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Three Reasons Why The Housing Recovery Dream Is Overdone

Tyler Durden's picture


We know its is blasphemous to question the NAR and given the dismal state of the manufacturing sector data in the US in recent months, the entire recovery now seems predicated on good old 'residential real estate' rising phoenix-like from the ashes of negative equity. Goldman's Jan Hatzius ignores the 'see no evil, hear no evil, speak no evil' of the mainstream media's call for a glorious recovery in housing and lays out his own three monkeys. While recent data is encouraging, he is far from sounding the all-clear as the massive instability of seasonal factors; the gradual nature of the 'turn' and wide dispersion between strong and weak markets; and housing's considerably less important role in the broad economy (and macroeconomic spillover wealth effects); all leave the Goldman economist unamused as he sums up his perspective quite succinctly: "while housing may be getting better, it's no longer about housing."

Jan Hatzius, Goldman Sachs: Are House Prices Finding A Bottom?

While the recent house price news is encouraging, we would not yet sound the "all clear" for the housing market or the broader economy.

First, the instability in the seasonal factors over the past few years is a potential source of noise in the recent house price indicators, and also in our model. As shown in Exhibit 2, the seasonal factors in the Case-Shiller home price index have shifted substantially since 2007. The reason is the increase in distressed/foreclosure sales. Since distressed sales account for a much bigger share of total sales in the winter than in the summer, and since distressed properties are typically sold at lower prices, the increase in distressed sales since 2007 magnifies the seasonal pattern of higher prices in the summer and weaker prices in the winter. In addition, the seasonal factors can be also distorted by one-off items such as the 2009-2010 first-time homebuyer tax credit, the foreclosure moratorium taking place in the fall of 2010, and the warmer and dryer than usual winter this past season. All of these complications make it more difficult to assess than under normal circumstances whether the seasonal factors are too large, too small, or just right. This adds to the uncertainty as to whether the better recent numbers indicate a true turnaround in the US housing market.


Exhibit: The Magnitude of Seasonal Factors for the S&P/Case-Shiller 20-City House Price Index Increased in Recent Years


Second, even if the market is gradually turning, as our model implies, the difference between a slightly declining and a slightly increasing national average for home prices is minor, especially given the wide variation between stronger and weaker markets. Our broad view remains that national home prices will remain close to flat over the next 1-2 years, or at a minimum that the recovery will remain very "U-shaped."


Third, the housing market is less important for the broader economy than it was a few years ago. Homebuilding now only accounts for 2.3% of GDP, compared with 6.3% at the peak of the cycle. Thus, even a rapid percentage gain in homebuilding only has a moderate direct impact on GDP growth. Moreover, the macroeconomic spillovers of changes in house prices via the housing wealth effect are considerably smaller than they were a few years ago, given the absence of mortgage equity withdrawal (MEW) as a conduit for translating wealth gains into higher consumer spending. Lastly, the impact of house price changes on the availability of credit via bank balance sheets is probably also smaller than it was a few years ago, as banks have already recognized large losses on mortgage loans and mortgage-related securities and housing-related assets feature less prominently in their balance sheets.

For these reasons, the gradual turnaround in the housing market does not alter our expectation that the US economic recovery will remain sluggish, with real GDP growth averaging 2% through the end of 2013 and risks that are tilted to the downside of our central forecast, at least in the near term.

Put simply, while housing is getting better, it's no longer all about housing.


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Tue, 07/03/2012 - 22:50 | 2585868 veyron
veyron's picture

PulteGroup (PHM) stock price would disagree

Tue, 07/03/2012 - 23:02 | 2585894 I think I need ...
I think I need to buy a gun's picture

hope and change coming soon bitchez,,,,,,,make sure you have prepared for change so you can enjoy the hope!!!!

Tue, 07/03/2012 - 23:13 | 2585914 Yes_Questions
Yes_Questions's picture



Three ZH Billionaires not out speculating.

There's your reasons.

Wed, 07/04/2012 - 02:09 | 2586124 redpill
redpill's picture

Yes housing prices have bottomed.  House prices have a floor because houses actually exist, and have practical value: if nothing else, you can live in them.  Stocks predicated on a Fed-fueled ponzi scheme though?  That's a different story.  If anything real estate stands to gain from people across the world losing faith in financial markets.  Foreign investors are flooding in to buy homes in the US, especially in multi-cultural meccas like Miami. 

That being said, we are not on the onramp of a robust housing recovery.  Speculators jumping on homebuilding stocks in anticipation of a new boom of new home construction are fooling themselves.  There will certainly be the outperformers in the group but generally speaking this is not going to be an industry of substantial growth for quite some time.  And for the average person that's fine.  We've started to get back to a rational housing market, with rational prices, rational underwriting guidelines, and rational purchase decisions.  So while the stabilization and incremental increases in price may not be big, at least they are real.

Wed, 07/04/2012 - 02:16 | 2586131 Michael
Michael's picture

I don't care how much RE foreigners buy in the US, as long as they pay my, their property taxes for my public services. 

Wed, 07/04/2012 - 08:45 | 2586359 TheSilverJournal
TheSilverJournal's picture

Like anything else, housing pricing are set by supply and demand. The run up in housing prices before the bubble burst helped build a massive amount of supply, and demand is only being held together by gov supporting the entire housing market.

Housing prices in real terms have yet to drop another 75%. The entire market's being backed by the gov and gov is going broke: 95% of newly issued mortgages are backed by gov and gov is dishing out ultra low rates leading to ultra low monthly mortgage payments. When the gov goes broke and rates rocket, the standard $1,000 mortgage payment being achieved with the purchase of a new house will turn into a $4,000 monthly payment, or more.

When the gov goes bust, Americans will become much poorer and they will get rid of second and third homes, and move in together to save on costs such as: property taxes, heating, electricity, repairs.

