David Rosenberg Explains The Housing "Recovery"

Tyler Durden's picture

Confused by all the amusing arguments of a housing "recovery" (because if you believe in it, it just may come true.... maybe) in the sad context of a reality in which the economy is once again turning from bad to worse missing expectations left and right (for every report surprising to the upside, two do the opposite), corporate earnings and margins have rolled over, US states and cities and European countries are filing for default or demanding bailouts at an ever faster pace, and only headlines such as "stocks rise on hopes of more central bank easing" appear in the good news columns of mainstream media? Don't be: David Rosenberg explains it all.

From Gluskin-Sheff


What is really driving whatever recovery we are seeing in terms of home sales and prices are the units that are so ridiculously priced — like at less than $125,000. These are where the multiple offers are coming into the fore — and then to be rented out. The reason is that this is the only part of the market that is truly "tight" because almost 30% of American homeowners either have no equity in their homes or less than 5% skin in the proverbial game (according to CoreLogic). These folks have to write their lenders a cheque to make a sale, so many are holding out until they can get a better price and the all-cash deals being placed by investors are allowing for this (note too that 45% of the nation's homeowners have less than 20% of equity in their homes).

According to data cited by the USA Today, the supply backlog where over half of homeowners are "upside down" on their mortgage is at 4.7 months'; in areas where "upside down" borrowers make up less than 10% of the market, the listed inventory is closer to 8.3 months' supply — it is in this mid-to-high end where prices are still vulnerable to downside potential — this is not the sliver of the market where vulture funds are looking to pick up a cheap unit to then rent out to the "boomerang" crowd.

As the charts below visibly illustrate, it is probably a little early to be celebrating the recovery in the U.S. housing market, despite the exuberance in the homebuilding stocks which only capture a small share of the overall industry. The market is healing to be sure, but is far from healed. Look at these graphs and draw your own conclusions.

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Newsboy's picture

I'm gonna' buy me a house when the price in gold takes a dive to all time lows, in the fiat money panic, some time before 2020.

AC_Doctor's picture

Newsdouche "I'm gonna' buy me a house when the price in gold takes a dive to all time lows, in the fiat money panic, some time before 2020."

Dude, you are seriously fucked up...

The Monkey's picture

What to expect from the ECB (there is really only one possibility).

- ECB will cut 50 basis points on Friday. This will benefit Spanish and Italian bonds among others.

- Assets will rally through the auctions and beyond.

- Newsflow will improve, especially with respect to Europe. We may get all the way to "everything is solved" until again, it isn't.

This has the potential to set up quite a short in a few weeks, because it doesn't take a genius to see that FY 2013 earnings are going to be a big problem, and there is no getting around it for the indices.

Easiest bear market call of all time.

OutLookingIn's picture

Interest rates will have something to say.

Watch the LIBOR in the next Month.

All other interest rates take into account the LIBOR rate

A little over 90% of US mortgage rates are set with the LIBOR rate in mind.

For those who require a quick upgrade; LIBOR is London Inter Bank Offer Rate. This is the rate at which banks lend to each other. There are 16 very big banks that daily submit their previous days borrowings rate, plus their negotiated premium paid number to the committee.

The committee then throws out the four highest numbers and the four lowest numbers, then averages the remaining eight to come up with the LIBOR for the next 24 hours.

So, you see, RBS, Barkleys and Bof E are just the tip of the iceberg. To effectively manipulate the LIBOR you require the participation of at very least, eight banks. Unless the committee itself is at fault. The object of this manipulation was to keep rates artificially low, to lower their borrowing costs and increase their margins on their levered loans and derivative contracts.

With the LIBOR now under a global financial micoscope, don't be surprised to see rates start to rise.

Not good news. Got gold? Got silver?  


IBelieveInMagic's picture

LIBOR is London Inter Bank Offer Rate. This is the rate at which banks lend to each other.

Correction: LIBOR is the rate with which banks lie to each other.

Newsboy's picture

Time will tell, won't it?

You sayin' Im WRONG, or all you got is ad-hominem?

C'mon, show me yer grey matter "Doctor".

My scenario is that when all fiat currency becomes highly suspect for international trade (Why won't this happen?) there will be a transient panic value increase in the traditional no-trust-needed international trade medium, analogous to the increased value of "money" in deflation.

