This Run-Up Has Been Historically Exceptional
A report from McClatchy DC. “Two new measures released Tuesday show home prices continued their upward climb earlier this year, even as sales remain lukewarm. U.S. house prices rose 1.3 percent from January through March, according to the Federal Housing Finance Agency House Price Index. It marked the 15th straight quarter in which prices rose on the index, compiled from information about mortgages sold to or guaranteed by Fannie Mae and Freddie Mac.”
“‘Home prices are now, on average, roughly 20 percent above where they were three years ago,’ said Andrew Leventis, the principal economist for FHFA. ‘This run-up has been historically exceptional and is particularly notable in light of the limited household income growth and modest rate of inflation observed during that same period.’”
“Translation: People aren’t earning much more, yet home prices are rising faster than the rate of inflation in much of the country. San Francisco and Denver saw the biggest jump in home prices on the Case-Shiller index, jumping by 10.3 percent and 10 percent respectively. Dallas prices rose 9.3 percent over March 2014. A McClatchy article earlier this month raised concerns that some parts of the nation might be seeing housing bubbles, a concern both recognized and dismissed by David Blitzer, chairman of the Index Committee for S&P Dow Jones Indices.”
“‘The only way you can be sure of a bubble is looking back after it’s over. The average 12 month rise in inflation adjusted home prices since 1975 is about 1.0 percent per year compared to the current 4.1 percent pace, arguing for a bubble,’ he acknowledged in Tuesday’s report. ‘Home prices are currently rising more quickly than either per capita personal income (3.1 percent) or wages (2.2 percent), narrowing the pool of future home-buyers. All of this suggests that some future moderation in home prices gains is likely.’”
The Wall Street Journal. “The S&P/Case-Shiller Home Price Index released on Tuesday was the latest report to show a relentless rise in housing prices, causing some economists to ask: Is another bubble forming? ‘There is no bubble to be anxious about,’ said David Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices. Price growth in most markets is ‘a lot softer’ than it was a year ago, he noted.”
“To be sure, some markets, such as San Francisco and Denver have seen staggering gains. Denver has surpassed its peak home prices in 2006 by nearly 17%. Lawrence Yun, chief economist for the National Association of Realtors, has been among the loudest sounding the alarm that prices are too high. But he said that he isn’t worried about a bubble, just that the lack of affordability may cause demand to evaporate. ‘In a sense it is demoralizing for people who want to save up for a down payment,’ he said.”
“Another concern is a possible jump in interest rates. John Burns, chief executive of John Burns Real Estate Consulting Inc., said that would put homes out-of-reach for many at current price levels in many major cities. If rates rose to 6%, homes in more than half of those markets, including Los Angeles, San Francisco, Miami, and Denver, would be overvalued. ‘We are in a pretty precarious environment,’ Mr. Burns said.”
“Economists also aren’t concerned about a price bubble because far fewer new homes are being built than a decade ago so there is little concern about oversupply.”
From Bloomberg “Purchases of new homes in the U.S. rose more than projected in April, a sign this part of the market is picking up steam during the busiest selling period of the year. Housing starts soared in April to a 1.14 million annualized rate, the most since November 2007, Commerce Department figures showed last week. More permits, a proxy for future construction, were issued than at any time since June 2008.”
“The median sales price increased 8.3 percent from April 2014 to $297,300, the report showed. Purchases rose in two of four U.S. regions, led by a 36.8 percent surge in the Midwest, the biggest jump since October 2012. Buyers are getting help from low borrowing costs during the housing market’s busiest time of the year. The average 30-year, fixed-rate mortgage fell to 3.84 percent in the week ended May 21, close to the level at the start of 2015 and well below last year’s high of 4.53 percent in early January 2014.”
The Press Enterprise in California. “Home sales picked up in April as builders sold 517,000 new single-family houses across America at a pace that is up 26 percent from April 2014, according to a new Census Bureau report. Builders in the West bested that home building rate with a 39.8 percent year-over-year gain. The report released Tuesday, May 26, 2015, put new single-family home sales at a seasonally adjusted annual rate of 130,000 in the West, nearly one-fourth of all homes sold in April. It was the fifth consecutive month showing sales of 130,000 or more.”
“At some point, said Dennis Handler, director of Metrostudy’s Southern California region, new home sales will rise. He’s pinning it on the moment resale home inventory wanes and a fresh supply of new homes come into the Inland market at the lower end of the price spectrum. Still, the Metrostudy report noted a $135,000 difference between new and resale median prices of Inland homes, with less than 30 percent of Inland homebuyers currently able to afford a new home. The median sales price of new houses sold in April in the U.S. was $297,300; the average sales price was $341,500. In the Inland area, Handler said most new home starts, 37 percent, were in the $300,000 to $400,000 price segments. Twenty-eight percent were $400,000 to $500,000 range.”
The Bay State Banner in Massachusetts. “Jill Edwards likes her three-bedroom apartment on Munroe Street well enough. But with real estate prices inching up in the Roxbury neighborhood she’s called home most of her life, she’s looking for something more permanent. She was among dozens of prospective buyers perusing condominiums in Roxbury and Dorchester, looking for the right mix of affordability and space. Priced at $293,500, the condo is one of several listed in Roxbury priced below $300,000. ‘I want to get in the market before it gets crazy,’ she says.”
WIVB in New York. “It is an eyesore in this neighborhood of well-maintained Colonial-style homes. The two-story house on Goundry Street in North Tonawanda has been vacant for years, and the owner, Donna Neal has even tried give it back to the bank for a dollar. ‘Hasn’t been my house, I haven’t lived in it. I haven’t wanted it, tried to give it to them,’ said Neal.”