Also, as the economic situation in the US becomes more dire, the most ambitious will leave the US in search of opportunity, further exacerbating the overbuilding of housing.

Wed, 07/04/2012 - 13:09 | 2587060 AldousHuxley
AldousHuxley's picture

massive amount of supply controlled by few banks who are only letting few houses on the open market and keeping the rest in shadow inventory.


like the diamond market, banks have cornered the housing market and can set prices higher than nature supply/demand curve would indicate.



Wed, 07/04/2012 - 12:22 | 2586920 Diogenes
Diogenes's picture

"I don't care how much RE foreigners buy in the US, as long as they pay my, their property taxes for my public services. "


You'll love Florida. Foreigners pay double or triple property taxes while using almost no services since so many are seniors, are well off and only reside in the state part time.

Wed, 07/04/2012 - 02:23 | 2586139 SoCalBusted
SoCalBusted's picture

You can live in a cardboard box too.

House prices have not reached bottom because of supply and demand.  We don't know what the real supply is and we don't know what the demand is.  Even if one had a "stable" job, who wants to be locked into a specific part of the country/world if/when the SHTF and you may have to move for your next "stable" job?

Wed, 07/04/2012 - 04:36 | 2586190 dexter bland
dexter bland's picture

"Put simply, while housing is getting better, it's no longer all about housing."

Well what is it about then?

Housing is the root cause of it all. Housing isn't just construction, finance, real estate. People like to buy stuff to fill their houses with. Like beds which they fuck in and end up with kids who just consume stuff constantly. It helps the romance along if the owners of the houses are comfortably above water on the mortgage and not facing foreclosure.


Wed, 07/04/2012 - 09:50 | 2586490 yogibear
yogibear's picture

A history lession for all.....

Remember what housing prices dropped from the peak during the great depression??

What did they drop to in Japan (An island, with limited land)?




Tue, 07/03/2012 - 23:22 | 2585934 Snidley Whipsnae
Snidley Whipsnae's picture

"We know its is blasphemous to question the NAR..."


NAR = Never Are Right

Tue, 07/03/2012 - 23:26 | 2585943 Yes_Questions
Yes_Questions's picture



Not Anything Relevent

Tue, 07/03/2012 - 23:45 | 2585967 Michael
Michael's picture

Agreed. Housing prices are not coming back in the rest of my lifetime.


In case anyone is panicking over the recent early summer heat wave and Colorado fires like the TV tells you to, It's not unusual or your fault.

Yellowstone Fire of 1988(Mad World)

Argentina: Serious frosts have led to a declaration of agricultural emergency and disaster


June 30, 2012

Argentina – More snow in two weeks than an entire normal winter season


Tue, 07/03/2012 - 23:54 | 2585982 Yen Cross
Yen Cross's picture

Michael, you are a puppet! Take advantage of your opportunity! Get lost fast!

Wed, 07/04/2012 - 00:05 | 2586000 Michael
Michael's picture

If it makes you feel better, millions of illegal aliens became unemployed when the US housing bubble went bust.

Wed, 07/04/2012 - 00:22 | 2586015 Yen Cross
Yen Cross's picture

 If it makes you feel better? Get a FACE!  You worthless troglodite! You pop up like a rabid field mouse! Give me something? Anything ? You are a mental midget! Get a job, or at least create an idea.


   I want Snidley, and he is hiding behind a Clown!

Wed, 07/04/2012 - 00:41 | 2586037 Michael
Michael's picture

Here's something;

64 million empty vacant real estate properties in China, their housing bubble currently going bust and there is nothing in the known universe that can stop the bust. Imagine how many unemployed Chinese there's going to be.

Wed, 07/04/2012 - 01:32 | 2586081 Yen Cross
Yen Cross's picture

 Hey "Clown Face" do you even understand Chinese lending practices? Dip Shit, china just lowered the repo rate! How does that affect you?  You are a mindless Idiot!   I'm after( that pin head) , your cohort!

Wed, 07/04/2012 - 02:03 | 2586116 Michael
Michael's picture

Snidely no want to make contact wit chu.

Wed, 07/04/2012 - 01:07 | 2586059 Michael
Michael's picture

Is this who you're looking for YC?

Snidely Whiplash: Bondage Practitioner

Wed, 07/04/2012 - 01:31 | 2586083 Yen Cross
Yen Cross's picture

 Get lost! As if I would actually watch your worthless diatriabe!?

Wed, 07/04/2012 - 01:52 | 2586102 Yen Cross
Yen Cross's picture

Michael, why is it you feel compelled act like a clown? Green Hair, Black eyes Ect...?

   If you have a dark secret, it's ok. Apparantly you want to take the punctuation of this arguement?

  Michael I dont see " Snidley" stepping up? Michael you are your own man?

Wed, 07/04/2012 - 02:04 | 2586119 Michael
Michael's picture

Snidely no want to make contact wit chu.

Wed, 07/04/2012 - 02:27 | 2586143 Yen Cross
Yen Cross's picture

 Thanks , Pizza Delivery boy. frankley I could care less if you ever make contact with me! I'l deal with both of you like " Boris".

Wed, 07/04/2012 - 08:02 | 2586292 Snidley Whipsnae
Snidley Whipsnae's picture

Michael... Please don't feed the troll known here as Yen Cross... and probably other screen names. He/She appears here from time to time to derail threads and feeding IT will not add anything to ZH.

BTW... I have no knowledge of or connection to Snidley Whiplash...

Snidley WHIPSNAED was a roll played by great comedic figure, W.C. Fields... I like Fields attitude and performances in his comedy rolls. I left the 'D' off my screen name out of respect for W.C.'s legacy. See Wiki entry for W.C. Fields...

Tue, 07/03/2012 - 23:59 | 2585993 SHEEPFUKKER

The American'd have to be fast asleep to believe in it. 

