"Of course, home prices aren't going to fall in every market. About one-third of the nation is expected to see moderate price growth for the rest of the year. Those areas include Dallas, Austin, Newark, Del., and Birmingham, Ala. areas where prices didn't test the stratosphere during the boom.
Even in the once-sizzling markets, homeowners and investors who bought their properties more than two years ago should still see modest gains if they sell in the current market."
Which translated means that if you bought a house with the sole intent of flipping it within a year you didn't make the killing you expected. Boo fricking hoo. People who found out that successfully investing in real estate is not another version of day trading get no tears from me.
Buy and hold. Occupy it or manage it tightly and generally you will be fine.
Marketwatch on NPR had a nice piece today on how one could get into debt/bankruptcy, if you fall for realtor false promises of transforming neighborhoods.
But only after vacuously repeating Greenspan's self-serving propaganda on the end of the housing downturn.
Of course we are not seeing the bottom of this. This month's data just blew up the underlying assumptions used to assess futher performance in many home equity portfolios. The relatively early defaults reported from the '05 and first-half '06 vintages are another factor that will induce acute unease as people try to adjust future expectations to observed reality.
We have moved much closer to the point at which the broader markets for these debt obligations reassess the relative impact of risk and the pricing they will demand for accepting that risk.
We're a lot closer to a credit crunch than the pundits are willing to admit.
Housing has just begun to swing the other way. I wouldn't be surprised if we get back prices of the mid to late 90's. There is still no fundamental value in place. The party is just beginning folks...
Marketwatch on NPR had a nice piece today on how one could get into debt/bankruptcy, if you fall for realtor false promises of transforming neighborhoods.
Here's the LINK to the transcript & the 'radio web' link.
Pretty funny but sobbering. The live feed is worth the hassle to access.
BTW - I KNOW that neighborhood, the part of the city she is refering to. Condos going in all over.
Back in the 70s, when I was in college at the U of MN... about 2-3 miles away by drunken stumbling stagger... we'd go slumming there... and man you can do a lot of slumming when they are serving two for one double shot whiskey sours for a dollar 'a glass'.
Bruce pens another great name for a blues band: Boo Frickin Hoo.
I'm sorta of the opinion that speculators in housing were a lower animal on the chain of being than the futures traders or the folks who dump their wad with some HF, but I'm not so sure, now.
Quite a ways further up the ladder is the studious investor who invests his time finding some stock that he thinks has a product/service that is an improvement, that adds value to our lives, that is developed by people who have the same hopes and aspirations for it and not something that is likely to be dumped as soon as the shares are worth enough.
With this bust, lots of innocent people who won't be able to "hold" as you say, because of much higher resets and lower property values, will be hurt. (Ok, innocent and a little short-sighted, a little irresponsible and therefore a little accountable.) Even those who may not be looking at a reset but lose their fancy-pants RE related job, will be hurt. (Ok, not even innocent.)
If the scale is large enough, the banks that rely on their mortgage income streams are next, but I'd expect BB to intervene before that happens. Ok, the non-real estate related depositors in those banks (should they fail) are the innocents I was looking for. And here are some more honest to goodness tear jerkers:
Those innocent tax-payers who will be bailing out Fannie and Freddie should the derivatives fiasco unravel (not to mention bailing out the PBGC when it needs a cash infusion to keep the pension funds going).
So there could be a large Mormon Tabernackle Choir behind that Boo Frickin Hoo...
Ok, I'm sure there were a lot of old ladies who were also hurt because they could not afford to pay the taxes on the way up in this housing boom, and sold only part way up the ladder.
Maybe Housing will be bailed out by increased renting?
Vader - do you see that kind of rental pressure in B'ham? I sure don't see it up here in Minnesota except for a very few choice locations in the Twin Cities... and they have to be very nice.
I can understand it in SF, LA & NYC but not in fly over. I helped my son look for rentals & reasonably nice two bedrooms in a suburb near where he goes to school run $1000 or LESS. He found one bedrooms that ran $500-$600 and were quite tolerable.
