Housing: The Ship Is Turning 22 comments
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The housing market is bottoming, as is the economy. Inventories of unsold homes are declining at a rapid pace, so it won't be much longer before construction activity must pick up. The same process is also setting us up for a bottom in manufacturing, where inventories are declining at a precipitous pace that will soon lead to a healthy pop in production. Growth should resume by the third quarter, although possibly as soon as the second quarter.
It is the depletion of inventories most everywhere that seems to be setting the stage for a turnaround in the economy. First quarter GDP, to be reported this week, will show another sizeable decline of more than 4%. But it is the composition of this decline that offers so much promise. Inventory liquidation occurred at one of the fastest rates on record, as consumer spending increased, final sales declined more slowly, and production fell sharply. Production cannot remain so far below the pace of sales for long. This sets the stage for an economic rebound.
Housing inventories are also falling to levels that will shortly require a rise in new construction. It is conventional wisdom that the housing market will not bottom until 2010 at the earliest, while pessimistic forecasts point to 2011 or even later. We see the housing outlook more positively. Conditions are falling in place for a bottom in housing within months, possibly even in the second quarter. Unsold newly constructed inventories fell to 311,000 units in March, a historically low level, despite the growth in population and record levels of affordability. Buyers remain cautious about buying, because prices have been falling, so it has paid to wait.
But as housing scarcities become more common in more markets, bidding wars have already erupted in several markets over the past few months, as reported by the Wall Street Journal last week--many people waiting on the sidelines will be forced to bid or risk missing the bottom in prices and their housing choices.
In fact, recent reports suggest housing sales and construction outlays are stabilizing, even as inventories are still declining rapidly. Thus, we expect housing to swing from being a drag on growth to being a contributor very soon.
Improvement in the credit markets is a crucial element to any prospect for recovery. As the asset-backed securities markets improve, credit will become more available to enable consumers to pick up spending, particularly for autos and other durables. Fortunately, credit spreads are falling and the asset backed securities market has improved. The stage for recovery appears set.
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I wish you had waited until after the Case Shiller numbers came out to write this article...
So, to all the "what are you smoking" responses out there, I'd advise you to actually go try to buy a house and see what you find. Certainly ravished areas such as Las Vegas and Phoenix will still be soft, but try buying a house in Denver, Minneapolis, or other more stable markets and see if you still think that Charles is "high."
Good article Charles.
1- Foreclosure supply is increasing. By the end of this year we will again experience record levels of bank owned homes entering the market. See the Credit Suisse Chart:
bp3.blogger.com/_pMscx...
It will take about a year for the majority of the resets of 3Q08 and 4Q08 to translate into bank owned homes. Most of these REO homes today (60% to 70%) are not listed on the MLS giving the appearance of lower inventories. A nice strategy from banks to pump value but the reality is that there are a growing number of vacant homes- more supply.
As supply goes up, price goes down. -Econ 101
2- Jobless claims were 2.6 million for 2008. By the end of March 09’ we lost nearly 2 million more jobs. Job losses will continue; just open up the paper and witness nearly everyday job cuts somewhere by somebody. Yesterday it was GM who announced 22,000 jobs to be cut by the end of 2010. With unemployment rising, there will be less people in the market to buy a home- less demand.
As demand goes down price goes down. -Econ 101
So lets see… Supply going up, demand going down. And no end in sight for either of these trends. I recommend going to the beach or the park and learning how to love the life you have. Don’t struggle to buy a home today, they will be cheaper tomorrow.
You Gotta Luv CA.
They have the solution to the Subprime Mortgage Crisis,
all the foreclosures and short sales.To finally stop the falling
home prices and stabilize the housing market.
As per WSJ article( Google:Tax Credit Gives California Builders A Lift )
Some economists state it is doing nothing to help but it also generates
increased TAX revenues as well as Sale tax revenues on household items
and CREATES employment......THIS IS FOR NEW HOMES PURCHASE!!!
PLEASE APPLY THE SAME PRINCIPLE TO ALL THE UNDERWATER,
DEFAULTING AND SOON TO BE DEFAULTING LOANS and turn the "toxic"
bad loans INTO 100% asset based AAA loans.