Wed, 07/04/2012 - 13:15 | 2587071 AldousHuxley
AldousHuxley's picture

WTF is American Dream?

car and a house?

like that is exclusive to America?


millions of Chinese communists have cars and houses too.


so why is it still a dream for US middle class when 3rd world citizens are able to obtain them these days?


Tue, 07/03/2012 - 23:44 | 2585968 bonderøven-farm ass
bonderøven-farm ass's picture

National Association of Ruffians

Tue, 07/03/2012 - 23:51 | 2585979 Yen Cross
Yen Cross's picture

 You do have a Heart? I was waiting for you Snidley. I catch you on other threads.

        As an attorney, do you feel like your younger "BRETHREN" have the same Gusto you do/did?

Tue, 07/03/2012 - 23:59 | 2585991 Yen Cross
Yen Cross's picture

NEIN BITCH! Lets Dance!

Wed, 07/04/2012 - 00:14 | 2586012 Yen Cross
Yen Cross's picture

Cartoon Character Snidley Whipsnae       Hey Snidley , are you long " Play Doh"?  Hey Snidley are still using the Fiat game plan?

   Still selling em, off Snidley? 

Wed, 07/04/2012 - 08:11 | 2586301 Snidley Whipsnae
Snidley Whipsnae's picture

YC... I see you are drunk as usual when you show up here. Congrats on the impressive number of NEGS that your comments have accumulated. Are you trying for a record?

Which gov agency are you working for? How much are they paying for math challenged trolls now days? Have your math skills improved or are you still dependent on others to solve your basic arithmatic? Math challenged... too bad since this condition probably leaves you in a sales only roll... or 'management' if you have an 'in' through the ol boy network.


Wed, 07/04/2012 - 01:46 | 2586098 Yen Cross
Yen Cross's picture

 Hey ass face/ Quit hiding!

Wed, 07/04/2012 - 07:04 | 2586249 Offthebeach
Offthebeach's picture

August 5th, 1945.
Hiroshima Association of Realtors.
"Now's a good time to buy."

Wed, 07/04/2012 - 10:31 | 2586602 PC Load Letter
PC Load Letter's picture

Maybe the mindless pumpers at NAR would be taken seriously if they stop claiming "Now is the best time to buy a house." No better than the banks on CNBC everyday telling people "Now is the time to be in stocks."

Tue, 07/03/2012 - 23:24 | 2585940 barliman
barliman's picture


There is one sure cure for anyone inclined to believe the HOPE-shit "The Housing Market has Bottomed" meme:



The housing market does not matter NOT because of a reduced share of GDP - though failing to note the long term effects of it being reduced to 1/3 of its previous percentage of GDP is not unlike failing to report on a wedding "because, like, there was no wedding ... because the bride took a chainsaw to the wedding party in the back of the church"

 The currently developing recession (i.e. the raison d'etre for the ramp in the markets the past four trading days) is going to be an Extinction Level Event for housing in the United States.

Anywhere you go on the Zilllow link, you are going to see an unbelieveble percentage of underwater mortgages.

Do the math.

How much of an economic contraction will it take before the "Black Hole" implosion occurs with regard to housing?


Tue, 07/03/2012 - 23:29 | 2585950 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Let's do basic logic here. Young people do not have jobs. Those older people who do have jobs have reduced salaries. Funny zero down give to anyone with a pulse loans are not coming back. This EQUALS NO HOUSING RECOVERY!!

Wed, 07/04/2012 - 02:40 | 2586147 disabledvet
disabledvet's picture

yep. i think if i had a 100 percent return in just six months in my housing stock price i'd at least cash out my initial investment. interesting that the financial media calls these equities "the housing market." what are they, .00001 percent of said multi trillion dollar market? anywho...

Wed, 07/04/2012 - 00:39 | 2586035 jonjon831983
jonjon831983's picture

Nice link, thanks

Wed, 07/04/2012 - 08:07 | 2586296 Offthebeach
Offthebeach's picture

House = Hostage to union town/county pension
bomb. ( Don't worry, it's safe. So long as it's ticking it's fine.)

Wed, 07/04/2012 - 10:39 | 2586630 mmanvil74
mmanvil74's picture

Let's not forget that foreclosures sold by banks are not negative equity, they are 100% equity, and a good percentage of those buying foreclosures are using 100% cash.  This sets the floor on housing for US, and the pig (of foreclosures) is almost all the way through the python in the earliest hit states (FL, AZ, CA, NV).   Once the foreclosures are back to "normal" levels, housing will see relatively sudden price increases.

In fact, while national statistics make US housing look as though it is dragging along the bottom, key markets are popping big time - 10% - 25% gains in certain neighborhoods of cities like Phoenix, Miami, San Fran and others so far THIS YEAR.

Housing is at or near historical lows when priced in terms of the DOW, OIL, or GOLD.  

By the time ZHers get bullish on housing, it will have doubled in price (in key markets and in particular types of housing, I don't expect large gains in places like Witchita Kansas, but I do expect gains in communities that attract retirees in FL and AZ for example, and places that attract young affluent professionals like, San Diego, Seattle, San Fran and NYC) even while the national stats will continue to show modest gains for many years to come.  Following national stats only is a bit like just watching the NASDAQ, oblivious to the fact that APPL is up 400% in 5 years.

US housing right now is cheaper than you will find almost anywhere in the world.  I've been all over the world looking at housing and no, you will not find 2000 sf houses in Ecuador, Colombia, or Vietnam for $80,000 like you can right now in Phoenix.  Maybe Africa has cheaper housing than US, but even there, housing in large cities are probably more expensive than US.

Sure, housing may not become a national economic growth engine like it once was for a long time, nor will a positive housing market drag the US economy out of recession (or stagnation, or whatever you want to call it), but it is a great - once in a lifetime - opportunity to buy US residential property, if one buys right (foreclosures from the banks) and in good locations with high (double digit) NET rental returns.