“The owner can’t give the property away because the bank says more is owed on the mortgage–than the property is worth. Neighbors, like Stan Fularz are getting frustrated because the house is like a sore thumb. Fularz offered to buy the house, but Donna says the bank would not allow it, since Stan’s offer wasn’t enough to pay off the mortgage. ‘Yes, I wanted to tear it down, open up the yard, double the size of my lot.’”
“In the meantime, the bank is paying the taxes, the insurance, sewer and water, and the upkeep of the property, which is puzzling to Fularz who suspects the house is costing the bank–and the Federal Housing Administration which guaranteed the loan–more than the loss if they had accepted his original offer.”
“Donna has also learned there are liens on the property that have to be paid before the deed can change hands, and seems to be how Goundry St. ends up with this zombie property: Stan can’t buy it, Donna can’t give it away, and the bank won’t take the title. ‘They put a new roof on it. They cleaned out the backyard, and emptied out the house,’ Donna Neal asks herself, ‘who’s decision is it for the bank to keep losing money by the day? Bank statements indicated more than $50,000 is owed on a mortgage that started out at about $40,000. Shouldn’t the bank be looking to cut its losses?’”
As PB pointed out, you don’t hear price increases called “improvements” as much these days.
‘San Francisco saw the biggest jump in U.S. home prices according new figures that show nationwide the housing market is continuing its upward trend. The Standard & Poor’s/Case-Shiller 20-city home price index rose 5 percent in March from 12 months earlier, the S&P said Tuesday. Prices increased at the same pace in February. In San Francisco prices rose 10.3 percent from a year ago. Denver was close behind with a 10 percent increase.’
‘David Blitzer, chairman of S&P’s index committee, said prices are rising at a faster pace than their long-term trend. They also rose more quickly in the past 12 months than average hourly wages. ‘I would describe this as a rebound in home prices, not a bubble and not a reason to be fearful,’ Blitzer said.’
Here’s what I find odd about this Case/Shiller hub-bub. It’s really old data. March numbers that were probably signed in February. As we know, some of these areas are in full on crazy mode. What’s ol’ David gonna say when he gets around to May?
He will cherry pick data from areas that are different. Just like always.
Some California areas are going crazy right now. California is distorting everything and full of fraud.
All I know is the housing market based O
All I know is if the housing market is based on what Denver is doing, than it is a disaster waiting to happen?
If you throw out the CA markets, Case Shiller still shows:
Atlanta up 5.4%
Boston up 4.6%
Charlotte up 5.8%
Dallas up 9.3%
Denver up 10.0%
Detroit up 4.2%
Las Vegas up 5.7%
Miami up 8.7%
Portland up 6.9%
Seattle up 7.5%
Tampa up 8.1%
I just picked the 11 that seem to well outpace inflation. The 3 CA markets are also above inflation.
Case Shiller’s CA markets are only coastal (SF, LA, SD). Inland markets in CA are quite a bit more tame.
More like grossly inflated and falling Rental_Fraud.
http://img802.imageshack.us/img802/7812/caseshiller.jpg
Denver, CO List Prices Plunge 10% YoY
http://www.movoto.com/denver-co/market-trends/
Housing Analyst,weep boy weep!! hahaah banana dance lol
A three-bedroom town home in El Segundo recently had 14 offers, he said. It’s about to close escrow for $810,000 — $41,000 over the asking price, Sulpor said.
The “open house was standing room only,” he said.
Agent Carey Chenoski said her client recently sold a three-bedroom house in San Bernardino to a couple for $15,000 over asking price. That, she said, probably wouldn’t have happened last year.
“It’s actually pretty strong,” the Beaumont resident said. “On my street, three houses closed in the last week or so.”
Sales rose in all six Southland counties: Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego. L.A. County saw a 12.5% increase, while Orange County posted a 8.9% gain.
http://www.latimes.com/business/la-fi-home-prices-20150416-story.html
Fail.
Ben,
Just trying to understand what you are saying above… Sorry if you’ve stated this in previous posts because I haven’t logging in for a long time. Are you saying that the SF Area housing prices are not booming right now?
Based on what I’m seeing people are offering far over asking prices. Bidding wars are back. Realtors are marking up the asking price on each successive listing compared to the previous sale. It’s just like 2004 or 2005 all over again. Prices in my area are now higher than they were during the previous bubble by a hefty amount. To be clear I’m talking about in the SF Bay Area not in other parts of California per se.
And the Fed lingers are 0%.
I posted this just the other day:
“How high does this ladder stretch? With spring buyers vying for a limited number of properties, the median price for Santa Clara County homes reached yet another all-time high in April. Sticker shock spread throughout the region, with prices for single-family homes jumping from a year ago in all nine counties, according to CoreLogic. ‘Prices are jumping,’ said Kristine Kim-Suh, a Palo Alto-based agen. ‘Some properties are selling for $30,000, $40,000 or $50,000 beyond last month’s comparables, and it’s making buyers that much more aggressive. For example, they know that the comparable is $825,000 and they’re bidding $885,000, they’re so anxious. It’s even surprising the listing agents.’”
“On the Peninsula, ‘nothing has slowed down,’ said Alain Pinel agent Nick Granoski, who recently worked with first-time homebuyers Becky and Brandon Stroy, who had been outbid and worn out since their house-hunting began in December. But by throwing an extra $400,000 on top of the $1,350,000 list price on a Mountain View ranch-style home in the Varsity Park neighborhood, the Stroys were finally winners. ‘There were 17 other offers and ours was sort of just barely high enough to win,’ said Brandon, an attorney. He received news of the successful bid while on his way to work, taking it in with ‘a mixture of joy and relief and surprise — and then terror, I guess.’”
http://thehousingbubbleblog.com/?p=9035
OK, but look at this from February 1, 2015:
‘“San Jose and San Francisco lead the nation in house flipping, according to Trulia, but the best days for making a profit may be over as price gains slow. Glenn Polf of Diversified Ventures Group in San Ramon said his group bought a house in East Oakland at auction but only broke even on the resale. ‘We overpaid. That’s what happens when you don’t get deals for a while. You get a little bit more aggressive. We were more optimistic than we should have been,’ he said.”