"about half of American homeowners who thought of selling their homes in the past year have delayed putting their homes on the market"
Latent supply, the realtors keep talking about all the DEMAND on the sidelines. But there is much more supply on the sidelines than demand. The most "motivated" side, loses.
I'll check, to be careful of selectivly selecting info. But what I remember recently is lots of specials. But it is older apartments around here. Rent.com shows 800s fo 2br/2ba.
Cal -- you make a good point. I noticed that quote, too, and I got me thinking: everyone seems to agree that the speculators have left the market, and it would seem now that maybe 75% of those that were "testing the waters" (i.e. hoping to cash in on the house they've been living in for 10 years) have withdrawn from the market. Yet inventory continues to go up -- I have to wonder if the supply side is more pure now, made up more of those that have to sell rather than those that want to. A bit troubling then, given that a lot of the most bubblicious makrets have already exceeded their all-time high inventory marks.
Here in the northeast corridor (I am in Connecticut-17 miles NE of Hartford)
Rentals still are rising- a 'luxury' 1 bedroom is $1000+ a month- two bedroom
$1275+.
Trouble here is new construction is mainly focused on Mc Mansions and 55+ townhouse condo communities which start in the low 200's and up.
'Affordable' new construction for SFH near Hartford for 1600 square feet on a tiny lot 235K and up- (not many being built however) A new Condo townhouse 200K and up.
Housing here has slowed- with an increasing inventory for homes and condo's. Median priced home according to the NAR -for Hartford metro is around 255K.
Prices have fallen on some condos (around 10%) locally- prices still 'sticky' however, with some sellers 'holding out'. Price appreciation on all stuff listed has stalled- with only a 2-3% rise since the peak which was in the summer of 2005.
Would be interesting to see comparisons here with the locations
of others here.
home prices will start moving up, again, when it costs as much to rent as it does to own, and when the return on rental real estate is more than one can get from a cd. i am currently getting 5.92% apr on a one year cd. a $350,000 rental home in my area will not rent for more than $1,250. this will not give me anything even close to a six-cap after expenses. this market's downside will continue trending down for a long time to come.
if the fed lowers rates, as the pimco boys predict, expect the 10-year note rates to climb. this will not be good for the mortgage business, or the housing business, at a time when the federal government is making noises about cracking down on adjustable rate mortgages.
Here's the word from my neck of the woods: everything is great!
But seriously, in Austin things have not been nearly as crazy in as in the rest of the country. When my wife and I moved here, we rented a one-bedroom downtown for $600. Units in that same building are going for $650-700 now.
The RE market has continued to chug along -- average time on the market for a single family home is 59 days. Condos are going up everywhere (the skies are full of cranes right now), but the pace of single-family construction has slowed, and seem mostly limited to the outerlying areas (either the very affordable ($300k)).
It's still possible to buy a 3/2 house in a reasonable neighborhood here for around $150k. Rentals of the same size houses go for about $1250, which seems about right (if house price=10 X Annual rental income).
Overall, it seems like owning vs. renting here is a split decision. It's costs about the same either way, so it's probably a matter of personal preference.
The city does continue to grow, which helps both markets. But as the city becomes increasingly focused on high tech, a major downturn in that area could have some dramatic effects.
Ok. The numbers are in, and it surely looks like Dr Cassandra-Roubini's predictions are coming true. I have little doubt this latest data (GDP 1.6%) will be spun to death and shrugged off, probably by "lower growth is good, the fed will ease and this is good for stocks". But seriously the day, THE DAY the market wakes up, and breaks down what will the safe haven be? I mean logically, you ought to buy Good'ol'Sam's Bonds, right? But who seriously would want to that today? this is no more Good'ol'Sam, but more Sam-can't-balance-a-budget-banana-republic, and the tsunami of debt is only coming closer? So what is the safe have, when THE DAY comes. Is it still short bond, and a massive steepening is starting 3y-10y? Is the only outcome a massive weakening of the USD? Is gold rallying despite the current deflation? I don't see any easy answers? some ideas?
Calculated, I just found this over at The Big Picture: The Big Picture
"4. Commerce department does not do an "Apples-to-Apples" comparison. They report initial New Home Sales (pre-cancellations) versus the prior months adjusted (post-cancellations). This has the effect of lowering the older months data, thereby making the present monthly gain appear larger."