Factor in ultra low mortgage rates and housing is a no brainer investment for anyone who does not trust stocks or bonds or any other Wall Street contrived "security".  Just give the math a chance: 30% down on an $80,000 house with 30 year mortgage at 4% for a house that rents for $1000/month.  If you are lucky enough to buy a personal residence with even less money down, all the better.

Middle class Americans, aka "the dumb money", the ones that were buying their 6th "investment property" late in 2006, are prone to buying at the top and selling at the bottom.  They will be renters now for a long time until housing looks like a golden opportuntiy again, by which time it will be time to unload your rental properties to them for a tidy gain.

Wed, 07/04/2012 - 17:48 | 2587162 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 about 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?

Would you mind providing an explanation of the relevance of U.S. home prices with respect to the rest of the world? Why should that affect someone's investing decisions if they are never going to buy a residence somewhere else in the world?

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

The best case argument that can be made regarding the housing market in the U.S. is:

If your net cash position is greater than $ 10 million USD and you have a 10+ year high risk tolerance to 30% downside in the near term against 50% upside in the 10+ year term ... then you might take 10 - 15% of your net cash position and invest in very select properties in cities where the current underwater mortgage percentage is less than 5%.

But then, you had better hedge that risk substantailly with an offsetting portion of your net cash position.

"Buy when there is blood in the streets."    Baron Rothschild


Wed, 07/04/2012 - 15:39 | 2587356 beachdude
beachdude's picture

Search 92651. Search up and down the SoCal coast. From Laguna and Newport up to Manhattan and Hermosa.

When will the beach cities slide?

Wed, 07/04/2012 - 18:25 | 2587637 barliman
barliman's picture


If you remove your head from the sand ... or wherever else you might have it stored ...

... you could take a moment to notice the 92651 zip code has 10% underwater mortgages for what has long been considered some of the BEST real estate iinvestment property in the world.

In the real world, rather than the pharmacologically assisted one you must live in, the fact that 1 in 10 properties of this level of real estate is now worth LESS than the buyer paid for it is equivalent to being told you have a new volcano as a tourist feature.

No, alarm bells yet?

Slide up the coast to Malibu - one of the most recognizible "neighborhoods" in the world - 16% underwater - math is hard, so let me help you out - 1 out of every 6 is now worth LESS than the buyer paid for it.

I know I am going to be setting the bar to high for you here (i.e. most 14 year olds would be able to clear it) ...

Google what the normal percentage of underwater mortgages for those same beach cities has been over the last 50 years.

For the casual reader who wants an education; fire up the link, go to the zip code and then click the zoom out (minus sign) three times.

Well .... FUCK ME!  Orange County is a little island of orange at 25% underwater surrounded by a sea of red.


Fri, 07/06/2012 - 10:18 | 2591704 beachdude
beachdude's picture

That's how I see it as well, but I live here. The statistics may show 1 in 10 homes underwater, but inventory is low as not many are selling. I've been waiting for prices to soften since '05 when I sold near the top in anticipation of the housing bubble crash. The fact is that most, if not almost all, don't need or even want to sell.


This slow motion train wreck is just testing my patience. That's the reason I asked for others opinions here... how they saw things.

You, barliman, are evidently an abused, angry human being. I'm sorry for you, but feel free to limit your commenting here.

Tue, 07/03/2012 - 23:15 | 2585916 in4mayshun
in4mayshun's picture

And we know stock prices never mislead.

Wed, 07/04/2012 - 02:09 | 2586125 veyron
veyron's picture

Indeed, but at least I'd hope the author would address the point.  Alas, it is goldman sachs ...

Wed, 07/04/2012 - 02:50 | 2586151 Peter Pan
Peter Pan's picture

While we continue to view the situation as a housing crisis rather than as a homelessness crisis, while we wait with baited breath for house prices to rise but wages and jobs remain soft to say the least, and while we see banks reluctant to take write offs so that it does not affect their balance sheets, we will not see any real of recovery in housing prices, reduction in foreclosures, or inventory decreases.

Wed, 07/04/2012 - 08:26 | 2586318 Snidley Whipsnae
Snidley Whipsnae's picture

veyron... PulteGroup stock prices are whatever the 'President's Working Group', sometimes known as the plunge protedtion team, wants them to be. In this respect PulteGroup is no different that any stock on any exchange, any bond, or any commodity.

All mkts are now levitated or depressed according to the misguided desires of the Fed, big banks and crooked pols; ie, misguided for those whishing to save or protect their savings from a dollar that has been debased by 96% by the Fed, which is charged with maintaing 'price stability'...

When the next crash comes to equties, PHM will be a loser along with the majority of listings. 

Even LIE BOR is not exempt from rigging.

...and real estate has not reached it's final bottom by a large margin. RE will not turn around until a driver for jobs is found. When will that driver be found?

Thu, 07/05/2012 - 08:54 | 2588390 geoffb
geoffb's picture

"RE will not turn around until a driver for jobs is found."



Wed, 07/04/2012 - 09:28 | 2586463 Freewheelin Franklin
Freewheelin Franklin's picture

You gauge the housing market by the stock price of one national builder? I don't know about Pulte, but I can tell you Hovnaninan has been selling off all of the empty property they can. The only housing being built, and it isn't much, are cheap townhomes (very cheap), and very expensive "mansions". The middle is dead. I've been working in the industry for 30 years in the NE part of the country. Take my word, nothing is moving except very cheap and very expensive. And the 55+ are dead in the water.



Tue, 07/03/2012 - 22:55 | 2585880 Yen Cross
Yen Cross's picture


Wed, 07/04/2012 - 02:43 | 2586148 disabledvet
disabledvet's picture

when are we going to that Yen Cross anyways? one of those "every day Charlie's in the jungle gettin' stronger" things?

