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No Housing Recovery Until 2020 In 5 Simple Charts

Tyler Durden's picture




 

Every day (for the past 3 years) we hear countless fairy tales why housing has bottomed and will improve any minute now. Just consider the latest kneeslapper from that endlessly amusing Larry Yun of the NAR, uttered just today: "pent-up  demand could burst forth from the improving economy." Uh, right. Here's the truth - it won't and here is why, in 5 charts from Bank of America, so simple even an economist will get it.

Epic supply backlog...

From BofA: "The foreclosure inventory pipeline that must be cleared in the next few years is very large. Our mortgage strategists forecast that another 6.6 million homes will need to be liquidated over the next five years."

Coupled with a secular shift from plunging demand via habitation patterns, as more and more simply opt to live with their parents...

"Live at home children: Since the recession, the share of young adults that still live with their parents has climbed. Of the 25-34 year age group, 14.2% live at home compared to an average of 10.5% in the first half of the last decade. Similarly, of the 18-24 year age cohort, 54.6% live at home, which is up from the low of 50% early in the last decade, but is close to the longer-term average. We should expect to see the 25-34 year  olds move out of their family homes once the economy heals. It may take more time for the younger age cohort."

Means more and more are forced to rent...

"We forecast household formation to gradually turn higher over the next two years with a notable pickup starting in 2014. This inflow of new  households will be supportive of the renovation market. Many of these new households will initially move into the rental market due to slow wage growth and tight credit conditions, as well as the typical attraction to renting for the young adult age cohort."

Which means home prices will slide ever more as the American Dream of home ownership is forgotten, leading to even less wealth extraction via home equity loans...

"Typically, the decision to renovate a home is a function of the value the homeowner sees in the home and the ability to finance the improvements.  Rising prices is a signal to homeowners that the home is a good investment, so renovating would only increase the potential return on investment. In addition, when home prices are rising, homeowners can borrow against home equity to finance renovations. The housing boom brought a notable increase in home equity lines of credit and second liens, which were used to finance renovations. This has since collapsed along with home prices."

Which means no hope for a long, long time.

...

Actually, there is hope... in 2020.

"The gain in renovations and multifamily building in the next two years should provide some support before the eventual turn in single family  construction begins. Assuming housing starts return to the historical average of 1.5 million by 2016 and renovation spending remains healthy, residential investment will once again become an important part of the economy. We expect residential investment to reach 3.5% of GDP by 2016 and return to the historical average of 4% by 2020."

 

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Thu, 04/19/2012 - 11:14 | 2358363 SilverTree
SilverTree's picture

.

Thu, 04/19/2012 - 11:18 | 2358371 wang (not verified)
wang's picture

Great interview on Bloomberg Radio this AM (Robert Wetenhall, analyst with RBC Capital Markets) with Tom Keene on housing - link is not yet available

 

the  so called recovery is about to get impaled by a tsunami of foreclosures with prices dropping a further 5% at least - recovery will take years with the added bonus that those who have been living rent free are about to direct some of that windfall of "disposable income" to actually paying for shelter

Thu, 04/19/2012 - 11:20 | 2358385 Oh regional Indian
Oh regional Indian's picture

no housing recovery intended.

Was just thinking last night about my 12 year American sjourn. in effect, magical as it was, in all respects, started with a big fat school loan that followed me back to India...and ended, in June 2006 with jobless me and my equally jobless partner, neither collecting (or collected) any kind of .gov hand-outs even, so FLAT BROKE 9we did drive my awesome 87 528e, in style though.....

We got a million DOllar NINJA loan. 

We were looking at creek properties in Berkely. Such a joke back then. Already.

No recovery is intended. mcMansions will go back to being farm land, irridiated or otherwise.

ori

socthr-e-never-too-late

Thu, 04/19/2012 - 11:31 | 2358432 MillionDollarBonus_
MillionDollarBonus_'s picture

This article fails to take into account the many green shoots in the economy.  For example, we have had consistently positive NFP results coupled with superb bank stress tests, which the doomers always fail to mention. In addition, the successful Greek restructuring indicates that the "imbalances" in Portugal and Spain will be inconsequential, despite the whining from doomer libertarians. In short, the global recovery is strengthening, and we are well overdue for a sharp rebound in property prices in accordance with the fundamentals for global economic growth.

Thu, 04/19/2012 - 11:34 | 2358448 CPL
CPL's picture

God yer a fucking retard. 

 

Is there a home missing a resident?  If you are please retrieve Mr. Millions before the doors are locked for the night.

Thu, 04/19/2012 - 11:41 | 2358472 Hippocratic Oaf
Hippocratic Oaf's picture

CPL

Obviously you haven't had the pleasure of meeting our newly avatar'd MDB.

Take his comments on the lite side. His humor is somewhat needed.

Thu, 04/19/2012 - 12:03 | 2358561 economics9698
economics9698's picture

MDB mentions something serious.  The stress test were given to banks on the event that housing prices would fall, they all passed.  But the real tits up crisis will be when interest rates rise and they are all holding 4% paper.

Thu, 04/19/2012 - 13:59 | 2358942 Bwahaha WAGFDSMB
Bwahaha WAGFDSMB's picture

Yes, they all passed, Dexia included.

Thu, 04/19/2012 - 16:22 | 2359439 neidermeyer
neidermeyer's picture

Dexia is a champ compared to SunTrust... I just wonder what the results might have been if the T-Bills and other bonds they hold are hammered with a few % points increase in rates.

Thu, 04/19/2012 - 12:06 | 2358569 Dr. Richard Head
Dr. Richard Head's picture

I also find humor in the responses to MDB's posts.  I sometimes like to kick him verbally with retorts.  Keeps me sharp for when our company's 401K portfolio manager comes in to sell some snake oil to our Board of Directors.

