Another Month, Another NAR Revision
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CalculatedRisk on Wed, 10/10/2007 - 7:20am (83 comments)
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Baghdad Bob goes to the NAR
Surprise! No wait, stunned!
I got it - stunned AND surprised!
Paulson announces some sort of foreclosure problen solving group of industry super-friends on CNBC. Didn't he say this was contained?
National Association of Revisionists
what else can we expect from a shill organization.
This truly is a frog in boiling water issue. Think if they gave October's report at the beggining of the year! (And they still would have been wrong)
Don't worry. The revisions will fix all of this. Move along, nothing to see here...
When will they stop with this garbage. Im also wondering when the media will just stop using NAR as a measuring stick for anything meaningful. They should be bashing NAR because none of their forecasts are ever correct, unless the market is on the upside. Amazing.
it is possibe, if two things happen
1) fnm conforming limits to rise 50%
2) 0 down loans will comeback again
after the FED starts accepting
Mortgage backed Securities as
collateral.
Both of the above are very likely. It should help sales, by how much,
CR is the person to ask.
http://www.weblinks247.com/indexes/idx24_usd_en_2.gif
Help me I've fallen and I can't get up.
"The comedians . ."
Gets me every time!
What's really funny is that their December revision will still be too optomistic.
--
I am waiting for downwards revision of housing demand from all the economists! I have heard and read estimates in 1.65-1.90M range. Census data clearly do not support these estimates. People, especially, economists seem to have hard time admitting when they have been wrong.
Jas
I love it - the salami approach to count. A little slice here, a little slice here, and soon no salami.
How do you think they get these numbers? Do you think they have an algorithm with actual data input (plus a massage factor), or do they just pull one out of thin air?
If it weren't for the huge amount of advertising dollars the media whores get from the Realtwhores, we wouldn't have to hear a single peep from these ridiculous biased shills.
George Seldes is a true American hero. He observed the corrupt link between advertising money and suppressed and manipulated information in the media in his first job at the Pittsburg Post. Know this documentary if you want to know the truth of the American "Free" Press Tell the Truth and Run: George Seldes and the American Press
Jas, enough with the broken record already.
How is housing for 07 gonna be 1.9mm houses, are the people who already bought giving their houses back?
620,000 fewer new houses sold at an average price of $292,000 is an economic activity hit of $180bn. That's 1.3% of GDP ($13.9t) is it not? And that's not counting multiplier effects associated with new home purchases.
While I hate to advocate Chomsky on a finance site, his work, "Manufacuturing Consent" really explains the Mainstream reliance on false information from the NAR, etc.
But if you don't want to read a book, or look it up online, dotcommunist's comment about George Seldes, etc. is the short version.
You think that's funny? You haven't seen comedy until you review Stephen Kim's material from Citibank. First he upgrades the builders as a group saying they tend to rally ahead of the fundamentals improvement (how do they know when fundamentals are going to improve?) and now he is saying that they are just about finished writing down land values - despite the fact that the downslide of land values is really just starting.
The not so funny part is this guy really seems to have influence over the market, for after every report the builders rally up to 20%.
In the link below, I graphed the MLS asking price trend and the MLS inventory in each of the builder's major geographic profit (now loss) centers.
Reggie Middleton's Boom, Bust & Bling Blog - HAS MOVED TO REGGIEMIDDLETON.BOOMBUSTBLOG.COM!!!: Bubbles, Bank, & Builders - Pt IV: I can't believe this guy
Keep running those commercials saying this is a great time to buy! One of these days my shoe will actually shatter the TV screen.
Alec, if your going to attack, at least know wtf your talking about.
new homes vs existing
catch up with us before posting agai
Jas is correct if unfortunately also overly strident and repetitive. Census type demographics are slow to reveal trends and notoriously slow to acknowledge inflections in trend. Predictions for demand were skewed upward by household formation, decreasing household size, sewcond home ownership among boomers and low interest rate induced demand. Remember also probably 400k are replacement housing not adding to the housing stock totals. Regardless, even the slightest change in occupancy overwhelms any of this. If just 1 house out of 10 takes on an addition occupant this creates a theoretical 4 million house surplus. Gee, anyone think household formation will be delayed or average occupancy will rise from economic necessity?
