CR: This [demand estimate] is based on the number of new households being formed
OK, now I know the fatal flaw in CRs logic. Who says that a new one household = demand for one housing unit? Also, depending on the economy and cost oof housing the ratio Housing Units Occupied to Number of Households can change significantly. My method of looking at increase in Occupied Housing Units as well as Vacant Units, year Round, is far superior and reflects the actual demand for Housing Units. How about multiple Hispanic households (fastest growing) sharing one Housing Unit?
Q: When two unmarried persons in a relationship, of the same sex or the opposite sex, share one Housing Unit are they considered two households or one?
Any estimates on how much California population has grown since 1995? As a guesstimate On a per capita basis things are worse than the historical comparison suggests, but still not as bad as 1995.
Capital investment unexpectedly fell 0.9 percent, compared with predictions of a 0.5 percent increase.
Machinery orders fell 4.5 percent in March and companies said they expect orders to plunge 11.8 percent this quarter, which would be the biggest drop in 20 years.
Exports to the U.S., a destination of more than a fifth of Japanese exports, grew at their slowest pace in more than two years in March.
Here is a graph worth looking into:
compare the New Homes Sales in California per month vs. the Monthly Combined Total of Notice of Defaults, Trustee Sales and Bank REO's.
It would appear that these lines will be intersecting very soon.
Jas, thanks for the laugh! I suggest you reread some of my old posts - the number of people per household can change over time (and has significantly). But you appear to be suggesting a short term increase in the ratio (people per household) based on poor economic circumstances. Remember, bad times don't last - and the number of people per household will probably remain fairly stable over the next decade.
There might be some demographic reasons why the ratio changes further into the future, but for now I wouldn't consider it a "fatal flaw" in my analysis
Frank, That would be a great graph, but DataQuick changed their methodology - so the old sales numbers aren't comparable. But it does appear they will intersect soon.
Aaha CR, so you don't think that high home prices reduce the demand for Housing Units that are occupied? I guess my not taking any courses in economics must have confused my thoughts about effects of very high prices on the demand. Even the gasoline demand was down 3%, YoY, at one point recently.
The debate shall continue as the Vacant Units keep piling up despite lower unit completions.
I think this "fundamental demand" on housing is an interesting topic.
We should separate a 'need' and demand. Potential household formation is just the need. Demand is the need plus financial means to fulfill the need. Demand is not a simple number, it is a full curve showing relation between the amount that can be purchased at a given price. So the household formation is the potential demand when the price is equal to the fundamental value. Since the prices hasn't yet dropped significantly, I think the demand at current prices is way below the household formation.
On the other hand, it is not that simple to use the Jas metric of
Demand For Dwellings = Units Newly Built - Increase in Vacant Units
Housing is not a commodity. The demand is definitely more than the above figure since the country is repopulating in a non-uniform way. There can be a quite strong demand in the "Sun belt", while the vacancies mostly increase in the "Rust Belt".
Moreover, some of the increase in the vacant units are second houses. Rich people can afford them even during strong recessions.
Thank you CR.am i the only one that finds Jas jain a bit tiresome? Sebastian can be genuinely funny due to his narrow,sef centered world view and cognitive dissonance(I'd really like to take him to some places i know in oakland and sf),but jas is just tiresome,not stupid,just tiresome.
Maybe Jas has a point about household formation in bad times?
In the UK the housing officer used to define a unit in multiple (household) occupation, as opposed to single household occupation, by such criteria as:
Do the bedrooms have locks?
Do people have separate food even if cooking areas, living areas and bathrooms are shared?
It was a bit subjective and yet fairly obvious. To avoid overcrowding rental houses had 'notices' issued that limited them to one household with a max number of people based on existing amenities.
Without the "notice" it was legal to have zillions of people forming one household. So as poverty builds and "exploitation" increases more households may be formed in response to local government pressure. Units then can then get smaller and smaller.
--
"Demand For Dwellings = Units Newly Built - Increase in Vacant Units"
Sorry, I forgot to add Year Round to the Vacant Units in the above eq. In my calculations, as well as in communication with CR, I always use the Year Round number.
Anyway, getting to the truth is always very tiring because you have never answered why the above eq. is not to be used and other ways of estimating should be used in preference.
Believe it or not, the DEMAND does go down during recessions AND when prices double and triple in a 5-year period, as was the case in many areas.
INCREASE IN EMPTY HOMES IS THE BEST MEASURE OF EXCESS BUILDING. From that fact one can calculate the actual demand.
BTW, I do understand that people much prefer to communicate with those that agree with them, or have similar background. It is a sad fact that keeps people married to their misconceptions. All meaningful economic commentary is about human behavior!
