Am I correct in assuming that the decline substantially accellerated during the fourth quarter? It seems that many people expect a "bottoming" this summer in housing. However, if both the rate of decline in home prices is very high and the rate of foreclosures is increasing, perhaps we need to write off 2008 for a bottom in home prices. This will be interesting. The fed and the government do everything that they can to get the market and the economy on track during an election year.
My guess is that we might get some stabilizing of the economy during summer and fall. However, I also guess that the next president will have a very difficult time. The fed shows a strong tendency to increase rates during the first year of a president's term and we may be heading for a form of stagflation by next year.
I just want to make sure I am understanding this. So, in the absense of any home price inflation you could expect prices to fall for another say nine years to get us back to around 80? But if there is inflation (which there is) you would expect prices to stabilise at some number higher than 80 but less than where it is now? Did I do that right?
NEW YORK (AP) -- Consumer confidence has weakened significantly as Americans worry about less-favorable business conditions and job prospects.
The New York-based Conference Board says in a report released on Tuesday that its Consumer Confidence Index plunged in February to 75.0 from a revised 87.3 in January.
The reading -- the lowest since the index registered 64.8 in February 2003 -- is far below the 83.0 analysts expected.
--
Consumer Confidence falling off the cliff. It is consistent with the economy having been in recession for several months.
All econ-meisters who are denying recession, a majority by far, are a bunch of premeditated liars. Born-and-bred American dopes don't understand that they, including Burn-ass-ke, are lying purposefully.
"My guess is that we might get some stabilizing of the economy during summer and fall. However, I also guess that the next president will have a very difficult time. The fed shows a strong tendency to increase rates during the first year of a president's term and we may be heading for a form of stagflation by next year.
BillD | 02.26.08 - 10:02 am "
I disagree. Nov-Jan 2008, between the election and inauguration will be when the rubber hits the road. EVERY measure necessary to maintain status quo will be taken until then. Depending on who wins the election we'll either see full acknowledgment and capitulation from the current admin (to try to save the R party) or an 'over-the-cliff' head in the sand move (to try to destroy the D party by handing them a primed explosive).
--
"Anybody see that Sam Zell said housing should start recovering this summer? I told you he is overrated."
Yes, I caught him. He is very much part of the Network of Crooks. He is in the business of selling something or other and his comments are self-serving most of the time. He even looks like a Crook. So do Greenspan and Burn-ass-ke.
BillD, alot of people seem to be assuming that the bottom is nigh. Certainly many of the plans, "to save the housing market," seem to presuppose that we are at or near bottom. Many of them would help borrowers if we are indeed near bottom. But if housing falls another 20% from peak, they would have been better with a foreclosure today than with these plans to save them.
Jas Jain: "All econ-meisters who are denying recession, a majority by far, are a bunch of premeditated liars. "
As a reader of thehousingbubbleblog I'm sure you are familiar with Upton Sinclair's observation: "It is difficult to get a man to understand something when his salary depends upon his not understanding it."
Stickiness wherefore art thou? - 2006-7. Until the second half of 2007 the housing market was hanging on like that guy in the old Crazy Glue ad. But there are limits to what even CA adhesives can do.
There appears to be an avalanche of foreclosures here in the Chicago suburbs, too -- and high-value ones. And now a smattering of $2-5 million commercial buildings and rental apartment buildings in the mix.
OFHEO data's out today as well - and surprisingly, it's showing price declines as well...
"U.S. home prices fell in the fourth quarter of 2007 according to OFHEOs seasonally-adjusted purchase-only house price index. The index, which is based on data from home sales, was 1.3 percent lower on a seasonally-adjusted basis in the fourth quarter than in the third quarter of 2007."
"The year 2007 showed the first four-quarter decline in the purchase-only index since its earliest data in 1991, Lockhart added.However, both OFHEOs purchase-only index and the all-transactions index show relatively greater house price stability than do other nationwide house price indexes. That may reflect, in part, the greater stability in the prime, conforming mortgage market served by the enterprises than in other segments of the mortgage market, said Lockhart."
Luckily this minor problem in data collection will be fixed as Freddie and Fannie start to originate jumbo loans this summer...
Their web geeks are in the process of updating the site now. Give them a bit and the full data sets will be up.
Yes. And that is my point about the thoroughly corrupt econo-political system.
The main point is that deception is indeed far worse, more prevalent, today than at any time in the history of the US that I know of. It will lead to the collapse of the American system as we have known it.
There are limits to all abuses and when those limits are exceeded the system collapses. Bad things, including the collapse of the system, dont just happen to other countries. Regrettably, tt is our turn now.
Take these numbers with a grain of salt -- the collapse of the Sub Prime and Alt-A mortgage markets, along with the rise in REO sales, has pushed the averages downwards by increasing the ratio of distress sales to non distress sales.
What I'm seeing in Denver is that in entry level and less desirable neighborhoods (i.e., areas with high concentrations of sub prime lending) the values are being driven down by the REOs and short sales. In move up neighborhoods, the average values might be down, but the demand for top of the market properties is still strong. In high demand areas, the impact of REOs is barely noticable.
The key to future trends will the rate of REO absorption -- as the ratio of Owner Occupied to REO sales increases, the markets should improve. Of course, it might be years before that happens in the hardest hit areas -- but that's been the pattern in the past.
OT and I know Tanta is going to come on soon and kick me off but I cant resist making a Zell comment.
I dont know what he is selling but ever since they raised the price to 75 cents at the first of the year, I cant find a Tribune in any of the vending machines. What the heck is he selling virtual papers? maybe he is planning to sell off all the Tribune real estate?
"Why are the presidential candidates pretending this is not really happening?"
Because they can. You don't really think they care, do you?
