CR or Tanta, do you know what the actual numbers of homes being sold using DAP? Nehemiah held a town hall meeting earlier this month and claimed that 50,000 homes a month were closing with DAP. I am sure some of these people didn't have to have it, but still believe this is going to have a big impact on sales(especially new homes). Does HUD supply actual numbers?
One interesting implication of these numbers is that, if you look at any relatively new housing development, the concentration of buyers at the elevated prices of 2004-2006 is enormous. Those developments are massively underwater in the more bubbled markets.
"I now expect that 2008 will be the peak of the inventory cycle (in terms of months of supply) and could be the bottom of the sales cycle for new home sales."
I'm really sorry you said that CR. Care to retract?
Can someone please point me to a chart for existing home inventory? My impression was that although new home inventory has been decreasing, existing home inventory has been increasing rapidly due to all the foreclosures, yes?
Think about the comparatives for next year...if we are running at the base rate of sales, then next year can be painted as smashingly great even if it only reaches 2007 numbers.
the local news here in SD had the same spin from yesterday's #'s. "housing sales are up" and then proceeded to have a mortgage broker spin it further. The ironic part is that the very next story was about high foreclosures in the county. 2+2=5
Re: Second Graph
What's with the 400k floor during the past down-times? I think we are going to be floor busting this time around as we also busted through that 800k ceiling.
This chart should scare anyone who bought a mortgage since 2000!
Elvis said:
I'm really sorry you said that CR. Care to retract?
Elvis,
I think what CR means is that all the home-builders are exiting the market, hence their new home inventory is going down to zero. Hence, if they don't replace their inventory they are not going to be selling anything.
Anecdotal evidence can be seen in the weight of the "New Homes Guide". My wife has been picking this think up in Southern California for 2 years now. 2 years ago it was three times as thick... yesterday she brought the latest one home and I was laughing at how light-weight it was. Guess there is no money to spare on these ads, and they aren't building anything new.
The study found that the number of fraudulent loans issued during the first three months of 2008 skyrocketed 42% compared with the same period in 2007.
The big jump was a surprise even to MARI. "We were stunned," (im not. are you ?) said spokeswoman Jennifer Butts.
Looks like our actions so far are just causing the rottenness spread further and faster throughout the system.
We're going to have to figure out a way to purge it somehow.
Elvis, why? We are talking about New Homes here - and inventory is clearly declining.
Months of Supply is Inventory / Sales, and with starts below sales, even if sales fall further, months of supply will probably decline.
As far as sales, '08 could see the bottom. This is hard to predict because new home sales could go to zero with all the existing home inventory - but that isn't the way the world works. Some people always want a new home.
The problem for the home builders is it seems unlikely there will be a significant rebound any time soon.
"but this time I expect a slow recovery because of the overhang of existing homes for sales (especially distressed properties)."
CR, I normally share your views;
but do you really think, people want to move in rotten houses in former subprime areas?
Imho, there is a good possibility, that new home sales pick up faster while those old "subprime huts" stay empty for ever.
June's New Home Sales were initially estimated at 530k
that would mean today's estimate would be a DROP of 15k, except that June was revised down to 503 today.
To be fair, May's numbers were revised UPWARD in June, causing June to look worse than May (when initially it would have looked better without the revision).
CR, I normally share your views;
but do you really think, people want to move in rotten houses in former subprime areas?
Imho, there is a good possibility, that new home sales pick up faster while those old "subprime huts" stay empty for ever.
I disagree. A lot of the new homes and new home growth has occurred in the far suburbs and exurbs.
A lot of the largest distress right now is in those same areas. So I can see a lot of areas where used homes would sell better than a new home, due to geography.
if energy prices don't fall substantially, these suburban/exurban places will get slaughtered. They are far away (so high transportation costs) they tend to be big (high heating/cooling).
it's not just gas prices either, it's commutes. In Mpls/St. Paul they are debating whether or not to allow ANY new highways ANYWHERE, since there isn't enough money to keep up the highways we already have. (I35 bridge anyone?)
Jul 25th: Sales of new one-family houses in June 2008 were at a seasonally adjusted annual rate of 530,000...
Aug 26th: the revised June rate of 503,000...
That's one hell of a miss. I know these estimates are supposedly ±11% but come on. If the bias persists this months' 515,000 preliminary is likely below 500k. I don't see honest inventory declining.
Since the population must be about 20% greater than it was in 1991 (no time to check the exact figure this morning), on a population-weighted basis this is much worse than 1991.
INHO NHI will slow as the Inventory remains upper level homes, anything priced above jumbo...aint gettin the 20% down... Whats moving is the new home that, with upgrades was advertised high 600's selling for 800 with finished basement now going for high 300's UF Basement, but builders still willing to do anything to get you in...
the price declines have exceeded 50% in and around here on new homes, killing the dumb ass's that bought at 800 with Alt-A and 70 yr ...
we have 52 month inventory anything priced above 400K....
its the existing folks that are not reducing the prices and in areas like MD that bought the FHB's another 160 days , well the curve will be screwed a little
people caught in the top of a bubble never want to accept reality - this is the slope of hope that something will save us; but it won't - reality just is. You can hide the actual numbers - making the pain last longer - the numbers only report the status of reality. Next ± honest report is due sometime after Jan 2010 as FASB accounting regulators deferred new rules on off-the-books assets to avoid "serious unintended consequences" on the asset-backed securities market.
you can focus all the attention you want on ancillary details between now and then, but it is a waste of time and effort. you are watching a collapse wallow in it if you must.
