This page has been archived and commenting is disabled.
If There Is A "Housing Recovery" Then This Chart Can't Be Right
Let's start with the oldest economics joke in the book: "assume there is a housing recovery."
Ok, let's assume that.
So, applying logic, wouldn't consumers be actively buying furniture for their brand new homes, instead of furniture sales not only declining for the past year but posting the first negative print since January 2011, and the Great Financial Crisis before that?
... Because we are confused.
And here are some additional thoughts on the issue of the housing recovery via Doug Kass:
I expect last week's "rally" in applications will be short lived relative to history.
Here is why:
Home affordability is overstated today when compared to the last cycle.
The bubble from 2003-2007 was all about "leverage-in-finance", I.e.: popular, exotic loan products of each period, terms, allowable DTI, documentation type, start/qualifying interest rates etc. For example, from 2003 to '05 a 5/1 interest only loan allowed 50% DTI qualifying at interest only payments. From 2006 to '07 Pay Option ARMs allowed 55% DTI at a 1.25% start rate.
This made the "cost" of buying a house HALF of what it is today.
Then when the leverage-in-finance all went away during a short period of time from late-2007 to mid-2008 house prices quickly "reset" to what people could afford to pay on a fundamental basis...30-year fixed mortgages, fully documented, 45% DTI, at a 6% interest rate.
Because 70%+ of homebuyers use mortgage loans -- and the monthly payment trumps the "purchase price" of the house with respect to purchase ability and decisioning -- then it stands to reason that the monthly payment rate of popular loan types of each period relative to house prices would determine whether or not house prices are once again bubbly.
Bottom Line: the popular loan programs during the bubble years -- which allowed for rapid and large house price appreciation -- were not 30-year fixed loans like today. Rather, exotic interest only loans, negative amortizing Pay Option ARMs and high CLTV HELOCs. Thus, comparing the "affordability" of houses using today's 30-year rates and program guidelines vs 30-year rates and guidelines from 2003 to 2007 is apples to oranges.
Based on "cost of ownership" for the 70% who need a mortgage loan to buy, CA houses are more expensive today than from 2003 to 2007. This is why first-timer buyer volume has plunged to 4-year lows recently. And if not for the incremental buyer & price pusher -- the institutional "buy and rent or flip "investor" that routinely pays 10% to 20% over the purchase price / appraised value treating a house like a high-yield bond -- present house prices cannot be supported.
On this basis, back in 2006 a $555k house "cost" as much as a $325k house does today.
»
- 36732 reads
- Printer-friendly version
- Send to friend
- advertisements -
I think you've posted the chart upside down....
You can always sleep in your car, but it is tough to drive your house.
That chart doesn't include sales of chairs with leather wrist and ankle straps
The explanation is simple: The sheep are using 3D printers to make their own furniture.
I talked to a neighbor of mine in the roofing business. He says that they are busy and that there is a bunch of new construction in our area. One of the issues he said is that a lot of the people that were in the trades have left and they are having trouble finding stable labor.
My brother in law, who is a plumbing contractor said that new construction in Nashville was selling and backlogged.
A blip or a trend? Dunno.
Non-lib states are doing fine.
uh oh. Now you've done it. Now there's going to be a liberal demand that we subsidize furniture for the poor. How can we, the greatest nation on earth condem the downtrodden to sleep on anything less than a temperpedic? Why should YOU shop at Ethan Allen when others must endure Ikea? You horrible people, you.
"...wouldn't consumers be actively buying furniture for their brand new homes..."
People that had a house and lost it via foreclosure probably had some furniture at that point. Why buy new furniture when you lose your home and move into an apartment or rent a dump from a slumlord.
FurnitureFUBAR.
I'm in the it's-all-lies camp, but even so, with all humility, are you reading the chart right? Values above the dashed red line (at 0%) indicate growth YoY.
The chart shows growth YoY since around the start of 2010. The "growth" has fallen to 0%, or flat, but that means that the level of activity is actually still near a peak, and will not decline from where it has climbed to until we start seeing negative values YoY.
A related chart showing actual units sold would show a climb to a leveling peak, which is why YoY %change charts are the number one tool for disinformation.
Consumers want to have less clutter, because it a) a hassle to deal with and b) wages are stagnant/declining, so when you do get that mortgage, you have to cut the consumer "fat".
CNBC pundits say part of the reason that corporation are posting such great profits are due to them being "mean and lean" which is corporate speak for "cutting costs, and cutting wages, jobs, and benefits, to satisfy shareholders"
When THAT happens, the consumer is only going to react to the market he lives in. He'll buy a house....but not be able to afford to put shit inside of it (minus a TV).
Also, many-a-home sales today are for "flipping" in this faux boom market. You don't need to buy furniture if you ain't living there!
Apparently, Rentiership isn't good for Keynesian "demand" economics. Who knew?
Our local thrift shops are doing really well.
