CR,
There are millions of 5-8 year old houses in the bubble areas with half the cost basis of the units in the new homes inventory. I don't see new home sales recovering in the face of that situation.
"Generally what I have observed in other countries that have these mortgage tax breaks is, once the tax break is taken away, activity and prices decline somewhat.
Also, rising mortgage rates in the absence of economic growth will lower prices as well. "
Tax rebates doesn't seem to be abating, but seems like Govt is discussing even increasing more tax incentives.
And if you believe mortgage rate is going to raise anytime soon... I got a bridge to sell you.
The Fed has made their position crystal clear. BRIC has also showed their hand, that they'll support Bretton Woods 2 & UST no matter what.
No... I'm beginning to think housing bubble becoming like Japan RE burst. Throughout the whole 23 year of RE burst in Japan, at no point was property lowered to an affordable level.
So for everyone waiting for "affordable property" I think you guys may have to revise your theories.
Tell me why I'm wrong... The current events are collectively working to move things in that direction.
The European Central Bank has pumped a record €442.2bn into the eurozone banking system in a first-ever offer of unlimited one-year funds.
Demand for the one year funds – offered at the ECB’s main policy rate of just 1 per cent – was obviously strong given that that ECB interest rates are not likely to fall any further. This was a big hand out to banks that are part of the ECB system.
Bernanke has tightened here short-term but the ECB is certainly not following in those foot steps/
From previous thread:
" hc (profile) wrote on Wed, 6/24/2009 - 11:48 am
* reply
* Ignore user
"The next bubble..."
If the result of a bubble is the overinvestment of something, such that it leads to overproduction and glut of such item...."
Actually, we may be there already. There's effectively a "bubble" in production capacity in China. Makes it hard to build a plant and put folks to work with all that excess capacity over there cheap and waiting to be put to use.
That is exactly why deflation is and will continue to move prices down. Affordable is of course relative to having a means of generating any income at all.
"Throughout the whole 23 year of RE burst in Japan, at no point was property lowered to an affordable level.
So for everyone waiting for "affordable property" I think you guys may have to revise your theories."
as for the latter statement - there's plenty of affordable property here in the golden state, if you don't mind a commute or slightly interesting neighboorhood. every major region of CA - LA, SD, the bay, Sacto - all have plenty of single family homes for sale at well under 200K.
but the former statement is more interesting. it is easy to find the chart showing japanese housing values return to 1980 levels - but how do housing costs compare to incomes at current levels?
@Lefty - it's not green shoots for the electricity industry. You're partially responsible for upcoming layoffs by not keeping your beer cold. Not to mention the ice-making companies and the truckers who deliver that ice to stores; those poor retailers, the cooler manufacturers, etc.
You are part of the problem if you're not consuming! /this is called "sarcasm" for the humor-challenged/
Isn't this good news. The faster we get rid of the existing inventory the better. If new home sales were increasing, we would be creating greater inventory. I'm jumping up and down for joy on this one.... and I am not a home builder....
Millionaires’ Club Shrank at Record Rate in 2008, Merrill Says
The global slump in property and equity markets last year cut the number of millionaires by 15 percent to 8.6 million, wiping out two years of increases, the firms said in their 13th annual World Wealth Report published today. The value of the world’s millionaires’ assets slid 20 percent to $32.8 trillion, after a 9.4 percent increase the previous year, the survey said.
But, I think if you read some Great Depression history, you would temper your view that we will see the ratio revert to normal levels anytime soon.
The purpose of a recession/depression is to send strong signals on, and cause liquidation of, bad investments. We have too many homes and too many commercial buildings.
No way will residential or commercial construction be healthy for the next 10-15 years, at least.
Much to do about BART in the Bay Area as they are ready to go on strike. I have read that the AVERAGE compensation with benefits for train operator is... 114k.
Tim waiting for 2012 (homepage, profile) wrote on Wed, 6/24/2009 - 9:30 am
Much to do about BART in the Bay Area as they are ready to go on strike. I have read that the AVERAGE compensation with benefits for train operator is... 114k.