There will be a window of opportunity where the purchasing power of "real money" will find bargains in any non-fungible regional asset class, like land.

The question is not whether I'm right or wrong, but HOW right I'll be.


Kyron95131's picture

all i see is the banks creating offshore trusts to slowly let lose thier inventory and synthesizing demand on paper then shouting "recovery recovery!" to stir the poeple who have had resources and on the sidelines into spending it to pad the banks books.


in other words the ponzi is just more fancey, i dont see recovery.


if you pull comps and check MLS in the US on houses in the area, its SO WEIRD how their is only 10-15 single family dwellings available withing a 1 - 2 mile radius of any west coast metro area. but even after 2 years you pull comps and the SAME VOLUME is available but different addresses... come on....

FEDbuster's picture

I don't think anyone knows what the real shadow inventory is.  My guess is that it is much bigger than any number that has come out.  I have two formerly really nice homes near mine that have been sitting empty for almost three years now with yellowed forclosure notices in the windows.  Low end, smaller home seem to be blown out quickly, it's bigger homes that are sitting empty.

DOT's picture

The large houses still have some way to go before a pick-up in buying. I think the new term in RE will be "multi-generational" housing.  Maybe if the local zoning was less restrictive or the HOAs were re-purposed. Imagine that 3800 sf golf course home with chicken coops and a dairy goat in the front yard.

Unfortunately most of the newer housing stock will not last more than a generation with-out major renovation as the quality of the buildings is getting poorer as the market for housing gets more stress.

By the way....golf course homes usually have a pretty good field of fire.

memyselfiu's picture

This post by Gluskin-Sheff is about as relevant as last year's bananas....how can you tell me about the housing market recovery and then present me with charts that are 3 quarters old and all trending upward?

Now I'm certainly not providing a counter argument to their precis on the housing market, just saying that if you want to be relevant maybe put up some data that's useful and a little more timely?

yofish's picture

Gold britches!


RockyRacoon's picture

...with silver suspenders.

GMadScientist's picture

I'm guessing you live south of the 40th parallel.

Brrrrr. On a place where you don't want brrrrr.


old naughty's picture

My conclusion is that its not healed. But I am afraid many of you concluded in dream-escape state.

ghenny's picture

All this negative BS.  The fact is housing is on the mend, people are buying again, the economy is growing modestly, consumer debt is down and the stock market is up. Europe is on the mend.  Yes they will achieve a consensus and implement key policies that do the righ things even if they continue to proceed in a peacemeal fashion.   China is coming back (see their beige book). My guess is we'll see a pretty good year in 2013 and a great year in 2014 here in the US.  I expect the DOW to hit 14,000 in the next six months.  You guys are living in dreamland if you think we can't climb your wall of worry.  Its happening and you will be left out. The Bear story is over.

RockyRacoon's picture


There.  It's fixed for ya.

Pure Evil's picture

Wow, the Dow will hit 14,000!

Just 14,000, not 36,000 or 100,000?

So, I guess the 100 million unemployed will all have jobs by Christmas too?

And, the price of oil will drop and gold will sky rocket?

Obamacare will save trillions in healthcare costs and Obama will be elected dictator for life.

So ghenny, exactly where do you live?

On sparkley unicorn lane in rainbow county, lollypop USA?

Seer's picture

Remember: the DOW is priced in [ever expanding FIAT] USD.  It's the details that'll kill ya...

northman's picture

Exactly....Dow 14000, dow 25000.. it really doesn't matter. We should be talking about dow 5, 8, or 10 oz of gold. Or...apples. Can't imagine anyone would bother to manipulate apples... would they?!?!

dolph9's picture

Guys like you are always promising that, just around the corner, everybody's going to be a millionaire and some new technology will make us all live forever.

Strangely, that never seems to happen.

mark mchugh's picture

No, no, no, Dolph,

It does really happen.  Most recently it happened in Zibabwe.  The made everybody Trillionaires!