So how are they managing to sell new homes? How about marking them down $230,000 in 10 days. Actually, that's not even working, being that this place is still listed.
"Consumer confidence readings suggest that the economy remains stuck in neutral, but may be showing signs of improvement by early next year," Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.
The Standard & Poor's/Case-Shiller U.S. National Home Price Index tumbled a record 15.4 percent during the quarter from the same period a year ago.
The monthly indices also clocked in record declines. The 20-city index fell by 15.9 percent in June compared with a year ago, the largest drop since its inception in 2000. The 10-city index plunged 17 percent, its biggest decline in its 21-year history.
The median prices were off -6.3 yoy, but were slightly improved against the June. Inventories remain deep, 10.1 months, but that was improved against the previous 10.7. The market has slid since the reports were sorted out but the mix was generally bond negative on the surface. The OFHEO reported actual sale prices were unchanged in June, slowing in the rate at which they had been coming off.
Jas, I don't understand your anger. Yes, you've been wrong consistently - how did that Q2 2008 depression call work for out for you? I guess you need to post another retraction.
I used to try to help Jas with his forecasts (he made all the usual mistakes like confusing housing starts with sales), but instead of thanking me, he now attacks me. I tried to help Jas politely, but he took the intended helpful criticism personally (and from his forecasts, it appears he hasn't learned anything).
That said, no one has a crystal ball. Anyone who makes forecasts will be wrong on occasion. I try to call it as I see it. Jas just attacks people who disagree with him - even though Jas has been consistently wrong. Oh well ...
"the numbers only report the status of reality."
- if that's true, we have nothing to fear. But, it's not true.
"Next ± honest report is due sometime after Jan 2010 as FASB accounting regulators deferred new rules on off-the-books assets to avoid "serious unintended consequences" on the asset-backed securities market."
- can you tell us what regulatory authority the FASB has?
- do you have any knowlege of proposed follow-up regulation to FIN46?
FDIC
Liquidity Risk Management Summary:
"The FDIC is issuing this guidance to highlight the importance of liquidity risk management at financial institutions. Liquidity risk measurement and management systems should reflect an institution's complexity, risk profile, and scope of operations. Institutions that use wholesale funding, securitizations, brokered deposits and other high-rate funding strategies should ensure that their contingency funding plans address relevant stress events. The requirements governing the acceptance, renewal, or rolling over of brokered deposits are applicable to all insured depository institutions." FDIC: FIL-84-2008: Liquidity Risk Management
FDIC Deposit Insurance Seminars
Nationwide Free Seminars for Bank Employees on How to Calculate Deposit Insurance Coverage Summary:
"The FDIC will host eight identical telephone seminars for bankers this fall on the FDIC's rules for deposit insurance coverage. The free seminars will guide bank employees through the process of determining a customer's deposit insurance coverage. Each seminar will run approximately two to three hours. The seminars will be held between September 17 and November 4, 2008, and are available to employees of all FDIC-insured banks and savings associations." FDIC: Error 404 - Page Not Found
American Banker (no link)
Failure Spurs Questions on Timing of Enforcement Orders
"The failure of Columbian Bank and Trust could be Exhibit A in a growing number of experts' argument that the system for giving enforcement actions to banks is flawed."
The report -- which looks at the 100 largest forest, paper and fibre-based packaging products companies in the world, measured by revenue -- includes 13 Canadian companies, six of them in British Columbia.
Net losses among the 13 Canadian companies climbed to $1.1 billion in 2007, up from $166 million a year earlier. Ten of the 13 companies were in negative territory, including all the companies from B.C.
lama,
I'm sorry but when the FASB: Financial Accounting Standards Board officially announces that you cannot count on their numbers, I accept them at their word. You can choose to wallow in the details if you must.
CR,
This is an area we have differed on for quite some time. Perhaps the numerator (supply) is getting smaller, but so is the denominator (demand and I believe at a faster rate). I think demand has quite some time before it bottoms. Furthermore, if a vast majority of homebuilders go BK over the next year due to negative margins and lack of financing, why would new home sales increase? Less new homes will be built and new home sales should go below 500k for at least a couple of years until supply and demand start to get closer to equilibrium, IMO. I agree with most of what you say, but, I also believe strongly that you are understimating the problem of new home sales, homebuilders, and the devastating effect of foreclosures/oversupply hammering the market and tightening lending standards.
Wait a minute - both CR and Jas have somewhat valid points...
However, as to Jas's Q208 depression forecast - what with revisions and all, who knows? Maybe Q407 was the beginning of a depression. (It was revised negative growth - a depression is usually defined as 8 quarters of negative growth)
Yearning To Learn, anyone that has tried to make forecasts is usually humbled pretty quickly! Not Jas (although he has been wrong more than most).
I think I've been much more right than wrong - especially on housing - but I still don't have a crystal ball. That is why I try to spend time explaining why I think what I think.
I think different views are good. And I have no problem with criticism. But I don't understand Jas' approach of attacking people simply because they disagree with you. Oh well ...
So now the FDIC is giving classes on how to be a good banker?!? Does anybody else get the feeling that the current regulatory leadership in Washington is now kicking the can down the road with both feet? Anything to be able to blame on the next administration!
Oh, and WaMu just e-mailed me about a 5% CD! I'll take two weeks in the office pool.
Does the concept of 'bottom' really mean anything if it is an 'L' shape downturn?
Did people on the Titanic express relief when it hit the bottom? "Hey, the only way we can go from here is up, right?"
lana,
You can drive yourself crazy attempting to comprehend the machinations involved in recalibrating the tool of measurement - or you can accept a broader view. It's your choice.