The presidential candidates are also pretending there is no national debt and that our service economy is every bit as diverse and exportable as manufacturing.
ck,
The Back Bay in Boston is still selling well with prices just off peaks. Priced right, properties in desirable Boston neighborhoods are still selling just fine.
" Priced right, properties in desirable Boston neighborhoods are still selling just fine."
This is true in "desirable" Los Angeles 'hoods as well. Probably true in the desirable parts of most areas. Seems that people with higher incomes / better credit are more optimistic about housing, not paying attention, or insane. I'm not sure which. . .
--
Dale: Why are the presidential candidates pretending this is not really happening? They're all buffoons.
It takes two to Tango, no?
Only buffoons have a chance with born-and-bred dopes! Only dopes in America vote!! (They unwittingly give consent to the agents of the Network of Crooks). What a system!
Something good must have happened as stocks are up.
IBM is buying back shares!!! What a joke. The market is up on this joke.
What the hell is wrong with Wall Street these days. Do they think we're fools.
What about those inflation numbers. Yeah, right, the market doesn't like inflation. Sure... Liers, they love the damn thing. Deflation is what they hate. Bastards.
Folks, "desirable" areas always fall late - but they still fall hard. Here's an article from well into the return to rent equivalence in Los Angeles during the last crash. Hoity-toity areas like Ranch Palos Verdes estates and Belmont Shores were getting creamed while LA county as a whole was slowing down. When the lower-end collapses the move-up market evaporates and the higher-end follows.
Dale writes:
Why are the presidential candidates pretending this is not really happening?
Because campaigns are aiming for the lowest common denominator (re: stupid) voters. It will only get worse as we close in on the general. The true-believer's are already got, and a negative outlook is untenable in a campaign.
I'm glad they aren't talking more about it. The promises that have already been hinted at scare the bejesus out of me.
Priced right, properties in desirable Boston neighborhoods are still selling just fine
You know, what these other areas need to do in the neighborhoods that are going down-market is attract the gays. They'll buy the distressed properties, don't mind colorful neighborhoods, will rehab everything and drive the values up, open little bistros, restaurants, and coffee-shops...clothing stores etc. When straight women see this, they'll start hanging around too, because gay men are everything they like. Except...well...you know. But that's OK becuase when straight guys see all the available women, they'll start hanging around too. And everyone will be getting what they want. A lot of them will move in with each other in the hood, and the gays will make a ton of money renting and then selling to them. They'll of course move out, but leave behind a nice place. More boring, but nice.
Ooops. I've just described the South End of Boston This post was intended as a little humor...with a kernel of truth If you read the news you'll just get too depressed.
Jas,
Just one point. I think you should call them "Fraudsters and Bankrupters of NYC". The mechanics are such that the fraud is committed long before the actual bankruptcy.
Your comments on high-end areas are right on. They will be down 80-90% during the depression. An estate in Greenwich, CT, sold for 92.5% lower in 1930s than it was bought in late 1920s, for example.
--
Thanks, lama! Deception and manipulation are integral part of the fraud that results later.
The new American values for success, over the past dozen years, have been: Deception, Fraud, and Manipulation. Lot of the Fraud was not legal fraud (because Crooks control the legal apparatus), but Fraud nevertheless. Legalistic robots like Tanta don't understand that part. The mortgage mess is all due to Fraud.
"Your comments on high-end areas are right on. They will be down 80-90% during the depression. An estate in Greenwich, CT, sold for 92.5% lower in 1930s than it was bought in late 1920s, for example."
Yes but what you are missing is the yardstick. In 1920 the dollar was gold, so if you want the right comparative index you need to deflate home prices by gold. If you do that you can see we have already crashed. This is the wonder of fiat currency. Everyone looking for nominal price declines throughout the economy has already been and will continue to be vastly disappointed. Leaving your wealth in dollar deposits in the bank or under the pillow has been a disaster and will probably continue to be as such.
On an unrelated but interesting topic the CDX indexes have rallied very strongly the last two days. If this continues it will be extremely bullish for the equity markets.
[Why are the presidential candidates pretending this is not really happening? They're all buffoons.]
What would you like to hear? Should the Democrats run on a platform of regulation? Conservatives and the media have so demonized these efforts as an attack on the purity of free market capitalism that the average joe believes it.
It is frustrating that they all seem to jump on board with the lame intervention proposals. At least they include a disclaimer that it's not enough.
There is plenty of talk about NAFTA, energy, and taxes. Do you just want them to encourage the public to save their money and stop buying cheap crap?
It's up to us to force the media and politicians to think long term. I doubt you have the power to increase your neighbor's attention span or make them less apathetic. But, a painful recession or possibly depression might just do the trick.
--
No, david_in_ct, I am not missing any yardstick.
It was lot easier to inflate with the gold standard (FDR manipulated the price of gold to inflate and he succeeded) than would be with the fiat currency!!!!!!!!!!
Every dope I know, and I know too many, is calling for high inflation and cannot imagine deflation in the US once the economy is in depression.
Jas,
Oh I think Tanta gets it. I think she and I have been worn down somewhat by watching it for decades. There's plenty I don't dare write about here (lawyers are expensive) and I'm just an occasional member of the peanut gallery.
Don't the data indicate that (a) we're still quite early on the REO curve and (b) the current REO/short sales DO define the market?
The current issue is "Who's left to buy?" Three years of free credit has brought potential buyers into the market prematurely, then dumped them out in no position to be a buyer in the near future, at virtually any price.
Regarding higher-end homes...I see two competing forces. The inability of people to move up (since they have little equity to draw on) will reduce demand. OTOH, increasing economic inequity means there will always be "the rich" (at least in a relative sense) and this may protect values to some extent.
--
Picosec: OTOH, increasing economic inequity means there will always be "the rich" (at least in a relative sense) and this may protect values to some extent.
