johngonole

Where Are Housing Prices Headed Now?

I think the author was trying to say that housing's ultimate floor and long term price trend will mirror that of how much it cost to build a home. If prices go too high supply will increase. If they go too low supply will dry up. (by supply I mean homebuilding).

I agree with the above premise for the long term. I also agree with the poster about lack of data. How do we know immigrants are still coming into this country. I've actually heard that because of unemployment (which would be much higher if we counted the illegals) illegals are leaving the US. This might be true but who has the data.

I think the easist measurem will be the supply of homes figure

Housing: Strong Recovery Ahead

Author is correct that with such a low build rate there will be plenty of construction capacity to jump back online when ready. From lots to labor supply is ready.

His thesis of a build up of demand is weak however. In Florida we've heard and seen that many of the illegals have left to go back home. In fact I think the recession has been longer than most people know. The unemployment rate lagged reality because it failed to reflect the fact that many of the first laid off employees were illegal. Especially the contraction that occured in the construction and hospitality industries.

Shadow inventory will suppress what demand there is. Prices can't be expected to rise too much. If home prices begin to rise that is when you will see the homebuilding explode. Why buy old when you can buy new. The only case against this thesis of mine is if commodity prices explode due to recovering economies elsewhere or another lending explosion.

The other thing I would argue is that home prices are still out of reach for a lot of people (and obviously in areas where unemployment is high) compared to their income. Rental rates are dropping in many places which also indicates spare capacity.

I think think housing, bankin, and the stock market in general will head lower till say November or December. The plunge protection team can't keep buying forever. Fundemetals will eventually rule

The New MacroShares Housing Funds Revealed

If you bet the movement of direction right then you win big. Guess wrong and you lose big. I would prefer an instrument like this that is one to one without any leverage. That is if prices move up 1% you also gain 1%. This way people could still bet on the direction of prices. At the same time it would be a more effective hedge for everyone. For example if you can't afford to put money into a house right now but would like to start prepaying on one. Using a non-leveraged version of this fund would be the preferred way. Every share you buy would reflect the prices of homes at the time. So you would essentially capture the prices of housing at the time. If prices fall you haven't really lost anything cause houses would then be cheaper. If they rise you were able to buy before the price rise. I guess what I'm saying is that a housing ETF would make more sense then this.