I don't care to become involved in a contest over how far or how fast the market will fall - nor will I attempt to forecast the point of bottom. I've seen this movie before and I know what a bottom looks like. Wake me when you hear the ball hit ground.
{hint, penny stock hype}
Elvis, I keep saying new home sales could technically go to zero (based on lending standards and overhang of existing home inventory). But we know that won't happen.
Calling for sales to fall to 600K or less a few years ago was considered outrageous - but that call proved correct. Now we are into the fine strokes. Pick your number - the bottom will be somewhere between 500k and zero. Trying to call the bottom for sales and months of supply is somewhat of a mug's game.
IMO the important point for the economy is that New Home sales will NOT recover quickly (if at all) for some time.
And for housing, people shouldn't confuse new home activity with existing home prices and sales. I'm much more pessimistic (looking forward) on existing homes.
"I'm sorry but when the FASB: Financial Accounting Standards Board officially announces that you cannot count on their numbers, I accept them at their word."
- Can you please name one number (amount) relating to a public company that the FASB has ever produced?
I was being nasty and a bit sarcastic; for that, I apologize. The FASB sets the rules for accountants who use those rules to produce the numbers upon which we rely for accuracy. The FASB announced that they cannot accommodate a reporting standard that would accurately reflect a "current status" for the "asset backed securities market". That was my original objection. I apologize if that was not clear.
"IMO the important point for the economy is that New Home sales will NOT recover quickly (if at all) for some time." CR
Your are right. This is the important part. I guess my opinion is there will be more pain until new home sales hit bottom. Any significant recovery is in a galaxy far, far away.
"Aug. 26 (Bloomberg) -- New-home sales in the U.S. improved in July from a 17-year low and construction cutbacks by builders reduced the glut of properties on the market by the most in almost five decades."
Truth: Last month's sales were revised down to 503 from 530.
515 - 503 = 12
But 515 - 530 = -15
So if you actually report based on the original releases, new home sales were negative from the previous report.
Now to be fair, the Bloomberg article cited did show the revised number and the truth - in the second paragraph.
But the headline is false. In truth it is "New Home sales continued to decline from already abysmal levels reported last month."
This sort of nonsense is found in all sorts of economic reporting, and is a big part of where the "pumps" come from in the market.
in Fremont CA, the exactly the same community, same floor plan
to buy: 580k
to rent: $2400 a month.
no money down (like renting), mortgage would be $3600k + hoa + insurance. I assume property tax and income tax deduction cancel each other out.
that is roughly $4000k vs $2400.
of course, no one can get a no money down loan now... which i might say, it is most needed now to give you that flexibility to walk away from the home next year, should price collapse.
On "numbers", this may be slightly OT, but is anyone here knowledgeable about the Paper Economy blog? Do you have any opinion on its being a reasonably reliable source?-- its credibility, data, research, etc.?
I'm not trying to compare Paper Economy to CR, (*and thank you both CR & Tanta for continuing to share your knowledge, thoughts, and opinions in a most generous and civil fashion, even when undeservedly subjected to rudeness). I'm just trying to read different sources for housing news.
On its home page, Paper Economy doesn't provide any info on who writes it, or why, or their background & experience-- so I'm curious.
I don't have any info on that site, but - having never been there, I can pretty well guess what it says { crisis, crisis, crisis }.
Truth is, I'm not confident that a crisis is not on our doorstep. To my mind that is a possibility. However, this is not the first bear market I have seen.
Truth is, that in the last bear market there were different stories that were just as scary.
Truth is we are going to see a rough time ahead.
That said, you can choose to wallow in the muck and mire that attends the downside from any economic bubble you care to pick. That, in my humble opinion is the most painful way to go, but it's your choice.
The other option - which is what I suggest - is to recognize the facts that our economy became overblown by cheap money. Of course, there is a price to pay for that - so accept it { cuz you don't have no other choice } - and let it fall. Stand back and let other people try to pretend they know where the bouncing ball will find bottom.
Ask 1,000 people on the street to count the number of jellybeans in a jar. Some way overestimate, some way underestimate, yet, when you average all their guesses together, researchers are consistently amazed at how accurate they are.
The same principals are at work on this blog. The pollyannas common here a while back were wayyy too positive, while the doomers (who are still post comments here en masse) are wayyy too negative. The reality of the situation, as it almost always is, is in between.
This is why I respect Calculated Risk - he is sometimes bullish, sometimes bearish - there is no hidden or stated agenda - with him its just call it as I see it.
The pollyannas agenda kept them from seeing reality - humiliated they have now left this board. The doomers are still here but their agendas prevent them from seeing any positives (and in case we all forget, there will be a bottom one day, whether we like it or not and whether we want to admit it or not).
So keep up the good job CR. There are a lot of us lurking buyers (knifecatchers if you doomers prefer) who appreciate your ability to call it as you see it. One day, the bottom will come, one day, I and many others will buy, and yet the doomers will still be here, screaming knifecatcher and dead cat bounce from here to eternity.
Anonymous is right in saying there will be a bottom - it is my sincere hope he bought kevlar gloves if he is trying to catch falling knives {because I admire him}.
My previous posts were not meant to scare anyone. I only ask that you look at the facts as they are, and that you don't dwell {waste time and energy} trying to predetermine how fast or how far the market will fall.
It is important to understand that small investors do not make the market go up or down. Quant funds - massive amounts of money that trade on the basis of algorithms - account for the vast majority of the trades. Small investors don't make the market, they ride it.
Attempting to outsmart folks who {I'm sorry to say} are trading on inside information or who simply outgun you, is the surest way to loose your savings that I can think of.