Challenging the bad math,
Jas
PS: I predict below 1M Permits and Starts some time next year, most likely early in 2008.
Tom Stone said: "...Sebastian can be genuinely funny due to his narrow,self-centered world view and cognitive dissonance(I'd really like to take him to some places i know in oakland and sf)..."
My particular housing market is one of the best in the nation, but I never assumed that it was representative, any more than I assumed that Southern California was representative. All I've ever done is look at the whole country, instead of focusing only on the extremes.
The Inland Empire acts as the plankton for the real estate food chain in Southern California. When you see that region showing home sales off over 45% (YOY) you know that the tuna and whales will soon be starving. We are starting to enter a period that looks a lot like the last recession in 1990-1994. I am sorry to say that this one will make the last one look like a childs play.
My Family has lived in California since 1846, and I can tell you I watch that market very closely. The demographics are very different from the last real estate recession in 1990-1994. The infrastructure, income distribution, and economic underpinings are a lot weaker than in the last recovery.
May 16, 2007
CA Home Sales For Apr'07 Down 48.4% From Jun05 Peak Sales
And down 37.6% from Apr05 (two years ago). These are all home sales (new, resale, SFH, condos) reported by DataQuick.
This should take a serious bite out of the economy.
Jas
--
In case missed on the other thread...
CR: This [demand estimate] is based on the number of new households being formed
OK, now I know the fatal flaw in CRs logic. Who says that a new one household = demand for one housing unit? Also, depending on the economy and cost oof housing the ratio Housing Units Occupied to Number of Households can change significantly. My method of looking at increase in Occupied Housing Units as well as Vacant Units, year Round, is far superior and reflects the actual demand for Housing Units. How about multiple Hispanic households (fastest growing) sharing one Housing Unit?
Best regards,
Jas
OPEC head says no need for more crude
Business Week Online > File Not Found
"The market is fine" he added and OPEC's current output policy won't be amended ahead of its next meeting Sept. 11.
--
Q: When two unmarried persons in a relationship, of the same sex or the opposite sex, share one Housing Unit are they considered two households or one?
Thanks.
Jas
--
OPEC's "band" had changed from $25-35 three years ago to $55-65. Isn't it nice to double one's income soooooo easily?
BTW, the falling dollar provides a good excuse.
Jas
Here comes the crap-
Risk abounds in sizzling IPO market - May. 15, 2007
Trouble lurks ahead for one of private equity's exit routes - Apr. 26, 2007
Roubini makes the point at RGE monitor that the increase in housing starts is an illusion.
NC Jim
Tanta, here's a candidate video for Saturday. Does it sound contemporary!
YouTube -
Any estimates on how much California population has grown since 1995? As a guesstimate On a per capita basis things are worse than the historical comparison suggests, but still not as bad as 1995.
--
"risk capital,"
Is that the uncalculated kind of risk?
The game is to pass the risk on to pension funds and others who are not known for their smarts.
Jas
--
" Any estimates on how much California population has grown since 1995?"
Approx 15%.
Jas
Japan's Economic Growth Slows to 2.4% Annual Pace
Japan's Economy Cools; BOJ Leaves Rates Unchanged (Update8) - Bloomberg.com
Capital investment unexpectedly fell 0.9 percent, compared with predictions of a 0.5 percent increase.
Machinery orders fell 4.5 percent in March and companies said they expect orders to plunge 11.8 percent this quarter, which would be the biggest drop in 20 years.
Exports to the U.S., a destination of more than a fifth of Japanese exports, grew at their slowest pace in more than two years in March.
--
2.4% for Japan looks like a booming economy.
Jas
Jas,
the more crap, the more indicative of a top, the Bear Sterns potential IPO takes the cake though.
From Sorry. Page not found.
Pop by State (I just took 19902006, but goes way back): BEA : Something unexpected has occurred
Forgot to add in the Housing Demand...
CR,
Why estimate when you can count?
Demand For Dwellings = Units Newly Built - Increase in Vacant Units, Year Round. No?
I realize than one quarter or one year could be noisy but how about 4, 6, 10, 12 year averages.
Jas
CR
Here is a graph worth looking into:
compare the New Homes Sales in California per month vs. the Monthly Combined Total of Notice of Defaults, Trustee Sales and Bank REO's.
It would appear that these lines will be intersecting very soon.
Jas, thanks for the laugh! I suggest you reread some of my old posts - the number of people per household can change over time (and has significantly). But you appear to be suggesting a short term increase in the ratio (people per household) based on poor economic circumstances. Remember, bad times don't last - and the number of people per household will probably remain fairly stable over the next decade.
