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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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Wed, 07/04/2012 - 22:31 | 2587823 Newsboy
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.

Thu, 07/05/2012 - 00:32 | 2587966 AC_Doctor
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...

Thu, 07/05/2012 - 00:53 | 2587995 The Monkey
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.

Thu, 07/05/2012 - 02:42 | 2588059 OutLookingIn
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?  


Thu, 07/05/2012 - 06:47 | 2588163 negative rates
negative rates's picture

Troubling news indeed.

Thu, 07/05/2012 - 07:03 | 2588173 IBelieveInMagic
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.

Thu, 07/05/2012 - 12:18 | 2589196 Newsboy
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.


Thu, 07/05/2012 - 04:54 | 2588124 Kyron95131
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....

Thu, 07/05/2012 - 08:51 | 2588381 FEDbuster
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.

Thu, 07/05/2012 - 09:26 | 2588445 DOT
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 course homes usually have a pretty good field of fire.

Thu, 07/05/2012 - 05:51 | 2588143 memyselfiu
memyselfiu's picture

This post by Gluskin-Sheff is about as relevant as last year's 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?

Wed, 07/04/2012 - 22:31 | 2587826 yofish
yofish's picture

Gold britches!


Wed, 07/04/2012 - 22:39 | 2587839 RockyRacoon
RockyRacoon's picture

...with silver suspenders.

Thu, 07/05/2012 - 00:28 | 2587958 GMadScientist
GMadScientist's picture

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

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


Wed, 07/04/2012 - 22:33 | 2587827 old naughty
old naughty's picture

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

Wed, 07/04/2012 - 22:37 | 2587833 ghenny
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.

Wed, 07/04/2012 - 22:41 | 2587843 RockyRacoon
RockyRacoon's picture


There.  It's fixed for ya.

Wed, 07/04/2012 - 23:12 | 2587875 Pure Evil
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?

Thu, 07/05/2012 - 00:50 | 2587989 Seer
Seer's picture

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

Thu, 07/05/2012 - 01:09 | 2588011 northman
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?!?!

Wed, 07/04/2012 - 22:42 | 2587845 dolph9
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.

Wed, 07/04/2012 - 23:38 | 2587913 mark mchugh
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.

Thu, 07/05/2012 - 00:03 | 2587936 A Nanny Moose
A Nanny Moose's picture

This time it's diffferent

Thu, 07/05/2012 - 00:25 | 2587957 ghenny
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.  

Thu, 07/05/2012 - 00:55 | 2587999 Seer
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...

Thu, 07/05/2012 - 01:07 | 2588010 merizobeach
merizobeach's picture

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

Thu, 07/05/2012 - 01:13 | 2588014 northman
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.

Thu, 07/05/2012 - 01:14 | 2588016 Socialized Losses
Socialized Losses's picture

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

Thu, 07/05/2012 - 08:23 | 2588299 Ned Zeppelin
Ned Zeppelin's picture

I think Million Dollar Bonus has a protege.

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

Thu, 07/05/2012 - 09:12 | 2588403 Shizzmoney
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.

Thu, 07/05/2012 - 09:49 | 2588518 capitalist bison
capitalist bison's picture

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

Thu, 07/05/2012 - 18:54 | 2590412 RockyRacoon
RockyRacoon's picture

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

Thu, 07/05/2012 - 09:31 | 2588452 DOT
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 ?

Thu, 07/05/2012 - 09:48 | 2588512 capitalist bison
capitalist bison's picture

haha I see what you did there...

Thu, 07/05/2012 - 00:23 | 2587945 Arnold Ziffel
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.

Thu, 07/05/2012 - 00:57 | 2588000 merizobeach
merizobeach's picture

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

Thu, 07/05/2012 - 08:13 | 2588277 Gazooks
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.

Wed, 07/04/2012 - 22:45 | 2587847 THECOMINGDEPRESSION

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

Thu, 07/05/2012 - 00:16 | 2587947 jimmyjames
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

Thu, 07/05/2012 - 01:04 | 2588006 Seer
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.

Thu, 07/05/2012 - 01:45 | 2588035 Socialized Losses
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.

Wed, 07/04/2012 - 22:48 | 2587856 Western
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.

Thu, 07/05/2012 - 00:03 | 2587935 barliman
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'.)


Wed, 07/04/2012 - 23:54 | 2587926 Kayman
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.