Its the retirement plump and infamous CalPERS spike that are so deadly. These kinds of discontinuities always happen when fares dislocate from service. For the last decade we should have been pushing fares higher at a pace at least on par with costs. Now we are in a transit trap.
SO are we ready for W recession? Prior to the last century, that's exactly the way the business cycle looked like. Current government policy, could be called an ad-hoc bullet train approach. Unfortunately, the direction of those trains is quite unpredictable.
p.s. someone fax to the FED, wake up! , please. Forcing a recovery at the expense of future generation may not be the brightest idea. Providing the liquidity for a few chosen banks, so they can build a supercomputer and gun the market is contra-productive as well.
....New Homes pretty much have an automatic limiter due to construction costs (The NEW house cost "X" dollars to build yesterday, "Y" today, and more than "Y" tomorrow). Existing homes have no comparative factor. The typical existing empty spec home will always sit on the market longer, hence an increasing "Distressing Gap".
"Much to do about BART in the Bay Area as they are ready to go on strike"
This raises another problem with any public transportation scheme that requires employees to operate (can't think of one that doesn't, but hey.) Anyone who depends on public transportation can be held hostage by labor actions. No surprise that the employees can extract insane compensation.
This "distressing gap" is not IMHO. The months of inventory for new homes is nicely, for the most part, dropping. There are now, thankfully way fewer homes being built. Those that have been built are being sold, All necessary for inventory correction.
Used home supplies continue to climb and probably will for some time as the glut works through the system, while I feel for the home builders, they need to just sit it out.
There will continue to be a reduction in new home sales since fewre will be for sale, fewer built and more Used home competition. It is not distressing ... simply a natural outgrowth of the current market correction.
Yeah, I'm with unqualified and tbrander on this one. We can certainly hope the new home SALES are going down because new home COMPLETIONS are going down. It was just a few years ago here that we were commenting that builders were much quicker to liquidate at market, even if there was a loss than bubblesitters. If they've finally stopped BUILDING more homes that we need, eventually we'll work through the current backlog
Firsty
Eventually=10 years?
CR,
There are millions of 5-8 year old houses in the bubble areas with half the cost basis of the units in the new homes inventory. I don't see new home sales recovering in the face of that situation.
Looks like lots of people are house shopping at Goodwill Industries.....
"Generally what I have observed in other countries that have these mortgage tax breaks is, once the tax break is taken away, activity and prices decline somewhat.
Also, rising mortgage rates in the absence of economic growth will lower prices as well. "
Tax rebates doesn't seem to be abating, but seems like Govt is discussing even increasing more tax incentives.
And if you believe mortgage rate is going to raise anytime soon... I got a bridge to sell you.
The Fed has made their position crystal clear. BRIC has also showed their hand, that they'll support Bretton Woods 2 & UST no matter what.
No... I'm beginning to think housing bubble becoming like Japan RE burst. Throughout the whole 23 year of RE burst in Japan, at no point was property lowered to an affordable level.
So for everyone waiting for "affordable property" I think you guys may have to revise your theories.
Tell me why I'm wrong... The current events are collectively working to move things in that direction.
ECB Pumps Record €442bn Into System
Talk about money pumping.
The European Central Bank has pumped a record €442.2bn into the eurozone banking system in a first-ever offer of unlimited one-year funds.
Demand for the one year funds – offered at the ECB’s main policy rate of just 1 per cent – was obviously strong given that that ECB interest rates are not likely to fall any further. This was a big hand out to banks that are part of the ECB system.
Bernanke has tightened here short-term but the ECB is certainly not following in those foot steps/
From previous thread:
" hc (profile) wrote on Wed, 6/24/2009 - 11:48 am
* reply
* Ignore user
"The next bubble..."
If the result of a bubble is the overinvestment of something, such that it leads to overproduction and glut of such item...."
Actually, we may be there already. There's effectively a "bubble" in production capacity in China. Makes it hard to build a plant and put folks to work with all that excess capacity over there cheap and waiting to be put to use.
hc,
Answer: jobs.