Yes, don't forget to donate... A couple of those slips doubled my tax return last year!
My sister in law works in a mid-upper mkt furniture store in Chicago. This is a small chain that did huge business for years. Now, there are nights when NO ONE comes into the store. Recovery, really?
Furniture? Fuck that, I got my Bernanke summer collection arriving this weekend, cardboard boxes, milk crates and 5gal compound buckets.
I am also confused since one would expect that based on your logic, 2006 would be peak furniture buying. I am thinking that 2001 might not be the best starting year. It would be good to see it starting in a neutral year, such as 1995 and then adjusted for inflation.
this was supposed yo go in above. please ignore...
John Embry: 'everyone should look at Zero Hedge'
http://www.youtube.com/watch?v=70xrKV0n52I
@13 minutes ca.
You watch TV on your Iphone sitting in a bean bag chair, you eat out 3 times a day, and you sleep on a blow up mattress. Who needs furniture?
You watch TV on your Iphone sitting in a bean bag chair, you eat out 3 times a day, and you sleep on a blow up mattress that you got at Walmart after returning bottles and cans for the deposit money. Who needs furniture?
Fixed it for ya.
...in the French office building that has been vacant for three years.....
fixed it further.
New physical furniture is so 2006.
Today it's all about virtual furniture, displayed on your iPad.
+1... moar screen spew........ready thy flotation devices!
BUT if you make a hedonic adjustment to the data, allowing for the fact that without chairs we are standing which is better for us, and is just as good as sitting down ultimately, and saves a ton of money, and and and beds are sooooo overrated and bad for the posture.
Once adjusted, down will be up, S&P higher, and we can buy furniture with feelgood effect.
You can buy a whole store full of furniture in my town for next to nothing. Better hurry though, they're the last one which hasn't already gone out of business.
(I know, they always say that, but this time they really meant it.)
Ugly: Go check FBN (Furniture Brands International Inc.). "The company?s brand portfolio includes Thomasville, Broyhill, Lane, Drexel Heritage, Henredon, Pearson, Hickory Chair, Lane Venture, Maitland-Smith, La Barge, and Creative Interiors." yahoo profile
There is an obvious disconnect. Chart seems right.
Since when does Carlyle need to buy furniture?
the basement at Marriner Eccles looks like a furniture warehouse. "What happened to our GOLD Ben?" "I don't know, but this is better, more comfortable, and it goes with all that MBS paper.."
WAIT!
I totally have this trend all figured it out....
The chart is trending down exclusively due to elevated short-selling in the furniture futures market on the COMEX
Actual physical furniture off-take in the over the counter London and Hong Kong markets has been off the charts.
The NAV on Sprott's furniture ETF has also been rising steadily
Ted Butler has COT and BPR data that says the "big 4" furniture shorts have taken the sell side of over 4o% of outstanding furniture futures. There is rumor of a commercial signal failure on the largest furniture swap meets in LA later this year...
Fucking manipulated furniture market. I'm going to go see what Eric King has posted on his blog about this... I'll bet Russel and Celente are ALL OVER this.
Just buy the physical furniture and stand for delivery. Crash the Broyhill, furniture stackers!
Yes, but none of you are counting the people that burned their furniture for heat this past Winter that are now "waiting on the sidelines" to jump in and buy more new furniture.
that was part of the Cash For Couches Program. any furniture more than five years old has to be destroyed, in case you are wondering what NSA is really up to... datamining people who look at furniture on the internet, and then ordering them to turn in that leather sectional (PETA gets in on the deal too).
I'm putting it all on Castro Convertible....
Something Weird in the editing department HERE......
Doug Kass Thoughts are toooo similar to this most recent article from Mark Hanson
Plagiarism
http://www.zerohedge.com/news/2013-06-04/housing-bubble-pop-alert-colony-pulls-ipo-market-conditions-blue-mountain-rushes-cas#comment-3625410
Another sign of the housing top?
America's 'Versailles' to Be Finshed in 2015http://finance.yahoo.com/news/americas-versailles-finshed-2015-203620332...
Another sure sign is that Donald Trump's wig came out, saw its own shadow and started hawking condo-tel towers again. The End Is Nigh!!
now that is resort fullness........let them eat bathrooms.....
Welcome to ZeroHedge, where one chart can "explain" a national housing market, and where one static model answers all questions about everything.
There's much more to this picture than furniture buying can explain.
The question about housing is not whether a 'recovery' is happening, it's how long can sales continue at this rate without an improvement in employment.
The answer? In some areas it can continue for a while, in others it will fade. Some submarkets have a housing shortage. Another chart could show how few new homes have been built since 2007.
We currently have a resale and investment market for the most part. Rental properties are in shortage in many areas, but those sales don't generate furniture sales.
People buying used houses these days need housing, but used house buying doesn't generate furniture sales to the extent that new house buying does. And in the new normal, people aren't buying as much of the ancillary items that they did when they were more confident.