Thu, 07/05/2012 - 00:24 | 2587955 barliman
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.


Thu, 07/05/2012 - 00:43 | 2587982 GMadScientist
GMadScientist's picture

- The check is in the mail

- I'll only put the tip in

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

Wed, 07/04/2012 - 23:58 | 2587930 Lucky Guesst
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.

Thu, 07/05/2012 - 00:50 | 2587990 merizobeach
merizobeach's picture

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

She sounds so smart though!

Thu, 07/05/2012 - 01:52 | 2588039 EverythingEviL
EverythingEviL's picture

Oh so you're from Stockton too?

Thu, 07/05/2012 - 00:06 | 2587939 Steverino
Steverino's picture

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

Thu, 07/05/2012 - 00:18 | 2587949 q99x2
q99x2's picture

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

Thu, 07/05/2012 - 00:34 | 2587968 AC_Doctor
AC_Doctor's picture

ghenny, you will be washing my cars and picking up my dogs shit in 2 years for $4 a day...

Thu, 07/05/2012 - 00:44 | 2587983 GMadScientist
GMadScientist's picture

Job creator!

Thu, 07/05/2012 - 00:38 | 2587972 salvadordaly
salvadordaly's picture

MDB is that you? Damn you had me going for a moment.

Thu, 07/05/2012 - 00:41 | 2587976 The Monkey
The Monkey's picture

I agree with you that in the short-term, we're moving higher with the ECB cutting 50 basis points on Friday. Anything less will disappoint markets, and the ECB will deliver, almost guaranteed.

Here's the rub. All of the points you have made, considering where we are with respect to price, margin and earnings suggest a top. Things look great at tops, just as they should.

Tops and recessions fool nearly everyone. Without bulls, we would not get tops to short. Without growth we would not get recessions.

Good luck! Higher prices are welcome!

Thu, 07/05/2012 - 00:41 | 2587978 GMadScientist
GMadScientist's picture

And then you woke up and people were still using more than one hand's worth of fingers to count unemployment percentages (and in some countries, their toes too), without a speck of productive collateral left in the Zooro, America ready pick the lesser of two stupids, and a motherfucking tsunami of debt to be rolled between now and your rosy 2013 over the rainbow call. As revenues dry up from sovereign to corporate to muni and the layoffs of public and private sector alike once again start to pick up pace to match the dwindling income of the state and the realities of a world with shrinking aggregate demand you will finally see that there is absolutely nothing in common between Kansas and here little Dorothy and your bitch Toto too.

Spain: 6.42% Portugal: 10.17% Italy: 5.77% Greece: 26.15% (note: these are 10yr spreads, not 30yr rates)

Thu, 07/05/2012 - 00:55 | 2587998 GlassSteagall
GlassSteagall's picture

In my state (California=State of Confusion) they are still adding to the employment rolls to save money

Thu, 07/05/2012 - 08:31 | 2588320 GMadScientist
GMadScientist's picture

"Eight sectors posted employment gains, led by leisure and hospitality, with a net gain of 13,200 jobs. Professional and business services and educational and health services also showed respectable increases, adding 10,500 positions each.

Three categories lost jobs, led by the government sector, which shed 3,300 jobs in May, followed by the trade, transportation and utilities sector and the other services sector."

I'm were saying?

Thu, 07/05/2012 - 00:53 | 2587993 GlassSteagall
GlassSteagall's picture

Dow 14,000 is the new Dow 36,000

Thu, 07/05/2012 - 03:35 | 2588078 dexter bland
dexter bland's picture


That's the most unpopular post I've ever seen on this site, you must be saying something that makes sense. But I don't entirely agree with you. Europe is nowhere near "on the mend", China will not collapse but keep slowing (dragging commodity prices down) as they can't manufacture consumer demand the way they can manufacture cheap crap. But the US has the most self-sufficient economy and will slowly crawl out ot the mire. USD will rule again.

"it is probably a little early to be celebrating the recovery in the U.S. housing market"

...yes and that's what investors are supposed to do, be little early.



Thu, 07/05/2012 - 09:42 | 2588483 DOT
DOT's picture

"be a little early."  


If you want to trade.  The future is  coming, it will be different from your expectations.

Thu, 07/05/2012 - 05:27 | 2588136 Tommy Gunner
Tommy Gunner's picture

Are you on drugs or just stupid?