He says he found this out by digging around the government source website. The line of question is "the prior months adjusted (post-cancellations)." I thought you have written that cancellations are never adjusted for.
"To think otherwise after a bubble is to not understand bubbles. Risk appetite in property markets will not be restored by modest declines in market-determined interest rates."
So true. I know several people that got burned on stocks or their 401Ks that do not own stocks to this day. It takes a long time to change that mentality. Enron and Cisco are not coming back anytime soon and they remember that.
Plus they all know someone getting burned in housing.
Safe haven? If I had any pocket change, it'd be going into Swiss Francs.
But US bonds might not be a bad bet, if you can hold cash for long enough. There is so much outstanding debt that if people did start unloading it, rates would have to go up to attract enough buyers. I, for one, would have loved to pick up some 30-year US bonds in the early 1980s when they were yeilding 16-18 percent. Of course, if the situation actually got that bad, we'd all have a lot more important things to worry about.
"Housing is going to be very inelastic to falling interest rates on the way down, just as it was very inelastic to rising rates on the way up,"
Not supported by fact. Interest rates on the way down initiated the bubble in 2001. They bottomed in 2004. The market did not peak until 2005. Though rates were increased 17 straight times, the rate on a 30-year fixed today is still lower than in 2001.
Inelastic is being used as a surrogate for delayed.
I agree with the sentiment of the article, but if this is the quality of our analysis we have no right finger waiving at the NAR.
Inelastic is being used as a surrogate for delayed.
Not necessarily - that would require knowing 'intent' and 'cause'... as in 'the demand for housing was CAUSED by low rates' and people bought for that reason (their intent).
If so then the delay in response would just be the lag of effect from earlier stimulus AND pent up demand.
Or the cause could have just been a mania. Herd psychology.
Whatever.
In reality all one can do is observe that the housing boom continued to boom even as prices increased & the fed raised. I'd sure call that 'inelastic' behavior regardless the cause implied.
Now I do agree it is a stretch to ASSUME the reverse behavior on the way down (that housing will exhibit the same behavior but in reverse, continue to bust even as prices fall & the fed cuts)... 'cause it hasn't happened yet. But it is a reasonable assumption and if it does, then that too would indicate 'inelasticity' - yes/no?
The medium price slowly goes down but the YOY RE sales sharp decline is killing the economy. The RE food chain from paint to furniture to landscaping to new developments out in the boondocks has lost its wheels.
Baddriver, I was basing my comments off of Caroline Baum's article.
The Census Bureau, which is one of the Commerce Department's statistical agencies, counts an initial new home sale: Sales go up and the for sale'' inventory is reduced. If the sale is canceled, it isn't reflected in revisions to previous months. What happens? When the home isresold,'' statisticians ignore that transaction.
``We don't double count,'' says Steven Berman, the survey statistician for the residential branch of the Census Bureau's manufacturing and construction division.
When the cancellation rate is changing -- in either direction -- it can distort both sales and inventories.
I'll try to figure out what Barry is talking about, but Baum talked to the guy at the Census Bureau who does the analysis!
RE YOY sales are now an important part of the modern fast moving lifestyle. The ability to get up and move from NY to Ca to AZ to NM for jobs or get closer to the kids is key. Hard to do that when nobody wants to buy your home or it takes 6 months to a year.
Dryfly, good post on inelastic markets. An example of elastic markets (OSB), OSB prices are at distress levels(-40%ytd) with producers scheduling lots of production cutbacks and cutbacks is future capital spending now under discussion.
Is there a record setting real estate boom from 2001 to 2005 without the historic lows in interest rates?
Not likely. Low rates had to have an effect as did the mid90s cap gain changes.
Answer me honetly. Do we know for a fact that historic low interest rates are the ONLY factor? Or even the most important factor?
You could say low interest rates increased affordability and therefore was the only factor driving prices higher - but pricing blew right through every measure of affordability placed in front of the bull on this run up.