Thu, 04/19/2012 - 12:45 | 2358679 The Big Ching-aso
The Big Ching-aso's picture

 

 

Stupid Question of the Day...................

How can you accurately predict subjective value 8+ years in the future through 5 simple subjective charts?

 

 

Answer:  You phuckin' don't.

 

Thu, 04/19/2012 - 15:49 | 2359328 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Exactly TBC. I looked into my crystal ball and realized that I was going to be a millionaire not so far off in the future. Well, at that point $1 million would buy one Big Mac. Hey, it is the future.

Thu, 04/19/2012 - 16:51 | 2359534 Larry Dallas
Larry Dallas's picture

Up Arrow +1000

Unless of course the RMBS/CMBS machine starts cranking again and China, Germans and everyone else in the developed world has a reason to buy crappy paper again.

Until then, there is absolutely no catalyst for home appreciation forseeable in the next 10 years.

Thu, 04/19/2012 - 17:52 | 2359661 MeelionDollerBogus
MeelionDollerBogus's picture

If they're 5 good charts odds are very good you can see where value will NOT be and draw your own conclusions.

Thu, 04/19/2012 - 12:58 | 2358722 Red Heeler
Red Heeler's picture

"Take his comments on the lite side. His humor is somewhat needed."

I get more of a kick out of replies such as CPL's than MDB's original posts. They're an excellent comedy team - MDB and his legion of unacquainted straight men. 

Thu, 04/19/2012 - 12:14 | 2358593 jez
jez's picture

Naw, MDB is great. And the "green shoots" he refers to are even now pushing their way up between the cracks in the floorboards in abandoned McMansions all across America.

Thu, 04/19/2012 - 14:37 | 2359086 wee-weed up
wee-weed up's picture

@MDB  many green shoots

Obama Admin and DNC talking points

Pure bullshit for sheeple and MSM consumption

Thu, 04/19/2012 - 17:49 | 2359656 MeelionDollerBogus
Thu, 04/19/2012 - 12:32 | 2358648 q99x2
q99x2's picture

Good year to fuck a leopard. What's that? Hehe, oh I see got my glasses now.

Thu, 04/19/2012 - 11:35 | 2358452 Vincent Vega
Vincent Vega's picture

You're just not funny anymore.

Thu, 04/19/2012 - 11:39 | 2358464 Clueless Economist
Clueless Economist's picture

Very good effort, right up there with the original MDB!

I renowned Clueless Economist Paul Krugman salute you sir!

Thu, 04/19/2012 - 11:44 | 2358466 GCT
GCT's picture

Well done MDB.  I see you have done some more homework at the local CNBC and MSM.  I thought we lost you for a while there.  We all need your daily humor.  While your at it could you please post your charts and figures showing us where we are making our mistakes.  We obviously need to correct our way of thinking and our charts. Historically if you look without government intervention I think it would have been the year 2015.

MDB as you know we tend to believe more when you post your proof in this and thanks!

Thu, 04/19/2012 - 11:42 | 2358474 conork
conork's picture

Ah yes, stress tests, I remember Ireland was put through a stress test, think less than 12months later we had the IMF popping in for a visit.

Thu, 04/19/2012 - 11:44 | 2358478 William113
William113's picture

Why do you waste your time commenting. You must be related to Larry Yun.

Thu, 04/19/2012 - 12:07 | 2358574 EvlTheCat
EvlTheCat's picture

The people down the street from my mother will be happy to hear your suggestion that property prices are about to rebound!  They bought their house at $325 thousand and are now short selling for $175 thousand.  I will run over there and tell them the good news.  Maybe they will hold out for the recovery?

Thanks for the heads up!

Thu, 04/19/2012 - 12:18 | 2358601 Buzzworthy
Buzzworthy's picture

MDB = Robert Brusca?

Thu, 04/19/2012 - 17:41 | 2359636 MeelionDollerBogus
MeelionDollerBogus's picture

MDB = Joe Weisenthal, Business Insider ! just listen to both of them and tell me where you spot the difference...

Thu, 04/19/2012 - 12:22 | 2358617 Thamesford
Thamesford's picture

Hey MDB! I am sure you forgot to type "/sarc" before you hit save, no?

Thu, 04/19/2012 - 12:41 | 2358671 Grinder74
Grinder74's picture

Been eating dog again?

Thu, 04/19/2012 - 12:41 | 2358674 SeattleBruce
SeattleBruce's picture

"fails to take into account the many green shoots in the economy."

 

Let me pick myself up off the floor from mock laughing...you didn't just use that term, did ya?  Seriously?

Thu, 04/19/2012 - 17:40 | 2359635 MeelionDollerBogus
MeelionDollerBogus's picture

what about Japan? Isn't that green shoots? Oh wait, I think the actual color is called Cerenkov blue

Thu, 04/19/2012 - 17:36 | 2359630 MeelionDollerBogus
MeelionDollerBogus's picture

For example, we have had consistently positive NFP results

which are revised down later and actually some have NOT been positive even before revision...

In addition, the successful Greek restructuring indicates

that you're living in wonderland because there isn't any such restructuring...

despite the whining from doomer libertarians

giggity, the MDB money-shot at libertarians ...

overdue for a sharp rebound in property prices in accordance

in accordance to the massive wage increases and new credit lending to home owners... which is ... negative. Ya... good call, MillionFecesBonus. You're a SUPA-STAHHHHHH


Thu, 04/19/2012 - 11:27 | 2358416 Desert Irish
Desert Irish's picture

What it amounts to is even with a 5% drop (I've heard 10% is more likely) everyone that has bought a house since 2008 has effectively lost their deposit so one more reason to walk away further swelling the forclosure backlog. And this is bullish......