Nop. The inequality cannot keep rising from ridiculous levels once the depression begins. There will be lot fewer rich than the mansions that have been planned and built for them. Just watch as the depression develops during 2009-10.
energy:
the harsh reality is that the people most at risk in the housing game are not the ones who are owners of equities. To the extent that they are there has been a lot of selling in IRA, and 401k accounts . If you look at the mutual fund flows over the last two months there has been a huge amount of selling. The buyers of these assets are not people who are one paycheck away from foreclosure. So the question then becomes what is going to motivate equity owners to sell if they are not forced to do so?
While I don't have any opinion on financials because they are just too hard to analyze, most everything else that i have looked at with a balance sheet and income statement looks just fine and some of the commodity stuff looks extremely cheap based on where the commodities are selling. (obviously when it comes to commodities this can change in a heartbeat so selection care is important)
It's pretty apparent from the market action that it's going to take a lot more than housing price declines to significantly knock the stock market from here. I would say that the biggest risk to the equity markets would be rapid back up at the long end of the yield curve and that certainly is worth watching.
energy-I don't know about 15,000. My take is the market was afraid in Dec-Jan that the Fed would allow deflation to take hold. Now they are convinced the Fed will fight it tooth and nail. I don't believe the market fears inflation; in fact that gives pricing power. They fear the Fed raising rates in response to inflation. In this the housing and credit situation have given the stock market a bit of a gift, because they keep the Fed lowering rates.
Inflation at 5 or 7% certainly makes a CD below 4% unattractive.
There are far too many interested entities who cannot afford to let the markets fail.
S&P's AAA reiteration on MBI was about as big a buy signal as I've ever seen.
Whatever it takes, they're going to prevent a disaster, and the avalanche of bad news is proving impotent. I've been a fanatic bear, but at some point, reality needs to be faced, which is, that the people with power clearly have resources which are beyond what we can conceive. This is a worldwide problem, and all the screaming and charting and fingerpointing won't overcome the ability to buy time and assemble a rescue of international proportions.
If the catastrophic data we've been ingesting for the last six months won't break the markets, nothing will, short of a nuclear bomb. It defies all logic, but the proof is in the pudding.
I dont think that wall street is going to be a great profit machine going forward. At least not for a while. They made (before they lost) a huge amount of money pushing structured credit and all the buyout stuff that it supported. even if they stop the bleeding their ability to turn on the income stream is going to be very impaired.
One of the better 'rules' of investing is that after some sector has had a big run which has coincided and abetted a major economic transformation and that sector breaks, it woon't be a place to make great money for a long time except as a trading vehicle. From the action over the last few months it appears the globalization play is the going to be the leadership in the next up leg whenever that is. In a nutshell the leadership is all the stuff which is directly related to 2 billion people going from third world to at least second. That genie is not going back into the bottle.
Right, the equity action is basically all institutional and hedge/PE these days, retail is gone to the sidelines or replacing MEW with REW (Retirement Equity Withdrawal)...I am not so sanguine about continuing home price declines, particularly at the rate we are seeing most recently though it will be knockon effects in employment, state and municipal budgets and failure in the credit markets to surface all the known losses - this before the 'unknown unknown' of what the ultimate losses will be. And that long end of the curve sure hasn't behaved itself to date with the recent 125 bps cut...
Aotc,
Yes, the punishment of the savers must continue!
The challenge I see if for corporate profits to maintain their current share of GDP, much less expand as consumers get hammered by inflation and progressively gloomier...making gains rather ephemeral bear market rallies rather than sustained bullish gains.
energy- Putting spare cash into stocks is saving, just as much as buying CDs.
Profit growth these days is almost entirely overseas. Anyone selling in BRIC countries has enormous pricing power right now as their currencies are dropping almost daily against the USD.
I should have said corporate profits instead of Wall St. But your point is probably the same. That international sales will allow companies to maintain above trend line profits.
Does anyone have an argument that profits on overseas sales will drop? Are abnormally high corporate profits only that way because of dollar weakness? Couldn't inflation in third world countries negate consumption or is it just opportunity for more pricing power?
Forgive the simplistic approach, but if the conventional wisdom is a 20% peak to trough price decline nationally should get us within walking distance of the bottom to home prices, does this mean we are about halfway there?
The high-end market is finally starting to dive though. In Burbank, CA there's a whole block of builder owned homes that have dropped from 2mm to 1.5mm in price and just down the street the first NODs are being served...
w
i think in general that 'abnormal' corporate profits are a reflection of the ongoing leverage to technology. while it still takes the same number (more?) nurses to care for a sick patient, in those field that have any sort of engineering basis productivity has exploded. This is just anecdotal but one of my partners owns a two person company which sells a piece of software for enterprise monitoring. The software installs on all the machines in the corp's network and monitors they're state and reports back to a central location. In the biggest installation 15,000 machines are being managed by just a few people in an IT center.
I think the important take-aways are twofold. First the obvious is that on an ongoing basis a very few people can now handle what used to take very many. Secondly, and probably more important, is that a single bright idea (my partners software implementation) can now propagate extremely rapidly through the operational pipeline of the world.
I think the high end is more of a waiting game. Most of the homes I look at have ~50% equity at what they are listed at now. They are marked down from the peak too. There just are not many buyers. So sellers are waiting.
case shiller is inflation adjusted, so if we get back to the level of the 1990's at a reading of 80 the nominal price of a home will be higher by whatever the rate of inflation has been since then.