Tue, 07/03/2012 - 23:11 | 2585906 caimen garou
caimen garou's picture

would'nt expect anything else! the old saying applies, no pot to piss in or a window to throw it out. the repos will continue for awhile......

Tue, 07/03/2012 - 23:13 | 2585910 Seasmoke
Seasmoke's picture

sorry but this is not your grandaddys recession........its something much much worse, with fraud and deceit all around

Wed, 07/04/2012 - 00:00 | 2585996 caimen garou
caimen garou's picture

I hope not my grand dad fought ww1 and lived though the depression and fought ww2

Wed, 07/04/2012 - 00:33 | 2586027 FEDbuster
FEDbuster's picture

Correction:  "this is not your Granddaddys DEPRESSION....."

Wed, 07/04/2012 - 01:37 | 2586090 Missiondweller
Missiondweller's picture

He fought in WWI AND WWII?


Damn. I salute him. Must have had a remarkable life.

Wed, 07/04/2012 - 08:07 | 2586297 caimen garou
caimen garou's picture

he was a great man and lived through a lot of shit! 1899 to 1991 and yes there was lying stinking  cheating bankers even back then. after he died he left me REAL money but it was lost in a boating accident.:(

Wed, 07/04/2012 - 08:13 | 2586304 caimen garou
caimen garou's picture

and yes I'm a pretty old son of a bitch myself and went through recessions and yes there was fraud around even then, people were not as informed as they are today and the criminals got away with a lot more

Tue, 07/03/2012 - 23:13 | 2585912 in4mayshun
in4mayshun's picture

Houses at $150,000 or less are selling well. $200,000 + (or what it costs to actually build them) are totally stagnate.

Tue, 07/03/2012 - 23:20 | 2585927 jim249
jim249's picture

Stagnet and falling.

Wed, 07/04/2012 - 07:45 | 2586280 WonderDawg
WonderDawg's picture


Wed, 07/04/2012 - 00:22 | 2586017 kito
kito's picture

Those houses are selling well because large investment/hedge funds are buying dozens at a time full well knowing that rentals are the future. Once that spree is over you will see the plunge least another 20 percent more....perhaps goldman sachs can show us the chart demonstrating the ltv ratio on mortgaged homes are still wayyyyyy higher than historic norms....and that ratio can only adjust by debt being wiped out or home prices skyrocketing......hmmmmm......"also funny how the housing optimists don't talk about the fact that once the world wakes up to the insolvency of this country, home buying will be the last thing citizens will be thinking about....

Wed, 07/04/2012 - 00:34 | 2586028 FEDbuster
FEDbuster's picture

People are buying guns and ammo, lots of guns and ammo.

Wed, 07/04/2012 - 09:33 | 2586467 crawldaddy
crawldaddy's picture

have fun being a landlord in a society where jobs are sucky and temporary.  What a nightmare. Nothing like having renters squat in your property, fuck it up, not pay rent, while you have to jump through hoops for months on end to get them out.

Being a landlord in this environment is nuts. Just more stupid investments from stupid people.

Wed, 07/04/2012 - 10:04 | 2586514 Spastica Rex
Spastica Rex's picture

My wife and I just "bought" a house because we couldn't afford rent. We never wanted to "own" a house again. We sold our first house in Seattle in 2004. We "bought" this current house in eastern Washington State for 1/5 the selling price of our first home.

Wed, 07/04/2012 - 11:26 | 2586768 kito
kito's picture

well as long as you have the sense to know that you "bought" a house, and that you "own", you should be ok.........

on this independence day, its good to remember your masters, the bank and the property tax office...............

Tue, 07/03/2012 - 23:14 | 2585915 JackT
JackT's picture

Hell... banks are the biggest collectors of houses. Seems they can't get enough of them.

Wed, 07/04/2012 - 02:23 | 2586140 Sudden Debt
Sudden Debt's picture

Yeah, UNLESS JPM for example needs to sell it's foreclosed homes to raise capital for it's 9 billion "mistake"

Tue, 07/03/2012 - 23:17 | 2585921 Son of Loki
Son of Loki's picture
Surge of tax foreclosures likely this year


The foreclosures are surfacing now because a property must have delinquent taxes for four years before the county can foreclose on it. And it takes two more years for the county to finalize the foreclosure and put the property up for auction.


...and so on.... I don't see a turn around in house prices for years to come. Hatzius said, "about 8 more years" the other day on TV. He ( and some guy from DB) said house prices will not stop falling until unemployment stabilizes and they agreed/predicted that would take 8 years.

Tue, 07/03/2012 - 23:18 | 2585923 catch edge ghost
catch edge ghost's picture

You can't get there from here.

Tue, 07/03/2012 - 23:22 | 2585932 The Navigator
The Navigator's picture

1) The banks still hold a tremendous number of foreclosed homes in inventory

2) There's a tremendous number of homes where the owners haven't made payments in months or years, which will add to to the existing number of bank owned (REOs)

3) The demographics of baby boomers - they will soon want out of their 2 story McMansions and want smaller single stories in low tax, good weather locations

4) JOBS!!!! Gotta have jobs so people can have money to buy houses - no gain there in the last 4 years.

5) Prices in CA are still too high considering 1-4 above - buyers still expecting prices to come down, causing 'wait and see' attitude.

A little Hopium, well maybe a lot of Hopium and, aw forget it - it's all fucked up.

Wed, 07/04/2012 - 09:37 | 2586469 crawldaddy
crawldaddy's picture

exactly, plus last century when people fled the large cities, the big turn of the century homes were so well built, they could easily be divided up into apartments etc. You see this ALL over every major city. Now fast forward, as people come back to the city, you really think anyone can buy and divide up this suburban drywall monstrosities knowns as mcmansions.  They are built like shit. Fucking worthless in the long run.