Thu, 04/19/2012 - 11:55 | 2358526 WonderDawg
WonderDawg's picture

10% is wildly optimistic. Even Schiller, of Case-Schiller, said last year that prices had another 25-40% yet to fall. This is closer to the truth, but possibly still a bit optimistic.

Thu, 04/19/2012 - 12:29 | 2358628 Bollixed
Bollixed's picture

Yes, but with the coming riots and the burning down of entire city blocks all across have-not-ville what once was an oversupply of housing will become a net breakeven once the obamanites are moved from stadium quarters into the now confiscated rentals units in the onward drive known as spreading the wealth around.

The coming ghettoization of outer-city suburbia will no doubt make that 40% figure look wildly optimistic.

Thu, 04/19/2012 - 12:44 | 2358687 SeattleBruce
SeattleBruce's picture

"Yes, but with the coming riots and the burning down of entire city blocks all across have-not-ville what once was an oversupply of housing will become a net breakeven"

Now there's a contrarian view - gotta love ZH.

Thu, 04/19/2012 - 14:44 | 2359110 wee-weed up
wee-weed up's picture

Trickle-up poverty, bitchez!

Thu, 04/19/2012 - 15:52 | 2359345 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

"The coming ghettoization of outer-city suburbia will no doubt make that 40% figure look wildly optimistic."

Yes, that is already occurring in certain places. I looked up my former high school in a middle class suburban community. When I attended, it was a fairly good school a few years back.  It was described recently as a "dropout mill".

Thu, 04/19/2012 - 12:37 | 2358660 centerline
centerline's picture

That is my understanding as well.  And it is the good news, considering many other financial investments are even more overpriced relative to the "real world."  Lots of pain coming one way or another.  If the TBTP have it their way, it will be through coordinated inflation.

Thu, 04/19/2012 - 14:18 | 2359017 Slim
Slim's picture

I've read about everything Schiller has said and he's pretty careful with numbers even though he does say he believes that we could indeed go substantially lower (has NEVER said we will or that's his base case...he's careful).  I believe you are talking about Shilling who is pretty bearish and this is his full bear case.  Not saying your wrong but I've seen these confused before and this is a lot more consistent with Shilling.  If you have a link or referencable quote I'd be interested.

Thu, 04/19/2012 - 11:35 | 2358451 narnia
narnia's picture

I'm sure the people of Japan thought that the housing market in 1995 would be back to normal by 2003.  They were wrong.

There's too many involuntary transactions that need to be unwound, too much inventory to be liquidated, and too much credit to be expunged or inflated away for us to get any sense what housing is worth.  

Thu, 04/19/2012 - 12:53 | 2358713 Bicycle Repairman
Bicycle Repairman's picture

The housing market in Japan is never returning to normal.

Thu, 04/19/2012 - 14:07 | 2358969 Bwahaha WAGFDSMB
Bwahaha WAGFDSMB's picture

Depends on how you define normal.

Thu, 04/19/2012 - 16:36 | 2359489 neidermeyer
neidermeyer's picture

Normal for Japan is a steadily decreasing population of people in their prime earning years, an aging population (everyone gets one day older each day) , and new births below replacement... most land is still underwater and much of it now glows slightly (as noted by others this "hold until recovery" real estate will be liquidated by force at some point ,, taxes , death , to pay for something that cannot be avoided) ... like us they have shipped manufacturing off to other countries such as Thailand and Malaysia ... their banks are STILL zombies 20+ years later ... they're doomed ... NORMAL SUCKS SOMETIMES...    They needed to pull an Iceland when they could have... they had basically no foreign debt when this started.

Fri, 04/20/2012 - 08:34 | 2360667 Bicycle Repairman
Bicycle Repairman's picture

"Depends on how you define normal."

People living in houses, as opposed to the houses being irradiated wrecks.

Thu, 04/19/2012 - 19:52 | 2359885 rosiescenario
rosiescenario's picture

There will be a psychological spillover from these short  sales and foreclosures....if my neighbor is foreclosed upon, does that make me want to ante up for a new car? Maybe buy another motorcycle? Or does it make me think, hey I better be careful here, or that will be me.

 

All these foreclosures I think will lead to less spending and more saving and I rather doubt the economists have figured that out.

Thu, 04/19/2012 - 12:26 | 2358626 Gully Foyle
Gully Foyle's picture

How come there is no estimate on rising property taxes?

Won't that be the real killer for new home owners?

 

Thu, 04/19/2012 - 16:39 | 2359497 neidermeyer
neidermeyer's picture

Absolutely ,, 5-10 years down the road that 3,000 sq ft house with a $2,000 a month mortgage will have a $100,000/month property tax bill (a coffee will be $100 at 7-11) ... we'll see "Detroit" on a wide scale ... people will buy abandoned houses cheap or free , live in them until it gets sold for unpaid taxes and buy another.

Thu, 04/19/2012 - 14:57 | 2359151 Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture

<-- Keep renting, don't worry about collapse for a few years

<-- Buy now with FHA loan, fortify house with water, greenhouse, livestock

 

I am so torn...

Thu, 04/19/2012 - 11:13 | 2358369 Clueless Economist
Clueless Economist's picture

I (and Jim Cramer) disagree with your 5 simple charts....we have hit a bottom and are now in recovery.

Prepare yourself for Recovery Summer .

Thu, 04/19/2012 - 11:21 | 2358393 resurger
resurger's picture

lol

Thu, 04/19/2012 - 11:24 | 2358399 Dr. Engali
Dr. Engali's picture

You mean this guy? I didn't junk you. I know you're clueless :>

 

http://www.youtube.com/watch?v=HPc16cuQJR0

Thu, 04/19/2012 - 11:30 | 2358430 azzhatter
azzhatter's picture

again?

Thu, 04/19/2012 - 11:31 | 2358434 JailBank
JailBank's picture

3rd recovery summer in a row isn't it?