“‘The buyers are paying such a premium for houses, it doesn’t make sense for flippers,’ said Alisha Karandikar of CSR Real Estate Services in San Jose. ‘The acquisition costs are so high, that one little tweak in the market and they are going to lose their shirts,’ she said.”
http://thehousingbubbleblog.com/?p=8833
It’s clear prices in the BA were either stalled or dropping just a few months ago. Then ka-boom, and we’re right back to trees growing to the sky.
Thanks for the reply Ben!
Its amazing how many homes I see on the market now that we’re purchased only one to three years ago. Some were intentional flips and others are “well what the heck might as well cash out and lock in a $250k profit!”
This is the same paper! Mercury News; lose your shirt, overpaid to crazy time in 3 months.
Prices in my area are now higher than they were during the previous bubble by a hefty amount. ”
Still below peak prices in Ventura Co. CA. Whats SLO like ? above peak ?
As I understand it, there are few broad markets that are above peak values.
Colorado is one.
Texas is another.
Although those two states didn’t experience the same kind of run up during the bubble (so they had a lower hurdle).
CA as a whole is still below the peak, but that is made up of coastal markets that are at or above peak, and inland markets, which are way below peak.
Inland California is like Nevada, but with a lot more taxes.
I wonder if inland CA RE markets start going up in price ase coastal RE becomes just too unaffordable if that’s a TELL for the next blow off.
I’ll just answer my own question - yes it is. Not there yet but looks like headed that way. A double bubble. Who would have thought after what we just went through?
So this is how economies work after outsourcing and computer controlled robots.
San Francisco is awash in stupid tech money AND stupid RE money. It’s going to be like 2000 and 2007 combined when it busts.
It can’t be ruled out that it’s possible. That would be like Texas and the oil states; oil economy wiped out and a real estate bust to deal with. Hollowed out for a generation.
I read the other day some metric that implied more people were looking east Bay (and farther) to purchase, since they were “priced out” of the more desirable parts of the Bay Area.
Unless there is development to absorb the overflow, it will drive prices higher…just like prior cycles.
When the big paychecks are gone, so will the overflow.
There’s is plenty of development and houses, not enough demand to absorb it all.
I’ve already documented bay areans buying in the boondocks.
“I’ve already documented bay areans buying in the boondocks.”
Yes. The article was about a recent uptick in such activity (a higher proportion of buyers in eastern locations coming from the Bay Area).
There have been more than one, including a reference to using primary house credit to purchase the second house.
April 27, 2015
The Sacramento Business Journal. “Luxury home sales in the Sacramento region took a 30 percent jump in the first quarter of 2015 compared to a year earlier. The easiest explanation? Look west. ‘I think we’re seeing Bay Area retirees move here,’ said Terri Briggs, regional VP at Coldwell Banker Residential Brokerage in Sacramento. ‘The Bay Area is just really hot.’”
The Calaveras Enterprise. “The housing market in Calaveras County is improving, according to the Calaveras County Association of Realtors. Valerie Moon, administrative manager for the association, said that the booming housing market in the San Francisco Bay Area appears to be finally impacting Calaveras County as Bay Area residents take the equity they have in homes there to purchase investment properties, second homes and vacation homes here. ‘Our second home market is integral to the overall picture of our sales volume,’ Moon said.”
http://thehousingbubbleblog.com/?p=8983
“San Francisco is awash in stupid tech money AND stupid RE money. It’s going to be like 2000 and 2007 combined when it busts.”
Doesn’t the Fed stand in the ready this time to ensure that stock and home prices always go up from here on out to the indefinite future? How is a bust even possible under such a regime?
as markets slow the data gets to be 6 months then a year old
They’re back on the heroin.
When, and why, did David Blitzer become the go-to person when news outlets need a quote on housing? Why is David Blitzer more upbeat than even the NAR’s chief economist? No reason to be fearful, Americans! Once again, propaganda is being disguised as expertise. You’d think that we’d embarrassed ourselves enough.
It’s freak out time for the price pimps.
Mountain View, CA Sale Prices Crater 6% YoY
http://www.zillow.com/mountain-view-ca/home-values/
Weep mr. slave renter for life. Have you remolded your crib in your grannies basement ?
HOUSING: Sales up 8 percent in Riverside, San Bernardino counties
Riverside,
San Bernardino county homes sales were up 8 percent last month, the third best April since 2006, according to CoreLogic DataQuick
The median sale price in Riverside County rose 8.3 percent to $310,000 from $286,250, according to CoreLogic. In San Bernardino County, the median price home buyers paid for a new or existing home or condo bumped up 5.2 percent to $252,000 from $240,000 in April 2014.
“What I think you’re seeing is a combination of a lot of good things all at once,” observed Rich Simonin, co-owner of Wescoe Realtors in Riverside. “You’ve got low rates and better economic news. The flipper investors are basically gone. What you have in this market are real buyers, real sellers.”
CoreLogic analyst Andrew LePage said home sales across the two-county region market and all of Southern California made the month one of the strongest since April 2006. It was the second consecutive month of gains, coming off the worst February for sales in seven years.
The region has some catching up to do. Median prices in Riverside in San Bernardino counties are around 30 percent below their all-time high. But with median home prices rising to $600,000 in Orange County, local Realtors say it’s only going to be a matter of time before more sales are inked by buyers from the coast.