Well, if there's a silver lining to today's utterly inappropriate attack by Jas Jain, it would be that I've been shamed into halting my total free-riding and have signed up for the newsletter.
You, and Tanta, so don't deserve such treatment. I make regular use of your analysis (with attribution) when teaching undergrad macroeconomics.
Your graphical presentations are excellent examples of high quality professional analysis, and I use them to show students how "the pros" present their data.
Thanks again for so freely sharing your expertise and putting up with the nonsense that erupts sometimes on the site.
For the record, I'm not counting as nonsense all the silliness about Spam (the meat) from a few weeks ago in the comments section. I've reached the age where that counts as a fun night.
@Jas Jain
If the Central Banks stop lending and taking toxic mortgage collateral from the banks in trouble with their derivatives, the SHTF: "Credit Crisis II" by Christopher Laird, FSU Editorial 08/25/2008
Thoughts?
Is there a gatekeeping process at work even on the econ blogs?
Every month that goes by we find out this Crash is worse than it 'appears'.
Have we learned anything yet?
CR- the most salient part of the data is that large number of homes still being sold in the south. As the South drops like a stone due to the recession, I predict one could easily see as few as 350k new homes built next year.
10.1 months supply still is quite large given the falling sales.
Further evidence of foreclosures entering another phase:
Nice rise back over 15k homes, even with mass sales through auctions.
New housing will go back to being a semicustom business, with tract housing moribund for the near future (three years)- all that remains is for the banks to pull financing deals and let them fall. The banks will no longer have the capital to commit to a three or four year wait.
Popeye - my comment wasnt directed at you - you are far too reasonable and objective in your comments above for this to be directed towards you.
Anon, thank you for the kind words. I do take a side, but I am also willing to abandon it if it does not fit the facts I see. In here am an anonymous faceless cog in the blogosphere, I have no reputation to protect. Renting is not a badge of honor, or a cause for me, its a way of life that sucks that I want to end some day - period.
I am simply a prospective buyer who has no problem catching a knife that is affordable - especially if the other alternative is to shop forever because prices have not gotten down to where you want them to be or think they could go. A dirty bomb could go off the day after I buy and I lose everything - but such is life. In the mean time I am determined to live it as opposed to watch from the sidelines endlessly.
The Anonymous-- I agree with what you've said. Personally, I'm much less interested in "calling a bottom" than I am in trying to call the middle.
"Middle" meaning the point in time when buying a home in the still bubbled-up market of Norfolk VA entails a reasonable and sustainable amount of financial risk to me.
Inventory here is sky high and sales volume way down-- but median prices have only just begun to decline, and by a very small amount, this year.
The Norfolk/VA Beach area came late to the national bubble, and its late to the national decline.
So like you, I try to keep informed of developments, and when I think it's better than a 50-50 chance that buying a home won't land me underwater for more than a few years, I will buy.
Meantime, I'll rent & let my landlord float the risk.
Numero uno?
CR or Tanta, do you know what the actual numbers of homes being sold using DAP? Nehemiah held a town hall meeting earlier this month and claimed that 50,000 homes a month were closing with DAP. I am sure some of these people didn't have to have it, but still believe this is going to have a big impact on sales(especially new homes). Does HUD supply actual numbers?
One interesting implication of these numbers is that, if you look at any relatively new housing development, the concentration of buyers at the elevated prices of 2004-2006 is enormous. Those developments are massively underwater in the more bubbled markets.
"I now expect that 2008 will be the peak of the inventory cycle (in terms of months of supply) and could be the bottom of the sales cycle for new home sales."
I'm really sorry you said that CR. Care to retract?
Can someone please point me to a chart for existing home inventory? My impression was that although new home inventory has been decreasing, existing home inventory has been increasing rapidly due to all the foreclosures, yes?
Duh, nevermond. CR posted one just yesterday.
It's Case-Shiller Tuesday!!!
Let's see if they can make it another scorching market rally
Think about the comparatives for next year...if we are running at the base rate of sales, then next year can be painted as smashingly great even if it only reaches 2007 numbers.
the local news here in SD had the same spin from yesterday's #'s. "housing sales are up" and then proceeded to have a mortgage broker spin it further. The ironic part is that the very next story was about high foreclosures in the county. 2+2=5
Ciao
MS
It could have been worse. Buy! Buy! Buy!
CR,
what do you see as the new "normal" going forward for home sales considering the last few years activity has been abnormally high ?
Re: Second Graph
What's with the 400k floor during the past down-times? I think we are going to be floor busting this time around as we also busted through that 800k ceiling.
This chart should scare anyone who bought a mortgage since 2000!
Mortgage fraud still soaring:
Mish's Global Economic Trend Analysis Message Board - Msg: 24878823
what was the June sales rate PRE-revision?
Is this one of those times where home sales would have fallen except that last month's number was revised down?
sort of like beating piss-poor expectations?
Elvis said:
I'm really sorry you said that CR. Care to retract?
Elvis,
I think what CR means is that all the home-builders are exiting the market, hence their new home inventory is going down to zero. Hence, if they don't replace their inventory they are not going to be selling anything.
Anecdotal evidence can be seen in the weight of the "New Homes Guide". My wife has been picking this think up in Southern California for 2 years now. 2 years ago it was three times as thick... yesterday she brought the latest one home and I was laughing at how light-weight it was. Guess there is no money to spare on these ads, and they aren't building anything new.
The study found that the number of fraudulent loans issued during the first three months of 2008 skyrocketed 42% compared with the same period in 2007.