Thu, 04/19/2012 - 12:43 | 2358678 Grinder74
Grinder74's picture

It's like the economy and like Lindsy Lohan are like totally twins and all.

Thu, 04/19/2012 - 12:47 | 2358684 Bananamerican
Bananamerican's picture

it's like Coachella..."Recovery Summer 2012 Edition™"

Thu, 04/19/2012 - 11:53 | 2358503 jus_lite_reading
jus_lite_reading's picture

There's a recovery every spring, summer, fall and winter from now until WWIII. I can guarantee world war will be the final unintended consequence of central planning... the "mutually assured destruction" thingy is getting old and China is getting tired of holding worthless dollars/euros/yen and ponzi of every kind. 

Hold tight boys... those few naive homebuyers will be sorry in just a few short months when their property taxes skyrockets and home equity plunges 10%+ this year...

BTW, you are funny!

Thu, 04/19/2012 - 13:27 | 2358839 blunderdog
blunderdog's picture

I tried a recovery summer a few years ago.

It lasted right up until an outdoor Sunday brunch watching a friend sip mimosas.  Thank god I was able to end the horror there.

Thu, 04/19/2012 - 11:17 | 2358379 Lazane
Lazane's picture

The foreclosure market has been artifically manipulated by the central banksters in order to manage the misery versus manage the chaos, I think these charts provide clarity for navigating the real estate market for at least the next 5 years. 

Thu, 04/19/2012 - 11:22 | 2358402 NotApplicable
NotApplicable's picture

RE market? By the end of five years, there won't be any mortgages not owned by some gov. entity (with the exception of the 1%ers who will borrow from some corp/investment club instead).

RE is dead, dead, dead, dead.

By 2020 your political connections will determine your mortgage rate.

Thu, 04/19/2012 - 16:06 | 2359386 johnnynaps
johnnynaps's picture

I agree. RE is beyond dead. I cant wait to see what happens when the boomers leave these properties to their burger flipping kids who won't be able to handle the taxes let alone any mortgage payments.

Thu, 04/19/2012 - 11:58 | 2358540 csmith
csmith's picture

...manage the misery versus manage the chaos,

 

This is the single best description of what our political leadership has been trying to do for the past 4  years that I've seen yet. We could have had chaos for a few short months, and many who today remain in positions of power and wealth would have been ousted, but we would now be in recovery. Instead, we're in for at least 5 more years of misery. 

You pays your money and you makes your choice...

Thu, 04/19/2012 - 12:50 | 2358708 SeattleBruce
SeattleBruce's picture

Recall the idea, the notion at the outset of the United States of America, of farmers and blacksmiths serving their country for a time - 4 or 8 years, and then returning to their vocations - their true calling?  Imagine - they were called civilian politician, civilian servants - civil servants.  How FAR away we've gone from those quaint notions.

Thu, 04/19/2012 - 11:17 | 2358380 NotApplicable
NotApplicable's picture

Good thing housing starts are "up."

Thu, 04/19/2012 - 11:58 | 2358532 WonderDawg
WonderDawg's picture

Close, but not quite. Applications for permits are up, starts are down.

Thu, 04/19/2012 - 14:57 | 2359154 smiler03
smiler03's picture

Terrorist.

Thu, 04/19/2012 - 11:19 | 2358381 Boilermaker
Boilermaker's picture

BoA CEO just announced the housing bottom was in.

I'm confused.  This is very concerning.

Thu, 04/19/2012 - 11:25 | 2358417 Chupacabra-322
Chupacabra-322's picture

@ Boilermaker, "BoA CEO just announced the housing bottom was in."

Translation: BoA CEO just announced that housing hasn't hit bottom.

Word to the wise.  Whenever a CEO or politician announces something.  Think the opposite will happen.  It's called double speak or Jedi mind tricks. 

Thu, 04/19/2012 - 11:31 | 2358428 Boilermaker
Boilermaker's picture

Huh?  I even recieved a 'breaking news alert' from CNBC to my mobile phone clearly stating that Moyinhan said specifically that it was over.  I doubt very seriously that he would fib on that.

Thu, 04/19/2012 - 11:47 | 2358486 GCT
GCT's picture

Boiler some media outlets are now stating it was a faked letter.  Not sure myself.  Only time will tell but I got the same message.

Thu, 04/19/2012 - 12:10 | 2358584 Boilermaker
Boilermaker's picture

True, but what if Moynihan himself faked his own letter?

Thu, 04/19/2012 - 13:50 | 2358909 Temporalist
Temporalist's picture

Shit Moynihan fakes his own humanity, a letter is nothing compared to that.

Thu, 04/19/2012 - 11:59 | 2358544 Vince Clortho
Vince Clortho's picture

The important thing is that the rumor has been released, or there was a rumor of a rumor, or something like that.

Taking reality into account is soooo old school.

Thu, 04/19/2012 - 12:12 | 2358591 Boilermaker
Boilermaker's picture

Yes, but SEC regs clearly state that it's illegal to falsely and knowingly spread a rumor to gain a market movement.  So, that's not what's going on.

Thu, 04/19/2012 - 12:43 | 2358683 Grinder74
Grinder74's picture

And if you're a midget, that's not all that's getting spread.

Thu, 04/19/2012 - 11:19 | 2358386 tony bonn
tony bonn's picture

but jim cramer promised that the housing recovery would start in june 2009...

Thu, 04/19/2012 - 11:43 | 2358476 Dien Bien Poo
Dien Bien Poo's picture

jim Cramer! what a clown. How can he be on tv still. Hes the financial equivalent of that old dog on Chanel J TV in NY years ago who used to sing "baby can you bang my box!

There is one guy worse than him tho...Kudlow....ugh.

Thu, 04/19/2012 - 13:29 | 2358850 contrarianz
contrarianz's picture

Totally agree. 

