Housing 2008/2009 Thread

[ElFenix]

Dec 2009 Graph

It has been a few months since I've bothered to update this thread. Existing housing sales are roaring back. They are at levels not seen in 3 years. Heck, they are now only 10% below the all time high. Prices are stagnantly low though.

according to the graph over the last 4 years the 'new house construction' rate has outpaced the 'new house sales' rate by 50% plus. how the hell did anyone think that was a good idea?

 

[dullard]

according to the graph over the last 4 years the 'new house construction' rate has outpaced the 'new house sales' rate by 50% plus. how the hell did anyone think that was a good idea?

You do have a point. When starts exceeded 2 million per year in 2005, it was just companies chasing after a bubble. The US population is only growing by about 2.5 million per year. At that rate, virtually every new person will need to buy a house for himself/herself just to keep up.

But, I think you are missing the finer point. Not all new homes built are intended for sale. I can build a home for myself (or pay someone to build it for me) and not turn around and sell it. I could actually live in it. Thus, there SHOULD be more homes built than sold.

 

[StageLeft]

I visit doctorhousingbubble.com from time to time. He lacks the alarmism I see in some bloggers and more importantly backs up his predictions with vast amounts of data and research. From his end things are not yet bottom. And I think he's right because they've overall continued to decline. There are occasional blips, but in the grand scheme more people are defaulting, underwater, etc.

Also, if rates do go up meaningfully (they were at their historic lows a few weeks ago but on their way up again), they will inexorably lower what people are willing to pay for a house unless they are, along with the higher rates, receiving more pay. But as we know inflation is basically flat and pay raises are too plus most importantly unemployment is high and will stay that way.

There are numbers to support both sides but overall I think housing has not hit bottom yet, though even defining exactly what that is is hard since many things make it up from median prices to numbers of homes sold to homes in foreclosure, etc.

On CNBC today or yahoo finance it reiterated how the fed reserve come March will be cutting back its backing of loans, which is going to be one factor increasing interest rates.

 

[ElFenix]

You do have a point. When starts exceeded 2 million per year in 2005, it was just companies chasing after a bubble. The US population is only growing by about 2.5 million per year. At that rate, virtually every new person will need to buy a house for himself/herself just to keep up.

But, I think you are missing the finer point. Not all new homes built are intended for sale. I can build a home for myself (or pay someone to build it for me) and not turn around and sell it. I could actually live in it. Thus, there SHOULD be more homes built than sold.

i doubt that many people were building their own homes.

 

[Vic]

Dec 2009 Graph

It has been a few months since I've bothered to update this thread. Existing housing sales are roaring back. They are at levels not seen in 3 years. Heck, they are now only 10% below the all time high. Prices are stagnantly low though.

Short sales are the primary driver in the housing market at this time.

It only makes sense though. In a perfect capitalism, sales would be strongest when market prices are low. While bubbles OTOH are the result of manipulated markets.

 

[Zebo]

I visit doctorhousingbubble.com from time to time. He lacks the alarmism I see in some bloggers and more importantly backs up his predictions with vast amounts of data and research. From his end things are not yet bottom. And I think he's right because they've overall continued to decline. There are occasional blips, but in the grand scheme more people are defaulting, underwater, etc.

Also, if rates do go up meaningfully (they were at their historic lows a few weeks ago but on their way up again), they will inexorably lower what people are willing to pay for a house unless they are, along with the higher rates, receiving more pay. But as we know inflation is basically flat and pay raises are too plus most importantly unemployment is high and will stay that way.

There are numbers to support both sides but overall I think housing has not hit bottom yet, though even defining exactly what that is is hard since many things make it up from median prices to numbers of homes sold to homes in foreclosure, etc.

On CNBC today or yahoo finance it reiterated how the fed reserve come March will be cutting back its backing of loans, which is going to be one factor increasing interest rates.

I agree with this and lets not forget the home equity bailout program that expires in April and how that will effect home sales... I see things from a very localized POV here and no builders or developers I know are even thinking about snatching up lots/closed developments at 50% on the 2007 dollar. When they move I'll have some confidence in a recovery of housing. Some fools were doing commercial up into the summer but that has shut down once they realized no one is leasing thier spaces.

 

[dullard]

i doubt that many people were building their own homes.

Why?

People do it all the time. Some people like a house to be new; one where they can choose the layout, features, colors, etc. So they find a builder, and hire the builder to make the home. Nearly half of all new homes are built that way. Those homes are recorded as being started but aren't recorded as being sold since they were never sold.

A smaller number of people do the work themselves, if that is what you are talking about. Even I know two families doing that themselves right now and I've helped one of them with the framing. But the person doing the building (the owner or a contractor) has nothing to do with these statistics.

The options are (a) a builder starts building the home with no buyer in mind and just hopes to sell it later or (b) a builder builds the house with a buyer already lined up. The statstics show that (a) roughly equals (b).

 

[StageLeft]

http://finance.yahoo.com/news/Novem...tml?x=0&sec=topStories&pos=main&asset=&ccode=

New home sales sink 11%.

WASHINGTON (AP) -- Sales of new homes plunged unexpectedly last month to the lowest level since April, a sign the housing market recovery will be rocky.

A couple of weeks ago we beat the historic lows for mortgage interest rates. Although homes sold in November would be using rates locked probably in October or maybe september, rates have been extremely low recently plus there is the new home owner credit and yet still they are not moving swiftly.

This guy http://www.cnbc.com/id/34571747 talks about how foreclosures are still so delayed that those holding the mortgages are not fully realizing the loss that they truly have in reality.

 

[dullard]

New home sales sink 11%.

A couple of weeks ago we beat the historic lows for mortgage interest rates. Although homes sold in November would be using rates locked probably in October or maybe september, rates have been extremely low recently plus there is the new home owner credit and yet still they are not moving swiftly.

I updated the graph links above with this data.

The thing to keep in mind is that new home sales data are quite volatile. The average monthly change is ~45,600 homes sold. This month had a 45,000 home sale drop. So, that is typical monthly variation. And it is small compared to the 450,000 home change in the existing market.

I think the prices are still on their freefall. But the freefall is coming closer and closer to an end. See this year-over-year price change graph since the end of the boom. This graph takes the nationwide average sale price of an existing home for each month and divides the price from that same time 1 year before. Prices started dropping year-over-year in summer of 2006. By summer 2007, the prices started falling off the cliff (under 100% on that graph). The drops hit their worst in Winter of 2008-2009. Prices have still dropped year-over-year, but as you can see the rate of the drops is getting smaller and smaller. If this trend continues, we'll have year-over-year nationwide average price INCREASES by spring.

So, I think we have more pain ahead (prime mortgages are starting to enter foreclosure, interest rates will rise, government life-support will end, etc), but I can see the light at the end of the tunnel.

 

[StageLeft]

So, I think we have more pain ahead (prime mortgages are starting to enter foreclosure, interest rates will rise, government life-support will end, etc), but I can see the light at the end of the tunnel.

Certainly. As home prices acclimate toward what the historical trend says they should be and the natural balance is restored in that manner we can call it a day. I am not sure off the top of my head if they've hit that or are overshooting it. I think they may be overshooting in some places.

 

[Vic]

This guy http://www.cnbc.com/id/34571747 talks about how foreclosures are still so delayed that those holding the mortgages are not fully realizing the loss that they truly have in reality.

That article is biased junk. Ellington is an MBS liquidator. So of course they want to see write-downs and expedited foreclosures.