People are changing their habits in the face of the new reality despite the static models used around here that assume nothing ever changes.
There is no national housing market, that's the first mistake people make. There are about 250 submarkets in the USA, and those markets are all over the lot in performance.
Bu simple minds will always look for simple answers.
Welcome indeed, because you appear to be quite new here. We have been covering every aspect of the new housing bubble for about 1.5 years now. You are of course welcome to browse our posts on the topic of "housing market" which will "explain" away all your confusion.
I gave this newbie some "on the ground" reporting. Keep up the good work, Tyler. Maybe this schmuck will learn something. It is tough to deprogram from Bloomturd and other "financial news" sites.
Look at my comment just beyond yours, prick. My brother is renting his other house. My parents can't sell theirs, wife's parents can't sell theirs, brother in law has an apartment building 2/3rds unfilled and declining in price. All are in major cities in different areas of the country. Does that answer your question, dumbass. Tough day down at agency? Just shut the fuck up. Selling a house in theis "recovery" is the most fucking frustrating thing I have ever had the displeasure of going through. Fuck you.
Ooooo, LOOK!! Another RE "expert" who is here to explain how the reality that we see all around us every day is just an illusion... Pinheads.
While there may not be a national housing market, there is a national interest rate. Little messed up dontcha think? Record low rates and all the market can do is pop in certain areas and wither in others. What happens when rates climb? You may be invested so unable to grasp the precarious picture. I live in Canada and the sediment from home owners is things are ok while those renting are like you ppl are on glue. The fact of the matter is a few central bankers have decided that low interest rates are the solution and many have took the bait. Now watch what happens when they have to take the punch bowl away. Hint.. Watch craigslist for awesome deals on cars, houses and furniture.
Welcome to ZH !
My brother's wife is pressuring, I mean convincing, him to buy a house. My suggestion has been... There will be better prices in our lifetime, just wait. But of course, they convince females "Buy now or forever be priced out". Ethos, baby. Fear sells.
If there was a housing recovery, my house would have been sold and not declining in price like an AIDS carrying hooker. We will hopefully only lose 10-15K and that's if anyone will even put an offer in.
IridiumRebel,
Finally sold my house in CT: middle of the state. It took 5 months to close. I had the house for ages and no mortgage; should have walk away with twice the money.
Zillow shows 40% underwater in my zip code. I can not tell you how relieve I am. CT unemployment rate is 8 / 8.2% which is again a lie.
It is a furnitureless recovery
3 percent drop in 2003. YoY sales recently went negative. There is always volatility in every data set so conclusions shouldn't be jumped at.
Schiff mentioned this article on his show this morning.
I love the fact that he reads Zerohedge!!
There's no recovery in housing. Period.
I live in an area of the country that has amazingly stable real estate prices (Rochester, NY). Tok a little tour of my neighborhood (the suburb of West Irondequoit, for those familiar) and saw an average of two to three houses on every side street vacant, some boarded up, almost all with lawns unmowed.
Then there's this:
http://www.homepath.com/listing?listingid=38793076
House is right down the street from me, about 1/2 a mile. First listed at 87,000, three months ago. Now at 67K. So, if there's a housing recovery, how come Fannie Mae can't find a buyer for this decent home, reasonably priced, 20K below original price and last sale price?
Here's a clue. With incomes stagnant or declining, interest rates on savings near zero, who has money to buy, even at 3% down?
Answer. Not many, and prices are going down, not up, at least around here.
I once drove 800 miles round trip in one day to profess my love to a chick in Greece. Despite the romantic aspect of it all, I was rebuffed. Oh well.
Is that Jame Gumb's old place?
FreeNewEnergy,
In "normal" times that listing would have been gone in one day. this is sad beyond believe.
The drop is due to people carving out their own houses, furniture and appliances inside their favorite Minecraft server. Go long on Creepers, bitchez!
The Kansas plains looked like a garage sale. The pioneers started out with everything they owned, and realized after a day or two they were overloaded. They jettisoned the heavy furniture first. I wonder what the plains indians must have thought. A grand piano sitting in the tall Buffalo Grass.
does the chart include online sales?
Good question.. Yet idk most ppl I know buy furniture at the store. Hard to fedex a couch. Yes I know some look in store then go online and buy. But Im thinking the sample size is pointing to decreasing sales.. Best bet is to go to retailers income statements and cash flows to get a better picture. Curiously I just meandered this question the other day.. If ppl are not buying homes they may be inclined to spruce up the ones they are in.. However I suppose the opposite is true..what renter wants to be sattled with a bunch of furniture? Ah well Im just glad Im alive and have no obligations.
Maybe people are just "printing" their furniture!
Can you buy 3D software for printing a set of dining-room table and chairs?
Could you "print " a house in parts and then simply glue it together?