Tue, 07/03/2012 - 23:23 | 2585933 TulsaTime
TulsaTime's picture

Housing is OUT as a factor in any economic comeback.  Everybody is broke and living in any hole they can find.  Prices are still going down, and will until supply clears out in 5 or 10 years.  Builders are gonna build, what other alternative do they have?  They may as well give them away.

Tue, 07/03/2012 - 23:28 | 2585948 jim249
jim249's picture

We need more houses to fix the housing mess just like we need more debt to fix the debt problem!

Tue, 07/03/2012 - 23:24 | 2585936 Yes_Questions
Yes_Questions's picture



Speaking of housing hear, in Armageddon Du Jor Colorado:

Anyone seen what is going on with re-insurance claims?

value of damages/rate of change of claims, killed (RIP), etc?



Tue, 07/03/2012 - 23:24 | 2585938 gookempucky
gookempucky's picture

Third, the housing market is less important for the broader economy than it was a few years ago. Homebuilding now only accounts for 2.3% of GDP, compared with 6.3% at the peak of the cycle. Thus, even a rapid percentage gain in homebuilding only has a moderate direct impact on GDP growth.

Using todays numbers YES--no construction=no nothing period

What a total crackpot summary--this guy spreading toenail fungus verbally--what a joke.

JAN put this in your ass and smoke it.

Economic Impacts of the Housing Sector

The real estate industry is one of the largest sectors of the economy.  It is a significant contributor to the U.S. economy, providing millions of Americans with jobs and generating hundreds of billions of dollars of economic output each year.  It is also an important source of wealth building.  And homeownership is an integral part of the “American Dream.”  There are several different methods of measuring the economic impact of the real estate industry (see below).  As large as the resulting numbers may be, many understate the financial impact.  Beyond economic measures, homeownership and adequate rental housing also contributes to our society. 


For an appreciation of the scope of the industry, consider the following: 

·         The housing sector contributes about 14 percent to the nation’s total production. 

·         Home equity constitutes the largest share of household net worth.

·         In the 1st quarter of 2001, 72.1 million households were homeowners for a national homeownership rate of 67.5 percent.

·         The stock of fixed residential assets is worth nearly $10 trillion – equivalent to one-year worth of U.S. GDP.

·         About 1.5 million newly housing units are started each year.  Housing starts is one of the key factors in the macroeconomic business cycle.

·         About 40 percent of monthly consumer expenditures are housing related.

·         More than $1 trillion exchanged hands from the sale of existing and new homes.

·         There are 288,273 establishments categorized as “real estate & rental & leasing with over 1.7 million paid employees.


Impact on the National Economy

Gross Domestic Product (GDP) is a measure of all goods and services produced in the economy.  And the housing sector contributes directly and significantly to overall production activity.  The two line items in GDP directly associated with the housing sector are residential fixed investment and housing service.  Residential fixed investment consists of value-put-in-place of new housing units, production of mobile homes, brokers’ commissions on the sale of existing residential properties, expenditures related to improving and additions to existing units, and net purchases of used structures from government agencies.  Housing service is a component of personal consumption expenditures, purchased by residents in the United States, usually in the form of rent for tenants or as rental equivalence for homeowners.  It is important to note that this approach measures the value to the homeowner of the daily consumption of the flow-of-services provided by a home (a place to fix meals, relax, entertain, garden, etc.) and not the value of an investment in a long-lived asset (home).  Rental equivalence or implicit rent is the amount of rent that homeowners could charge if their homes were leased to others instead of living in the homes themselves.  Because implicit rent is not a market transaction, such as the payment to a landlord from a renter, it is estimated by measuring the change in market rents for rental housing units with similar characteristics and in similar locations as the homeowner units.  In 2000, residential fixed investment totaled $415 billion and housing service expenditure was $956 billion.  The combined total of  $1.37 trillion represented 14 percent of GDP. 


The construction and sale of new homes make direct contribution to GDP, based on the value of construction put in place.  However, the sales price for existing homes do not enter into the calculation of the nation’s domestic output, just as a used car sales price does not get entered because the transaction does not represent a new production.  However, purchases related to the transaction of existing home sale do get included in the GDP.  For example, all payments for services rendered, such as real estate agent commissions, home inspection, attorney, and loan origination fees, are included.  The transfer payments, such as transfer taxes, escrows, title and other insurance premiums, interest payments, and loan points are excluded.  Furthermore, a sale of a home generates additional consumer expenditures.  Home sales naturally involve moving costs, whether through a professional moving company or via “self-move” from renting a moving van.  Expenditures accompanying the moves, though they do not show up in the housing sector category of the GDP accounting, also need to be considered. 

By examining the Consumer Expenditure Survey, which contains detailed information on all household expenditures over the course of 12 consecutive months, it is possible to assess different spending patterns between recent movers who are current homeowners and the rest of the population.  By comparing expenditures for recent homebuyers with the rest of the group, it is possible to assess the cost associated with homeowner moves.  For example, fix-up and furnishing expenditures were $884 higher for recent homebuyers than for non-moving homeowners, according a 1991 Price Waterhouse study for the National Association of Realtors (NAR).  There are also the actual moving costs, both the purchase of professional moving services and the out-of-pocket costs of “self-moving.”   Based on the number of home sales and accounting for these pre-move, post-move, and moving costs of each homeowner move, the additional expenditure from exisiting home sales amounts to about 0.28% of GDP.   This figure is in addition to the brokerage commission already accounted for in the GDP computation.