620,000 fewer new houses sold at an average price of $292,000 is an economic activity hit of $180bn. That's 1.3% of GDP ($13.9t) is it not? And that's not counting multiplier effects associated with new home purchases.
Robert Coté
do not repeat this to anyone
620,000 fewer new houses sold at an average price of $292,000 is an economic activity hit of $180bn. That's 1.3% of GDP ($13.9t) is it not? And that's not counting multiplier effects associated with new home purchases.
Robert Coté
Alec, Jas is talking about a different subject - the level of housing starts ceteris paribus.
Jas asks the same question over and over - and I've answered it many time in the comments - but he keeps asking anyway. I've offered Jas the opportunity to send me his questions - and that I'd post the questions and the answers. But he has declined.
Best to all.
Abandon all HOPE NOW, based on the No Child Clear Skies naming protocol
NYTimes here
CR, thanks for clearing things up better than Jas did.
Feeding Trolls, make yourself with the concept of rogering.
Feeding Trolls, make yourself with the concept of rogering
huh?
I was doing some problems the other day and came up with some estimates I would like people to review.
We are losing something like 750 billion a year now in realestate transactions vs 2005. Approximately 45 billion in realtor fees.
Also an additional 10 billion in closing cost fees.
HELOCS are down about 300 billion which adjusted up is approximately 400 billion due to it being tax free.
Then we have the layoffs from the REIC construction side. I feel most of these are hidden job losses because they are sub contractors. Estimate close to a million with an average annual salary of 40000 dollars. 40 billion dollars.
This is roughly 500 billion dollars and then you add ripple effects to this. Like people trying to make higher mortgage payments to avoid forclosure. Higher fuel and food costs.
I am estimating 4-6% of GDP which adds up to a recession.
I could be wrong about this, but I don't think the notional value of existing home sales are included in gdp, so declining existing home sales will not have a huge impact on gdp directly. However, realor commissions, appraisal fees, closing costs, renovations, etc, etc are all part of gdp, and are declining, but their impact isn't of the magnitude you're describing. Declining new home construction and sales are where the real estate bust has a meaningful impact on gdp.
Paulson announces coalition to help homeowners
Paulson announces coalition to help homeowners
| Reuters
The coalition will try to ensure that homeowners get the advice they need to keep from falling behind on their mortgage obligations and that servicers "get better responses when they reach out to people," Paulson said, so that foreclosures are minimized.
The coalition will try to ensure that homeowners get the advice they need to keep from falling behind on their mortgage obligations and that servicers "get better responses when they reach out to people," Paulson said, so that foreclosures are minimized.
I can think of far better uses for this technology if they actually have invented time travel.
GS marked down pools of bonds and loans by 53% in 3rd qtr..
Goldman CDO, CLO Holdings Fall 53 Percent in Quarter (Update2) - Bloomberg.com
Paulson announces coalition to help homeowners
Yes, they are very concerned about homeowners. This has nothing to do with protecting lenders, nothing! They will help "advise" serfs, uh, I mean homeowners, on how they can continue to make payments forever (or at least for the rest of their lives) on overprice and quickly depreciating real estate. This will help the homeowner, don't you see!
"Regardless, even the slightest change in occupancy overwhelms any of this. If just 1 house out of 10 takes on an addition occupant this creates a theoretical 4 million house surplus. Gee, anyone think household formation will be delayed or average occupancy will rise from economic necessity?"
I've lived in desirable areas on the California coast nearly 30 years. Because of the expense and scarcity of housing, house sharing is a way of life even for the middle-aged, even for families (although that's rarer).
And "moving home with the folks" has always been an option, albeit one that the folks don't like. If this pattern spread across the nation, yes, we'd have a lot of vacant housing sitting around.
Another interesting trend I'm seeing locally: my town has streamlined the process for permitting granny units in the backyard of existing homes, even provides pre-approved plans for free. I know two households (one single, one couple) who've built extra-nice granny units and moved into them themselves; they now rent out the main houses for income.