The chart shows 80 around 1996. Assuming 3%/y inflation since then would move the CS curve to 114 early 2008. Reversion to the mean, no overshoot, means 1/3 decline from current 170.
energy
with foreign central banks owning such an enormous pile of treasuries and gse's i would say that there are many non economic buyers in that market. it is easily seen that their activities which in some part were driven by not wanting a repeat of 1998 and another part by mercantilist leanings are a financial disaster for their people. look at what china can buy with all its tbonds today that they purchased and continue to purchase instead of goods and services. 40% of the corn, 30% of the oil, 20% of the copper etc, etc. Trading against the 'politburo', be it chinese or some municipality in california is always a near certain win.
david- I agree with much of what you say. My issue with many on this board is that they say we had a historic housing and credit bubble. Domestically that is true. That is true also in a few other countries-the UK, Spain, perhaps Australia. But it is not true globally. Much of Asia and the Middle East is drowning in excess savings. Even most of continental Europe has high savings rates. When I lived in France in the mid-90s, one bank tried to introduce a US-style credit card (French Visa and Master Card balances are debited from your account monthly). They gave it up after 6 months because no-one wanted it.
There is certainly a case to be made that 2 billion people entering the world economy will be more significant historically than the housing and credit bubbles in the US.
energy:
yoy increase in us treasuries and agencies held in custody account by the fed is 303 Billion. Total number is now 2.13 trillion. Went up 17 billion in the latest reporting week.
you can get these numbers at federalreserve.gov, look for the h41 release.
I have posted some charts showing the past performance for each city in the Composite-10 as well as projected values in the future using the CME futures market. The futures market is valuing that the Composite-10 will decline by 9.11% over the next 12 months.
iceman, why not to overshoot on the downside? it would be great and fair for first time buyers, so they get compensated for years of renting while waiting in the sidelines.
iceman writes:
The good news is that with another 25-40% drop we should be back to the long run trendline (which is that housing roughly parallels inflation).
Lets hope we don't overshoot on the downside.
iceman | 02.26.08 - 9:45 am | #
"david: Why are they buying at these levels? Why lend at 3% with inflation running 2x that here and 4x that in China?"
because in china they don't let just anyone trade forex, the central bank gets just about all of it. then you have a bunch of politicos sitting around a table downing tsing tao's or johnny walker red deciding what the hell to do with it all. since it still appears that bad 'investment' decisions in china get you swinging on the end of a rope instead of 3 hots and a cot at allenworth i'm guessing the 'players' are a bit risk averse.
it is possible that they have changed their tune recently. since no western democracy is going to allow them to buy any company of significance 'national security' ahem, maybe they will just buy up all the tradable commodities perhaps putting a top into this bull run. could be rather exciting. speaking of which i chatted with a friend of mine who runs one of the precious and base metal desks on the street and he is really scared that there is going to be a dislocation upwards. Pricing keep going higher, no one seems to care and everyone is waiting for the big crack.
Strange... I thought "housing only went up!" Maybe they were talking about foreclosures!
No doubt this slow return to affordable housing will be considered the end of the world; once the Recession/Depression begins, it won't really matter, of course.
I wonder if this graph will be printed in my local paper?
8.9% ____ year over year.
Drop is too small a word to describe the reduction in value...
Certainly now reality will set in right? Right?
The good news is that with another 25-40% drop we should be back to the long run trendline (which is that housing roughly parallels inflation).
Lets hope we don't overshoot on the downside.
Once we get back to 75 things should be OK.
Nice graph. Those are the kind I like.
Eek!
Cheers,
Overlay the stock market bubble and we have a good perspective on Greenspans bubblenomics
Am I correct in assuming that the decline substantially accellerated during the fourth quarter? It seems that many people expect a "bottoming" this summer in housing. However, if both the rate of decline in home prices is very high and the rate of foreclosures is increasing, perhaps we need to write off 2008 for a bottom in home prices. This will be interesting. The fed and the government do everything that they can to get the market and the economy on track during an election year.
My guess is that we might get some stabilizing of the economy during summer and fall. However, I also guess that the next president will have a very difficult time. The fed shows a strong tendency to increase rates during the first year of a president's term and we may be heading for a form of stagflation by next year.
I just want to make sure I am understanding this. So, in the absense of any home price inflation you could expect prices to fall for another say nine years to get us back to around 80? But if there is inflation (which there is) you would expect prices to stabilise at some number higher than 80 but less than where it is now? Did I do that right?
Anybody see that Sam Zell said housing should start recovering this summer? I told you he is overrated.
I've never seen CNBC take Case-Shiller as seriously as they are today. Real fear for the first time in some of these commentators.
Consumer Confidence Down on Job Worries
Consumer Confidence Plunges in February on Worries About Business Conditions, Jobs
NEW YORK (AP) -- Consumer confidence has weakened significantly as Americans worry about less-favorable business conditions and job prospects.
The New York-based Conference Board says in a report released on Tuesday that its Consumer Confidence Index plunged in February to 75.0 from a revised 87.3 in January.
The reading -- the lowest since the index registered 64.8 in February 2003 -- is far below the 83.0 analysts expected.
[snip]
Homebuilders are flying. This must be good news.
Brian,
If the NAR doesn't like it, it must be accurate.
--
Consumer Confidence falling off the cliff. It is consistent with the economy having been in recession for several months.
All econ-meisters who are denying recession, a majority by far, are a bunch of premeditated liars. Born-and-bred American dopes don't understand that they, including Burn-ass-ke, are lying purposefully.
Jas
Stickiness wherefore art thou?
"My guess is that we might get some stabilizing of the economy during summer and fall. However, I also guess that the next president will have a very difficult time. The fed shows a strong tendency to increase rates during the first year of a president's term and we may be heading for a form of stagflation by next year.
BillD | 02.26.08 - 10:02 am "
I disagree. Nov-Jan 2008, between the election and inauguration will be when the rubber hits the road. EVERY measure necessary to maintain status quo will be taken until then. Depending on who wins the election we'll either see full acknowledgment and capitulation from the current admin (to try to save the R party) or an 'over-the-cliff' head in the sand move (to try to destroy the D party by handing them a primed explosive).