The big jump was a surprise even to MARI. "We were stunned," (im not. are you ?) said spokeswoman Jennifer Butts.
Looks like our actions so far are just causing the rottenness spread further and faster throughout the system.
We're going to have to figure out a way to purge it somehow.
Elvis, why? We are talking about New Homes here - and inventory is clearly declining.
Months of Supply is Inventory / Sales, and with starts below sales, even if sales fall further, months of supply will probably decline.
As far as sales, '08 could see the bottom. This is hard to predict because new home sales could go to zero with all the existing home inventory - but that isn't the way the world works. Some people always want a new home.
The problem for the home builders is it seems unlikely there will be a significant rebound any time soon.
Best Wishes.
3% MoM growth?
here's the video clip that was on after the original "spin" of the numbers yesterday:
We're sorry, you've encountered an error
A violin needs to be played in the background for full effect.
Ciao
MS
"but this time I expect a slow recovery because of the overhang of existing homes for sales (especially distressed properties)."
CR, I normally share your views;
but do you really think, people want to move in rotten houses in former subprime areas?
Imho, there is a good possibility, that new home sales pick up faster while those old "subprime huts" stay empty for ever.
--
Please correct me, didn't CR call for a bottom at 600K some time last year?
CR is clueless about the housing supply-demand, CRE and the severity of the current recession.
Jas
"We're going to have to figure out a way to purge it somehow."
String a few of these clowns up by a rope would be the best thing, but hey this is America fraud on the way up and fraud on the way dow
SO I looked it up.
June's New Home Sales were initially estimated at 530k
that would mean today's estimate would be a DROP of 15k, except that June was revised down to 503 today.
To be fair, May's numbers were revised UPWARD in June, causing June to look worse than May (when initially it would have looked better without the revision).
CR, I normally share your views;
but do you really think, people want to move in rotten houses in former subprime areas?
Imho, there is a good possibility, that new home sales pick up faster while those old "subprime huts" stay empty for ever.
I disagree. A lot of the new homes and new home growth has occurred in the far suburbs and exurbs.
A lot of the largest distress right now is in those same areas. So I can see a lot of areas where used homes would sell better than a new home, due to geography.
if energy prices don't fall substantially, these suburban/exurban places will get slaughtered. They are far away (so high transportation costs) they tend to be big (high heating/cooling).
it's not just gas prices either, it's commutes. In Mpls/St. Paul they are debating whether or not to allow ANY new highways ANYWHERE, since there isn't enough money to keep up the highways we already have. (I35 bridge anyone?)
Let's see if they can make it another scorching market rally
I love irrational investors. I could buy and sell from them all day.
"Let's see if they can make it another scorching market rally"
I love irrational investors. I could buy and sell from them all day.
I think somebody just intentionally pumps the markets and sends all the trend following programs into a frenzy.
ALL RIGHT!!!!! Welcome back Jas. Missed ya!
Jul 25th: Sales of new one-family houses in June 2008 were at a seasonally adjusted annual rate of 530,000...
Aug 26th: the revised June rate of 503,000...
That's one hell of a miss. I know these estimates are supposedly ±11% but come on. If the bias persists this months' 515,000 preliminary is likely below 500k. I don't see honest inventory declining.
Since the population must be about 20% greater than it was in 1991 (no time to check the exact figure this morning), on a population-weighted basis this is much worse than 1991.
That's a damn good point....
INHO NHI will slow as the Inventory remains upper level homes, anything priced above jumbo...aint gettin the 20% down... Whats moving is the new home that, with upgrades was advertised high 600's selling for 800 with finished basement now going for high 300's UF Basement, but builders still willing to do anything to get you in...
the price declines have exceeded 50% in and around here on new homes, killing the dumb ass's that bought at 800 with Alt-A and 70 yr ...
we have 52 month inventory anything priced above 400K....
its the existing folks that are not reducing the prices and in areas like MD that bought the FHB's another 160 days , well the curve will be screwed a little
good pt JM....
Since I'm bored
US Population 1991: 252,153,000
today: 304,976,812
So today's population is 20.9% higher than it was in 1991.
good estimate jm.
Thanks CR for all you do and for putting up with the cranks.
people caught in the top of a bubble never want to accept reality - this is the slope of hope that something will save us; but it won't - reality just is. You can hide the actual numbers - making the pain last longer - the numbers only report the status of reality. Next ± honest report is due sometime after Jan 2010 as FASB accounting regulators deferred new rules on off-the-books assets to avoid "serious unintended consequences" on the asset-backed securities market.
you can focus all the attention you want on ancillary details between now and then, but it is a waste of time and effort. you are watching a collapse wallow in it if you must.
So how are they managing to sell new homes? How about marking them down $230,000 in 10 days. Actually, that's not even working, being that this place is still listed.
SDLookup.com | 374 Bryan Point Dr - MLS# 080053435
sis
US Population 1991: 252,153,000
today: 304,976,812
So today's population is 20.9% higher than it was in 1991.
That's a hell of a lot of born and bred dopes!
The monthly indices also clocked in record declines. The 20-city index fell by 15.9 percent in June compared with a year ago, the largest drop since its inception in 2000. The 10-city index plunged 17 percent, its biggest decline in its 21-year history.
The median prices were off -6.3 yoy, but were slightly improved against the June. Inventories remain deep, 10.1 months, but that was improved against the previous 10.7. The market has slid since the reports were sorted out but the mix was generally bond negative on the surface. The OFHEO reported actual sale prices were unchanged in June, slowing in the rate at which they had been coming off.
Jas, I don't understand your anger. Yes, you've been wrong consistently - how did that Q2 2008 depression call work for out for you? I guess you need to post another retraction.