Wed, 07/04/2012 - 22:37 | 2587837 deflator
deflator's picture

 Don't worry, Obomney is gonna re-open the floodgates of immigration to swell the U.S. population to over 1 billion in the next 5 years. Home prices will definitely be going up in nominal terms. Real terms? Not so much...

Wed, 07/04/2012 - 22:44 | 2587848 Duke of Con Dao
Duke of Con Dao's picture

just watched the Macy's Fireworks in NYC. a lot more red this year. a Portent, by chance? 

you want boom boom? here's something from the archives. arty, even painterly. plus music by Richard Hell...

YouTube - July 4th Fireworks seen from the Rooftops of Brooklyn NYC


not a bad country, really. the Duke's been around. I mean, how many on here are

banned in Burma? 

Thu, 07/05/2012 - 00:29 | 2587961 merizobeach
merizobeach's picture

I've been to Myanmar a couple times.  I really enjoyed visiting there, and I was fascinated by the people.  How did you abuse that poor place to get yourself banned?

Wed, 07/04/2012 - 22:43 | 2587850 flying dutchmen
flying dutchmen's picture

The Gold ratio to Medium house price hit a low of around 100 in 1980..  it is about there now  so i would not expect and big moves in either..

Wed, 07/04/2012 - 23:06 | 2587879 Western
Western's picture

Volcker stopped gold in its tracks in the 70s, that provided a bottom for the gold-house ratio.


What's stopping it from going to 1.0 this time around? Nothing.

Wed, 07/04/2012 - 22:54 | 2587857 dolph9
dolph9's picture

Go over to Yahoo Finance, right now.

They are showing oil and gold as negative!

This is propaganda or some sort of cruel joke.  It's not a mistake.

Wed, 07/04/2012 - 23:02 | 2587872 Urban Roman
Urban Roman's picture

It shows both quotes at zero. I'll take all the gold you'll sell me at that price.

Wed, 07/04/2012 - 23:43 | 2587919 mark mchugh
mark mchugh's picture

I saw it.

So give me $1620.81 and I'll take an ounce of gold off your hands.

Thu, 07/05/2012 - 00:02 | 2587933 Lucky Guesst
Lucky Guesst's picture

Last year I slept in once and when I woke up and looked on the internet either Google or Yahoo had DOW in red -0. For a brief second I thought something crazy happened while I slept!!!! Now I just consider it a premonition lol


Thu, 07/05/2012 - 00:30 | 2587962 Nobody For President
Nobody For President's picture

Nice hack. Gold now fixed, oil still -100% 

Time to fill the tank!

Wed, 07/04/2012 - 22:55 | 2587864 mmanvil74
mmanvil74's picture

I agree with Rosenberg's outlook. Interestingly, he is not directly bearish on housing in this post but points to "pockets" of strong demand at certain price points.  Higher value homes are vulnerable to further downside risk because those owners were able to hold on longer through this downturn and their credit rating probably meant something to them relative to people living in homes worth under $125k who could more easily (or by necessity) walk away from their mortgage.

As I pointed out in previous comments on ZH here, and here, national statistics are skewed to the downside and will be late to indicate the signifcant upside moves that have already ocurred in certain pockets of the housing market.  The first and hardest hit segments (lower priced homes in the sunshine states like AZ, CA, FL and NV) will be the first to rebound (currently recieving multiple offers as Rosenberg indicates which has lead to double digit price gains over the first part of this year in cities like Miami and Phoenix).  It took other areas of the country up to 2 years before their prices started sliding to the degree that the overbuilt sunshine state markets did - those markets will be slower to rebound and skew the national stats accordingly.

It's also important to mention that some of the key real estate markets in the US went red hot for a reason - people want to live there - for the weather, for the lower taxes, for the beach, for whatever reason - parts of CA, FL, AZ and NV were and still are among the fastest growing areas of the US in terms of population growth for the last couple of decades at least.  Also don't discount new money from emerging markets in Brazil, Russia and China looking to park some cash in the relative (perceived?) safety of USA.

The next big move in US housing will be the retirement wave, as Baby Boomers sell their McMansions in favor of a condo on a golf course, and many will be drawn to the same states that felt the worst of the housing collapse (another reason the higher end of the market could slide further, skewing national averages downward, as Baby Boomers downsize).  The lower priced markets are on their way back up in price, because of investment demand and affordability.  Now is the time to buy in these segments, not after you see national stats tick up by 20%.