“April will not be an aberration,” Simonin said, and predicted: “May numbers will be equally as strong.”
full story
http://www.pe.com/articles/sales-767615-april-county.html
And not a buyer in sight.
Remember housing demand is a 20-year lows.
Frisco, TX Housing Inventory Billows 123% On Oil Bust; Prices Dive 8%
http://www.movoto.com/frisco-tx/market-trends/
Arvada, CO List Prices Tailspin; Down 17% YoY As Oil Bust Spreads
http://www.movoto.com/arvada-co/market-trends/
Orange County housing shortage could drive out workers, hurt economy
At 1.5 jobs per housing unit, the county already has 50,000 to 62,000 too few homes to support its workforce, the report estimates. And if state projections for job growth and housing development hold, Orange County will fall another 100,000 units short of its housing needs over the next 25 years, Walrod projects.
“We know that the economy is going to continue to grow jobs,” he said. “We’re going to need to put people somewhere.”
Traditionally, that “somewhere” has been on newly developed land somewhere in Orange County, or in less-expensive locales in Riverside or San Bernardino Counties. But developable land is growing sparse along the coast, and, in a place where 40% of workers already spend an hour or more commuting each day, pushing east becomes less appealing all the time, Walrod said.
In other parts of the county, planning commissions and neighborhood groups are pushing back. The study also pointed to high development fees — from $40,000 to $80,000 per unit — and regulatory hurdles as factors that slow homebuilding in Orange County and elsewhere in coastal Southern California.
full story
http://www.latimes.com/business/la-fi-orange-county-housing-shortage-20150330-story.html
With 25 million excess empty and defaulted houses, 4.4 million of the in California, I don’t think there is a need to worry about a “shortage” of housing.
Plano, TX(Dallas) List Prices Crumble 19% On Plummeting Oil Prices
http://www.movoto.com/plano-tx/market-trends/
Thornton, CO(Denver) List Prices Crater 12%; Inventory Balloons 214% On Looming Housing Correction
http://www.movoto.com/thornton-co/market-trends/
CNBC reporting record returns for house flippers this morning. Buy the rumor sell the news?
Yet housing demand is at 20 year lows and falling.
‘RealtyTrac reported foreclosures in Nevada jumped almost 40 percent last month, making the state the second in the country for the highest residential foreclosure rate.’
‘RealtyTrac vice president Daren Blomquist told KNPR’s State of Nevada that part of the reason we’re seeing an increases is because of efforts to slow down foreclosures during the height of the housing crisis.’
‘He believes the efforts to prevent foreclosures were well intentioned but they just delayed the inevitable for many homeowners.’
‘Nye County topped the list of counties with the highest foreclosure rates, with one in every 234 homes subject to a filing. Clark County ranked fourth with one in every 509 residential properties subject to a foreclosure filing.’
Remember when Romney got skewered when speaking in Vegas for saying that the housing market should be allowed to clear?
I don’t intend to make this thread political–my point is that doing the right thing (letting the market reset) was incredibly unpopular, and that is why we got all these (now failed) efforts to slow down the inevitable.
A failing of democracy… the majority has a vested interest in seeing house prices rise, so anybody that comes out against that is not going to get the power to do anything about it.
You are such a back-tracking phony. I told you about these foreclosures that had yet to come to market, and you made up all sort of lies. There are over 20,000 vacant houses in Washoe County alone.
What “lies” were those specifically? I’m sure you can find my posts on the subject.
As I recall, the conversation went something like:
You: Nevada stopped all foreclosures, there’s a huge backlog yet to hit the market.
Me: Yes, they did stop foreclosures, but then they restarted foreclosures and are in the process of clearing the market at a much faster rate (and I posted a link to Property Radar’s Nevada page showing the level of foreclosure activity).
You’ve got zero credibility Rental_Fraud.
‘KANSAS CITY, Mo. - Memorial day is the unofficial start of summer and the busy season for realtors. Becky Budke has been selling homes in the metro for more than 30 years, but says 2015 could be her best year, yet.’
“The inventory is flying off the shelves. We are experiencing the best market I’ve seen in 33 years,” said Budke.’
It ends the season in Phoenix. Too hot now.
The only stuff selling is being reduced significantly.
Yeah, I see open house signs everywhere in Glendale, etc. No mobs, no reports of boom-boom. The builders are offering incentives and have been for a while. But what they are putting up is too expensive.
Here’s a thought experiment that shows how silly this all is. Ask Yun or Shiller or Blitzer, if this isn’t a bubble, what would be? What crazy high price in Silicon Valley or Bozeman Montana is a bubble? Cuz they don’t know. So why is the media even asking them?
The bubble is in the prices. The prices will go too far if greed of the participants is the primary motivation:
‘Priced at $293,500, the condo is one of several listed in Roxbury priced below $300,000. ‘I want to get in the market before it gets crazy,’ she says.’
People sitting on a house they want/need to sell, waiting for top dollar is greedy mania behavior too. As are banks doing the same thing.
The worst person would be one sitting in LA but owning a house in Phoenix they are trying to unload. Reading the LA pimps’ propaganda right now in the LA papers, you would sit and sit because trees can grow to heaven.
But prices are being reduced in Phoenix. Maybe not enough for some yet, but the fact that it is going on at all is telling.
Nobody more than a hawk than me in Real Estate, but even a hawk doesn’t eat without prey,none are around. Phoenix and much of the Southwest not doing well, traffic is vey slow over the a year now, the NRA always skews the charts, seems like CA also is cherry picked, many are reducing their prices also, this put it on the market sold in 10 days is a dream. RE agents tell you a fairy tell to unspecting sellers to get or buy the listing, than they hit you with, after 30 days you are the only one not selling reduce???.
“The inventory is flying off the shelves. We are experiencing the best market I’ve seen in 33 years,” said Budke.’