Housing out here rents for$1500-$3000 a month on average, and a granny unit only costs $50K. Expect to see more of that as local permits allow, if times get tougher.
Of course it is a great time to buy if you just let your grandchildren or their children do the selling.
My original 2006 estimate for three year losses to banks (government charters) was 900 billion, (plus 5%, minus 10%) and I haven't revised it. If I do revise it, it will be to the upside.
OT - CR, MOM I didn't see anyone post on this yet, but over on CNN/Money there's a short Fortune Mag. interview with the CEO of Yellow trucking. He's confirming the slow down in shipping that Ryder and the Ports data noted.
Fortune interviews Bill Zollars, CEO of YRC Worldwide - Oct. 10, 2007
. . .
"From your perspective, how is the overall economy doing?
New York and most of the world get fixated on the credit crunch, since there's a tendency to be mesmerized by the financial markets. But underlying that is the real economy, which is the movement of goods. That economy is driven by people making and shipping stuff. They are not making and shipping as much [right now], and we see that every day."
. . .
"How is the holiday season shaping up?
We've got a window now of about ten weeks or so where we should really see a big increase in shipment volumes as we get ready for Christmas. We have not seen that, and that's a concern. Last year's inventory buildup for Christmas was lower than historical standards, and the season ended up okay - not terrible. This year you have some easy comparisons, so you would expect to see more of a preholiday inventory buildup, but we have not seen that. Maybe it's coming later. Maybe it's not coming."
. . .
Here's Randall Forsyth's comments on real estate employment that helps me better understand the realtively healty jobless claims and payroll numbers:
Maybe the housing recession got short shift because of the impression that the worst is over. That's reinforced by the recent jobs data, which show better-than-expected payroll growth and no upsurge in unemployment claims.
But, points out one real estate professional, there are good reasons that the thousands of job losses in the industry haven't shown up in government numbers.
"Most every mortgage officer I know is commissioned not salaried and so are all real estate agents. Independent contractors. We cannot collect unemployment, or disability. It is the nature of real estate," he writes.
During the boom, the number of realtors swelled to 1.4 million from about 750,000 in 2001, this pro estimates. Now, that's being rewound.
He's a pretty cool dude.
Paulson announces coalition to help homeowners
When he refers to "homeowners", in this case I think he's referring specifically to the banks.
I bet a lot of recent "homebuyers" will be more than happy to walk away from tens of thousands of dollars of depreciation.
Especially now that landlords are beginning to welcome prospective tenents with a foreclosure on their credit record.
"Everybody's foreclosing, so it's OK."
I bet that thought more than anything scares the hell out of the lenders.
Andrew, thanks. I have been in cataleptic shock after reading that Goldman marked down the value of its CDO/loan holdings by over 2 billion. article.
3.79 billion -> 1.77 billion in a quarter. The evap rate of the liquidity is very impressive - a bit over 53 percent in one quarter:
The ``fair value'' of retained interests in collateralized debt obligations and loan obligations sank to $1.77 billion at the end of August from $3.79 billion three months earlier, the New York-based firm said in a regulatory filing. Investments in mortgage-backed securities fell 16 percent.
I bet they are thinking that they'll be able to mark the CDOs up again in a quarter or two to offset further declines in the MBS. CR is right, the confessional is open.
With due respect, Jas, you are turning into a troll. Trolling is what I do for living, and got my authorization to do so here. Are you sure you want to compete with me?
How come every self interested asshat ( e.g. Bush now Paulson ) pretends a coalition will solve major league collusion fuck ups.
Is this a coalition of the willing ?
--
CR: "Jas asks the same question over and over - and I've answered it many time in the comments - but he keeps asking anyway. I've offered Jas the opportunity to send me his questions - and that I'd post the questions and the answers. But he has declined."
No, sir, you have NOT answered the questions that would expose your estimate to be wrong. You simply repeated your prior statements as to why your estimate is correct.