(It's a success story as long as you don't point out that a trillion Z-dollars wouldn't buy a rotten apple)

It could happen here, stop being so negative.

ghenny's picture

I am really excited.  You guys must be terrified I'm right by the level of your invective.  All your short plays are going to bite the dust so of course your mad.  I'll tell you another thing.  Once we organize a proper redistribution of income and wealth like the French, our economy and market will really take off.  My ideal world is no family earns less than $ 50,000 or more than $ 500,000.  No family has wealth less than $ 250,000 or more than $ 2.5 Million. In this scenario we will generate a truly fair and prosperous society with people motivated to do the right things.  I see it on the horizon.  With the right tax policy and debt pay down we can achieve it (once we confiscate all the ill gotten gains from the top 10%).  I expect a consumer boom and a stock market roar to ensue.  Viva La France.  

Seer's picture

Here's a path for you:


Yes, slightly tongue-in-cheek, but unless you can identify how we're going to be able to get by without actual physical resources (which, heretofore have been the essetenal mechanism for increasing populations) this is the only way...

merizobeach's picture

Alright, your first piece was straight-faced, but this time we can see you smirking.

northman's picture

Ya know... MDB really ruined these kind of comments for me. I can never tell if someone truly thinks this nonsense or is just emulating him.

Socialized Losses's picture

Have you met MillionDollarBonus yet? One /sarc nut is enough. You two battle it out. Winner take all.

Ned Zeppelin's picture

I think Million Dollar Bonus has a protege.

Brilliant.  Plus points for using a cool word like "invective."

Shizzmoney's picture

I expect a consumer boom and a stock market roar to ensue.

With what cash?  It's not like the up-and-coming consumer generation (18-35) is working with Scrooge McDuck capital over here (unless you equate capital=debt).

Just because rich people are moving real estate in a crappy economy doesn't mean "housing is on the mend".  Just because people are trading up for a newer car with easy-and-low refinancing, doesn't mean the economy is on the mend. 

It means that rich people are positioning themselves to get richer when asset prices are falling.

As Mittens would say, "Incomes taking a dive?  Only means time to Buy!"

Matt Busigin on Twitter has been posting these charts that point to slightly higher retail sales, car sales, and home pricies rising:


The problems with the charts?  They don't factor in math that effects the actual working class.  As we have said before, it's been a boom for the 20%; and a continued recession for everyone else.

- Incomes are stagnant. 

- Job quit rates are low (usually a sign that people are "movin' on up").

- ANd on top of that, 1/3 of the workforce turns over every year...yet incomes still stagnant.  What does that tell me? Tons of shitty jobs out there!

- Time between jobs is 37.5 weeks.  Down from the high of 47, but still at highs.

- Food is up 20% the last 3 years.  So is food stamp usage.

- Rents are at at all time high, and so are vacancy rates in areas of high employment (i.e. Boston, SF, NYC).

The charts don't factor in ease of auto credit that's available, or the fact that those retail numbers are boosted by consumers not buying things with cash, but most likely with credit.  The consumer, when he gets income, is deleveraging.......because the consumer knows the other shoes WILL drop at some point, and they don't want to be left stuck in the mud like after 2008.

Do the charts look like past recessions? No.  But this isn't your ordinary recession; it was created by fraud.  So the recession can also be hidden by fraud, either by central banks or government entities, especially before an election.

Remember, even the Soviet Union turned a solid "profit" for 5 years at a time; then one day, the Generals' checks bounced. 

That didn't go over well.

capitalist bison's picture

Don't bother analyzing his comments. He's a satirist, just like MDB.

RockyRacoon's picture

Satirist?  Nah.  They are anti-trolls.  Just as annoying.

DOT's picture

(once we confiscate all the ill gotten gains from the top 10%)


I beleive the thieves are now taking 30% of GDP.  Are you one of them ?

capitalist bison's picture

haha I see what you did there...

Arnold Ziffel's picture


Like other cities in California, Stockton chose to offer many public safety workers the same benefits as those mandated by a state law for highway patrol officers. The change allowed police officers to retire at 50 with pensions based on 3 percent of final pay for each year in service, up from 2 percent before.

City employees in other unions also received more generous pensions with eligibility to retire at age 55 - with 2 percent of final pay multiplied by the number of years of service.

This is in contrast to the vast majority of private-sector workers who cannot receive Social Security payments before they are at least 62.

By the 2000s, Stockton's full-time employees were also entitled to free healthcare for life.