Who could have seen it coming ??
‘In a sense it is demoralizing for people who want to save up for a down payment,’
What’s a “down payment”? And how or why would someone go about “saving” for one of these?
There’s a whole lexicon that’s become almost irrelevant.
‘Housing analyst Ted Wilson isn’t surprised as North Texas home values continue to rise with the region being short tens of thousands of homes.’
“Even with home prices up 28 percent to 30 percent in the last three years, Dallas continues to still be one of the most affordable metropolitan areas in the country,” Wilson, a principal at Dallas-based Residential Strategies Inc., told the Dallas Business Journal.’
“About two thirds of all people — assuming their credit is decent — can still afford to buy a new home in Dallas-Fort Worth,” he added.’
‘Nationally, home prices have increased 5 percent in March year-over-year in the Case-Shiller 20-city composite. Given the long stretch of growth, Chairman of the Index Committee David Blitzer said, “It is no surprise that people are asking if we’re in a new home price bubble.”
‘Portland metro prices are up about 6.9 percent from one year ago, Case-Shiller reported, compared to the 20-city increase of 5 percent. March was the 35th straight month of year-over-year increases in the 20-city average.’
‘David Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices, said the strong housing market raises some concerns about a possible housing market bubble. But Blitzer said a cooling process is likely, given that prices are rising more quickly than personal income or wages, narrowing the pool of future buyers.’
Where was all this referencing of prices to incomes when Phoenix saw the median shoot up 70% in two years?
From that recent study released about where SFOers are looking to move, Portland could be the next tech hub city with ‘affordable’ housing. I wouldn’t bet against it.
Snap out of it. Rather than Portland becoming the new SF, SF prices are going to crater and Portland will always be Portland.
‘It’s been nearly four years since the S&P 500 has suffered a 10 percent correction — the third longest run since 1960. Investors are complacent, with Deutsche Bank Chief U.S. Equity Strategist David Bianco (one of Wall Street’s most bearish forecasters for much of 2014) now estimating we’re moving into mania territory last seen in late 2007 and early 2008, based on the ratio of the price-to-earnings multiple and the CBOE Volatility Index. Valuations are high, with the Shiller cyclically adjusted price-to-earnings ratio at levels that were only seen during the 1929 and 2000 market bubbles.’
‘By an alternative measure, the median price-to-earnings multiple for U.S. stocks, equities have never been this expensive in the post-war era. As I’ll explain below, that makes this the perfect time for smart baby boomers to cash out.’
‘Unless the global central banks have uncovered the policy equivalent of the philosopher’s stone — creating wealth out of thin air — the boom will not last forever. Like death and taxes, the business cycle cannot be avoided. Economics is a social science; the study of man’s propensity to make poor decisions when it comes to buying and selling, saving and borrowing.’
‘Booms lead to malinvestment, overcapacity, narrowing profits, and eventually, default and losses. It’s inevitable. The movement of interest rates can control the flow but cannot stem the tide. Otherwise, monetary debasement would’ve saved the Roman Empire instead of precipitating its fall.’
‘The signs of froth are clear to those without rose colored glasses. Fed Chair Janet Yellen recently warned that stock valuations are “quite high” while former chairman Alan Greenspan said stocks are “without doubt extremely overvalued.” Mark Cuban recently explained why the current bubble — led by private investors throwing money at app developers and small tech outfits — is worse than anything seen in 2000.’
‘The debut of money-losing IPOs is at a level not seen since the dot-com boom. CB Insights currently lists 108 U.S. startups with a valuation of $1 billion or more — most of which are nowhere near profitability. Uber’s valuation soared from $17 billion to $40 billion within six months as it changes gears from taxi industry disruption to a play on autonomous vehicles. Biotech and energy sector valuations have gone orbital.’
‘The chart above shows how the S&P 500 has been ignoring the collapse in U.S. economic data relative to expectations. The Citigroup Economic Surprise Index has dropped to lows not seen since 2011. The Fed’s policy response logic — no growth equals more cheap money — has investors hypnotized…and ignoring the fact, noted by HSBC analysts, that the global economy could be headed for a new recession with central banks already at full throttle.’
‘The Fed has had short-rates near 0 percent since 2008. Just imagine what would happen if central bankers lost their veil of omnipotence?’
‘After all, the cost of credit was never the problem. A lack of demand fueled by the hollowing out of middle-class wages — and the reliance on credit and asset price inflation as Americans families struggled to stay ahead — has been and remains the gist of what ails us.’
‘Demographics will bring this into sharp relief soon as boomers try to cash out for retirement and find jobless or underpaid/overindebted millennials unable or unwilling to buy their homes and their stock portfolios at current prices.’
‘The chart above, from Yardeni Research, suggests the American “Age Wave” is about to withdraw as more boomers age out and the smaller Gen X cohort take their place. According to Pew Research, this is the year millennials will overtake boomers as the nation’s largest living generation. The chart below, from The Wall Street Journal, sums up the problem: Millennials simply don’t have the financial firepower to cash out Boomers. Not even close. The supply-demand imbalance suggests stock prices will need to fall in the years to come.’
‘The smart money is already getting nervous, as evidenced by the recent pullback in market breadth. Jason Goepfert at SentimenTrader notes that while the S&P 500 pushed to a new all-time closing high last Thursday, only 10 percent of its component stocks were trading at even a four-week high; and nearly 3 percent of its components were trading at a four-week low. The net difference of 7 percent is one of the weakest readings of the past 25 years.’
‘All of this is coming as stocks push deeper into the weakest time of the year on a seasonal basis. Boomers, ask yourself: How much better can things get?’
‘By an alternative measure, the median price-to-earnings multiple for U.S. stocks, equities have never been this expensive in the post-war era. As I’ll explain below, that makes this the perfect time for smart baby boomers to cash out.’