Japan chose full-employment-esque policies.
That is exactly why deflation is and will continue to move prices down. Affordable is of course relative to having a means of generating any income at all.
--bh
Check this out!!!!
USDA and HUD ARRA Projects Map
USDA - Map
New homes are caught between an REO and a wrecking ball (a la Victorville).
The question is not only when the two graph lines will merge but by what corrective method.
In sympathy with the MidWest heat wave, all beer served at Leftys will be warm. Also it saves electricity. You know, green shoots.
These USDA and HUD projects create private sector jobs within our communities.
The Zombie-Matic continues to spew fake GDP.
"Throughout the whole 23 year of RE burst in Japan, at no point was property lowered to an affordable level.
So for everyone waiting for "affordable property" I think you guys may have to revise your theories."
as for the latter statement - there's plenty of affordable property here in the golden state, if you don't mind a commute or slightly interesting neighboorhood. every major region of CA - LA, SD, the bay, Sacto - all have plenty of single family homes for sale at well under 200K.
but the former statement is more interesting. it is easy to find the chart showing japanese housing values return to 1980 levels - but how do housing costs compare to incomes at current levels?
@Lefty - it's not green shoots for the electricity industry. You're partially responsible for upcoming layoffs by not keeping your beer cold. Not to mention the ice-making companies and the truckers who deliver that ice to stores; those poor retailers, the cooler manufacturers, etc.
You are part of the problem if you're not consuming!
/this is called "sarcasm" for the humor-challenged/
Isn't this good news. The faster we get rid of the existing inventory the better. If new home sales were increasing, we would be creating greater inventory. I'm jumping up and down for joy on this one.... and I am not a home builder....
pigged:
So the question is whether NJ will ever reset to a lower price? Or it'll just stay at half a mil forever slowly. It's not coming down.
=====
This could only be true in an area where there are no job losses and everyone has a manageable debt-to-income ratio.
Otherwise, there will be a reset eventually.
OK I relent. Green shoot beer, which is warm, will be $0.50 more. Cold beer will be $0.50 less. Happy?
Now, I will turn off the air conditioner.
Dan Ackroyd should be the spokesman for the American Recovery Act of 2009:
Hulu - Saturday Night Live: Bassomatic
Millionaires’ Club Shrank at Record Rate in 2008, Merrill Says
The global slump in property and equity markets last year cut the number of millionaires by 15 percent to 8.6 million, wiping out two years of increases, the firms said in their 13th annual World Wealth Report published today. The value of the world’s millionaires’ assets slid 20 percent to $32.8 trillion, after a 9.4 percent increase the previous year, the survey said.
Millionaires’ Club Shrank at Record Rate in 2008 (Update1) - Bloomberg.com
all beer served at Leftys will be warm.
Your margins would be even better if you sold recycled beer.
@Lefty - lol
@black dog - that's fairly gross. I like it!
Thats the Val-U-Rite vodka.
Market Watch...thanks for the Dart Board!
http://s.wsj.net/public/resources/MWimages/MW-AA981_bernan_MD_20090624054642.jpg
Very nice analysis, CR.
But, I think if you read some Great Depression history, you would temper your view that we will see the ratio revert to normal levels anytime soon.
The purpose of a recession/depression is to send strong signals on, and cause liquidation of, bad investments. We have too many homes and too many commercial buildings.
No way will residential or commercial construction be healthy for the next 10-15 years, at least.
black dog (profile) wrote on Wed, 6/24/2009 - 9:18 am
all beer served at Leftys will be warm.
Your margins would be even better if you sold recycled beer.
Oh. The trickle down effect our financial masters keep pushing.
“There’s another old saying, Senator: Don’t piss down my back and tell me it’s raining.” - The Outlaw Josey Wales (1976)
I like those last two graphs. They really make it clear that something "unusual" is happening.
Personally I prefer to see it as a new housing bubble, but only in existing homes.
Also, it seems to me in a sense that the "distressing gap" roughly represents the "potential energy" available for further price declines.