Rather than arguing about the past how about you reconcile your estimate of the demand with the Census data:
Total Units
Total Occupied
Total Vacant, Year Round
New Privately Owned Housing Units Completed
In order to include at least one recession period I suggest that you look at these data for 2001-2007Q2. Here are my calculations for 2001-2007Q2 period (6.5 years), changes, or increases, in thousands:
Total Units\t\t10,544
Total Occupied\t\t5,809
Total Vacant, Year Round\t3,424 (dont include other categories of Vacant Units)
New Privately Owned Housing Units Completed\t11,393
Can you reconcile your demand with these cold hard facts?
Thanks.
Simply seeking the truth,
Jas
How come every self interested asshat ( e.g. Bush now Paulson ) pretends a coalition will solve major league collusion fuck ups.
Because that's how politics work they don't give a rats ass but they need the votes. I feel you pain. Trust me. I'm here to help you.
Anonymous, just calling the kettle black and no pain here.
So are they making it up on volume or what?
[hat tip Housingwire blog]
Mortgage Production Profits Negative in 2006
Mortgage banking production profits fell to negative $50 per loan in 2006 from a positive $258 per loan in 2005, according to the Mortgage Bankers Associations annual cost study, released today. While production revenues increased on a per-loan basis, this increase did not keep pace with the increase in production operating expenses which grew by 17 percent to $3,416 per loan in 2006.
Production profits began to slip in 2004, and we see a continuation of this trend in 2006, said Marina Walsh, a senior director in MBAs research and economics department.
[snip]
--
Annual Increases For the Past 6.5 years\t\t\t
\t\t\t\t\t
Total Units\t\t\t\t\t1622
Total Occupied\t\t\t\t\t894
Total Vacant, Year Round\t\t\t\t527
New Privately Owned Housing Units Completed\t\t1753
The difference between the top and the bottom number can be accounted for by replacement of demolished units and some discrepancy in the data.
Looking forward to debate on the facts.
Jas
So is it more critical to maintain the (artificial) values, or clear inventory? Personally I don't think either objective can be achieved for years to come, but a house can be sold in a heartbeat if it is priced right.
I wonder how the "new plan" from Paulson will fly for distressed borrowers. Sounds like the plan is mostly about giving advice to homeowners.
If someone asked for help "I was right on the edge before my ARM reset and now I need to choose between eating and paying the mortgage. Selling is not a great option, since the house is worth 50k less than I paid, even more if it were priced to sell quickly."
My advice: "Try to hang in there until Congress passes the new law that allows the bank to forgive your debt without having the IRS charge the banks write off as taxable income.
Only a few distressed borrowers on the edges will be helped much by "advice."
deb,
Good post. I was beginning to think that I was the only one who didn't think keeping people in over priced, depreciating homes with mortgage payments much greater than rents was charity.
I wonder how the "new plan" from Paulson will fly for distressed borrowers. Sounds like the plan is mostly about giving advice to homeowners.
If I were one of the millions who've already been forclosed on in recent years, and these guys announce a bailout plan that I have to pay for out of my paycheck that's being sent to my one room apartment, I'd be rioting in the streets.
In response to Bob Dobbs | Homepage | 10.10.07 - 12:34 pm post.
Where I live the county is rezoning like crazy in an effort to help the HBs.
For example we have what you call a R20, R30 etc. 20 equaling 20,000 sq. foot lots. They are now changing the R20s to what is called RA5 where you can build Town homes on the same R20 lot. This is in turn just making the problem even worse when it comes to too many units available.
Does the NAR realize that all the pronouncements of a "bottom" are not in their agents interest if it prevents sellers from lowering prices? No volume = no commission.
Is there any correlation with britains rumored withdrawal of Iraq and there own housing/banking woes?
Just a short public service announcement. I'm done trying to reign in Jas. I've better things to do than listen to rhetoric like his.
Using the period 2001-2007Q2 as a reference is the worst form of cherrypicking.
My take on housing construction going forward is decidely pessimistic but hardly apocalyptic. The necessity for "replacement" housing is probably going to rise significantly for a number of reasons. Politically I expect incentives favoring replacement (and infill) rather than exurbanation. Second, the 1947-1957 era housing, the Levitton period, is way past end of life as designed and constructed and will need wholesale replacement. Zoning restrictions will likely favor replacement over relocation as will the aging boomer generation who will preferably age in place. This is a different market than what the HBs are used to servicing but the idea of slapping down onion skin periphial boomburgs and sprawl is dead for years if not a decade.