--
"Anybody see that Sam Zell said housing should start recovering this summer? I told you he is overrated."
Yes, I caught him. He is very much part of the Network of Crooks. He is in the business of selling something or other and his comments are self-serving most of the time. He even looks like a Crook. So do Greenspan and Burn-ass-ke.
Jas
BillD, alot of people seem to be assuming that the bottom is nigh. Certainly many of the plans, "to save the housing market," seem to presuppose that we are at or near bottom. Many of them would help borrowers if we are indeed near bottom. But if housing falls another 20% from peak, they would have been better with a foreclosure today than with these plans to save them.
Just revert that and you have a description of what's happened to HB stocks at the same time.
Off 10.2% from it's peak, eh... it's gone 40% the way down it needs to go. Drip drip drip drip...
Jas Jain: "All econ-meisters who are denying recession, a majority by far, are a bunch of premeditated liars. "
As a reader of thehousingbubbleblog I'm sure you are familiar with Upton Sinclair's observation: "It is difficult to get a man to understand something when his salary depends upon his not understanding it."
Stickiness wherefore art thou? - 2006-7. Until the second half of 2007 the housing market was hanging on like that guy in the old Crazy Glue ad. But there are limits to what even CA adhesives can do.
Is this graph available with the logarithm of the y-axis? The most recent drop does look precipitous, but it's hard to tell in percentage terms.
OT: Funniest thing ever, "Subprime Meltdown As Told By Stick Figures". Hat tip to consumerist.com. Warning, cuss words used.
subprime works
There appears to be an avalanche of foreclosures here in the Chicago suburbs, too -- and high-value ones. And now a smattering of $2-5 million commercial buildings and rental apartment buildings in the mix.
OFHEO data's out today as well - and surprisingly, it's showing price declines as well...
"U.S. home prices fell in the fourth quarter of 2007 according to OFHEOs seasonally-adjusted purchase-only house price index. The index, which is based on data from home sales, was 1.3 percent lower on a seasonally-adjusted basis in the fourth quarter than in the third quarter of 2007."
"The year 2007 showed the first four-quarter decline in the purchase-only index since its earliest data in 1991, Lockhart added.However, both OFHEOs purchase-only index and the all-transactions index show relatively greater house price stability than do other nationwide house price indexes. That may reflect, in part, the greater stability in the prime, conforming mortgage market served by the enterprises than in other segments of the mortgage market, said Lockhart."
Luckily this minor problem in data collection will be fixed as Freddie and Fannie start to originate jumbo loans this summer...
Their web geeks are in the process of updating the site now. Give them a bit and the full data sets will be up.
--
Brian,
Yes. And that is my point about the thoroughly corrupt econo-political system.
The main point is that deception is indeed far worse, more prevalent, today than at any time in the history of the US that I know of. It will lead to the collapse of the American system as we have known it.
There are limits to all abuses and when those limits are exceeded the system collapses. Bad things, including the collapse of the system, dont just happen to other countries. Regrettably, tt is our turn now.
Jas
Why are the presidential candidates pretending this is not really happening?
They're all buffoons.
Since confirmatory loans now could run up to 750K, will OFHEO include higher priced homes in their future calculations?
Bill Gross Commentry:
PIMCO - IO March 2008
Elvis writes:
Anybody see that Sam Zell said housing should start recovering this summer? I told you he is overrated.
he's a newspaper man now, has to sell fear, hope, greed... anything to move the paper and ads.
If home depot is slow, then that must
mean there not selling as many
gps enabled Stud finder's...
GRMN...ya know what to do!
Take these numbers with a grain of salt -- the collapse of the Sub Prime and Alt-A mortgage markets, along with the rise in REO sales, has pushed the averages downwards by increasing the ratio of distress sales to non distress sales.
What I'm seeing in Denver is that in entry level and less desirable neighborhoods (i.e., areas with high concentrations of sub prime lending) the values are being driven down by the REOs and short sales. In move up neighborhoods, the average values might be down, but the demand for top of the market properties is still strong. In high demand areas, the impact of REOs is barely noticable.
The key to future trends will the rate of REO absorption -- as the ratio of Owner Occupied to REO sales increases, the markets should improve. Of course, it might be years before that happens in the hardest hit areas -- but that's been the pattern in the past.
OT and I know Tanta is going to come on soon and kick me off but I cant resist making a Zell comment.
I dont know what he is selling but ever since they raised the price to 75 cents at the first of the year, I cant find a Tribune in any of the vending machines. What the heck is he selling virtual papers? maybe he is planning to sell off all the Tribune real estate?
"Why are the presidential candidates pretending this is not really happening?"
Because they can. You don't really think they care, do you?
The presidential candidates are also pretending there is no national debt and that our service economy is every bit as diverse and exportable as manufacturing.
ck,
The Back Bay in Boston is still selling well with prices just off peaks. Priced right, properties in desirable Boston neighborhoods are still selling just fine.
All I know is that since Zell came to visit LA I have not gotten a paper delivered every day for a full week.
Brian | 02.26.08 - 10:23 am | #
That is my view exactly.
GOP governance ~ sabotage.
"gps enabled Stud finder's..."
and to think women used to just go down to the local fern bar.
[Why are the presidential candidates pretending this is not really happening?
They're all buffoons.]
Because they have NO idea what to do about it.
Plus, anything they do is unlikely to be helpful. Government action often makes the problem worse.
In a way, maybe it's good that they're not focusing on it.
" Priced right, properties in desirable Boston neighborhoods are still selling just fine."