I used to try to help Jas with his forecasts (he made all the usual mistakes like confusing housing starts with sales), but instead of thanking me, he now attacks me. I tried to help Jas politely, but he took the intended helpful criticism personally (and from his forecasts, it appears he hasn't learned anything).
That said, no one has a crystal ball. Anyone who makes forecasts will be wrong on occasion. I try to call it as I see it. Jas just attacks people who disagree with him - even though Jas has been consistently wrong. Oh well ...
Best to all.
"That's a hell of a lot of born and bred dopes!"
Yeah they were all taught money and credit are the same thing.
LOL jas...after he finishes peeing in his cornflakes he takes another big red 'Obnoxious' pill. Every morning.
I feel bad for Jas, to be hung with such shame in public. We need a weekly hanging!
"That's a hell of a lot of born and bred dopes!"
Nah... a lot of the immigrated here from places like... uh where is it that Jas is from again?
wow, the most scathing attack I've ever seen CR levy against anybody.
He didn't even say "best wishes" as he usually does... he said "best to all".
it really does show how much class CR has, that he is more than civil to even his most ardent of detractors.
and yet, I've rarely seen such a smack down ever, despite it being polite as all get-out.
bravo CR... now where is that tip jar?
Re: Please correct me, didn't CR call for a bottom at 600K some time last year?
Jas, go do your DD and post a link to that; if there is a link then you are right!
"the numbers only report the status of reality."
- if that's true, we have nothing to fear. But, it's not true.
"Next ± honest report is due sometime after Jan 2010 as FASB accounting regulators deferred new rules on off-the-books assets to avoid "serious unintended consequences" on the asset-backed securities market."
- can you tell us what regulatory authority the FASB has?
- do you have any knowlege of proposed follow-up regulation to FIN46?
FIN46R, that is.
ALL RIGHT!!!!! Welcome back Jas. Missed ya!
CR,
Next time you go hiking you'll have to let Jas do your blog posts while you're gone.
Re: Looking forward, I'm much more pessimistic about existing home sales, and existing home prices, than new home sales.
Is it possible that CR is really Hank Paulson? .... dons tinfoil hat
lama
enjoy your details
Jas is CR's frankenstein!
FDIC
Liquidity Risk Management Summary:
"The FDIC is issuing this guidance to highlight the importance of liquidity risk management at financial institutions. Liquidity risk measurement and management systems should reflect an institution's complexity, risk profile, and scope of operations. Institutions that use wholesale funding, securitizations, brokered deposits and other high-rate funding strategies should ensure that their contingency funding plans address relevant stress events. The requirements governing the acceptance, renewal, or rolling over of brokered deposits are applicable to all insured depository institutions."
FDIC: FIL-84-2008: Liquidity Risk Management
FDIC Deposit Insurance Seminars
Nationwide Free Seminars for Bank Employees on How to Calculate Deposit Insurance Coverage Summary:
"The FDIC will host eight identical telephone seminars for bankers this fall on the FDIC's rules for deposit insurance coverage. The free seminars will guide bank employees through the process of determining a customer's deposit insurance coverage. Each seminar will run approximately two to three hours. The seminars will be held between September 17 and November 4, 2008, and are available to employees of all FDIC-insured banks and savings associations."
FDIC: Error 404 - Page Not Found
Smackdown!
"That's a hell of a lot of born and bred dopes!"
Yeah they were all taught money and credit are the same thing.
I would amend that to "they were all taught money, credit and wealth" are the same thing.
That's the tie that blinds us.
American Banker (no link)
Failure Spurs Questions on Timing of Enforcement Orders
"The failure of Columbian Bank and Trust could be Exhibit A in a growing number of experts' argument that the system for giving enforcement actions to banks is flawed."
WSJ
Regulators Step Up Bank Actions
'Memorandums of Understanding' Surge
As U.S. Races to Head Off More Failures
Regulators Step Up Bank Actions - WSJ.com
The report -- which looks at the 100 largest forest, paper and fibre-based packaging products companies in the world, measured by revenue -- includes 13 Canadian companies, six of them in British Columbia.
Net losses among the 13 Canadian companies climbed to $1.1 billion in 2007, up from $166 million a year earlier. Ten of the 13 companies were in negative territory, including all the companies from B.C.
lama,
officially announces that you cannot count on their numbers, I accept them at their word. You can choose to wallow in the details if you must.
I'm sorry but when the FASB: Financial Accounting Standards Board
is it possible Jas is Tanta?
Hiking refreshed CR!
CR,
This is an area we have differed on for quite some time. Perhaps the numerator (supply) is getting smaller, but so is the denominator (demand and I believe at a faster rate). I think demand has quite some time before it bottoms. Furthermore, if a vast majority of homebuilders go BK over the next year due to negative margins and lack of financing, why would new home sales increase? Less new homes will be built and new home sales should go below 500k for at least a couple of years until supply and demand start to get closer to equilibrium, IMO. I agree with most of what you say, but, I also believe strongly that you are understimating the problem of new home sales, homebuilders, and the devastating effect of foreclosures/oversupply hammering the market and tightening lending standards.
Gustav now a hurricane. Why all the hype?
(I well remember when Hurricane Carla hit the Houston/Galveston area around Labor Day 1961 and made Dan Rather famous.)
Gustav now a hurricane. Why all the hype? | SciGuy | Chron.com - Houston Chronicle
Wait a minute - both CR and Jas have somewhat valid points...
