Clay Kime

How to Solve the Excess Supply in Housing

I would suggest an additional dynamic to consider. The current increases in rental vacancy rates are more a result of homeowners, unable to sell their property for an acceptable amount, having placed their properties on the market "for rent." Any stimulus that would increase demand for the purchase of residential real estate, would consequently move vacant, un-sold, rental properties out of the "rental vacancy rate" inventory. On a net basis, increasing home sales would actually reduce the overall "rental vacancy rate," not increase it.

Potash Corp: Dynamics of Supply and Demand Drive Earnings Growth

I'll go out on a limb and predict. When POT has sustained trades at or above $182 it will rapidly climb to $200. Whe we get sustained trades at or above $202, we're off to the races to $240+ as the largest shorts will be taken out. We may not see the $182 level today, but we will tomorrow and $202+ by Monday/Tuesday.

This is of course depends on the non-substitution of burnt wood and chicken droppings (kind of "really-old tech") for premium, balanced fertilizer needed to increase crop yields to feed the planet.

Potash Corp: Dynamics of Supply and Demand Drive Earnings Growth

As another note, I would be very cautious with trading POT today. I think the day-traders are going to whip-saw this stock all over the place for the rest of the trading day. Once the volitility settles down a bit, there should be a good opportunity to ride POT to $300+. David White is also on target with the positive effect of AGU's earnings report. That along with the catalyst of POT and the Steel Workers (miner's union) coming to agreement soon on a new contract, POT is headed up, as it should.

Potash Corp: Dynamics of Supply and Demand Drive Earnings Growth

Good analysis. Although Investor88 is right in the short term that its stock price will be swept down with the rest of commodotiy declines (buying opportunity), it won't be long before investors realize that Potash and the other fertilizer producers will retain their pricing power for the severely allocated resources. This is somewhat the similar issue with the oil services companies. They too will be swept down (buying opportunity) with the declines in crude, until investors realize that their buisiness is unaffected by the fall in crude and their continued growth will continue as contractors for exploration and production of oil.

The Upside of Low Housing Starts

Felix:

Thanks for your balanced observation. Finally, we have a rational comment on a housing news report at Seeking Alpha; One that has a view of the forest and not simply one's own tree.


Clay

No Bottom Yet: Housing Permits Drop To 14-Year Lows

Hi Tim:

How about providing some metrics. When will "too high" no longer be "too high?" Are we content to say "I'll know it when I see it?

I'm not sure I would rely on Dr. Shiller (Actually I'm sure I would not.) While he has a useful means of indexing the "past," he has been woefully short on accuracy about the future. He's been saying the same thing for 10+ years, also without any metrics, just his opinion. (Eventually the "wolf" had to show up!)

I also wouldn't rest on the speculators on the CME Housing Futures as a predictor of the housing market. The only CME futures that are more thinly traded are Hurricane Futures on the CME.

Regards,

Clay

Alan 'Not-Me' Greenspan Strikes Again

Paul:

Thanks for the observation. Do you or anyone else know the stats on the resulting increases in ARM loan originations? It would seem that that data would tell us the most about the major-ness of the Fed's impact.

Regards,

Clay

Why There's No Such Thing As a Housing Bubble

Dear t ton:

As mentioned in resposes to other comments above, this is just a report. All the things you mentioned are valid factors and theories, but how would you quantify them for objective analysis? Consumer confidence is also a significant factor. It's real, it has an impact, but how do you measure it? Rent vs. Buy decisions are not universal.

This report is focused on the common denominators which surfaced from the data. It is not a "topical" report; That is that we did not set out to assemble arguements to support a pre-conceived notion. We went in searh of facts not similarities of trend lines and bell-curves with events in 1952 or other historical periods.

I am in complete agreement with your observation that there was a significant amount of irresponsibility with some borrowers and their lenders. The bank's substitute trustee will likely visit them. But again, I ask, how can one identify good loans from bad loans? Some will still be able to pay heir mortgage from a bad loan and others may not be able to meet their obligations from a good loan. Unfortunately, the measure of this factor will have to wait until the forclosures unfold.

