunately, although I think this is a valid question, you're unlikely to get the answer you're looking for here.  First, the complexities of your situation are too numerous - it's going to boil down to your personal risk assessment, capital, location, capabilities, and how far you're willing to go to hold onto what you have. 

Secondly, love ZH as I do... let's just say this isn't always the best resource to get advice.  There are a lot of smart cats here (and I'm not using that animal because I'm stuck in the 70's) and there are a lot of smart alecs as well (and a fair number of trolls and nasties, too - but we know who they are). 

I'm guessing you have or have your eye on some land and are considering using it as a bug out when TSHTF.  Since living in a tent is really only fun for about 6 hours, you have to decide whether you burn your capital now at low interest rates or wait for a downturn - hoping it overcomes rising prices and interest rates.  Problem with inflation is that wages will lag.  You could use your eggs later (maybe PM at much higher resell value then) as fuel to repay or buy/build, but you always have to be aware that the government wants to control it.  They may not take your land/home outright through eminent domain.  But in a sense, they're doing it bit by bit through inflation. 

Plus, say you pay it off and "own" your land and home... what's to stop them from raising property tax on "wealthy" land owners by, say, the same ratio that gold has risen - or higher.  So instead of a $2,000 annual tax, it's $200,000 or more.  Eventually, they'll get it from you if they want.  And then you'll have a decision to make. 

Remember, these are progressives - it's not going to come overnight.  They want it bit by bit.  Take out your neighbors one at a time.  The reference above to Agenda 21 is apros pros.  FWIW, I'm buying now.  I understand the risks but I'm not a sheep.  I'll pay cash and deal with the attempted theft of my land when it happens.  Renting long term has the same issues - I'm just at the mercy of my landlord who is at the mercy of the government, so let's get rid of the middleman so I can have a few years of "freedom".  My $.02 anyway.  Good luck.

Fri, 11/30/2012 - 08:30 | 3023145 Urban Redneck
Urban Redneck's picture

Not necessarily, I don't know what your opportunity costs are.

The nominal cost of the house may rise if you postpone building, but whether your investment & savings choices over-perform or under-perform the inflation baseline in the interim determines whether or not the same house is actually more or less expensive.

But as you said you have to live somewhere, so your options from most to least expensive are build it, buy it, or rent it.  If there is a risk of losing a job and being forced to relocate, that is an important consideration.  Concentration risk is also important, if all your wealth is tied up between the land value and the construction cost- it is a recipe for bad things to happen.  If you can realisticly afford to build it without becoming overly allocated to it, then you might as well enjoy what you have made/saved.  

 

Thu, 11/29/2012 - 14:27 | 3021250 Harbanger
Harbanger's picture

I’m not smarter than you, but I have experience in this field and I like helping fellow rational preppers :)

1) If you own the Land already and are planning on building on it, it will be cheaper now than later.

2) It’s all area specific, some areas would be in decline regardless. It’s not at all likely that existing home prices will continue to fall in good areas.  Not with all the Fed intervention.

3) If you plan on living there and have the cash, build it now. Construction costs will only increase going forward, guaranteed. Keep in mind that there are Tax and other advantages to you if this is your primary residence.

On the other hand, if you don’t plan on living there and it‘s an investment, you may want to use your cash to hedge against the markets and currency in other ways. That’s your call, but either way, you want to get out of cash. Good luck.

Thu, 11/29/2012 - 12:25 | 3020664 Rainman
Rainman's picture

Sooner or later the builders will catch on and start building 1950s Levittowns to accomodate the wage-challenged masses. Cheap linoleum floors and wall paper....bring it !

Thu, 11/29/2012 - 12:38 | 3020715 Snidley Whipsnae
Snidley Whipsnae's picture

Yeah... they are called mobile homes...

Thu, 11/29/2012 - 21:43 | 3022520 SmittyinLA
SmittyinLA's picture

Again the Buffet is perfectly positioned.

Thu, 11/29/2012 - 12:36 | 3020705 Yen Cross
Yen Cross's picture

 Look at this chart! This is the algos picking levels!  I opened this short trade yesterday/ based on housing numbers before BONERS BBG one liner! I shit you not / 100K aud/usd @ 50/1 (2 thousand dollars) of margin... Not a big deal, if I wasn't prudent!

                    http://imageshack.us/photo/my-images/338/retrace.png/

Thu, 11/29/2012 - 14:18 | 3021214 TonyCoitus
TonyCoitus's picture

Below is from an email received today.  Wonder what this portfolio will sell for?

------------------------------

Due diligence materials are now available for this non-performing residential portfolio.

Debtx_6842 consists of 121 non-performing loans with a balance of $8.7 million.  The loans are secured by first liens on single family homes located in 22 states with concentrations in Florida, Illinois, Indiana and Ohio.

Final bids are due December 19th, before 2PM ET.
 

DebtX, 133 Federal Street, Boston, MA, 02110

Thu, 11/29/2012 - 21:45 | 3022525 SmittyinLA
SmittyinLA's picture

Maybe $650,000.

Thu, 11/29/2012 - 15:11 | 3021362 haskelslocal
haskelslocal's picture

Get all invested in reading this and then BAM. The CONTRADICTION statement.

Much of the current buying in the housing market has come from speculators and investors turning housing into rentals. This, however, has a finite life and rising home prices will speed up its inevitable end as rental profitability is reduced.

This is a true statement only if prices DO start to rise and therefore there IS the foundation of a housing recovery. CONTRADICTION to the principle of the argument.

Thu, 11/29/2012 - 21:40 | 3022514 SmittyinLA
SmittyinLA's picture

I live in Los Angeles, seems like most the housing now being built is "corporate socialist" ie community redevelopment private public partnerships (public liabilities with private control and private profits) nobody is paying,they're all 100% losing on public housing and 10% "ultra luxury", massive CRA stuff everywhere both big and small and school spending like there's no tomorrow.

 

I wonder, is it the Greeks buying up CA's debt?

 

Thu, 11/29/2012 - 21:52 | 3022540 SmittyinLA
SmittyinLA's picture

The rent market is dependent on rent subsidies, at least in CA where we have a super majority getting a subsidy of one form or another-totally reliant on continued Ca tax increases and borrowing.

Fri, 11/30/2012 - 01:20 | 3022869 Lord Of Finance
Lord Of Finance's picture

Still trying to reinflate that dang bubble again. The bubble has now become a whoopi cushion. All that air remaining inside will come bellowing out once the bond market parks its fat ass on it.

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