Finally, all economic activity produces a “Keynesian” multiplier effect.  A home purchase usually results in further spending in other sectors of the economy (landscaping, appliances, and so on).    The income earned by the landscapers is re-circulated into the economy as they spend, generating another round of income and purchases.  The degree of multiplier depends on the degree of monetary policy accommodation and the “crowding out” effect.  NAR’s macroeconomic modeling suggests that the multiplier is between 1.34 and 1.62 in the first year or two after an autonomous increase in spending.  This means that for each dollar increase in direct housing activity will increase the overall GDP by $1.34 to $1.62.


Wed, 07/04/2012 - 01:10 | 2586063 isudas
isudas's picture

gookempucky you forgot one thing



Do you really think you can quotes stats from 2001?

Wed, 07/04/2012 - 09:21 | 2586442 gookempucky
gookempucky's picture

Isudas---I see there is still a sharp knife in the ZH drawer.

Please apply sarc to my post above.

Actually the article above from 2001 was to show how much construction has collapsed as % of GDP from 2001 to the current year.--looks like you are the only one that got that.

Try to have a good 4th everyone.

Tue, 07/03/2012 - 23:26 | 2585942 Snakeeyes
Snakeeyes's picture

Cool article. I was on Fox saying the same thing last week. Too little dredit, massive tax increase coming, slow ecomonic growth, too much inventory, etc. Watch the Fox clip.


Wed, 07/04/2012 - 08:21 | 2586312 Offthebeach
Offthebeach's picture

Boomer buldge retiring or working Dollar
Store for cat food stealing opertumity.
Youths supporting SS one to one. Youths in debt
from Podunk U debt.
On the way
to 20-30 trillion Fedgov debt, 80 trillion liability.
Local pension/reality tax explosion.

Tue, 07/03/2012 - 23:26 | 2585945 steveo77
steveo77's picture

Independence Day 2012, How Ironic 
OK, no trading blog post, here goes a Quiz on the First Amendment to the Constitution of the United States of America. 
Take the Quiz Here, can you get 20 for 20? constitution.html 
There is also a Constitution quiz 
Can you find where they say separation of church and state?

Wed, 07/04/2012 - 10:14 | 2586540 Spastica Rex
Spastica Rex's picture

I just need to know which church my government is not going to be separate from, just to be prepared. I'm inclined to speculate that it ain't going to be my current church.

Tue, 07/03/2012 - 23:35 | 2585960 ghengis86
ghengis86's picture

Buy real estate and rent it out. Gotta live somewhere.

Tue, 07/03/2012 - 23:46 | 2585973 Yen Cross
Yen Cross's picture

  Like the Gardener in your GULCH?  What are you 3 years old? Show some compassion!

Tue, 07/03/2012 - 23:50 | 2585977 slewie the pi-rat
slewie the pi-rat's picture

if you don't know what is real in the first place the last place to look for clues is hazMat and others who know only propaganda channels and network spin

darned if slewie sees where he actually made any case about housing "turning" at all here into anything but raw sewage

he has a model which implies housing may be turning so it's turning? how nice!

but it really doesn't matter b/c it's a pile of shit there.  it isn't really turning into anything except a bigger pile of shit = conclusion for me

people wanna go on and on about shit pile propaganda?  actually, what else they gonna talk about?  what else is there?  how about this?


yeah!  that's the ticket!  Hahaha!

Tue, 07/03/2012 - 23:57 | 2585987 Yen Cross
Yen Cross's picture

 Slewie don't think about it! I have been waiting months to Fuck with this " MORON"!

Wed, 07/04/2012 - 00:28 | 2586020 Yen Cross
Yen Cross's picture

 Thanks Slewie! I'm not done, but you posted well! I wish that ass hole and I were in an alley, (VERY DARK)

Wed, 07/04/2012 - 00:02 | 2585999 steveo77
steveo77's picture

Happy 4th!
All below are Word Docs, they are easy to find on the net, if you don't have Word.

You can read all the docs below in less than 1 hour.   Misinformation is rampant concerning these basic laws of the US.   Read them, you will be really glad you did.

Presented below are text versions from the Articles of Confederation 1777
This is like the "Original Constitution"

Wed, 07/04/2012 - 00:09 | 2586006 QE49er
QE49er's picture

17,000 more IRS agents will be hired soon, only assets with real allodial title should be considered from this point forward.



Wed, 07/04/2012 - 00:11 | 2586007 Dr. Engali
Dr. Engali's picture

The only properties moving around here are foreclosures, investment properties for rentals, and the high end properties selling at a big discount. The single family homes from 100,000 to 200,000 are all over the place. It seems like I notice a new sign go up every day.

Wed, 07/04/2012 - 10:53 | 2586674 GoingLoonie
GoingLoonie's picture

And where do you live....generally?

Wed, 07/04/2012 - 00:21 | 2586016 Lucius Corneliu...
Lucius Cornelius Sulla's picture

Wait for 1997 prices.  The bubble started about then.  All bubbles are fully retraced and most over-shoot to the downside.

Wed, 07/04/2012 - 03:16 | 2586163 ebworthen
ebworthen's picture


Wed, 07/04/2012 - 00:30 | 2586026 Azwethinkweiz
Azwethinkweiz's picture

Recovery? We don't need no stinking recovery! Print! Print! Print! I posted an ad on craigslist looking to sell my stamp collection....49 out of 63 replies thought I was selling food stamps. I shit you not!

Wed, 07/04/2012 - 00:45 | 2586040 reader2010
reader2010's picture

If you price housing in either oil or gold, it's reached very cheap level the world has ever seen in the last 80 years.

Wed, 07/04/2012 - 01:04 | 2586055 RobotTrader
RobotTrader's picture

Check out the XHB.  Strongest sector ETF right now.


Lowe's warned again, yet the stock failed to sell off more than a few cents, no follow through selling on HD, either.

Wed, 07/04/2012 - 01:16 | 2586070 Yen Cross
Yen Cross's picture

 Robo I trade currency for a living. I'm light years ahead of you. I watch corporate flows, before IPO's happen.