Okay, more replacement construction and much lower addition to the housing stock. This still leaves to major problems. Location and product mix. The location issue actually favors builders. Sure we have enough housing. $200,000 can buy you 15 decent SFRs in Buffalo. It can't cover the permits and schools fees in my 'hood. We will still be building lots of new housing in places people want to live and much of my 4 million surplus is a statistical quirk in that they haven't been demolshed yet and really shouldn't be counted in the true housing stock in the first place. Finally product mix. No doubt the planner class will use this to overshoot and build too many townhouses and high density units but for now I'm not sure who can use all the McMansions we've slapped up in the places they've been built in the last few years.
Yun's quote in the AP release:
"The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains," Yun said.
Expired
You see guys, if it had not been for the fall of Berlin Wall, we wouldnt be in such a mess.(read Sir Alans book). Now you tell me if Stalin was wrong! What I dont understand is how come only Ches pretty face is on T- shirts. Don`t you think there is a bias here?
Flight of the Extreme UAVs, From Smallest to Deadliest
Hey, where's UA93 and aa11
--
"Using the period 2001-2007Q2 as a reference is the worst form of cherrypicking."
This is disgusting. Why don't you pick a period? Things only get worse if we pick 1988-2007Q2 or even 1995-2007Q2. I have very good reason to pick 2001-2007Q2 because that is the length of the latest business cycle. You have the right to disagree but you can't accuse me of cherrypicking.
BTW, why don't you let CR reconcile with my data or data that he can pick and choose as long as they are real numbers and not estimates.
I know that people like you cant imagine that I am right and CR is wrong. I would let the facts speak for themselves.
Jas
"Where I live the county is rezoning like crazy in an effort to help the HBs.
For example we have what you call a R20, R30 etc. 20 equaling 20,000 sq. foot lots. They are now changing the R20s to what is called RA5 where you can build Town homes on the same R20 lot. This is in turn just making the problem even worse when it comes to too many units available."
Yep. I guess my point was, in coming hard (ish) times, demand for housing can decrease simply by cramming more people into fewer units; while at the same time supply may continue to increase long past the point anyone expected it would, and in ways that the national prognosticators didn't consider or don't even recognize.
:"We have seen a massive acceleration of the speed with which these glaciers are moving into the sea. The ice is moving at 2 metres an hour on a front five kilometres long and 1,500 metres deep. "That means that this one glacier puts enough fresh water into the sea in one day to provide drinking water for a city the size New York or London for a year."
a few more housing problems
I need some
Updates on regional home sales in September (vs. year ago)
Orlando -- down 55% (mid Florida, which includes Orlando and Greater Tampa), down 45%)
Nashville -- down 25%
No. Virginia -- down 31%
Long Island -- down 20%
And that's just news from yesterday and today!
OT and please forgive me if this has been posted b4...I just came out of the bunker and getting caught up...
This article says the federal gov. is
contemplating buying 17k homes in the gulf area for 40B. That is a lot of scratch.
read Sir Alan`s book
"Unqualified democracy, where 51 percent of the
people can legally do away with the rights of the remaining 49
percent, leads to tyranny." (emphasis in original, p. 345)
"I bet they are thinking that they'll be able to mark the CDOs up again in a quarter or two to offset further declines in the MBS. CR is right, the confessional is open. - MaxedOutMama"
MOM, the cynical side of me thinks that it's an all to common corporate/political tactic to overstate the news when the news is going to be bad anyways and then take credit when things "improve." This gets people to forget the bad because of the recent "good," and garners credit for you for honesty.
GunterGliebenGlautenGloben, yes, existing home sales are not included in GDP (commissions are included as part of residential investment).
Best to all.
Anon:
"...but a house can be sold in a heartbeat if it is priced right."
Sure! My house is available for $1.98. I might even get some over bids.
The problem is to find the "right" price. Isn't it?
I dont understand what this fuss is all about. In 2-3 months sellers will raise the price 1%(I dont know if ajusted for inflation though) and the buyers will be back. Why is it so hard to believe that? And also most of the mortgage brokers will be 'fiduciary ready' by that time. What a time that will be!