___________________________/
The article asked this question later, but who buys these assets so that “smart baby boomers” can cash out and live relaxing lives in retirement? Wealthy foreigners? The Fed? I think I read that the BoJ is buying Japanese stocks.
Plus, I don’t know the stats on this, but I’ll suggest that the class of asset-rich boomers waiting to cash out is smaller than one might think.
Chicago a most powerful town is on the brink of bankruptcy. Imagine, the news is all about police shootings something that goes on everyday since the Marshall came to Dodge, and a major city is all but broke including the federal gov, and we need not worry folks?
‘Home prices in the Sacramento area are rising again after a brief winter slump. But the region’s housing market is still awaiting full recovery from the housing market crash.’
‘Median prices for all houses and condos sold in Sacramento County last month rose to $270,000, market researcher CoreLogic reported Thursday. That’s a 2 percent increase over March and an 8 percent increase from a year ago.’
‘Suburban counties also reported higher prices. In Placer County, the median sale price hit $390,000, or 8.1 percent higher from a year earlier. Placer’s prices are the highest in the Sacramento region.’
‘Sales volumes also increased, hitting 2,142 for all types of homes in Sacramento County. That made it the busiest April in six years for home sales, even though available homes for sale are still fairly scarce.’
“In light of the thin inventory in so many markets, it was a pretty good month for sales,” said CoreLogic analyst Andrew LePage.’
‘LePage said the absence of full recovery has left many homeowners still “underwater” or unwilling to sell. As a result, real estate agents say, the supply of available housing is still low. Underwater means homeowners owe more on their mortgages than their houses are worth.’
“‘LePage said the absence of full recovery has left many homeowners still “underwater” or unwilling to sell.”
15 years worth of transactions underwater. Oooooooph.
‘the bank is paying the taxes, the insurance, sewer and water, and the upkeep of the property, which is puzzling to Fularz who suspects the house is costing the bank–and the Federal Housing Administration which guaranteed the loan–more than the loss if they had accepted his original offer’
‘Stan can’t buy it, Donna can’t give it away, and the bank won’t take the title. ‘They put a new roof on it. They cleaned out the backyard, and emptied out the house,’ Donna Neal asks herself, ‘who’s decision is it for the bank to keep losing money by the day? Bank statements indicated more than $50,000 is owed on a mortgage that started out at about $40,000. Shouldn’t the bank be looking to cut its losses?’
And the motive is…. drumroll please…..To keep prices from falling. This effort simply collapses demand resulting in…….. falling prices.
A whole lot of people signed up for some hefty losses. Don’t be one of them.
This inventory thing is brought up to explain if sales are low or high. The winter slump; ah yes, remember when we were told ‘it’s a good thing prices are slowing down or we’d be facing a bubble.’
Interest rates down from a year ago. Easy Mel and Janet, working the credit into the system. But don’t worry, these speculators will take prices to the permanent plateau and not an inch further:
‘Southern California’s housing market displayed renewed vigor in April, with sales rising 8.5 percent compared to the same time last years. Sales and prices increased in all six Southern California counties, CoreLogic announced in its monthly sales report.’
‘Last month, the median price increased 6 percent from $404,000 to $429.000. That’s the highest median price for the region since November 2007, when it was $435,000. The median sale price has risen year over year in every month since April 2012.’
‘In Los Angeles County sales increased 6 percent from 6,642 a year ago to 7,038. The median price increased 10 percent from $441,000 to $485,000.’
‘The price gains continue to reflect sales of more expensive homes dominating the market and a lack of bargains as the economy continues healing from the Great Recession. During April sales of homes costing $500,000 or more accounted for 39 percent market share, the most for any month since a 40 percent share in November 2007.’
‘Foreclosure sales accounted for a 4.5 percent share and short sales at 4 percent of the share. San Bernardino County’s short sale share of 7.6 percent was the highest among the six counties.’
‘Absentee buyers — mostly investors — purchased 24 percent of the homes sold in April while cash buyers also accounted for a 24 percent share.’
“This inventory thing is brought up to explain if sales are low or high.”
Knowing what we all know about the massive growing excess empty and defaulted housing inventory, it’s a blatant misrepresentation.
Wasn’t someone saying builders weren’t adding inventory?
‘Builders in the West bested that home building rate with a 39.8 percent year-over-year gain…Metrostudy noted a $135,000 difference between new and resale median prices of Inland homes, with less than 30 percent of Inland homebuyers currently able to afford a new home. The median sales price of new houses sold in April in the U.S. was $297,300; the average sales price was $341,500. In the Inland area, Handler said most new home starts, 37 percent, were in the $300,000 to $400,000 price segments. Twenty-eight percent were $400,000 to $500,000 range.’
‘Housing starts soared in April to a 1.14 million annualized rate, the most since November 2007, Commerce Department figures showed last week. More permits, a proxy for future construction, were issued than at any time since June 2008.’
That was Rental Fraud, another heroin addict.
Imagine, seriously imagine, you are living in a society where the majority of the population are heroin addicts. Not some small sliver but the MAJORITY. This is where we are at with housing, credit, etc.
Politics, government, business, culture, entertainment, it is all controlled by this majority. Everything is directed at keeping prices up. The plutocrats AND the majority of the people want this. There is zero point arguing over Romney or Obama or Hillary or Jeb.
Imagine, seriously imagine, you are living in a society where the majority of the population are heroin addicts.
Or just sugar addicts. Imagine how everything would be an excuse to consume some. It’s easy if you try.
I didn’t say they weren’t building at all. I said they weren’t building enough.
How about some perspective on the total amount of construction, and not just the rate of increase?