The "EVERYBODY WINS PLAN" is simple and it is profitable.
A longer term loan at very low interest rates that
MAKE ALL THE HOMES AFFORDABLE.
As in California
They have added $10,000 to the $8,000 credit
to purchase new homes.
WHY NOT USE THE SAME TACTIC TO END
ALL FORECLOSURES AND SHORT SALES
AND TURN THEM INTO AFFORDABLE HOMES.
END THE MASSIVE INVENTORY ON THE MARKET
AND STABILIZE PRICES.
The "EVERYBODY WINS PLAN"
ALL LOANS TO BE MODIFIED AT 105% of
FAIR MARKET VALUE.
NEW LOAN GOES ON THE BOOKS
It is a 10 year loan at 4% with a balloon payment
of the balance.
THE LOAN
PER $100,000 will have a PITI payment of
$467 per month fixed for 120 Months.
YES,a $100,000 home will be an affordable residence
for an American homeowner for $467 per Month
...TOTAL PITI (PRIN. INT. TAXES, INS.
A $200,000 home will be $934
TOTAL PITI.
TOO GOOD TO BE TRUE?????
It just may be true using the California way-
Federal contribution of $100 per month for interest
instead of cash gift up front
and State contribution of $100 per month for taxes
instead of cash gift up front.
Both fed and state will benefit from giving.Yes If loans are
FDIC and Home Bank Loans they would be
"Stimulating the cash flow to banks and firm their assets.
The state will more than increase their tax revenues by
giving.Giving back on the 8% of homes in trouble will INCREASE
the income from the other 92%
EVERYBODY WINS!!!!
Too Good To Be True????
you will have to ask me for details of the "EVERYBODY WINS PLAN"
in order to find out how 120 payments of $467 with $100 (Fed) and $100 (State)
pays a $100,000 Note at 4%.
I await your request for free details: bestsolutionsfl at aol dot com
Carmen Basilovecchio
Best Solutions Fl Real Estate
9804 S Military Trail E-10
Boynton Beach,Fl 33436
Basics:
On new loan of $100,000.
10 years payments (120)
at $467,$100,and $100 equals $80,040
which is applied as follows:
PRIN -$15,000
INT -$40,000
TAXES-$15,000
INS -$10,000
THIS REDUCES THE AMOUNT OWED ON THE HOUSE
PER $100,000 TO $85,000.
THIS BALANCE IS PAID IN FULL with a new 30 year mortgage.
HOW THIS FOR "SMOKE AND MIRROWS:
*$40,000 paid to FDIC insured banks or Home Loan Bank
with no government stock issues
*$15,000 paid in property taxes,a net gain
*and if you really want to help the economy how about
$10,000 IN INSURANCE PRIMEUMS GOING TO AIG
TO HELP GET TAXPAYERS MONEY BACK.
HOW MANY JOBS WOULD BE SAVED AND NEW ONES CREATED.
And do not forget ,about 6 million homeowners with excellent credit with EQUITY
(the ignored part) in their home.What do you think they will do the the most
important part of the economy-CONSUMER SPENDING?
PLEASE post,send to Obama,Summers,Geithner,
their think tanks have already stated the solution is in LOWER RATES OVER A LONGER PERIOD OF TIME!!!
This is at NO cost to taxpayers and makes a profit.
bestsolutionsfl at aol dot com
On Apr 28 12:23 PM evergreen16 wrote:
> All these Nay-Sayers are just refusing to follow the latest developments.
> Situation have changed. You need to look at the numbers. Surprisingly,
> Sacramento, CA is running out of houses for sale, and that is a real
> shocker. Consumer confidence is quickly rising. Banks are making
> money. Yep, the times have really changed.
www.bls.gov/news.relea...
On Apr 28 12:23 PM evergreen16 wrote:
> All these Nay-Sayers are just refusing to follow the latest developments.
> Situation have changed. You need to look at the numbers. Surprisingly,
> Sacramento, CA is running out of houses for sale, and that is a real
> shocker. Consumer confidence is quickly rising. Banks are making
> money. Yep, the times have really changed.