This is true in "desirable" Los Angeles 'hoods as well. Probably true in the desirable parts of most areas. Seems that people with higher incomes / better credit are more optimistic about housing, not paying attention, or insane. I'm not sure which. . .
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Dale: Why are the presidential candidates pretending this is not really happening? They're all buffoons.
It takes two to Tango, no?
Only buffoons have a chance with born-and-bred dopes! Only dopes in America vote!! (They unwittingly give consent to the agents of the Network of Crooks). What a system!
Thanks for making my point.
Jas
I definetely agree with on of the previous posts.
Something good must have happened as stocks are up.
IBM is buying back shares!!! What a joke. The market is up on this joke.
What the hell is wrong with Wall Street these days. Do they think we're fools.
What about those inflation numbers. Yeah, right, the market doesn't like inflation. Sure... Liers, they love the damn thing. Deflation is what they hate. Bastards.
Danny
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Boy, so many people on this blog down on the American political system. Now, only if you gals and guys can take this one step further.
Jas
Folks, "desirable" areas always fall late - but they still fall hard. Here's an article from well into the return to rent equivalence in Los Angeles during the last crash. Hoity-toity areas like Ranch Palos Verdes estates and Belmont Shores were getting creamed while LA county as a whole was slowing down. When the lower-end collapses the move-up market evaporates and the higher-end follows.
Dale writes:
Why are the presidential candidates pretending this is not really happening?
Because campaigns are aiming for the lowest common denominator (re: stupid) voters. It will only get worse as we close in on the general. The true-believer's are already got, and a negative outlook is untenable in a campaign.
I'm glad they aren't talking more about it. The promises that have already been hinted at scare the bejesus out of me.
Priced right, properties in desirable Boston neighborhoods are still selling just fine
You know, what these other areas need to do in the neighborhoods that are going down-market is attract the gays. They'll buy the distressed properties, don't mind colorful neighborhoods, will rehab everything and drive the values up, open little bistros, restaurants, and coffee-shops...clothing stores etc. When straight women see this, they'll start hanging around too, because gay men are everything they like. Except...well...you know. But that's OK becuase when straight guys see all the available women, they'll start hanging around too. And everyone will be getting what they want. A lot of them will move in with each other in the hood, and the gays will make a ton of money renting and then selling to them. They'll of course move out, but leave behind a nice place. More boring, but nice.
Ooops. I've just described the South End of Boston
This post was intended as a little humor...with a kernel of truth 
If you read the news you'll just get too depressed.
Jas,
Just one point. I think you should call them "Fraudsters and Bankrupters of NYC". The mechanics are such that the fraud is committed long before the actual bankruptcy.
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Fair Economist,
Your comments on high-end areas are right on. They will be down 80-90% during the depression. An estate in Greenwich, CT, sold for 92.5% lower in 1930s than it was bought in late 1920s, for example.
Jas
Gary writes: "GOP governance ~ sabotage."
Dem governance ~ socialism
...Take that! Now perry! Problems solved! No?
I'd argue that kind of simpleton sloganism we've all been guilty of the past 20 years is more to blame than either ideology.
"All people have the government they deserve." - John Stuart Mills
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Thanks, lama! Deception and manipulation are integral part of the fraud that results later.
The new American values for success, over the past dozen years, have been: Deception, Fraud, and Manipulation. Lot of the Fraud was not legal fraud (because Crooks control the legal apparatus), but Fraud nevertheless. Legalistic robots like Tanta don't understand that part. The mortgage mess is all due to Fraud.
Jas
"Your comments on high-end areas are right on. They will be down 80-90% during the depression. An estate in Greenwich, CT, sold for 92.5% lower in 1930s than it was bought in late 1920s, for example."
Yes but what you are missing is the yardstick. In 1920 the dollar was gold, so if you want the right comparative index you need to deflate home prices by gold. If you do that you can see we have already crashed. This is the wonder of fiat currency. Everyone looking for nominal price declines throughout the economy has already been and will continue to be vastly disappointed. Leaving your wealth in dollar deposits in the bank or under the pillow has been a disaster and will probably continue to be as such.
On an unrelated but interesting topic the CDX indexes have rallied very strongly the last two days. If this continues it will be extremely bullish for the equity markets.
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Brian,
Both parties are agents of the Network of Crooks. USG's primary job is to keep people pacified while Crooks fleece them.
Partisan Democrats and Republicans are the easiest to identify born-and-bred American dopes. Now, at least you know 2/3rd of the dopes.
Jas
[Why are the presidential candidates pretending this is not really happening? They're all buffoons.]
What would you like to hear? Should the Democrats run on a platform of regulation? Conservatives and the media have so demonized these efforts as an attack on the purity of free market capitalism that the average joe believes it.
It is frustrating that they all seem to jump on board with the lame intervention proposals. At least they include a disclaimer that it's not enough.
There is plenty of talk about NAFTA, energy, and taxes. Do you just want them to encourage the public to save their money and stop buying cheap crap?
It's up to us to force the media and politicians to think long term. I doubt you have the power to increase your neighbor's attention span or make them less apathetic. But, a painful recession or possibly depression might just do the trick.
Bo
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call me when you hear a big "SPLAT" sound.
Joe
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No, david_in_ct, I am not missing any yardstick.
It was lot easier to inflate with the gold standard (FDR manipulated the price of gold to inflate and he succeeded) than would be with the fiat currency!!!!!!!!!!
Every dope I know, and I know too many, is calling for high inflation and cannot imagine deflation in the US once the economy is in depression.
Please look and think beyond the obvious.
Jas
Jas,
Oh I think Tanta gets it. I think she and I have been worn down somewhat by watching it for decades. There's plenty I don't dare write about here (lawyers are expensive) and I'm just an occasional member of the peanut gallery.
JasJain: "Now, at least you know 2/3rd of the dopes."
