Housing Prices May Have Stopped Falling 21 comments
April 22, 2009
| about: IYR
an article to
-
Font Size:
-
Print
- TweetThis
The housing boom is acknowledged largely because housing was accumulated at a faster rate 2002-2006 than it was in 1990s.
Maybe less recognized is that real per capita incomes grew 0.8% less per year 2000-2008 than they did in the 1990s. Population grew 0.3% per year less. Based on these factors alone, housing demand needs to increase 7% more in order for housing prices to stop falling. This could take a while.
However, I believe that there were at least some fundamentals other than income and population driving the housing boom, and those fundamentals persist today. Especially important is information technology, and its effects on the banking and real estate industries. Thus, from a theoretical perspective, it is possible that housing prices have already finished falling.
Interestingly, the OFHEO (now called the FHHA) released its price index for February. It shows that housing prices increased Jan-Feb, after an increase Dec-Jan. According to OFHEO, housing prices even increased in the Pacific and Mountain regions.
As noted by several commenters, the OFHEO index and the Case-Shiller index do not always agree. Nevertheless, it becomes more and more difficult to argue that housing prices and construction are falling in 2009 the way they were in 2008, and easier to argue that the housing market has hit bottom.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
That's probably one of the weakest arguments I've heard for housing prices bottoming. Thus, from a theoretical perspective, it is possible you don't know what you're talking about.
Is this some kind of cruel joke?
I don't understand the connection. Information technology can improve productivity, which can then increase income. I don't see how it has any direct effects on banking and real estate that weren't already there during the bubble.
i hope you are not another economist who is spinning data. i would not have touched an index that is so obviously out of touch with reality.
I can appreciate people grasping at every tidbit of good news and trying to be optimistic about the housing market.
There is just no way that housing can recover at this point in time. The facts are the facts.
"I believe that there were at least some fundamentals other than income and population driving the housing boom, and those fundamentals persist today".
Well, some people believe in UFOs. Do you think there are connections between UFOs and housing prices?
1) OFHEO is well known for being way off reality on house prices.. it had prices rising almost into 2008 when all other measures had national prices down slightly in 2006 and falling dramatically since
2) Real income is falling... so the government figures are clearly based on a sample of government employees who, in most places, are getting pay increases. The fact is the people living off 401ks have seen sharp declines in net withdrawals, there is ample evidence of reduced working hours across the country as well as elimination of overtime and in many industries outright pay rate reductions... not to mention unemployment is up 3%. Real incomes are, in fact, falling quickly
3) Net creation of households is declining... people are re-settling in multi-family residences to save money and others are doubling up
4) The house vacancy rate is at an all-time high, some 2.8% or 2.2 million units for sale and another 15 million units (www.marketwatch.com/ne...) that are vacant for other reasons
5) Rising foreclosures into the foreseeable future
On Apr 22 11:21 PM nova wrote:
> Dear Casey Mulligan,
> "I believe that there were at least some fundamentals other than
> income and population driving the housing boom, and those fundamentals
> persist today".
>
> Well, some people believe in UFOs. Do you think there are connections
> between UFOs and housing prices?
He would make a great comedy writer...perhaps we can get him a job on one of the CSI shows.
On Apr 22 07:53 PM McPhilip wrote:
> " Thus, from a theoretical perspective, it is possible
> you don't know what you're talking about.
On Apr 23 01:39 PM Chris Who Says Barney Frank is a Moron wrote:
> It's easier to argue that you do not know what you are talking about.
>
>
> 1) OFHEO is well known for being way off reality on house prices..
> it had prices rising almost into 2008 when all other measures had
> national prices down slightly in 2006 and falling dramatically since
>
>
> 2) Real income is falling... so the government figures are clearly
> based on a sample of government employees who, in most places, are
> getting pay increases. The fact is the people living off 401ks have
> seen sharp declines in net withdrawals, there is ample evidence of
> reduced working hours across the country as well as elimination of
> overtime and in many industries outright pay rate reductions... not
> to mention unemployment is up 3%. Real incomes are, in fact, falling
> quickly
>
> 3) Net creation of households is declining... people are re-settling
> in multi-family residences to save money and others are doubling
> up
>
> 4) The house vacancy rate is at an all-time high, some 2.8% or 2.2
> million units for sale and another 15 million units (www.marketwatch.com/ne...)
> that are vacant for other reasons
>
> 5) Rising foreclosures into the foreseeable future
>
One was: Real Incomes are falling. True but not adjusted for inflation. So falling realative to what?