This Author pretty much nails it
TheBurningPlatform.com » Economy » YOU CAN'T BORROW YOUR WAY OUT OF DEBT
At this point for every house the gets repo'd two more houses nearby go underwater. Heterodyne works in both directions.
Much to do about BART in the Bay Area as they are ready to go on strike. I have read that the AVERAGE compensation with benefits for train operator is... 114k.
Civil SERVANTS Unite!
Tim waiting for 2012 (homepage, profile) wrote on Wed, 6/24/2009 - 9:30 am
Much to do about BART in the Bay Area as they are ready to go on strike. I have read that the AVERAGE compensation with benefits for train operator is... 114k.
Its the retirement plump and infamous CalPERS spike that are so deadly. These kinds of discontinuities always happen when fares dislocate from service. For the last decade we should have been pushing fares higher at a pace at least on par with costs. Now we are in a transit trap.
My boss has a friend that operates a BART train and this is accurate. He gets paid mad cash to push a button to open and close doors. Amazing.
Yep, the only way to reset this corrupt -- at the city, state, and federal level -- system is for it to go bankrupt.
Burn, baby, burn!
green shootz everyone (good morning).
SO are we ready for W recession? Prior to the last century, that's exactly the way the business cycle looked like. Current government policy, could be called an ad-hoc bullet train approach. Unfortunately, the direction of those trains is quite unpredictable.
p.s. someone fax to the FED, wake up! , please. Forcing a recovery at the expense of future generation may not be the brightest idea. Providing the liquidity for a few chosen banks, so they can build a supercomputer and gun the market is contra-productive as well.
You other 49 better be careful what you wish for. The USA sans California or even with a vassal "Treaty of Versailles California" is a weaker nation.
E thomas RD
Why do you insist on keeping the average Joe Six figure down?
....New Homes pretty much have an automatic limiter due to construction costs (The NEW house cost "X" dollars to build yesterday, "Y" today, and more than "Y" tomorrow). Existing homes have no comparative factor. The typical existing empty spec home will always sit on the market longer, hence an increasing "Distressing Gap".
BTW, notice the 10-15% increases at HD of late? Especially imported small building supplies/hardware (screws, nails, pins, etc.)
"Much to do about BART in the Bay Area as they are ready to go on strike"
This raises another problem with any public transportation scheme that requires employees to operate (can't think of one that doesn't, but hey.) Anyone who depends on public transportation can be held hostage by labor actions. No surprise that the employees can extract insane compensation.
This "distressing gap" is not IMHO. The months of inventory for new homes is nicely, for the most part, dropping. There are now, thankfully way fewer homes being built. Those that have been built are being sold, All necessary for inventory correction.
Used home supplies continue to climb and probably will for some time as the glut works through the system, while I feel for the home builders, they need to just sit it out.
There will continue to be a reduction in new home sales since fewre will be for sale, fewer built and more Used home competition. It is not distressing ... simply a natural outgrowth of the current market correction.
"Preventive war was an invention of Hitler. Frankly, I would not even listen to anyone
seriously that came and talked about such a thing."
When the people fear their government, there is tyranny; when the government fears the
people, there is liberty.
~Thomas Jefferson
hat tip to Financial Opinions Updated Daily iamned.com for the good articles
Yeah, I'm with unqualified and tbrander on this one. We can certainly hope the new home SALES are going down because new home COMPLETIONS are going down. It was just a few years ago here that we were commenting that builders were much quicker to liquidate at market, even if there was a loss than bubblesitters. If they've finally stopped BUILDING more homes that we need, eventually we'll work through the current backlog
I just posted an entry about the distressing gap between new and existing homes , thought some readers might find it interesting:
Housing Beveridge: House Prices and New versus Existing Homes Sales
The basic idea:
Existing home sales and real price growth used to always move around together. However, just as in new v. existing home sales, a gap has developed.
The gap means that house price growth is related to new home sales, not existing home sales.
This evidence of a supply side shock: quantities rising, prices fall. Econ 101 at work