You forgot this quote from the article (that you posted no link to):
“Home sales picked up in April as builders sold 517,000 new single-family houses across America at a pace that is up 26 percent from April 2014, according to a new Census Bureau report.
Builders in the West bested that home building rate with a 39.8 percent year-over-year gain.
The report released Tuesday, May 26, 2015, put new single-family home sales at a seasonally adjusted annual rate of 130,000 in the West, nearly one-fourth of all homes sold in April. It was the fifth consecutive month showing sales of 130,000 or more.”
“The West” is a large region. An annual pace of 130k single family homes being built in the West is a joke.
517k single family homes nationally was up 26% from the year before…also not enough.
The 1.14MM total number includes multi-family, and is still 400-500k less than is needed to keep up with population growth and the destruction of obsolete structures.
Despite the gains, we are still under-building.
And the full article:
http://www.pe.com/articles/new-768174-home-sales.html
“Underbuilding”
With 25 million excess, empty and defaulted houses and a population on the decline, there is no need to build more houses Rental_Fraud.
“a population on the decline”
Whatever shred of credibility you had left is gone with this statement.
It’s a fact my friend. Population growth is the lowest in US history per the 2010 Census.
We already know who has the credibility here. It ain’t you.
Population is still growing, just more slowly. The US population is not a population “on the decline”.
According to the US Census, the US added about 2.5MM people from 2013 to 2014.
And when you add the fact that of the 130MM existing homes, a lot of them need to be torn down each year (houses deteriorate, remember?), you need to build 1.5+MM homes each year to keep up with replacement and population growth.
Lowest in US history According to the US Census
25 Million excess empty and defaulted houses.
Why build more?
http://www.census.gov/housing/hvs/files/qtr115/rvr115.png
http://www.census.gov/housing/hvs/files/qtr115/currenthvspress.pdf
Vacancy rates are falling quickly across the US. There are regions where there is plenty of housing. However, there are regions where there is not enough housing to have a functioning market without substantial power being in the hands of landlords.
Vacancy tables exclude defaulted and foreclosed housing.
Nice try.
LIAR
“Other Vacant” includes foreclosures.
http://www.census.gov/housing/hvs/files/qtr115/q115def.html
“Other vacant. Included in this category are year-round units which were vacant for reasons other than those mentioned above: For example, held for settlement of an estate, held for personal reasons, or held for repairs. Below are the definitions for the other vacant categories presented in Historical Table 18.
Foreclosure. This category is for units that are vacant because owners’ payments (mortgage, taxes, or loans) to their lending institution, city, or state, were no longer being made. Includes units that are under foreclosure, bank owned, bankrupt, up for auction, sheriff’s sale, repossessed, have a lien, or taken for taxes.”
Nope. They include foreclosures. The website from the Census will be posted shortly that goes through the definitions of what is included.
Nope.
Anything held up in foreclosure moratorium or mortorium like programs aren’t counted.
You misread the article. It’s 130,000 new homes sold, not built.
Sorry, just reposted the link…didn’t realize that the article you quoted was from above. My bad.
BINGO
And these are the same degenerates that howl about the moribund economy.
‘The Wall Street Journal reported that from 2012 to 2014, 82% of the 370,000 multifamily rental units constructed in 54 U.S. metropolitan areas were in the luxury category. In cities such as Atlanta, Denver, Tampa, Baltimore and Phoenix, nearly all new apartment construction has been targeted to high-end renters, Laura Kusisto reported.’
“I don’t believe there ever has been a time where we have produced so much luxury rental housing,” Susan Wachter, professor of real estate at The Wharton School of the University of Pennsylvania, told Kusisto.’
‘The boom in luxury units has been great for the affluent, while “many middle-class and young workers are straining to rent the units, in part because they have few others choices,” Kusisto wrote.’
If there was a higher vacancy rate, it wouldn’t matter what landlords wanted to charge, or how nice the units were. Rental rates would move down as competition swung in favor of renters.
Rental_Fraud, It doesn’t matter what a landlords carrying costs are. They don’t pass through to the end user.
They try to pass them through.
And if vacancy rates are low, they have a better chance of succeeding.
even when there is not enough income to cover the carrying cost of the owner ?
Qn to RentalWatch
I’m not sure I understand your question.
A logical property owner will charge as much as they can in rent while taking into consideration quality of tenant (ie. tenants who’s checks don’t bounce, and who won’t trash the place). If vacancy rates are low, they are in a better position to charge higher rents. The supply/demand equation swings in their favor.
Regardless of whether the market is a good one for landlords, or a bad one, if the landlord can’t pay their expenses with the revenue they are collecting from tenants (debt service plus property costs), they have a number of things they could do:
1. Delay standard maintenance items to reduce cash outflow…eventually this will backfire as they will have a hard time maintaining rent levels in a less well-maintained property;
2. Feed the beast–put money into the investment to keep it afloat in the hopes that it will get better in time;
3. Hand the keys back to the bank and walk away.
If the market won’t allow them to charge enough to cover non-debt expenses, then the project will fail, and the units they are trying to rent will come out of the rental pool, reducing supply and making it slightly better for all the other landlords.
‘Even Vancouver’s uber real-estate marketer Bob Rennie stated recently in a speech to the Urban Development Institute that he recommends a tax on speculation in order to stem the rampant inflation of prices.’
‘The tax would be another step forward in ensuring Vancouver remains the greenest city in the world by preventing money of uncertain origin and legality from tainting the city’s environmental standard.’
‘With buyers from Asia paying for multi-million dollar properties in cash, Vancouver is increasingly awash in money of questionable origin with unknown human and environmental cost.’
‘According to local policy-makers, the efforts of countries like China to crackdown on corruption and prevent ill-gotten wealth from being laundered overseas in the Vancouver real estate market will have limited effect if BC’s politicians do not do their part and treat their addiction to easy offshore money.’