So while I expect no re-run of the go go 2003-2006 period for US housing, this is still an excellent time to buy foreclosures from the banks and acquire rental units, particularly if you can apply 4% 30 year fixed leverage.  Like Rosenberg, I am bearish on almost everything, but residential real estate is one of few investments available today with limited downside risk, steady predictable yeild, built in inflation protection, and all the benefits of a tangible asset.  Most homes in the worst hit states are selling for below the cost of construction.  

Sure, stock up on food, pay down debt, acquire gold/silver first, but US rental housing should be a top investment consideration in my view for the small scale investor who rightfully does not trust equities in the current market, and cannot stomach bonds with their negative real returns.


Thu, 07/05/2012 - 00:19 | 2587951 barliman
barliman's picture


So, other than you've sunk a lot of capital into real estate (and need the market to pick up so you can sell out of it), what else in your book are you selling?

And you completely avoid discussing the economic impacts that will result in areas that are currently seeing more than 35% of mortgages underwater when the economy contracts.

Especially clear is your dodging what happens when the coming recession drops home prices off another cliff ...

... Or the continuing rise in property evaluations/taxes divorced from current market prices makes the property taxes on a monthly basis 30% or more of the mortgage?

What EXACTLY is your role in the real estate chain? I know! You're a real estate agent, aren't you!?!


Thu, 07/05/2012 - 11:25 | 2589006 mmanvil74
mmanvil74's picture

Nope.  Not a realtor.  No book to sell.  The point of my comment was to solicit an intelligent response from the ZH community, in an effort to bounce my ideas off other investment-minded readers, knowing that my perspective is limited, and quite potentially, wrong.  

So far most of the bearish responses point to global imbalances and potential black swan type events and/or a further deterioration in the social and regulatory environment in the US.  However, having been to other countries and having bought, sold, and managed properties overseas, the value proposition in the US is still very attractive despite taxes and other potential downside risks posed by society and government.  The rent and income to house price ratios are dramatically more attractive in the US than anywhere in the world, and in many cases, there are fewer risks with owning property in the US vs. other countries, yet prices overseas are much, much higher.  As a contrarian, I like to look for beat up markets to invest in and US real estate is one of the few sectors in the world that has not bounced from the March 2009 lows.  Should stocks return to those levels, maybe, maybe it would be time to buy equities.

I also like to look at ratios between US housing, Gold, the DOW and Oil.  Of these four, housing is the most undervalued on a historical basis by far.

There are plenty of problems and risks everywhere with any investment, the goal is to limit your risk (ie. not lose money, per Buffet), and earn income from your investment that is sufficiently adjusted for that risk.  I repeat, I find few alternative investments that offer good valuations today when adjusted for risk.  It's easy to be bearish on every investment out there, but cash also has limitations and, "over a long enough timeline", today's dollar will eventually be worthless or "worth less", of that we can be certain.  

One of the minor details I find missing on ZH is "so what do you buy with your money then, other than gold?".  As an investor, a cash return on your money has to be a top priority, and as much as I agree that everyone ought to own some gold and silver, I don't think owning gold/silver as your only investment is wise either.

Thu, 07/05/2012 - 00:25 | 2587956 RockyRacoon
RockyRacoon's picture

I have great respect for your comments and the fact that you took the time to outline a seemingly sane and rational investing proposal.  The only fly I see in the ointment is the capriciousness of local and state taxing authorities.  When their only tool is a tax, they will see your house as the nail.  Not just simple property taxes, they will find exotic things to tax like swimming pools, decks, jacuzzis, trees and shrubbery.  Utility taxes, curb taxes, occupancy certificates, tax on rental payments... you get the idea.

Thu, 07/05/2012 - 06:02 | 2588147 ParkAveFlasher
ParkAveFlasher's picture

right, pretty soon they'll tax you for things you DON'T buy hahahah.  oh wait

Thu, 07/05/2012 - 18:57 | 2590417 RockyRacoon
RockyRacoon's picture

Taxing you for things you DON'T do is not new.   A couple who decides not to have kids has the same as a tax (non-deduction) for being "selfish" enough not to have children.  Somebody tell me why there is a tax deduction for kids.