Still, there seemed little cause for concern.

Deis, who signed Stockton's bankruptcy filing last Thursday, slammed the decision to provide free healthcare to retirees as a "Ponzi scheme" that eventually left the city with a whopping $417 million liability.



merizobeach's picture

'All roads lead to Stockton', I heard the other day.

Gazooks's picture

Whopping $417m liability could have been cleared by combo tax/bond issue amounting to <$150 per year/Stockton citizen over 10 years @5% bond return rate.

Weak, corrupt politicians subvert life quality for all but the very wealthy. Big healthcare and pharma are more grievously corrupted by criminal greed and moral vacancy than banksterism. Exploiting the sick and disabled for profit is as disgusting and reprehensible as child molestation.

Capitalized medicine is an obscenity. It's utter travesty that 'free healthcare for life' isn't absolutely universal. It should be totally socialized and publicly regulated with free education for research science, medical technicians and physicians.

Cause for concern? Fuck. Line up the fat-cat doctors along with banksters, pharma pill-agers and crony politicians for a 30cal injection.


The DOW will hit 14,000 just like ZIMBABWE stock market hit multiple hyperinflation highs, as the rest of the world crashed in 2008. China is coming back with their beige fraud book...and you'll be the last person holding the real estate bag along with trillions of dollars on the lawn

jimmyjames's picture

. China is coming back with their beige fraud book...and you'll be the last person holding the real estate bag along with trillions of dollars on the lawn


If there is to be hyper-inflation then the more debt you have in real-estate the better-

Debt in tangibles is the next best thing to gold in hyper-inflation

Seer's picture

Again, this should be obvious, but...  I mean, that's how the big players play it (that's why policy always goes this way).

All things in moderation (not too much of any one thing) allows for the best hedging.

Socialized Losses's picture

+1 ChiCom beige book lies. May not come to light tomorrow but definitely in the mid term future ( 1 - 3yr). Eventually it will. ChiComs have enough reserves to paper over the problems for awhile if they are determined to do so. In the end Central Bank's have always failed at this game they're playing, always failed, 100%. Timing is the only variable, the eventual outcome is certain.  Our only dilemma is, and I'm paraphrasing others here, "Can you stay solvent longer than the CB's can remain irrational?"  Just ask anyone who shorted treasuries in 2009-2010  in anticipation of inflation. They're all crying over what they learned in "Econ 202" & thought was true. Me thinks Japan may be the future (USA), but I'm watching inflation rates closely.

Western's picture

It is coming. The closer we get to some real tough times, some real heat from the universe, the more desperate and lunatic the MSM's lies will be.


For every person that wakes up, it seems one sheeple buries his/her head deeper in the sand, cries even harder to make the world go away. Viciously attacking anyone that doesn't partake in the status quo.

barliman's picture


Hear, hear !!!

Except ghenny won't be able to hear you because he has his head so far up his ass.

(The sand metaphor just didn't seem to do his level of delusion enough 'justice'.)


Kayman's picture


9 weeks at Fight Club and trolling to beat-the-band. Don't forget house prices NEVER go down, it's always a good time to buy real estate, and bankers always tell the truth.

Now, I'm going to put on my happy shoes and play Bo' Jangles.


barliman's picture


I'm thinking this is another one of the Stuttering ClusterFuck of A Misrable Failure's "social media" people who has joined ZeroHedge to ...

... get paid for posting propaganda ...

Goody goody, gumdrops!

This should be ... amusing.


GMadScientist's picture

- The check is in the mail

- I'll only put the tip in

- I won't come in your mouth (again)

Lucky Guesst's picture

I have multiple neighbors desperate to sell their homes for 1,2,3 years in some cases who would beg to differ. One of them took a nice job 2 hours away believing lies like you are telling now. She is screwed. Her house will NEVER sell for what she needs it to. All her $$$ down the gas tank and in very extended hour child care costs. She is losing the game because she listened to FOOLS like you.

merizobeach's picture

"She is losing the game because she listened to FOOLS like you."

She sounds so smart though!

EverythingEviL's picture

Oh so you're from Stockton too?

Steverino's picture

..and Whitney Houston thought crack would make her live foreever.

q99x2's picture

How about Dow 13,000 for the 13,000th time.