Wed, 07/04/2012 - 01:24 | 2586075 q99x2
q99x2's picture

Although there are green shoots in the housing market it may be argued whether it is a U or a V recovery.

Wake me when its over.

Wed, 07/04/2012 - 01:36 | 2586088 Yen Cross
Yen Cross's picture

 Kinda like ( Tesla)? The Silicone golf cart company?  We all know the margins in the car business!

Wed, 07/04/2012 - 01:38 | 2586091 Milton Waddams
Milton Waddams's picture

upper middle class trustafarians are in the market actively attempting to dump their deceased parents' homes.

Wed, 07/04/2012 - 01:56 | 2586105 Cursive
Cursive's picture

Per Hatzius, homebuilding droped from 6.3% to 2.3% of GDP.  I wonder what could have taken it's place?  Transfer payments?

Wed, 07/04/2012 - 03:15 | 2586160 ebworthen
ebworthen's picture

I'm not so sure housing prices have bottomed.

Let's see how houses sell when rates are back up to 6% and unemployment is unchanged.

Wed, 07/04/2012 - 03:16 | 2586162 caerus
caerus's picture

there is no recovery...just a fibonacci bounce

Wed, 07/04/2012 - 05:05 | 2586194 Floodmaster
Floodmaster's picture

The fucked up generation, (the ones that have to pay for the ever increasing debt (now at 16 trillion), the social security and the healthcare costs) are also the greatest fool of the housing ponzi scheme.

Wed, 07/04/2012 - 05:54 | 2586223 Rockfish
Rockfish's picture

You can live in a card board box what ever the fuck tha means.

Housing (domicile) price is directly correlated to income - affordability . The aberation of free money, fog a mirror get a loan will not return. Thus for the broad market of humans that require - desire a roof over there heads and want to purchase it they will have to qualify for a loan. 

Buyers may want to live in the Mcmansion but there income says 3 bedroom bugalow. They may want to live in San Diaego but here there income says Pittsburg.

One last thing the greed and stupidity of the financial sector is what has distroyed this economy.  Money for nothin and you get shit for free.  

Wed, 07/04/2012 - 06:28 | 2586237 Expat
Expat's picture

Housing and the consumer frenzy that went with it are just symptoms of the overall credit bubble.  We could gleefully have another housing rally with all the accoutrements (granite counters, flat screens, new stoves, another car, etc.) but that is predicated on credit, not wealth.

Employment sucks.  Banks are broke.  There is an oversupply of homes. 

but remember, it's ALWAYS a good time to buy or sell a home because location is everything and houses only go up in value while refinancing is a no-brainer because renting is just throwing away money while a house is a home.

Wed, 07/04/2012 - 07:15 | 2586258 Roandavid
Roandavid's picture

The real issue facing housing has to do with the fact that when buying a house most people are shopping around a monthly payment.  Monthly payments rise with interest rates and as a result housing prices get capped or worse as interest rates rise.

I won't thinking about real estate for a good long time.

Wed, 07/04/2012 - 08:57 | 2586390 Winston of Oceania
Winston of Oceania's picture

The relationship between mortgage rates and house prices is inverse. Imagine what is going to happen to current pricing when interest rates go up. Housing bottom indeed, unless of course interest rates NEVER go up but then what happened to Europe? 

Wed, 07/04/2012 - 10:24 | 2586573 GoingLoonie
GoingLoonie's picture

That is the point.  The US Government will not allow interest rates to go up.

Wed, 07/04/2012 - 10:59 | 2586690 Winston of Oceania
Winston of Oceania's picture

They cannot prevent it, in order to sell debt you need a willing buyer and sooner rather than later the buyer will want a return that reflects the risk of default. Yes you can INFLATE/DEVALUE your way to default as well.

Wed, 07/04/2012 - 08:14 | 2586305 Downtoolong
Downtoolong's picture

A big problem for most people owning a home is that it's a long term committment. If Wall Street teaches us anything it's how that's a huge mistake in the new economy they have constructed for us, where the long term is 90 days..

Wed, 07/04/2012 - 10:01 | 2586507 I should be working
I should be working's picture

Yes, but you are still drinking the kool aid if you think housing is a good long term investment.

It never has been, housing prices at best follow inflation and are still way above their historical trend line, so they probably won't even return inflation.

If you need a place to live and it's cheaper than renting, fine. But housing is not an investment.

Wed, 07/04/2012 - 09:43 | 2586478 yogibear
yogibear's picture

Municipalities should be able to profit big from investor-owned properties.  Just keep raising the property taxes on those houses which are rented. Municipalities know they can just keep sucking investors dry because many have extra money. Police, firemen, teachers and other public workers here's your additional revenue!

Wed, 07/04/2012 - 09:51 | 2586483 I should be working
I should be working's picture

Every year with this housing recovery bullshit.

When people want to believe something badly enough their ability to self-deceive is without limit.

Just repeat after me, debt is wealth, ignorance is bliss, freedom is slavery. Orwell would feel right at home these days...

Also, you heard it first from GS this recovery is sluggish. Thanks Capt obvious.

Wed, 07/04/2012 - 12:42 | 2586981 Bohm Squad
Bohm Squad's picture

Goldman says I should stay away from real estate because 1) the data are muddy, 2) it appears we're reaching a "U-shaped" bottom and 3) builders have contracted their production by two-thirds...If I were a house hunter, this appears to be a good time to buy a long-term residence.  As an investor, I should be looking for a rental property.  Either way, one would get affordable housing or decent least where I'm living.

In my part of the country, I've seen plenty of anecdotal evidence the market is being cleared...houses moving above tax value within 90 days and the "veteran homes" that have been sitting for more than a year are being snapped up.  Check sold homes on in your neck of the woods to see what's going on.


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