Thu, 07/05/2012 - 22:46 | 2590828 barliman
barliman's picture


So there will be a never ending supply of Democratic voters?


Thu, 07/05/2012 - 00:40 | 2587974 AC_Doctor
AC_Doctor's picture

mmanville,  the housing market will go to all time lows, starting with the Dow crashing to below 5000 by X-Mas.  All the fucking baby boomers will be cleaned the fuck out and the survivors that are in bonds will be the next wave of broke, retired boomers fighting for a greeter job at China-Mart, so they can get employee discount on dog food.

Thu, 07/05/2012 - 07:21 | 2588199 Bicycle Repairman
Bicycle Repairman's picture

I'm a boomer.  When I go to FL for the winter, 3 months, I rent.  I'm not buying.  Ever.

Wed, 07/04/2012 - 23:11 | 2587882 onlooker
onlooker's picture

I would not buy housing or property-- but I have some land for sale.

However, my son bought a 400,000 house 6 months ago in a So Cal beach town. All the talking did no good, he did it anyway. It is up 40,000. Chinese are buying at market or a bid up, and paying cash. 

Wish the chinamens would go the Chitowm or Motown. 


Thu, 07/05/2012 - 00:41 | 2587979 merizobeach
merizobeach's picture

Don't think they're not.  There are enough to go around.  China's rich people are exporting themselves, and they've got something like a million new millionaires.  They're pushing property price bubbles in Australia and here in Taiwan as well.

Thu, 07/05/2012 - 01:21 | 2588022 Seer
Seer's picture

"They're pushing property price bubbles in Australia and here in Taiwan as well."

B.S. you are doing it to yourselves.

And, as I've been predicting, when China's failing economy can no longer be hidden you'll see a LOT of pullbacks.  <sound of flushing toilet here>

Thu, 07/05/2012 - 08:32 | 2588328 GMadScientist
GMadScientist's picture

It's always sad when a good colony's sugardaddy gets too old to cut the mustard.


Fri, 07/06/2012 - 10:59 | 2591869 merizobeach
merizobeach's picture

"B.S. you are doing it to yourselves."

Your point is correct in that local speculators are trying to cash in on expectations of future demand, but it is also true that Chinese are buying and contributing significantly to rising prices.  I also agree that if China crashes, there will be implosions in all the areas where Chinese demand is traditional or expected.

Thu, 07/05/2012 - 08:33 | 2588329 GMadScientist
GMadScientist's picture

It's not "up 40000" until he's sold it.

Wed, 07/04/2012 - 23:18 | 2587888 JackT
JackT's picture

Placebo Effect

Thu, 07/05/2012 - 04:07 | 2587920 reader2010
reader2010's picture


What shape of the recovery in housing market? If you ask, I will say  L________________.

Thu, 07/05/2012 - 00:07 | 2587940 aerial view
aerial view's picture

Yes, student debt will magically disappear, high paying jobs will materialize out of thin air, money will drop from the trees and unicorns will dance in the streets: all is well now because NAR says home prices and sales are rising! 

Thu, 07/05/2012 - 00:42 | 2587981 AC_Doctor
AC_Doctor's picture

Hell ya, aerial view.  The 98.5% of sheeple will be stripped of all paper wealth and have not fucking clue what is coming around the corner.

Thu, 07/05/2012 - 01:20 | 2588021 CCanuck
CCanuck's picture

No, I don't buy it! No Skittles, No Deal! It's fine the way it is, if can't have skittles with my unicorns, I won't agree/disagree.

MOOOOM ! They say I can't have my skittles, tell them to shut off the internet!

Moom, Bring down some chips, with them sammiches!

Piss off, now, I'm gaming!

Thu, 07/05/2012 - 00:59 | 2588003 CrashisOptimistic
CrashisOptimistic's picture

There are no longer any business cycles.  Oil scarcity defines what little life society has left and it will be a society of deflation.  How could it be otherwise as the lifeblood of civilization is less and less available to fuel economic activity?

Real estate has been deflating and it will continue to.  Rental real estate may tempt you, but oil scarcity derived deflation is ubiquitous and will erase the jobs of your renters.

There's no great place to hide.  Maybe farmland.  No other real estate can generate cash in a relentless crushing deflation.