The second was:
Net household cration is falling. Well we add 1.5 Million housholds a year. Now that maybe down from the 1970s but we are jsut getting into the echo-generation where we will see another spike.
The third was:
House vanacy is at an alltime high. Where on earth does that info come from. 15 million units! What are you smoking or marketwatch for that matter. It's so purposterous and contrary to ever peice of data from every credible source any economist has ever seen.
The forth was)
riding forclosures into the future- traditionally they are about 1%. Even with 10% unemplyment they won't go to 2.5%. We are talking fractions of fractions here so it's ahrd to move the needle.
It's like all these numbers that come out nowadays. They seem to tell whatever story someone wants them to.
So one might surmise that the numbers are a bit skewed because of the JUMBO loan factor. It's almost impossible to get a JUMBO now and all the banks want to write are FHA loans ($400K and below). There is talk of the FED raising the FHA line to $750K- this will dramatically change the "housing price" statistics going forward so watch out for that. What I mean is when that goes into effect, you will see a spike in prices.
The other thing that makes these numbers a bit erroniuos is the fact that what is selling are "distressed" sales. People who don't have to sell or move aren't. They are staying in their homes not wanting to "move" because they don't have to. So the remodel industry is getting strong again right now. Interestingly, becasue of the sited "home price declines" they are not doing these projects with home equity loans but, rather, with cash.
Anyway, look out for when the FED raises the FHA loan cap to $750K. Then prices will spike. But don't read to much into it, becasue it won't be indicative of a stronger market- except on paper- the reality is that prices will prob. to remain stagnent for years.
As for the rest...wow people have gone just batty....
House vacancy rates include vacation homes, abandoned homes, spec homes, vacant condos, etc. 15 million of them. well documented. Look up in google if you do not believe me.
Household creation may be 1.5 mil/yr, but that assumes they actually form net new households... right now the reconcentration of households is exceeding the creation of new ones... multiple family generations are moving back in together in very high numbers nationally as people lose homes, jobs, etc.
Perhaps you work for the government and are thus disconnected with what's happening out there and if so then we all understand.
On Apr 23 05:47 PM HardwoodFlooring wrote:
> People post the crazyist info here:
>
> One was: Real Incomes are falling. True but not adjusted for inflation.
> So falling realative to what?
>
> The second was:
> Net household cration is falling. Well we add 1.5 Million housholds
> a year. Now that maybe down from the 1970s but we are jsut getting
> into the echo-generation where we will see another spike.
>
> The third was:
> House vanacy is at an alltime high. Where on earth does that info
> come from. 15 million units! What are you smoking or marketwatch
> for that matter. It's so purposterous and contrary to ever peice
> of data from every credible source any economist has ever seen.<br/>
>
> The forth was)
> riding forclosures into the future- traditionally they are about
> 1%. Even with 10% unemplyment they won't go to 2.5%. We are talking
> fractions of fractions here so it's ahrd to move the needle.
>
>
> It's like all these numbers that come out nowadays. They seem to
> tell whatever story someone wants them to.
>
> So one might surmise that the numbers are a bit skewed because of
> the JUMBO loan factor. It's almost impossible to get a JUMBO now
> and all the banks want to write are FHA loans ($400K and below).
> There is talk of the FED raising the FHA line to $750K- this will
> dramatically change the "housing price" statistics going forward
> so watch out for that. What I mean is when that goes into effect,
> you will see a spike in prices.
>
> The other thing that makes these numbers a bit erroniuos is the fact
> that what is selling are "distressed" sales. People who don't have
> to sell or move aren't. They are staying in their homes not wanting
> to "move" because they don't have to. So the remodel industry is
> getting strong again right now. Interestingly, becasue of the sited
> "home price declines" they are not doing these projects with home
> equity loans but, rather, with cash.
>
> Anyway, look out for when the FED raises the FHA loan cap to $750K.
> Then prices will spike. But don't read to much into it, becasue it
> won't be indicative of a stronger market- except on paper- the reality
> is that prices will prob. to remain stagnent for years.
>
> As for the rest...wow people have gone just batty....
1. Incomes are falling. Ask anyone who is currently employed.
2. Echo generation wtf? Think about all the boomers who have just begun dying off...its happening, and when they are gone there will be millions of empty homes.
3. Vacancy- 1 in 9 homes, 9-15 million vacant has been widely reported...
4. foreclosures- you say won't hit 2.5%, how do you know this...???