However, as to Jas's Q208 depression forecast - what with revisions and all, who knows? Maybe Q407 was the beginning of a depression. (It was revised negative growth - a depression is usually defined as 8 quarters of negative growth)
Yearning To Learn, anyone that has tried to make forecasts is usually humbled pretty quickly! Not Jas (although he has been wrong more than most).
I think I've been much more right than wrong - especially on housing - but I still don't have a crystal ball. That is why I try to spend time explaining why I think what I think.
I think different views are good. And I have no problem with criticism. But I don't understand Jas' approach of attacking people simply because they disagree with you. Oh well ...
Best Wishes.
So now the FDIC is giving classes on how to be a good banker?!? Does anybody else get the feeling that the current regulatory leadership in Washington is now kicking the can down the road with both feet? Anything to be able to blame on the next administration!
Oh, and WaMu just e-mailed me about a 5% CD! I'll take two weeks in the office pool.
Does the concept of 'bottom' really mean anything if it is an 'L' shape downturn?
Did people on the Titanic express relief when it hit the bottom? "Hey, the only way we can go from here is up, right?"
No, I don't think so.
Sparks fly!
lana,
You can drive yourself crazy attempting to comprehend the machinations involved in recalibrating the tool of measurement - or you can accept a broader view. It's your choice.
I don't care to become involved in a contest over how far or how fast the market will fall - nor will I attempt to forecast the point of bottom. I've seen this movie before and I know what a bottom looks like. Wake me when you hear the ball hit ground.
{hint, penny stock hype}
Elvis, I keep saying new home sales could technically go to zero (based on lending standards and overhang of existing home inventory). But we know that won't happen.
Calling for sales to fall to 600K or less a few years ago was considered outrageous - but that call proved correct. Now we are into the fine strokes. Pick your number - the bottom will be somewhere between 500k and zero. Trying to call the bottom for sales and months of supply is somewhat of a mug's game.
IMO the important point for the economy is that New Home sales will NOT recover quickly (if at all) for some time.
And for housing, people shouldn't confuse new home activity with existing home prices and sales. I'm much more pessimistic (looking forward) on existing homes.
Best Wishes.
"I'm sorry but when the FASB: Financial Accounting Standards Board
officially announces that you cannot count on their numbers, I accept them at their word."
- Can you please name one number (amount) relating to a public company that the FASB has ever produced?
funny how two different conversations arrived at the same point at the same time - isn't it ?
lama,
them's the rules about how numbers are generated, they are not numbers in and of themselves.
Thanks, I didn't know how those fasbi thingies worked.
OT:
Lehman news from Bloomberg.
Is this one of those "arm's length transactions" where the arm is wrapped around the back?
lama,
I was being nasty and a bit sarcastic; for that, I apologize. The FASB sets the rules for accountants who use those rules to produce the numbers upon which we rely for accuracy. The FASB announced that they cannot accommodate a reporting standard that would accurately reflect a "current status" for the "asset backed securities market". That was my original objection. I apologize if that was not clear.
lana,
If you are attempting to look it up, that took place in late July.
"IMO the important point for the economy is that New Home sales will NOT recover quickly (if at all) for some time." CR
Your are right. This is the important part. I guess my opinion is there will be more pain until new home sales hit bottom. Any significant recovery is in a galaxy far, far away.
KD on "The Ticker" makes this good point:
Headline: New Home Sales were up.....
"Aug. 26 (Bloomberg) -- New-home sales in the U.S. improved in July from a 17-year low and construction cutbacks by builders reduced the glut of properties on the market by the most in almost five decades."
Truth: Last month's sales were revised down to 503 from 530.
515 - 503 = 12
But 515 - 530 = -15
So if you actually report based on the original releases, new home sales were negative from the previous report.
Now to be fair, the Bloomberg article cited did show the revised number and the truth - in the second paragraph.
But the headline is false. In truth it is "New Home sales continued to decline from already abysmal levels reported last month."
This sort of nonsense is found in all sorts of economic reporting, and is a big part of where the "pumps" come from in the market.
The Market Ticker
(not a Forum subscriber myself, but it seems to me that his recent Ticker posts have been quite good-ie better)
hope this has not been posted already, have no time to check carefully right now)
in Fremont CA, the exactly the same community, same floor plan
to buy: 580k
to rent: $2400 a month.
no money down (like renting), mortgage would be $3600k + hoa + insurance. I assume property tax and income tax deduction cancel each other out.
that is roughly $4000k vs $2400.
of course, no one can get a no money down loan now... which i might say, it is most needed now to give you that flexibility to walk away from the home next year, should price collapse.
just sharing....
On "numbers", this may be slightly OT, but is anyone here knowledgeable about the Paper Economy blog? Do you have any opinion on its being a reasonably reliable source?-- its credibility, data, research, etc.?
I'm not trying to compare Paper Economy to CR, (*and thank you both CR & Tanta for continuing to share your knowledge, thoughts, and opinions in a most generous and civil fashion, even when undeservedly subjected to rudeness). I'm just trying to read different sources for housing news.
On its home page, Paper Economy doesn't provide any info on who writes it, or why, or their background & experience-- so I'm curious.
zulu,
I don't have any info on that site, but - having never been there, I can pretty well guess what it says { crisis, crisis, crisis }.
Truth is, I'm not confident that a crisis is not on our doorstep. To my mind that is a possibility. However, this is not the first bear market I have seen.
Truth is, that in the last bear market there were different stories that were just as scary.
Truth is we are going to see a rough time ahead.
That said, you can choose to wallow in the muck and mire that attends the downside from any economic bubble you care to pick. That, in my humble opinion is the most painful way to go, but it's your choice.
