The chart I posted wasn't about housing prices. The thread isn't about housing prices. So yes, your charts are out of context, mine weren't.
Originally Posted by enoch150
Looking at the charts you posted, from an investment perspective, which is the only reason to really consider housing starts, permits, etc etc, then there is never a bad time to buy right? Housing prices will go up forever right?
It's nice that we can see even in an inflation adjusted index, prices are trending upwards. But, doncha think that might have just a wee bit to do with the insane credit and lending standards we've seen over the last 20 years? These are also initial prices, you don't see re-fi's caught up in those prices.
You need to look at the mythical home equity values as well. These prices if adjust for how much losses or additional debt were SUBTRACTED from the initial would be going in the opposite direction.
Remember, this isn't a cash market. If it were, you'd not see speculative housing starts lead and fall actual sales by some 50% in the exuberance times.
Bear market in housing construction since 1970. We had a synthetic bull from 1993-2005, you might call that a break in the secular bear, but if you do, then what you are saying is we are actually at the peak of the next secular bear.
Buy and hold.. more like buy and rent, IF you have cash or can speculate in the fixer uppers. Otherwise, again peel back the numbers in housing construction. It's not people saving up money while renting and then having a new home built that is driving this SUUUUURRRRGGGEEEEE in home construction. Nerp, it's speculative. People who see all other asset classes being overbought and need a place for their money to land.
Oh, and employment, the real drive of lasting prices and construction (besides inflation and malinvestment) is still in the toilet.
Last edited by newbitech; 01-27-2013 at 06:02 AM.
Something I didn't see mentioned is how many of these "starts" are funded by either section 8 or other government freebies..
post #8 mentioned. Kind of reminds me of the student loan bubble, where something like 95% of all new debt in that market is backstopped by the printing machine.
Originally Posted by tod evans
When I think about all time low mortgage rates, government guaranteed loans, totally lax lending standards and the relentless amount of recovery propaganda being shoved down my face, I can't help but to wonder if the FED will be successful in blowing the bubble back up.
Then I look at the charts and realize, they are starting from a much much worse place than their successful bubble blowing from 1993-2005.
in 1993, the fed effective rate was hitting its bottom at around 3% coming off a 4 year easing stretch from nearly 10% in 1989. Fed backed mortgage rates made it to as low as 6 3/4%
The boom proceeded in earnest with fed backed mortgage rates between 7-9% for 8 years from '93-'01 when .com collapsed. All with the back drop of a tightening policy with the fed effective rate topping out at 6.5% in late 2000.
The next 5 years of propping up from '02-'07 saw the fed effective rate drop to a low of 1% in 2004 with fed backed mortgage rates hitting a low of 5 1/4% in middle of 2003. All was rosy and the disaster was averted.
The fed has been in easing mode since middle of 2007 or nearly 6 years. the fed effective rate quickly went sub 1% in late 2008 and has been at sub .25% since 2009. 4 years of fed effective rate at 25 BP! fed backed Mortgage rates naturally falling from a secondary trend high of 6.5% in mid 2007 to lowest mortgage rates and history AND STILL FALLING 3.39% this MONTH in 2013.
See a pattern here? See the 8 year cycle? See how its lower lows and lower highs?
So we all know at some point the fed effective rate is gonna come of .16% and fed backed mortgage rates are gonna come off 3.39%.
THE QUESTION IS, FOR HOW LONG, and WHAT HAPPENS WHEN THE MARKET RECYCLES AGAIN?
Is the fed gonna have to go into negative effective rate territory in order to force down mortgage rates to even LOWER LOWS in order to "STIMULATE" lending in housing? Will fannie mae, freddie mac, FHA etc etc... begin making NO INTEREST LOANS in order to fuel BUYING INTEREST?
The cycle is not broken in the underlying fundamentals. The only thing that is broken is the FED response, and lenders loaning MONEY they simply DON'T HAVE, and borrowers/buyers hanging on to the feeling of the last generation that inflation adjusted house prices will always rise!
Hello! Paradigm shift!
Population growth rate is slowing, inflation adjusted wages are negative, cost of owning is increasing (tax, insurance, utility, repair). There is absolutely NO reason to believe that owning a home is getting cheaper or that flipping new construction is a good bet.
There is money in housing, and its right were everyone says it is. The 4 R's. Rents/Repairs/Renovation/Remodel. All of which DO NOT REQUIRE a LOAN GUARANTEE from a BROKE ASS GOVERNMENT to pull off and profit from.
Ok, fair enough, but do you think those things are going away anytime soon? We may agree they should, but will they?
Originally Posted by NoOneButPaul
just real quick, i just posted a quick look at the fed effective rates and the fed back mortgage rates (fannie, freddie, FHA etc -> HUD umbrella).
Originally Posted by Tpoints
I think it's plain to see that there is nothing that HUD can do to prevent the housing market from recycling. 1993-2005 was extraordinary in terms of propping up and handing out.
It didn't work! Oh it was nice for a stretch there from 2002-2007, or 5 years. But look now, rates at all time lows. Fed rates at basically 0. And for 4 years of this what do we see? finally an uptick in construction. Yeah, I don't think that's gonna last, and I wouldn't be surprised one bit if the numbers are more than a little fudged.
BUT, lets say we do get another run. How far is it gonna go? AND, when the market recycles in a couple of years, like it always does, then what?
Rates to 0%? They gonna pay people to live in these homes? Aren't they already doing that in some cases? YET, the best we get for recovery is a return to HISTORICAL LOWS? Come on!
HUD may not be going away anytime soon, and that is tragic. But all the propping and printing in the world didn't stop the last collapse. No reason to believe it will stop the next one in probably less than 2 years.
Not even subsidizing renters can prop of the market?
Originally Posted by newbitech
Actually, it was about both prices and production right from the first page. Post #2 at the very latest.
Originally Posted by newbitech
Here's an interesting fact:
Even pre-bubble, household size has declined despite, as Arklatex pointed out, the addition of 86,000,000 people. Excluding the recent bubble, that looks to me like the sign of a highly efficient market. Production scaled up with the first sign of demand, and immediately fell when demand was absent, resulting in relatively stable (inflation adjusted) prices.
The average size of new single-family homes in the US increased from 1,500 square feet to 2,266 square feet between 1970 and 2000. The Census Bureau also reports that over the same time period, the average household size declined, from 3.1 people per household in 1970 to 2.6 people per household. Thus, the square feet per person have nearly doubled, from 483 to 872.
A chart of housing production is deceptive because, other than fires and natural disasters, it's basically cumulative. They're not like computers or light bulbs, which have a shelf life and need to be replaced every so often. Claiming there's a bear market in housing based on production is like claiming there's a bear market in gold because production is down, despite stable or rising prices. Unless you're the one actually producing the house or gold, it's not relevant to most people.
In any case, I find your posts very difficult to read, so you can have the last word.
Last edited by newbitech; 01-27-2013 at 08:56 PM.
their are a couple of things that will turn the market around.
Originally Posted by Tpoints
1.) a shift from debt base purchasing of real estate to labor/cash based purchasing.
2.) population growth rate increase, either immigration or higher rates of birth
3.) land value appreciation IE, some heretofore undiscovered resource in the sand/rock/gravel/soil the house is built on.
4.) real economic growth
You need real economic growth , but then you need increases in Mnfg here in the US. Not seeing it .