Plus if you wanted to use interest rate as the only factor, prices should have retreated equally fast - they aren't, at least not yet, not quickly.
There is a whole lot more to this story than just interest rates. My guess is mass psychology (mania) is every bit as important and considering places like California where prices blew through affordability - more important.
And now the mass psychology is changing. We will learn if the market is as inelastic & manic on the way down as it was on the way up.
Is there a record setting real estate boom from 2001 to 2005 without the historic lows in interest rates?
To add to DryFly's comments above (all valid), I believe the biggest driver of the mania WASN'T low interest rates as it was loose lending.
When anyone with a pulse that wasn't in prison could get a mortgage loan - usually with 100% financing - what the heck does it matter what interest rates are or what price is being paid for the asset?
Plain and simple, loose lending is what primarly fed the mania. Low interest rates was only icing on the cake.
OK guys, so if loose lending was the driver, and not the delyed effect of increasing cost of capital, why did the bubble pop after rates began rising but before lending standards tightened?
Another quote from that same article:
"Of course, home prices aren't going to fall in every market. About one-third of the nation is expected to see moderate price growth for the rest of the year. Those areas include Dallas, Austin, Newark, Del., and Birmingham, Ala. areas where prices didn't test the stratosphere during the boom.
Even in the once-sizzling markets, homeowners and investors who bought their properties more than two years ago should still see modest gains if they sell in the current market."
Which translated means that if you bought a house with the sole intent of flipping it within a year you didn't make the killing you expected. Boo fricking hoo. People who found out that successfully investing in real estate is not another version of day trading get no tears from me.
Buy and hold. Occupy it or manage it tightly and generally you will be fine.
But Alan said worst is over no?
Marketwatch on NPR had a nice piece today on how one could get into debt/bankruptcy, if you fall for realtor false promises of transforming neighborhoods.
But only after vacuously repeating Greenspan's self-serving propaganda on the end of the housing downturn.
Of course we are not seeing the bottom of this. This month's data just blew up the underlying assumptions used to assess futher performance in many home equity portfolios. The relatively early defaults reported from the '05 and first-half '06 vintages are another factor that will induce acute unease as people try to adjust future expectations to observed reality.
We have moved much closer to the point at which the broader markets for these debt obligations reassess the relative impact of risk and the pricing they will demand for accepting that risk.
We're a lot closer to a credit crunch than the pundits are willing to admit.
Buy and hold. Occupy it or manage it tightly and generally you will be fine.
Exactly - unless they are too heavily leveraged w/ exotics, need to refi & can't. There are a lot of them & many thought they were buying to hold.
Flippers aren't the only ones who gambled and could easily lose.
Housing has just begun to swing the other way. I wouldn't be surprised if we get back prices of the mid to late 90's. There is still no fundamental value in place. The party is just beginning folks...
Apartment Rent, Demand Is Soaring
Maybe Housing will be bailed out by increased renting?
Marketwatch on NPR had a nice piece today on how one could get into debt/bankruptcy, if you fall for realtor false promises of transforming neighborhoods.
Here's the LINK to the transcript & the 'radio web' link.
Pretty funny but sobbering. The live feed is worth the hassle to access.
BTW - I KNOW that neighborhood, the part of the city she is refering to. Condos going in all over.
Back in the 70s, when I was in college at the U of MN... about 2-3 miles away by drunken stumbling stagger... we'd go slumming there... and man you can do a lot of slumming when they are serving two for one double shot whiskey sours for a dollar 'a glass'.
Bruce pens another great name for a blues band: Boo Frickin Hoo.
I'm sorta of the opinion that speculators in housing were a lower animal on the chain of being than the futures traders or the folks who dump their wad with some HF, but I'm not so sure, now.
Quite a ways further up the ladder is the studious investor who invests his time finding some stock that he thinks has a product/service that is an improvement, that adds value to our lives, that is developed by people who have the same hopes and aspirations for it and not something that is likely to be dumped as soon as the shares are worth enough.
With this bust, lots of innocent people who won't be able to "hold" as you say, because of much higher resets and lower property values, will be hurt. (Ok, innocent and a little short-sighted, a little irresponsible and therefore a little accountable.) Even those who may not be looking at a reset but lose their fancy-pants RE related job, will be hurt. (Ok, not even innocent.)