Not quite that many. But after my brief stint working in the White House I got to know the only handful that really matter.
Oh look! Ponies! -------->
-ck-
Don't the data indicate that (a) we're still quite early on the REO curve and (b) the current REO/short sales DO define the market?
The current issue is "Who's left to buy?" Three years of free credit has brought potential buyers into the market prematurely, then dumped them out in no position to be a buyer in the near future, at virtually any price.
Regarding higher-end homes...I see two competing forces. The inability of people to move up (since they have little equity to draw on) will reduce demand. OTOH, increasing economic inequity means there will always be "the rich" (at least in a relative sense) and this may protect values to some extent.
If we use the 1987 point on the left side of the chart as "normal", then we should end up around 142.5 as a normal value level in 2008.
How I got to that number:
Inflation takes us from 60 to 114. Average square foot increases of houses from 2000 to 2500 sq ft adds another 25%
Therefore another 10% drop over two years plus 6% inflation over that period will get us back to "normal"
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Picosec: OTOH, increasing economic inequity means there will always be "the rich" (at least in a relative sense) and this may protect values to some extent.
Nop. The inequality cannot keep rising from ridiculous levels once the depression begins. There will be lot fewer rich than the mansions that have been planned and built for them. Just watch as the depression develops during 2009-10.
Jas
energy:
the harsh reality is that the people most at risk in the housing game are not the ones who are owners of equities. To the extent that they are there has been a lot of selling in IRA, and 401k accounts . If you look at the mutual fund flows over the last two months there has been a huge amount of selling. The buyers of these assets are not people who are one paycheck away from foreclosure. So the question then becomes what is going to motivate equity owners to sell if they are not forced to do so?
While I don't have any opinion on financials because they are just too hard to analyze, most everything else that i have looked at with a balance sheet and income statement looks just fine and some of the commodity stuff looks extremely cheap based on where the commodities are selling. (obviously when it comes to commodities this can change in a heartbeat so selection care is important)
It's pretty apparent from the market action that it's going to take a lot more than housing price declines to significantly knock the stock market from here. I would say that the biggest risk to the equity markets would be rapid back up at the long end of the yield curve and that certainly is worth watching.
Daniel, so if 1991 is "normal" then we have bottomed?
energy-I don't know about 15,000. My take is the market was afraid in Dec-Jan that the Fed would allow deflation to take hold. Now they are convinced the Fed will fight it tooth and nail. I don't believe the market fears inflation; in fact that gives pricing power. They fear the Fed raising rates in response to inflation. In this the housing and credit situation have given the stock market a bit of a gift, because they keep the Fed lowering rates.
Inflation at 5 or 7% certainly makes a CD below 4% unattractive.
JMO
david_in_ct, How does Wall St maintain profit margins way above historical trend line? I always appreciate you insights.
There are far too many interested entities who cannot afford to let the markets fail.
S&P's AAA reiteration on MBI was about as big a buy signal as I've ever seen.
Whatever it takes, they're going to prevent a disaster, and the avalanche of bad news is proving impotent. I've been a fanatic bear, but at some point, reality needs to be faced, which is, that the people with power clearly have resources which are beyond what we can conceive. This is a worldwide problem, and all the screaming and charting and fingerpointing won't overcome the ability to buy time and assemble a rescue of international proportions.
If the catastrophic data we've been ingesting for the last six months won't break the markets, nothing will, short of a nuclear bomb. It defies all logic, but the proof is in the pudding.
TM-Now you have me worried. Please tj, rich, somebody? If all the bears are gone, then I may have to sell.
I dont think that wall street is going to be a great profit machine going forward. At least not for a while. They made (before they lost) a huge amount of money pushing structured credit and all the buyout stuff that it supported. even if they stop the bleeding their ability to turn on the income stream is going to be very impaired.
One of the better 'rules' of investing is that after some sector has had a big run which has coincided and abetted a major economic transformation and that sector breaks, it woon't be a place to make great money for a long time except as a trading vehicle. From the action over the last few months it appears the globalization play is the going to be the leadership in the next up leg whenever that is. In a nutshell the leadership is all the stuff which is directly related to 2 billion people going from third world to at least second. That genie is not going back into the bottle.
david,
Right, the equity action is basically all institutional and hedge/PE these days, retail is gone to the sidelines or replacing MEW with REW (Retirement Equity Withdrawal)...I am not so sanguine about continuing home price declines, particularly at the rate we are seeing most recently though it will be knockon effects in employment, state and municipal budgets and failure in the credit markets to surface all the known losses - this before the 'unknown unknown' of what the ultimate losses will be. And that long end of the curve sure hasn't behaved itself to date with the recent 125 bps cut...
Aotc,
Yes, the punishment of the savers must continue!
The challenge I see if for corporate profits to maintain their current share of GDP, much less expand as consumers get hammered by inflation and progressively gloomier...making gains rather ephemeral bear market rallies rather than sustained bullish gains.
energy- Putting spare cash into stocks is saving, just as much as buying CDs.
Profit growth these days is almost entirely overseas. Anyone selling in BRIC countries has enormous pricing power right now as their currencies are dropping almost daily against the USD.
Aotc,
Umm by dropping you mean (in light of the dollar about to retest the DX alltime low)...FX gains?
david_in_ct,
I should have said corporate profits instead of Wall St. But your point is probably the same. That international sales will allow companies to maintain above trend line profits.
Does anyone have an argument that profits on overseas sales will drop? Are abnormally high corporate profits only that way because of dollar weakness? Couldn't inflation in third world countries negate consumption or is it just opportunity for more pricing power?
energy-OOOPs. Of course you are right.
BRIC customers can pay because their currencies are FLYING.