Wait, Bob Rennie? “Warning” about high valuations? The same guy who derided this blog for suggesting there was a bubble in Canada?
Guys like Rennie are amoral profit whores. This crap about Chinese money feeds the frenzy. Better get in now before the Chinese money launderers price us out forever. He’s playing the racist card for personal gain. The amount of offshore money coming into Vancouver does not begin to explain the mania. The Van economy is mostly about buying and selling by the dumb ass locals.
This is what I’ve noticed. There might be a grain of truth to something that is used to justify soaring prices. Remember when that sales marketer got caught having Asian employees pretend to be potential buyers? Sometimes it is hard to separate myth from reality, especially if people want to believe.
That’s very true up here especially since there are no meaningful numbers collected by any unbiased group. There is no Zillow or likewise. The only source of real estate information available to Canadians originates with the real estate cartel. The realtors manufacture any stats they wish and go unchallenged. The race card works well in Van because it excuses stupid decision making by delusional house horny millenials.
U.S. home prices and household incomes are once again historically decoupled. How much longer this government-sponsored anomaly will last is anybody’s guess.
Hey there gang - top of the morning to you all!!!
So…..below is a small digest of stories about ILLANNOY from the last several days…..and where do you all think housing is headed in this miserable flea bitten cess pool of a state?
As for the liberal hell hole of Sh*tcago - only 82 more people moved INTO the city in the last year - wonder if this has to do with the weekly killings and shooting stats plaguing this place - ya think? Last weekend - over 3 days - 52 shot / 12 of those dead. Mayor tiny butt cheeks was on the radio yesterday bitching about how the state needs to give Sh*tcago more dough to help reduce the crime problem that has worsened under his watch. Sheesh!!!
http://dailysignal.com/2015/05/24/what-will-drive-illinois-to-ask-washington-for-a-bailout/
https://www.illinoispolicy.org/illinois-april-jobs-report-workforce-shrinks-manufacturing-continues-to-decline/
http://www.nytimes.com/2015/05/26/us/politics/illinois-pension-crisis.html?smid=fb-share&_r=1
https://www.illinoispolicy.org/daily-comics/gas-tax/
https://www.illinoispolicy.org/record-number-of-illinoisans-out-of-workforce-labor-participation-rate-at-37-year-lows/
http://www.nbcchicago.com/news/local/Chicagos-Population-Growth-Slows-Dramatically-304555131.html
http://www.chicagotribune.com/business/ct-census-0521-biz-20150520-story.html
Last weekend - over 3 days - 52 shot / 12 of those dead ??
My goodness….That sounds like something that would come out of Venezuela…
But, but, I thought that black lives matter?
Where are The Reverends Jesse and Al?
Where is the outrage?
P/e was allot higher in 2000
I was in rural Illinois a few years back… and it all looked like post apocalyptic ruins. I can’t IMAGINE what Chicago must be like.
Chicago has a lot of concentrated wealth and yuppie types, and also a lot of places that look run over. One of the saddest drives you can take is over the Chicago Skyway/I-90, although tolls now run almost $10 for the entire stretch to northwest Indiana.
I’ve only been in a couple of small Illinois towns, but they looked like most American small towns that don’t have a university in them — bombed out except for fastfood outlets and the Wal-Mart at the edge of town. And Rockford, wow.
somebody just needs to do a beatdown on that idiot Yun…..what a chumly that bozo is.
“Another concern is a possible jump in interest rates. John Burns, chief executive of John Burns Real Estate Consulting Inc., said that would put homes out-of-reach for many at current price levels in many major cities. If rates rose to 6%, homes in more than half of those markets, including Los Angeles, San Francisco, Miami, and Denver, would be overvalued. ‘We are in a pretty precarious environment,’ Mr. Burns said.”
What an idiot. SF is already overvalued, and, since home “values” are not locked in stone, if rates hit 6%, home values will FALL!
What is interesting to me, is that nowhere is the “price” described!
Price that is affected by rate of interest, whether it is cash price, loan price, term of loan, and types of down payment
I am suspecting a hell of a lot of short term,low interest loans, by by lenders to allow the speculation buyers to purchase homes.
If you can buy with a 1 year loan, at 5%, with a no-down, or down payment in loan, then it is a good risk for the buyer to buy at any price, and if the house doesn’t go up to cover risk, then bail out, start a new company, and go for the next one.
When lenders can bail out of bad loans why should lenders worry if buyers don’t pay and buyer bail.
Privacy rules would prevent this sort of thing from being disclosed to public, which only sees what it wants to see.
‘As rents and home prices have skyrocketed over the past few years, the Bay Area has become a more difficult place to live, to put it mildly. Real estate website Redfin has compiled data showing that Bay Area residents are increasingly looking to buy in other locations. Back in 2011, 85.5 percent of people located in the Bay Area were looking for homes within the region. Now, that figure has fallen to 75.8 percent looking locally, with growing percentages of people searching for homes in Sacramento, Seattle, and Portland.’
http://sf.curbed.com/archives/2015/05/27/even_techies_may_now_be_getting_priced_out_of_the_bay_area.php
The hot markets seem like they are being propelled by speculators, often buying more than one property. This must mean people buying who do not live in the target area who have someone local buying for them. They will be flipping them, if not already doing it. Have you seen any evidence of quick resales?
I don’t know why the government isn’t placing a “Speculation Tax” on all profits that result from reselling a home within one year.
Another way of taming the stock and RE markets is by layering the FED rate - higher for loans aimed at WS or RE.
‘Home prices grew more quickly than either per capita personal income (3.1 percent) or wages (2.2 percent), narrowing the pool of future home-buyers. All of this suggests that some future moderation in home prices gains is likely.’
Isn’t this easily remedied through looser lending standards?