If the scale is large enough, the banks that rely on their mortgage income streams are next, but I'd expect BB to intervene before that happens. Ok, the non-real estate related depositors in those banks (should they fail) are the innocents I was looking for. And here are some more honest to goodness tear jerkers:
Those innocent tax-payers who will be bailing out Fannie and Freddie should the derivatives fiasco unravel (not to mention bailing out the PBGC when it needs a cash infusion to keep the pension funds going).
So there could be a large Mormon Tabernackle Choir behind that Boo Frickin Hoo...
Ok, I'm sure there were a lot of old ladies who were also hurt because they could not afford to pay the taxes on the way up in this housing boom, and sold only part way up the ladder.
Maybe Housing will be bailed out by increased renting?
Vader - do you see that kind of rental pressure in B'ham? I sure don't see it up here in Minnesota except for a very few choice locations in the Twin Cities... and they have to be very nice.
I can understand it in SF, LA & NYC but not in fly over. I helped my son look for rentals & reasonably nice two bedrooms in a suburb near where he goes to school run $1000 or LESS. He found one bedrooms that ran $500-$600 and were quite tolerable.
I don't see much of a spike here in fly over.
"about half of American homeowners who thought of selling their homes in the past year have delayed putting their homes on the market"
Latent supply, the realtors keep talking about all the DEMAND on the sidelines. But there is much more supply on the sidelines than demand. The most "motivated" side, loses.
I'll check, to be careful of selectivly selecting info. But what I remember recently is lots of specials. But it is older apartments around here. Rent.com shows 800s fo 2br/2ba.
500-600 should get a good apt here in bham.
I still see rental deals.
Cal -- you make a good point. I noticed that quote, too, and I got me thinking: everyone seems to agree that the speculators have left the market, and it would seem now that maybe 75% of those that were "testing the waters" (i.e. hoping to cash in on the house they've been living in for 10 years) have withdrawn from the market. Yet inventory continues to go up -- I have to wonder if the supply side is more pure now, made up more of those that have to sell rather than those that want to. A bit troubling then, given that a lot of the most bubblicious makrets have already exceeded their all-time high inventory marks.
Here in the northeast corridor (I am in Connecticut-17 miles NE of Hartford)
Rentals still are rising- a 'luxury' 1 bedroom is $1000+ a month- two bedroom
$1275+.
Trouble here is new construction is mainly focused on Mc Mansions and 55+ townhouse condo communities which start in the low 200's and up.
'Affordable' new construction for SFH near Hartford for 1600 square feet on a tiny lot 235K and up- (not many being built however) A new Condo townhouse 200K and up.
Housing here has slowed- with an increasing inventory for homes and condo's. Median priced home according to the NAR -for Hartford metro is around 255K.
Prices have fallen on some condos (around 10%) locally- prices still 'sticky' however, with some sellers 'holding out'. Price appreciation on all stuff listed has stalled- with only a 2-3% rise since the peak which was in the summer of 2005.
Would be interesting to see comparisons here with the locations
of others here.
home prices will start moving up, again, when it costs as much to rent as it does to own, and when the return on rental real estate is more than one can get from a cd. i am currently getting 5.92% apr on a one year cd. a $350,000 rental home in my area will not rent for more than $1,250. this will not give me anything even close to a six-cap after expenses. this market's downside will continue trending down for a long time to come.
if the fed lowers rates, as the pimco boys predict, expect the 10-year note rates to climb. this will not be good for the mortgage business, or the housing business, at a time when the federal government is making noises about cracking down on adjustable rate mortgages.
skytrekker,
Here's the word from my neck of the woods: everything is great!
But seriously, in Austin things have not been nearly as crazy in as in the rest of the country. When my wife and I moved here, we rented a one-bedroom downtown for $600. Units in that same building are going for $650-700 now.
The RE market has continued to chug along -- average time on the market for a single family home is 59 days. Condos are going up everywhere (the skies are full of cranes right now), but the pace of single-family construction has slowed, and seem mostly limited to the outerlying areas (either the very affordable ($300k)).