Forgive the simplistic approach, but if the conventional wisdom is a 20% peak to trough price decline nationally should get us within walking distance of the bottom to home prices, does this mean we are about halfway there?
The high-end market is finally starting to dive though. In Burbank, CA there's a whole block of builder owned homes that have dropped from 2mm to 1.5mm in price and just down the street the first NODs are being served...
w
i think in general that 'abnormal' corporate profits are a reflection of the ongoing leverage to technology. while it still takes the same number (more?) nurses to care for a sick patient, in those field that have any sort of engineering basis productivity has exploded. This is just anecdotal but one of my partners owns a two person company which sells a piece of software for enterprise monitoring. The software installs on all the machines in the corp's network and monitors they're state and reports back to a central location. In the biggest installation 15,000 machines are being managed by just a few people in an IT center.
I think the important take-aways are twofold. First the obvious is that on an ongoing basis a very few people can now handle what used to take very many. Secondly, and probably more important, is that a single bright idea (my partners software implementation) can now propagate extremely rapidly through the operational pipeline of the world.
One other question to any taker, why isn't the ten year joining the party today?
I think the high end is more of a waiting game. Most of the homes I look at have ~50% equity at what they are listed at now. They are marked down from the peak too. There just are not many buyers. So sellers are waiting.
case shiller is inflation adjusted, so if we get back to the level of the 1990's at a reading of 80 the nominal price of a home will be higher by whatever the rate of inflation has been since then.
Case Shiller is inflation adjusted? Really? No mention of that in their methodology document. Reference?
Very interesting David. That makes a lot of sense.
"One other question to any taker, why isn't the ten year joining the party today?"
I think the bigger question is why anyone would buy a 10-year bond under 4 % (taxable) with inflation at 7 % y-o-y.
No that is it EXACTLY - we are asking the same question - WHY BUY?
That buying is why the yield is declining...I posit that the concern is return of rather than return on... yah know...
Except stocks are being bought too. And commodities. Don't see much selling of anything today.
The chart shows 80 around 1996. Assuming 3%/y inflation since then would move the CS curve to 114 early 2008. Reversion to the mean, no overshoot, means 1/3 decline from current 170.
energy
with foreign central banks owning such an enormous pile of treasuries and gse's i would say that there are many non economic buyers in that market. it is easily seen that their activities which in some part were driven by not wanting a repeat of 1998 and another part by mercantilist leanings are a financial disaster for their people. look at what china can buy with all its tbonds today that they purchased and continue to purchase instead of goods and services. 40% of the corn, 30% of the oil, 20% of the copper etc, etc. Trading against the 'politburo', be it chinese or some municipality in california is always a near certain win.
david- I agree with much of what you say. My issue with many on this board is that they say we had a historic housing and credit bubble. Domestically that is true. That is true also in a few other countries-the UK, Spain, perhaps Australia. But it is not true globally. Much of Asia and the Middle East is drowning in excess savings. Even most of continental Europe has high savings rates. When I lived in France in the mid-90s, one bank tried to introduce a US-style credit card (French Visa and Master Card balances are debited from your account monthly). They gave it up after 6 months because no-one wanted it.
There is certainly a case to be made that 2 billion people entering the world economy will be more significant historically than the housing and credit bubbles in the US.
david,
could well be, though recent TIC data shows reduced purchasing as I recall...
here is the press release with a graph...
http://www.globalindices.standardandpoors.com/data/pdf/CSHomePrice_Release_022603.pdf
energy:
yoy increase in us treasuries and agencies held in custody account by the fed is 303 Billion. Total number is now 2.13 trillion. Went up 17 billion in the latest reporting week.
you can get these numbers at federalreserve.gov, look for the h41 release.
david: Why are they buying at these levels? Why lend at 3% with inflation running 2x that here and 4x that in China?
david,
Thanks I will add the h41 to the other series I have found habit forming...
But if there is inflation (which there is) you would expect prices to stabilise
The only inflation that supports house prices is wage inflation. How's that doing?
CPI inflation with stagnant wages results in downward pressure on house prices.
I have posted some charts showing the past performance for each city in the Composite-10 as well as projected values in the future using the CME futures market. The futures market is valuing that the Composite-10 will decline by 9.11% over the next 12 months.
Financial Sight: The S&P/Case-Shiller Home Price Indices post record decline in December
iceman, why not to overshoot on the downside? it would be great and fair for first time buyers, so they get compensated for years of renting while waiting in the sidelines.
iceman writes:
The good news is that with another 25-40% drop we should be back to the long run trendline (which is that housing roughly parallels inflation).
Lets hope we don't overshoot on the downside.
iceman | 02.26.08 - 9:45 am | #
"david: Why are they buying at these levels? Why lend at 3% with inflation running 2x that here and 4x that in China?"
because in china they don't let just anyone trade forex, the central bank gets just about all of it. then you have a bunch of politicos sitting around a table downing tsing tao's or johnny walker red deciding what the hell to do with it all. since it still appears that bad 'investment' decisions in china get you swinging on the end of a rope instead of 3 hots and a cot at allenworth i'm guessing the 'players' are a bit risk averse.
it is possible that they have changed their tune recently. since no western democracy is going to allow them to buy any company of significance 'national security' ahem, maybe they will just buy up all the tradable commodities perhaps putting a top into this bull run. could be rather exciting. speaking of which i chatted with a friend of mine who runs one of the precious and base metal desks on the street and he is really scared that there is going to be a dislocation upwards. Pricing keep going higher, no one seems to care and everyone is waiting for the big crack.
Strange... I thought "housing only went up!" Maybe they were talking about foreclosures!
No doubt this slow return to affordable housing will be considered the end of the world; once the Recession/Depression begins, it won't really matter, of course.
The main point is that deception is indeed far worse.rc helicopter
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