Thu, 04/19/2012 - 11:19 | 2358388 resurger
resurger's picture

living with the parents is not all that bad if ya not married, those old folks bring happiness & blessings to us, we will try our best to pay them back if not with money, then by putting a smile on their faces.

miss my moms morning black coffee & my dads endless rants...

 

Thu, 04/19/2012 - 11:23 | 2358406 SheepDog-One
SheepDog-One's picture

Not MY folks....hell I'd much rather live in a cardboard box than ever live with my folks again.

Thu, 04/19/2012 - 11:24 | 2358408 NotApplicable
NotApplicable's picture

Funny how the boom split families apart, while the bust is bringing them back together.

Thu, 04/19/2012 - 11:25 | 2358412 insanelysane
insanelysane's picture

read the book "shit my dad says"

If my kids don't move out in 10 years, I am going to move out on them.

Thu, 04/19/2012 - 11:26 | 2358418 SheepDog-One
SheepDog-One's picture

LOL, just announce to the squatter kids that you just sold the house.

Thu, 04/19/2012 - 12:48 | 2358698 Bananamerican
Bananamerican's picture

unless they're ZH kids...they'll just call "bullshit"

Thu, 04/19/2012 - 11:33 | 2358440 NotAMathWhiz
NotAMathWhiz's picture

We can rant at you, but you gotta bring your own coffee...

Thu, 04/19/2012 - 11:54 | 2358512 trembo slice
trembo slice's picture

It's really not that bad.  It sure makes getting laid a lot less likely.  Out of respect I don't want to bring some skank home and root in the same house with my mother.  I enjoyed living with them for the past year especially Mom's cooking. 

But, I had to get out.

Thu, 04/19/2012 - 12:54 | 2358712 killallthefiat
killallthefiat's picture

Do you think your parents want you there?

Thu, 04/19/2012 - 11:21 | 2358396 ceilidh_trail
ceilidh_trail's picture

I'll know the recovery is really in when the people living in their mom's basement next door buy another house for themselves. Since they walked away from their first one, it'll be interesting to see how long that'll be...

Thu, 04/19/2012 - 11:23 | 2358401 SheepDog-One
SheepDog-One's picture

But...but....theres never been a better time than right now to buy a new home, contact your local NAR realtor today! HURRY!

Thu, 04/19/2012 - 11:34 | 2358442 Kali
Kali's picture

A little off topic, but, another instance of bad parents dumping their problems on some one else.  A house I bought over a decade ago, the neighbor was a party hardy 20-something.  Beer cans, broken bottles all over, music LOUD til 3 in morning every night, neighbors constantly calling police on them.  Never could figure out how he could afford to buy house, obviously couldnt maintain it.  Ends up, his parents bought the house to get him out of theirs', they couldn't get him to leave.  He finally sold house and moved, the whole neighborhood rejoiced and danced in the street the day the for sale sign went up.

Thu, 04/19/2012 - 13:43 | 2358887 dearth vader
dearth vader's picture

Pure coincidence, of course, but in Dutch NAR means a court jester. So very appropriate!

Thu, 04/19/2012 - 11:24 | 2358405 kekekekekekeke
kekekekekekeke's picture

I don't understand why ANYONE in their 20s would buy?  Unless I guess they lived in some small town that they knew they were going to die in... isn't the whole point of being in your 20s about being mobile and flexible and not tied down

Thu, 04/19/2012 - 11:46 | 2358487 engineertheeconomy
engineertheeconomy's picture

Houses are selling for 10 to 20 grand if you look hard on the outskirts. You can save that much cash in a yr if you don't mind working. Just don't take out a loan if you can't pay it back. That's the mistake 3 out of 4 people make. People don't study usury rate/foreclosure curves like they should

Thu, 04/19/2012 - 12:32 | 2358652 Gully Foyle
Gully Foyle's picture

engineertheeconomy

Many communities will give you 5k toward closing costs. You go through a few hours of training and an assessment for eligibility.

You need to remain in the house for three or five years, and it needs to be a first home.

The thing is, you can reapply later on, rent the first home and buy a second.

Many communities have low priced older homes, but there is no job market.

Some areas market those home to seniors for retirement.

Not bad compared to the cities they live in now, low crime and relatively low cost of living doesn't take as large a bite out as say NYC does.


Thu, 04/19/2012 - 11:24 | 2358414 Snakeeyes
Snakeeyes's picture

Good post!

The Fed simply can't jumpstart the housing market because ... it is dead! Killed, in part, by Fannie Mae, Freddie Mac and HUD.

http://confoundedinterest.wordpress.com/2012/04/19/existing-home-sales-d...

 

Thu, 04/19/2012 - 11:27 | 2358420 SheepDog-One
SheepDog-One's picture

They strangled the shit out of the Golden Goose stone dead and are now wondering why it doesnt lay any eggs.

Thu, 04/19/2012 - 11:41 | 2358469 engineertheeconomy
engineertheeconomy's picture

Everything is going as planned.

They already own everything, now it's just a matter of killing off the population...

Thu, 04/19/2012 - 12:00 | 2358553 hedgeless_horseman
hedgeless_horseman's picture

 

 

The population is domesticated and comfortable.  No need for a cull.

Thu, 04/19/2012 - 12:04 | 2358563 Ghordius
Ghordius's picture

I agree fully. They are consumers, which means credit. Culling would be wasteful.

Thu, 04/19/2012 - 12:35 | 2358659 Gully Foyle
Gully Foyle's picture

engineertheeconomy

No one will be killing off the population.

That has to be one of the looniest conspiracy theories yet.

First aging will start decimating the industrial world over the next few decades.

Once that happens you need people to buy goods, and young people as labor.

Population peaks at about 9 billion around 2050 then starts declining.