It's still possible to buy a 3/2 house in a reasonable neighborhood here for around $150k. Rentals of the same size houses go for about $1250, which seems about right (if house price=10 X Annual rental income).
Overall, it seems like owning vs. renting here is a split decision. It's costs about the same either way, so it's probably a matter of personal preference.
The city does continue to grow, which helps both markets. But as the city becomes increasingly focused on high tech, a major downturn in that area could have some dramatic effects.
Seems haloscan truncated my comments:
(either the very affordable ($300k)).
should have read:
(either the very affordable (less than $80k) or the gated sheep variety (more than $300K)
Also, I neglected to mention that we moved here in 2003 -- so it's been three years and the rents in that building have only climbed by 8-9 percent.
Ok. The numbers are in, and it surely looks like Dr Cassandra-Roubini's predictions are coming true. I have little doubt this latest data (GDP 1.6%) will be spun to death and shrugged off, probably by "lower growth is good, the fed will ease and this is good for stocks". But seriously the day, THE DAY the market wakes up, and breaks down what will the safe haven be? I mean logically, you ought to buy Good'ol'Sam's Bonds, right? But who seriously would want to that today? this is no more Good'ol'Sam, but more Sam-can't-balance-a-budget-banana-republic, and the tsunami of debt is only coming closer? So what is the safe have, when THE DAY comes. Is it still short bond, and a massive steepening is starting 3y-10y? Is the only outcome a massive weakening of the USD? Is gold rallying despite the current deflation? I don't see any easy answers? some ideas?
Pierre
Calculated, I just found this over at The Big Picture: The Big Picture
"4. Commerce department does not do an "Apples-to-Apples" comparison. They report initial New Home Sales (pre-cancellations) versus the prior months adjusted (post-cancellations). This has the effect of lowering the older months data, thereby making the present monthly gain appear larger."
He says he found this out by digging around the government source website. The line of question is "the prior months adjusted (post-cancellations)." I thought you have written that cancellations are never adjusted for.
1.6 GDP estimate, but how about the new deflator 0f 1.8 down 1.5 from last time. Hmm, 1.6 minus 1.5 about equals "0".
"To think otherwise after a bubble is to not understand bubbles. Risk appetite in property markets will not be restored by modest declines in market-determined interest rates."
So true. I know several people that got burned on stocks or their 401Ks that do not own stocks to this day. It takes a long time to change that mentality. Enron and Cisco are not coming back anytime soon and they remember that.
Plus they all know someone getting burned in housing.
Pierre,
Safe haven? If I had any pocket change, it'd be going into Swiss Francs.
But US bonds might not be a bad bet, if you can hold cash for long enough. There is so much outstanding debt that if people did start unloading it, rates would have to go up to attract enough buyers. I, for one, would have loved to pick up some 30-year US bonds in the early 1980s when they were yeilding 16-18 percent. Of course, if the situation actually got that bad, we'd all have a lot more important things to worry about.
"Housing is going to be very inelastic to falling interest rates on the way down, just as it was very inelastic to rising rates on the way up,"
Not supported by fact. Interest rates on the way down initiated the bubble in 2001. They bottomed in 2004. The market did not peak until 2005. Though rates were increased 17 straight times, the rate on a 30-year fixed today is still lower than in 2001.
Inelastic is being used as a surrogate for delayed.
I agree with the sentiment of the article, but if this is the quality of our analysis we have no right finger waiving at the NAR.
Inelastic is being used as a surrogate for delayed.
Not necessarily - that would require knowing 'intent' and 'cause'... as in 'the demand for housing was CAUSED by low rates' and people bought for that reason (their intent).
If so then the delay in response would just be the lag of effect from earlier stimulus AND pent up demand.
Or the cause could have just been a mania. Herd psychology.
Whatever.
In reality all one can do is observe that the housing boom continued to boom even as prices increased & the fed raised. I'd sure call that 'inelastic' behavior regardless the cause implied.