The other option - which is what I suggest - is to recognize the facts that our economy became overblown by cheap money. Of course, there is a price to pay for that - so accept it { cuz you don't have no other choice } - and let it fall. Stand back and let other people try to pretend they know where the bouncing ball will find bottom.
I'm sorry, that's just my point of view.
Ask 1,000 people on the street to count the number of jellybeans in a jar. Some way overestimate, some way underestimate, yet, when you average all their guesses together, researchers are consistently amazed at how accurate they are.
The same principals are at work on this blog. The pollyannas common here a while back were wayyy too positive, while the doomers (who are still post comments here en masse) are wayyy too negative. The reality of the situation, as it almost always is, is in between.
This is why I respect Calculated Risk - he is sometimes bullish, sometimes bearish - there is no hidden or stated agenda - with him its just call it as I see it.
The pollyannas agenda kept them from seeing reality - humiliated they have now left this board. The doomers are still here but their agendas prevent them from seeing any positives (and in case we all forget, there will be a bottom one day, whether we like it or not and whether we want to admit it or not).
So keep up the good job CR. There are a lot of us lurking buyers (knifecatchers if you doomers prefer) who appreciate your ability to call it as you see it. One day, the bottom will come, one day, I and many others will buy, and yet the doomers will still be here, screaming knifecatcher and dead cat bounce from here to eternity.
Anonymous is right in saying there will be a bottom - it is my sincere hope he bought kevlar gloves if he is trying to catch falling knives {because I admire him}.
My previous posts were not meant to scare anyone. I only ask that you look at the facts as they are, and that you don't dwell {waste time and energy} trying to predetermine how fast or how far the market will fall.
It is important to understand that small investors do not make the market go up or down. Quant funds - massive amounts of money that trade on the basis of algorithms - account for the vast majority of the trades. Small investors don't make the market, they ride it.
Attempting to outsmart folks who {I'm sorry to say} are trading on inside information or who simply outgun you, is the surest way to loose your savings that I can think of.
anon at 1:31-
Is that you Mr Greenspan??
With the exception of Sparky boy never has one typed so much yet said so little.
Take a side....this whole mess is allowed to continue because not enough people have confidence to take one.
Ciao
MS
and I couldn't agree more with Popeye's last comment....especially the last sentence.
Ciao
MS
CR,
Well, if there's a silver lining to today's utterly inappropriate attack by Jas Jain, it would be that I've been shamed into halting my total free-riding and have signed up for the newsletter.
You, and Tanta, so don't deserve such treatment. I make regular use of your analysis (with attribution) when teaching undergrad macroeconomics.
Your graphical presentations are excellent examples of high quality professional analysis, and I use them to show students how "the pros" present their data.
Thanks again for so freely sharing your expertise and putting up with the nonsense that erupts sometimes on the site.
For the record, I'm not counting as nonsense all the silliness about Spam (the meat) from a few weeks ago in the comments section. I've reached the age where that counts as a fun night.
@Jas Jain
If the Central Banks stop lending and taking toxic mortgage collateral from the banks in trouble with their derivatives, the SHTF:
"Credit Crisis II" by Christopher Laird, FSU Editorial 08/25/2008
Thoughts?
Is there a gatekeeping process at work even on the econ blogs?
Every month that goes by we find out this Crash is worse than it 'appears'.
Have we learned anything yet?
CR- the most salient part of the data is that large number of homes still being sold in the south. As the South drops like a stone due to the recession, I predict one could easily see as few as 350k new homes built next year.
10.1 months supply still is quite large given the falling sales.
Further evidence of foreclosures entering another phase:
Countrywide Foreclosures (REO) Blog
Nice rise back over 15k homes, even with mass sales through auctions.
New housing will go back to being a semicustom business, with tract housing moribund for the near future (three years)- all that remains is for the banks to pull financing deals and let them fall. The banks will no longer have the capital to commit to a three or four year wait.
Someday this war's gonna end...
Popeye - my comment wasnt directed at you - you are far too reasonable and objective in your comments above for this to be directed towards you.
Anon, thank you for the kind words. I do take a side, but I am also willing to abandon it if it does not fit the facts I see. In here am an anonymous faceless cog in the blogosphere, I have no reputation to protect. Renting is not a badge of honor, or a cause for me, its a way of life that sucks that I want to end some day - period.
I am simply a prospective buyer who has no problem catching a knife that is affordable - especially if the other alternative is to shop forever because prices have not gotten down to where you want them to be or think they could go. A dirty bomb could go off the day after I buy and I lose everything - but such is life. In the mean time I am determined to live it as opposed to watch from the sidelines endlessly.
The Anonymous-- I agree with what you've said. Personally, I'm much less interested in "calling a bottom" than I am in trying to call the middle.
"Middle" meaning the point in time when buying a home in the still bubbled-up market of Norfolk VA entails a reasonable and sustainable amount of financial risk to me.
Inventory here is sky high and sales volume way down-- but median prices have only just begun to decline, and by a very small amount, this year.
The Norfolk/VA Beach area came late to the national bubble, and its late to the national decline.
So like you, I try to keep informed of developments, and when I think it's better than a 50-50 chance that buying a home won't land me underwater for more than a few years, I will buy.
Meantime, I'll rent & let my landlord float the risk.
SWEET GRAPH
Build links to your blog with RSS Instant Feed of 6,000+ Links! Widgets so you can share the data too!
Shouldn't the FDIC have been giving the classes on how to be a good banker during the boom period, not waiting till the bust.
FU Sheila Bair you idiot. Your just as dumb and blind as Paulson and Bernanke