Record level of affordability based on what some new ponzi loan? Municipalities and states are under tremendous pressure since tax revenues are falling off a cliff. this is another issue that can put the squeeze on demand. Also tax withholdings are still down nearly 10% year over year to date.
There is a large shadow inventory of houses sitting somewhere on the banks balance sheet that will be heading to amrket shortly.
You have made many a great call - Manny Hanny style - but I sure hope you are right about this extrapolating into the metro NYC/NJ market. That would imply a trend change in local employment that is still speeding in the opposite direction!
On Apr 28 12:23 PM evergreen16 wrote:
> All these Nay-Sayers are just refusing to follow the latest developments.
> Situation have changed. You need to look at the numbers. Surprisingly,
> Sacramento, CA is running out of houses for sale, and that is a real
> shocker. Consumer confidence is quickly rising. Banks are making
> money. Yep, the times have really changed.
On Apr 28 08:32 AM David in D wrote:
> Charles: A couple of months ago I, like several posters above, would
> have told you that you are nuts. However, my wife and I began looking
> for a house in southeast Denver/Aurora CO recently and experienced
> first hand what you are referring to. In short, the best homes on
> the market (those with good floor plans and priced well) had multiple
> offers within days. We actually had to really move to get an offer
> in on the type of house we wanted.
>
> So, to all the "what are you smoking" responses out there, I'd advise
> you to actually go try to buy a house and see what you find. Certainly
> ravished areas such as Las Vegas and Phoenix will still be soft,
> but try buying a house in Denver, Minneapolis, or other more stable
> markets and see if you still think that Charles is "high."
>
> Good article Charles.
Not funny, witty, or smart. Seriously, to you and any other respondants on this post, have you actually attempted to buy a house in the last six weeks?
As I stated, I would have been one of you (the Charles-bashers) had I not actually experienced the REAL market versus playing arm-chair economist.
But then again, it is a lot to ask of someone to actually have some real data behind what they post on Seeking Alpha.
On Apr 29 12:02 AM theseanman wrote:
> I expect your real name is S. Puppet.
My point, backed by actual real market intelligence, is that homes in Denver selling below $275K in resonably desirable areas have (or are in the process) of stabilizing.
Therefore, there is legitimacy to Charles original post.
Look, unemployment is at a historical high and growing. The auto industry layoffs will put another 200,000 people out of work. This means more mortgage defaults and more houses on the market.
Retail sales are down again and will fall even more as unemployment increases. People are only buying what they need, the basics. Watch for many retailers failing by the end of the year.
How can manufacturing pick up when no one is buying? Inventory levels may be at an all time low but there will not be any major replenishment of new items when no one is buying.
And as for the housing market. More foreclosures mean more inventory on the market. No one can sell their existing home to move up. First time home buyers don't have 20% to put down to get their first house. How are things stabilizing??
Last but not least, the major home builders have all been using the Chinese drywall since 2005. The class action law suites will hit these companies like a tsunami with 10's of thousands of homes finished with this drywall.
I guess the housing market and industry looks pretty good, just like the rest of the economy!!
On Apr 30 06:26 PM David in D wrote:
> "theseanman",
>
> Not funny, witty, or smart. Seriously, to you and any other respondants
> on this post, have you actually attempted to buy a house in the last
> six weeks?
>
> As I stated, I would have been one of you (the Charles-bashers) had
> I not actually experienced the REAL market versus playing arm-chair
> economist.
>
> But then again, it is a lot to ask of someone to actually have some
> real data behind what they post on Seeking Alpha.
msnbcmedia.msn.com/i/m...
Here is Case Shiller which shows every major market is still trending down - Denver included.
www.macromarkets.com/c...
On Apr 30 06:29 PM David in D wrote:
> "All real estate is local" as the old adage goes. Therefore, not
> all parts of the country will experience price stability at the same
> time. Furthermore, not even all parts of the same city will stabilize
> synchorously.
>
> My point, backed by actual real market intelligence, is that homes
> in Denver selling below $275K in resonably desirable areas have (or
> are in the process) of stabilizing.
>
> Therefore, there is legitimacy to Charles original post.