Thu, 04/19/2012 - 11:27 | 2358423 ejmoosa
ejmoosa's picture

Live at home long enough and the kids won't have to move to have a house alone.

Thu, 04/19/2012 - 11:29 | 2358424 dick cheneys ghost
dick cheneys ghost's picture

Try 2060..............Or Never..........it just aint gonna happen.........

Thu, 04/19/2012 - 11:29 | 2358427 Pure Evil
Pure Evil's picture

If you want to solve the housing crises just import 30 million new homeowners a year and give each one 10 million dollars.

Thu, 04/19/2012 - 12:25 | 2358627 fwchiro
fwchiro's picture

Step one: Don't build a fence bettween the US and Mexi....err, the future Americans...done!

Thu, 04/19/2012 - 12:37 | 2358665 Gully Foyle
Gully Foyle's picture

fwchiro

You understand that illegals are moving away from the US, and I believe we have hit ZERO illegal immigration.


Thu, 04/19/2012 - 17:07 | 2359581 Pure Evil
Pure Evil's picture

I guess all those Amigos down at the car wash by my casa are just an outlier.

 

We may have hit ZERO illegal immigration, but the US .Gov still imports well over 2 million annually via lottery visas, student visas, visitor visas, fiance visas, family reunification visas, and all types of work visas. And these are just the tip of the ice berg of visas that are handed out on an annual basis.

 

http://www.globalvisas.com/countries/us_immigration.html

 

Check out that link and scroll down while looking in left side column.

Thu, 04/19/2012 - 11:36 | 2358457 engineertheeconomy
engineertheeconomy's picture

Housing recovery?

Banks don't make home loans anymore and probably never will unless there is a revolution.

Banks are in the business of RENTING homes now.

The Octopuss is putting the final deathgrip on its victim.

Now wake the fuck up and join the revolution like TED NUGENT

Thu, 04/19/2012 - 11:52 | 2358493 dwdollar
dwdollar's picture

"...like TED NUGENT"

Join the revolution and "elect" Romney???

Ahahaha...

If people like Ted Nugent and Chuck Norris had a shred of authenticity they would have endorsed Ron Paul years ago.

Thu, 04/19/2012 - 13:47 | 2358899 FinalCollapse
FinalCollapse's picture

Eng - Ted Nugent is cool as a singer but retard as a politician. To endorse Rombama - the guy who railroads/corrupts the GOP election process in a way that would make North Koreans blush? Eeeeeeew. 

Thu, 04/19/2012 - 11:39 | 2358468 dirtbagger
dirtbagger's picture

Don't buy the timeline.  Examination of the  national House Pricing Index shows that the Index will most likely hit the 35 year trend line by 2013.  Good chance that the index will overshoot the trendline to the negative during the bottoming process.   Expect to see a housing bottom no later than 2014.  

Buyers on the sideline will begin to return to the market as the cost of home ownership rivals the cost of renting and as the market is perceived to be in the bottoming process.   Interest rates will remain low(thanks to the Fed) for infinity, making houses even more affordable.  

This process is already happening in the deeply distressed markets where house prices have plunged in excess of 50%.   New housing construction to remain in the doldrums for years as cost PSF is much higher than on existing inventory.  Post bottoming, housing will again renew their long term appreciation ascent at about 2% per year.  

Thu, 04/19/2012 - 22:14 | 2360154 geoffb
geoffb's picture

I'll take the over on that. There is no goddamn income in the cohort that will be forming households and a giant pile of boomers looking to sell.

Thu, 04/19/2012 - 11:44 | 2358481 orangegeek
orangegeek's picture

The bottom of the market is likely to occur in 2016.

 

Whatever it takes, the next part of this market cycle will include the repayment and default of our mortgaged future, however long it takes.

 

Elliott wave folk are calling for the Dow to go below 1000.  It certainly fits into their model and with governments/countries defaulting, nothing would surprise.

 

http://bullandbearmash.com/index/djia/weekly/

Thu, 04/19/2012 - 12:37 | 2358666 lasvegaspersona
lasvegaspersona's picture

sounds like a deflationary outcome...can not happen in a fiat system due to lack of political will. The public will demand 'something be done' about falling prices. Even though that is the way things 'should' happen it never does. While hyperinflation is a much more devastating outcome it is the way that is always chosen because people only see the nominal. Collectively we are like a guy who buys a guitar for $500 and will not sell it for 'a penny less'. We are just not wired for deflation. Only when the money is real can there be deflation. If we had a system with real money we would get used to prices going down sometimes. Instead we have a system where prices stabilize  BUT THE VALUE OF MONEY GOES DOWN. I guess we collectively we just prefer that.

Thu, 04/19/2012 - 11:46 | 2358485 Dingleberry
Dingleberry's picture

no bottom until interest rates rise to normal levels (i.e. inflation plus a few percent). That will determine correct housing prices because it will determine correct housing payments. People buy payments. They do not buy houses. And now throw huge student loani payments nto the mix......see you at the bottom!!!

Thu, 04/19/2012 - 11:49 | 2358498 flacorps
flacorps's picture

It would help in the recovery if the banks would:

1. Finish their foreclosures (I know of many that have been dismissed for failure to prosecute). Those cases have to be re-filed with the court to get 'em moving again.

2. Remarket the properties. We have some around that are bank-owned but they're not on the market.

These observations are in Land O Lakes, FL in case anyone wants to know.

Thu, 04/19/2012 - 12:03 | 2358562 dirtbagger
dirtbagger's picture

Banks will probably continue the slow trickle of distressed inventory onto the market.  Problem is, once the distressed properties are sold, the banks will have to discount the loan values to market.   No more presenting the HELOC's and Jr Notes on the balance sheet at full value.