Lastly, and again, The title for this report was concocted by Seeking Alpha, not me.

Sorry you didn't otherwise like the report.

Best of good fortune.

Clay

Why There's No Such Thing As a Housing Bubble

Thomas:

I'm sorry Alex convined you that there was or is some conflict of interest. This is just a report, not a recommendation to buy, sell, stay, wait, rent, or do something or do nothing.

I have no idea in what region you are, but your reasoning is sound and I hope it works affirmatively for you.

We also recommend lenders from time to time. But, we always recommend "direct lenders" for precisely the reasons you outlined. With loan origination and underwriting done under the same roof, their stricter and supervised lending guidelines should well protect you as they protect their institution. While there are rational uses of ARMs, interest only and other derivitave products, I agree with you that this is a sector of products that has been abused for longer term financing requirements. If one knows that they are going to move in 4-5 years, a 5-year ARM may be a good choice. I think interest only loans are terrible for the buyer from just about every angle.

Regards,

Clay

Why There's No Such Thing As a Housing Bubble

Alex, Alex, Alex:

This was and is a "report" (please excuse the quotation marks, it's my style not an attempt at subtrifuge). It is a report from the foxholes on the front lines of the real estate market, not an ivory tower. It reports the conditions as we see them and makes no recommendations whatsoever. Your left-handed comments that there is an undisclosed conflict of interest and that I deliberately mis-lead the readers is unfounded, and quite frankly, offensive (as I'm sure it was intended to be.)

Bizarrely, we are in agreement about the effects of interest rates on the housing market. Interest rates have a direct correlation to "affordability." This was the focus of the report. Please read it again.

The report's conclusion that equalibrium in our market will likely be realized when prices retreat to Q1-05 levels may be wrong. We'll just have to see. But the conclusion about affordability converging on Q1-05 prices was set forth with the methodology used to reach that conclusion, namely our affordability index. Again, that "affordability index" is based on "interest rates." You are welcome to disagree with that conclusion, but you are not welcome to be nasty about it. Try some professionalism.

It also seems to have offended you that we noted that the vast majority of the sources quoted by the media are stock market analysts in connection with the housing market. But sometimes the truth hurts. It has been this way since the late 1990's so eventually they had to be right. I could forecast that a blizzard is going to hit Atlanta and, given enough time, I would eventually be able to say "see I told you so." I could forecast a major price correction in the stock market when record earnings are no longer sustainable and, given enough time, I would be right.

You did reach the pinnacle of offensiveness though, in your closing, by accusing me of putting people into houses that they could not afford, a thing I have never done nor would ever do. Where in the banana peels did you get that? What darkness lies within you to make such an unfounded and scurrilous charge? Isn't that "libel?"

Perhaps you should be banned from this blog. There are published rules of conduct.

In closing, please consider Prozac. I understand it has helped many.

Clay Kime, REALTOR(R)
RE/MAX Preferred Properties
380 Maple Ave. W.
Vienna, VA 22180
PlanToMove.com

Why There's No Such Thing As a Housing Bubble

Paul:

Thanks for your comments. This report was prepared for the Northern Virginia (DC Metro) Area at the very end of 2006.

You are absolutely correct, that conditions elsewhere in the country may well be different now as likely they have been during the first half of the 2000's. Even prior to the housing slow-down in Virginia, we had a number of clients relocating from other states where the level of activity in their home states never approached that of our area, Ohio being one of those. Recovery will certainly look different in different markets but I believe it will resemble market balance of supply and affordability-driven demand on a local or regional basis.

I also agree that at some point, hopefully not at the same point, we will see the withdrawn properties re-introduced as active listings. Additionally, some of these are the residences of those who cancelled their "new construction" contracts, so they are no longer under any pressure to sell. Many also were converted to rentals which puts those properties out of market reach for 1 to 3 years, depending on the lease term.

I would also like to note that the title "Why There's No Such Thing as a Housing Bubble" was unilaterally authored by the editors of Seeking Alpha. It was not my title. But the horse is out of the gate now. C'est la Vie!

Regards,

Clay