There might be some demographic reasons why the ratio changes further into the future, but for now I wouldn't consider it a "fatal flaw" in my analysis
Best Wishes.
Frank, That would be a great graph, but DataQuick changed their methodology - so the old sales numbers aren't comparable. But it does appear they will intersect soon.
Best Wishes.
--
Aaha CR, so you don't think that high home prices reduce the demand for Housing Units that are occupied? I guess my not taking any courses in economics must have confused my thoughts about effects of very high prices on the demand. Even the gasoline demand was down 3%, YoY, at one point recently.
The debate shall continue as the Vacant Units keep piling up despite lower unit completions.
Best, as always,
Jas
CR and Jas,
I think this "fundamental demand" on housing is an interesting topic.
We should separate a 'need' and demand. Potential household formation is just the need. Demand is the need plus financial means to fulfill the need. Demand is not a simple number, it is a full curve showing relation between the amount that can be purchased at a given price. So the household formation is the potential demand when the price is equal to the fundamental value. Since the prices hasn't yet dropped significantly, I think the demand at current prices is way below the household formation.
On the other hand, it is not that simple to use the Jas metric of
Demand For Dwellings = Units Newly Built - Increase in Vacant Units
Housing is not a commodity. The demand is definitely more than the above figure since the country is repopulating in a non-uniform way. There can be a quite strong demand in the "Sun belt", while the vacancies mostly increase in the "Rust Belt".
Moreover, some of the increase in the vacant units are second houses. Rich people can afford them even during strong recessions.
Thank you CR.am i the only one that finds Jas jain a bit tiresome? Sebastian can be genuinely funny due to his narrow,sef centered world view and cognitive dissonance(I'd really like to take him to some places i know in oakland and sf),but jas is just tiresome,not stupid,just tiresome.
Maybe Jas has a point about household formation in bad times?
In the UK the housing officer used to define a unit in multiple (household) occupation, as opposed to single household occupation, by such criteria as:
Do the bedrooms have locks?
Do people have separate food even if cooking areas, living areas and bathrooms are shared?
It was a bit subjective and yet fairly obvious. To avoid overcrowding rental houses had 'notices' issued that limited them to one household with a max number of people based on existing amenities.
Without the "notice" it was legal to have zillions of people forming one household. So as poverty builds and "exploitation" increases more households may be formed in response to local government pressure. Units then can then get smaller and smaller.
Mcmansions become 3 flats and so forth.
--
"Demand For Dwellings = Units Newly Built - Increase in Vacant Units"
Sorry, I forgot to add Year Round to the Vacant Units in the above eq. In my calculations, as well as in communication with CR, I always use the Year Round number.
Anyway, getting to the truth is always very tiring because you have never answered why the above eq. is not to be used and other ways of estimating should be used in preference.
Believe it or not, the DEMAND does go down during recessions AND when prices double and triple in a 5-year period, as was the case in many areas.
INCREASE IN EMPTY HOMES IS THE BEST MEASURE OF EXCESS BUILDING. From that fact one can calculate the actual demand.
BTW, I do understand that people much prefer to communicate with those that agree with them, or have similar background. It is a sad fact that keeps people married to their misconceptions. All meaningful economic commentary is about human behavior!
Challenging the bad math,
Jas
PS: I predict below 1M Permits and Starts some time next year, most likely early in 2008.
The whole idea of the institute of marriage is just a plot to support real estate market. We nailed them!
Gee, 750,000 realtors into 39,949 .........?
Tom Stone said: "...Sebastian can be genuinely funny due to his narrow,self-centered world view and cognitive dissonance(I'd really like to take him to some places i know in oakland and sf)..."
My particular housing market is one of the best in the nation, but I never assumed that it was representative, any more than I assumed that Southern California was representative. All I've ever done is look at the whole country, instead of focusing only on the extremes.
Sebastian
The Inland Empire acts as the plankton for the real estate food chain in Southern California. When you see that region showing home sales off over 45% (YOY) you know that the tuna and whales will soon be starving. We are starting to enter a period that looks a lot like the last recession in 1990-1994. I am sorry to say that this one will make the last one look like a childs play.
My Family has lived in California since 1846, and I can tell you I watch that market very closely. The demographics are very different from the last real estate recession in 1990-1994. The infrastructure, income distribution, and economic underpinings are a lot weaker than in the last recovery.
750,000 realtors into 34,949 = starving raltors.
750,000 realtors into 34,949 = More gals back into the go-go bar biz