Like others have said, if the housing market had been allowed to function without so much interference, we would be looking at the housing bottom in the rear view mirror.   Make no mistake, the number one priority of Bush, Obama, Romney, etc will be to preserve the illusion that the banks are solvent.  Expect the same policies of low interest rates, slow inventory release, and continued mark to fantasy balance sheets.

Thu, 04/19/2012 - 12:12 | 2358588 Vince Clortho
Vince Clortho's picture

Florida especially has a major problem with all these vacant foreclosed homes sitting around in the heat and humidity.  Most of them have the power turned off, no AC running.  If they sit for a summer or two (which many of them have), the heat and humidity start to produce insect infestation and even worse, Mold.  You can pull out the rugs, curtains, etc, but the mold also gets into the walls.  If it gets that bad, the only recourse is to gut the house down to the structure and rebuild.  That home is not so inexpensive anymore.  The banks are not about to pour that kind of capital into a dead market. And buyers are generally better off building a new home if you compare cost, aesthetics, health risks, and so on.

Many of these homes are truly toxic liabilities, and there is no profitable solution now for the banks.

Maybe that's part of the reason Bernank is wearing out the print button on his HP.

Thu, 04/19/2012 - 13:36 | 2358865 contrarianz
contrarianz's picture

Not just florida, most of these forclosed homes around the country will have to start being torn down. 

Thu, 04/19/2012 - 13:36 | 2358866 contrarianz
contrarianz's picture

Not just florida, most of these forclosed homes around the country will have to start being torn down. 

Thu, 04/19/2012 - 11:52 | 2358509 bankonzhongguo
bankonzhongguo's picture

In order to "stabilize" the real estate economy, the bank regulators will allow banks to become landlords en masse to weather the "housing emergency" rather than sell anything.

http://www.usnews.com/news/blogs/home-front/2012/03/23/your-new-landlord...

The return on rental income for a property that does not have a mortgage - meaning its owned by the bank exceed any other return in the so called market.

Why use a facility like ZIRP unless you can actually "hold the ground?"  Why keep churning the same free money when you can control a real asset in perpetuity.

You have property management fees and property taxes.  That's it.

The rest is gravy and because the lower end of the market is government subsidized, its just another macro method to fleece the taxpayers.

You can't make this stuff up.

Thu, 04/19/2012 - 13:55 | 2358929 blunderdog
blunderdog's picture

That's a pretty transparent scam.  Obviously they'll make the generous offer to the people with deeds to houses BoA can't produce notes for. 

Ignore that shit and make 'em foreclose.

Thu, 04/19/2012 - 11:54 | 2358511 monopoly
monopoly's picture

Between MDB and the sham Cramer I am ready to throw up. I will double my regular donations to the site if Tyler gives us an ignore button.:))

Housing recovery, not in this decade.

Thu, 04/19/2012 - 11:53 | 2358521 Rubbish
Rubbish's picture

As a boomer with some time left till riding off into the sunset, strategic default is always on the table as an option. I think this option is what is haunting this market, it's untalked about, no one wants to admit it, but the boomers know it's viable.

 

At some time the albatross must go.

Thu, 04/19/2012 - 11:57 | 2358531 EvlTheCat
EvlTheCat's picture

"We should expect to see the 25-34 year olds move out of their family homes once the economy heals. It may take more time for the younger age cohort."

Yep, when the economy heals.. Right out of their parents house into Century Village.

Thu, 04/19/2012 - 11:59 | 2358537 RagnarDanneskjold
RagnarDanneskjold's picture

How about China's housing market? Developers are trying to sell half-built buildings or empty land at 50% discounts in order to pay back private equity investments that are really just high-interest bridge loans with rates sometimes exceeding 20%.

Hundreds of billions in private placements are just covert loan sharking; high interest loans masquerade as equity stakes

 

Thu, 04/19/2012 - 13:27 | 2358843 contrarianz
contrarianz's picture

Hugh Hendry has been calling this for a long time.

Thu, 04/19/2012 - 12:04 | 2358560 asteroids
asteroids's picture

By 2020 you'll see a good portion of kids living at home inheriting. Boy I can't wait to see the headlines of home ownership rising!

Thu, 04/19/2012 - 12:13 | 2358590 Curt W
Curt W's picture

I have seen this story several times where 20 somethings are staying home.  Another trend I believe is When retired older couples downgrade from their large home, they are more and more moving in with one of the kids.

Thu, 04/19/2012 - 12:22 | 2358621 Rubbish
Rubbish's picture

Not so sure about that, my daughter now age 32 bought a home in late 2009 as I recall for $390k, that $8k give away was nice eh? I begged her not to do it, just wait, time is on your side. No dad...

 

Today that same house sells for $330k

 

Question now becomes, how long do these first time buyers bite the bullet in an ever decreasing market?

 

PS Please take my 22 yr, old son, he is eating me out of house and home...heh heh

Thu, 04/19/2012 - 13:55 | 2358921 Temporalist
Temporalist's picture

Put him to work by making him build a garden and tend some chickens or goats.

Thu, 04/19/2012 - 12:15 | 2358595 pods
pods's picture

You had me at "No Housing Recovery."

Thu, 04/19/2012 - 12:17 | 2358604 fwchiro
fwchiro's picture

I propose to simplify the process of economic forecast reporting down to the following template:  

"Mr./Mrs./Ms. {Insert name of useless pundit/talking head/windbag}{insert qualifications that are irrelevent to critical thinking but impress the unwashed masses} believes that {insert market sector/commodity/etc} will go {up/down/supernova/etc} by {insert date pulled completely out of rectum} due to {data massaged/manipulated/derived/hedonic/completely made up by the reporters dog}  Insert several graphs and charts and... done.  All future forcating should conform to the ZH forcast template to allow for ease of reading and proper critical analysis.  Thanks for your attention in this matter.