Thu, 07/05/2012 - 01:27 | 2588026 Seer
Seer's picture

All as you say, all as you say.  The ONLY thing that I figured had a chance was farmland (well, I'm not rich so I had to settle for Ag-classed land, land requiring a TON of work, but it's better, IMHO, than being stuck in an urban trap).  Food, Shelter, and Water.  I have no idea how one would do "water."  Shelter?  Seems that there's been an overabundance of shelters built (though not of the kind for the future); and, there's a ton of people who know construction.  So... well, Food is the only thing that I figured I had a chance at: and if I fail I'll at least be able to eat my work.

Thu, 07/05/2012 - 01:37 | 2588033 CrashisOptimistic
CrashisOptimistic's picture

It's a very tricky thing.  Analogous to Fight Club, if you make a choice of how to be one of the 800 million survivors on Earth, the one thing you do not do is run your mouth about it.  All those organic farmer this and that showing off to documentaries are just defining a location for the hungry streaming out from cities to target.

The big issue is bugs.  Crops won't have insecticide.  Or fertilizer.  Get real educated on calories/acre for potatoes and wheat and then overplant a factor of 3 or 4 to deal with bugs.  And of course overplanting is that many more hours walking behind your oxen, who also have to be fed over the winter, so plan to plant twice the acres you thought, with the other half being hay.

Life would be a lot easier in northern Argentina.  It's nearly Brazil-like there, without the Brazillian border guards, and Brazil-like means 3 growing seasons a year.

Regardless, good luck.

Thu, 07/05/2012 - 10:07 | 2588582 DOT
DOT's picture

Plus one on the animal husbandry. Also good for the soil ! 

Thu, 07/05/2012 - 09:42 | 2588477 goldfish1
goldfish1's picture

Drill well.

Used house trailer. Plant trees for shade.

Small tractor with tiller and mower.

Plant nut trees. Healthy soil helps with bugs.  Start a smaller garden and move on from there. Learn how to can and dry food. It's a lot of work.

Thu, 07/05/2012 - 09:53 | 2588531 DOT
DOT's picture

" there's a ton of people who know construction"


Two tons probably; unfortunately most do not understand how to build with-out power driven tools  and cranes to set the trusses. Those who understand

the basics and have the old tools will be in demand.

Thu, 07/05/2012 - 02:23 | 2588056 reader2010
reader2010's picture

the true housing bottom is when they convert all those empty mcmashions to hen houses or pig farms. 

Thu, 07/05/2012 - 09:55 | 2588540 DOT
DOT's picture

That's "multi-Generational" pig farms !  LOL




Se habla espanol. 



Thu, 07/05/2012 - 05:28 | 2588138 Tommy Gunner
Tommy Gunner's picture

David has forgotten to mention that all of this awesome activity is happeng with zero interest money.   There will be no housing recovery - only an economic collapse.

Thu, 07/05/2012 - 06:42 | 2588157 XtraBullish
XtraBullish's picture

"Never invest in yesterday's story."


We have lived through five years now of the same bearish, it's-all-going-to-zero, kill-the-banksters bullshit and lo and behold, the S&P and the Dow are WELL_ABOVE the 2008-2009 lows. Gold continues to be the best performing asset since 2000 and the bears out there continue to get reamed every time they think the next "crash" is beginning. I went though October '87 and, like most of you, kept looking for another "crash" right from 1,538 Dow to 3,800 amidst the basic same news/earnings/sentiment backdrop. 


Dow 3,000 is yesterday's story. The Black Swan is now Dow 20,000 by Q4/2013. Inflation, anyone?

Thu, 07/05/2012 - 08:05 | 2588247 printmoremoney
printmoremoney's picture

What housing market? The FED is the housing market. It is just another Central Bank Intervention. The State is the market, also known as Facism. A market has buyers and sellers discovering price. Ain't none of that shit going on, just a few people pretending there is a market while playing in Bernake's sand box of horrors. If the FED stopped buying RMBS, then we could see the "state of the real estate market". But then, I could be totally wrong and I am just part of the pyschologically-sterilized Sheeple living in a fairy tale that papers over anything that infringes on the Little Red Riding Hood story. And spending $1.3 trillion/year of money created out of thin air can prop up any bogus index.  Living on a credit card is great, until you stick it in and get "declined" for more cash advances. Then what? The new REALITY.

Thu, 07/05/2012 - 09:24 | 2588442 mendolover
mendolover's picture

Amen brother!


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