":"We have seen a massive acceleration of the speed with which these glaciers are moving into the sea. The ice is moving at 2 metres an hour on a front five kilometres long and 1,500 metres deep. "That means that this one glacier puts enough fresh water into the sea in one day to provide drinking water for a city the size New York or London for a year."
Beachfront property is not the safest long-term investment these days. Even a one-foot rise in sea level -- doable over the next 30 years by conservative estimates -- would cause problems. South Florida would lose a fair amount of real estate in a one-foot rise.
hey Jas -
Post a link to anything you claim. Sans proof, your numbers are more of a lie than everything you think you're "revealing."
You want to debate? Prove you're worth respect. Otherwise, you're just another self-interested asshat.
Hey Broker,
Don't waste our time with your trolling until you have a clue. Go back and study past housing cycles, the period 1989-1996 should be instructive.
You were probably in diapers back then and haven't lived through a housing downturn.
"hey Jas - Post a link to anything you claim. Sans proof, your numbers are more of a lie than everything you think you're "revealing.""
Another attack dog?
I said that I was using Census data. Any idiot knows how to get the Census data on housing:
vacancy rates
There are no multiple sources for the primary data. Got it?
I am sure that at least few people here can add and subtract. Since you accuse me of being a liar we will know who the real liars are.
Jas
CR,
You really should chart the NAR monthly predictions -- that would be pure (hilarious) infoporn!
But who is the GREATEST comic genious? Is it Lerah or Kim? Should we allow Presidential Spokesliars ...I mean Spokespersons to compete as well?
And Paulson is forming an advisory coalition huh? Lets see ...I put zero down, my home is worth 10% less than the loan ...and my ARM just reset from 2% to 7%. Any advice??
Correct Answer: Mail your keys to the bank and move to an apartment.
Coalition Answer: Get a 2nd or 3rd job and continue making payments on a depreciating asset. It is the American Dream is it not??
I must be getting too cynical in my old age, but how do these CLOWNS end up in such positions of power??
tj & the bear, it's a steady downward trend - that will eventually be close after two more revisions
I don't know why the media reports their forecasts anymore - except to make fun of them (I've seen those articles!).
I suppose the forecast is some sort of marketing tool, but I hope no RE brokers are using it for any kind of planning. Maybe they are handing it out to buyers to they feel more comfortable -"prices and sales are going up next year, see the NAR said so"!
Best Wishes.
The Paper Economy blog plots this every month. It is hilarious infoporn!
For the mathematicians adding up money NOT being generated by real estate and subtracting it from GDP:
Are you sure that consumers will now take their incomes and save them in money market accounts instead?
Net savings is about negative 0.5%. I think it is rational to expect more of the same.
The major news sites (WSJ, Bloom)didn't even mention this.
TC what a good laugh!!!! Made my night.
"Keep running those commercials saying this is a great time to buy! One of these days my shoe will actually shatter the TV screen."
Nar Confession,
California Association of Realtor chief economist Leslie Appleton-Young had a confession to make at the annual forecast lunch, or as she put it an apology of sorts.
Two years ago, amid a red-hot market, her forecast dismissed fears of a bursting California real estate bubble and called for only modest sales declines.
Two years later, the states seen a dramatic sales drop. In August 2005, the cyclical peak, sales ran at an annualized rate of 650,000 homes. By year end 2007, Appleton-Young foresees the sales rate under 300,000.
Weve had a fundamental change in the mindset of the buyer, she says. There is no reason (for a buyer) to act.
Especially, deep-pocketed buyers. This year to date in California, sales of homes above $1 million are about flat vs. 2006. Sales under that mark are off roughly 24 percent.
That trend is why the statewide median price is still showing slight gains, as pricier homes pull up the mid-point of all sales prices. CAR expects statewide prices to fall 4 percent in 2008, the worst since 1993.
This was more fun three years ago, Appleton-Young told the group as her forecast ended. But we need to deal with reality.
OCregister,
This happens when you run out of punch and sober up.
I don't read NAR opinions anymore.
You guys are dense.
All economists are usually wrong, not just NAR economists.