Now I do agree it is a stretch to ASSUME the reverse behavior on the way down (that housing will exhibit the same behavior but in reverse, continue to bust even as prices fall & the fed cuts)... 'cause it hasn't happened yet. But it is a reasonable assumption and if it does, then that too would indicate 'inelasticity' - yes/no?
The medium price slowly goes down but the YOY RE sales sharp decline is killing the economy. The RE food chain from paint to furniture to landscaping to new developments out in the boondocks has lost its wheels.
The RE food chain from paint to furniture to landscaping to new developments out in the boondocks has lost its wheels.
ron has that right - I call on window hardware manufacturers & even some of the OEMs... wow, it took their breath away the parade stopped so fast.
If the 'slow down' in domestic automotive intensifies, it could get real interesting.
Maybe Economic folks want to fit everything into a 'rational man' paradymn. When in reality, much of market behavior is dictated by emotion.
Although I am not real sure how you say something is 'elastic' regarding emotion.
Baddriver, I was basing my comments off of Caroline Baum's article.
The Census Bureau, which is one of the Commerce Department's statistical agencies, counts an initial new home sale: Sales go up and the for sale'' inventory is reduced. If the sale is canceled, it isn't reflected in revisions to previous months. What happens? When the home isresold,'' statisticians ignore that transaction.
``We don't double count,'' says Steven Berman, the survey statistician for the residential branch of the Census Bureau's manufacturing and construction division.
When the cancellation rate is changing -- in either direction -- it can distort both sales and inventories.
I'll try to figure out what Barry is talking about, but Baum talked to the guy at the Census Bureau who does the analysis!
Best Wishes.
dryfly
Answer honestly:
Is there a record setting real estate boom from 2001 to 2005 without the historic lows in interest rates?
RE YOY sales are now an important part of the modern fast moving lifestyle. The ability to get up and move from NY to Ca to AZ to NM for jobs or get closer to the kids is key. Hard to do that when nobody wants to buy your home or it takes 6 months to a year.
Dryfly, good post on inelastic markets. An example of elastic markets (OSB), OSB prices are at distress levels(-40%ytd) with producers scheduling lots of production cutbacks and cutbacks is future capital spending now under discussion.
Comment removed by CR
Edited By Siteowner
1st round knock-out: speculators
2nd round knock-out: arm, neg-arm owners
3rd round knock-out: real-estate professionals
4th round knock-out: mortgage bankings
5th round knock-out: recession-induced
6th
..
More bad news to come. This is the beginning!
Is there a record setting real estate boom from 2001 to 2005 without the historic lows in interest rates?
Not likely. Low rates had to have an effect as did the mid90s cap gain changes.
Answer me honetly. Do we know for a fact that historic low interest rates are the ONLY factor? Or even the most important factor?
You could say low interest rates increased affordability and therefore was the only factor driving prices higher - but pricing blew right through every measure of affordability placed in front of the bull on this run up.
Plus if you wanted to use interest rate as the only factor, prices should have retreated equally fast - they aren't, at least not yet, not quickly.
There is a whole lot more to this story than just interest rates. My guess is mass psychology (mania) is every bit as important and considering places like California where prices blew through affordability - more important.
And now the mass psychology is changing. We will learn if the market is as inelastic & manic on the way down as it was on the way up.
skytrekker: What a putz.
An emotional one is to buy now or lose it or to buy and sell to tne greater fool or but now or you will not get one.
Exactly.
To add to DryFly's comments above (all valid), I believe the biggest driver of the mania WASN'T low interest rates as it was loose lending.
When anyone with a pulse that wasn't in prison could get a mortgage loan - usually with 100% financing - what the heck does it matter what interest rates are or what price is being paid for the asset?
Plain and simple, loose lending is what primarly fed the mania. Low interest rates was only icing on the cake.
OK guys, so if loose lending was the driver, and not the delyed effect of increasing cost of capital, why did the bubble pop after rates began rising but before lending standards tightened?
(and if they've tightened, its only this month)
And just to clarify, I agree the housing market, GDP and unemployment are in trouble.
I also agree that emotion has been a big driver.
I also agree that the government and industry are disengenuous.
My contention is that calling housing inelastic in the face of rising cost of capital is absurd.