Thu, 04/19/2012 - 12:29 | 2358639 wang (not verified)
wang's picture

hmmm

 

Close to one-quarter of Canadians willing to enter into house `bidding war': BMO

 

 

http://www.canada.com/news/Close+quarter+Canadians+willing+enter+into+ho...

Thu, 04/19/2012 - 12:30 | 2358647 Hot Shakedown
Hot Shakedown's picture

Here is what Diane Olnick had to say over at CNBC Mobil:
"Supply is tight because banks, after the 25 billion dollar mortgage settlement over so-called "robo-signing" have slowed much of the foreclosure process, trying to modify more loans or find foreclosure alternatives. We predicted this earlier."

Is this statement regarding less supply the complete opposite of what occurred after the banks' $25 billion deal? Am I missing something ? Can't the MSM do better than this ? Forclosures INCREASED as a result of this deal. MSM editors should end up in hell.

Thu, 04/19/2012 - 12:38 | 2358668 xcehn
xcehn's picture

There are those who hold affordable underwater mortgages but sit on the fence with respect to walking away. They see the market hasn't nearly finished bottoming out but they have been waiting for any decisive signs of economic recovery. I expect that these homeowners will indeed walk away this year in massive numbers. That is rightly a major fear in 2012 for the US PTB.

Thu, 04/19/2012 - 12:40 | 2358675 Aristarchus of Samos
Aristarchus of Samos's picture

These projections are based upon lagging indicators.  The forward actions will be controlled by the coming election. The markets are unable to clear backlog and perform price discovery because of governmental interference in the process.  That said, there is still a foreclosure backlog which will continue into 2014, but not necessarily into 2020.  The latter will depend on whether Congress can get control of Freddie and Fannie back, and stop them from continuing to make high-risk loans.  Then if the foreclosure process were allowed to proceed without interference, the market would clear.  Good luck to us.

Thu, 04/19/2012 - 12:50 | 2358702 aerial view
aerial view's picture

"6.6 million homes need to be liquidated in the next 5 years"-that's assuming the economy doesn't get worse. If rents continue to increase, squatters will be living in these foreclosures and pawning whatever will bring them quick cash thus turning them into worthless empty boxes, devaluing adjacent properties and neighborhoods resulting in more foreclosures, etc. This outcome is far more likely than the pontifications from BAC morons.

Thu, 04/19/2012 - 13:37 | 2358837 contrarianz
contrarianz's picture

More like, no housing recovery ever...

Thu, 04/19/2012 - 13:59 | 2358936 lasvegaspersona
lasvegaspersona's picture

Waco

Thu, 04/19/2012 - 14:26 | 2358950 FinalCollapse
FinalCollapse's picture

In order to have healthy RE market you need to have the first time buyers for the low end properties. This market is completely broken - young people have no money or inclination to buy. The move up buyers are not there either - because they are underwater. 

Btw - some estimates (probably better ones) are that we have 10 mm houses in the shadow. This number is going to rapidly increase when houses dip another 5%-10%.

Good luck with housing recovery. Many years ago, I thought it will be 2015 but I was wildly optimistic. It is going to take much longer the way Obama mismanages it. No market reset - no recovery.

Thu, 04/19/2012 - 14:34 | 2359073 BlackholeDivestment
BlackholeDivestment's picture

Funny, I can't see this 2020 vision panning out anything but for the gold bug, till it's all over. Lol. Houses? Is that what they are calling the sell cell now? Lol.

http://www.youtube.com/watch?v=fIY-qd8todk&feature=fvst

Thu, 04/19/2012 - 15:09 | 2359199 reTARD
reTARD's picture

No mention of the effects of the student debt bubble??? The future generations after passing through this education bubble will be enslaved to student loan debt and will NOT be able to buy homes while also needing to take care of their more populous baby boomer parents in their old age. Yet another demographic factoid to consider.

Thu, 04/19/2012 - 17:10 | 2359585 SmittyinLA
SmittyinLA's picture

2020? 

Try 2045 we're at the beginning of the greatest housing sell off in the history of the world.

Baby boomer demographics, broke ZIRPs seniors will be selling for decades, worse still the "replacement population" of qualified buyers at current prices is tiny with the vast majority of the new population being unskilled, uneducated immigrants with a pre-disposition for diabetes and obesity, on public subsidy that have to compete with a non-Communist crony capitalist semi free market world market while carrying trillions in unfunded liabilities.

 

Thu, 04/19/2012 - 22:20 | 2360167 geoffb
geoffb's picture

Can you sell your house if you have a reverse mortgage on it?  /sarc

Thu, 04/19/2012 - 19:54 | 2359886 Kasperfx
Kasperfx's picture

the propaganda machines is  in full force the past week I've received over 12 realtors reports on how the markets quickly improving. ..

Thu, 04/19/2012 - 19:54 | 2359887 Kasperfx
Kasperfx's picture

the propaganda machines is  in full force the past week I've received over 12 realtors reports on how the markets quickly improving. ..

Thu, 04/19/2012 - 19:54 | 2359891 lemonobrien
lemonobrien's picture

the biggest problem i see with this is oil; the lack there-of will doom suburbia; where 90% of the houses are.

Thu, 04/19/2012 - 20:09 | 2359913 rosiescenario
rosiescenario's picture

The bigger bomb is now hitting in commercial real estate as it has taken some time for re-appraisals to get done for the tax rolls. All the properties that our fund owns have been either voluntarily reduced by the taxing authorities or by us forcing the issue with them. The commercial properties in CA have been taken down about 30 to 40 percent.

 

We are not alone, so I imagine we will be hearing more about muni bond defaults soon. Muni defaults will also impact the housing market and not in a favorable fashion if one's home i in a city that defaults.

 

But these are all things we know about.

 

The black swan is probably going to be a major earthquake hitting So. Cal. They are over due.

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