Housing

[gregf]

http://biz.yahoo.com/ap/080930/home_prices.html

S&P: Home prices post 16 pct. annual drop in July
Tuesday September 30, 9:35 am ET
Closely watched housing index shows home prices dropped at fastest annual rate ever in July


NEW YORK (AP) -- A closely watched index shows home prices tumbling by the sharpest annual rate ever in July, but the rate of decline is slowing.
The Standard & Poor's/Case-Shiller 20-city housing index released Tuesday fell a record 16.3 percent in July from the year-ago period, the largest drop since its inception in 2000. The 10-city index plunged 17.5 percent, its biggest decline in its 21-year history.

Home values in all 20 cities fell year-over-year, with Las Vegas prices plunging the most at nearly 30 percent.

However, the pace of declines has slowed over the last three months, but there is still no sign of a bottom, one of the index creators said.


Here's the article from S&P

http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_093042.pdf

[rffrydr]

These articles are to be expected at the bottom yet always a surprise--when you're well past the "bottom":

http://www.bloomberg.com/news/2011-05-10/bank-of-america-billions-of-dollars-in-losses-at-stake-on-moynihan-outlook.html


Street just can't deal with anything that happens over a longer period than 13 months. Doug Kass (october bear) is splashing this Zillow report around now making light of Buffett's remarks on housing stability in '09. Indeed Buffett is as right as he ever was. Housing doesn't have to go up to stabilize...it just has to to stabilize. People have yet to learn that there are prices and there are prices in this mark-to-market world we live (unlike, say, Germany or china).

The long drawn out foreclosure process has been a boon to the economy. Marking to juridical time vs. dumping makes all the difference. Yes, it comes at banks expense--short term. But the natural household formation rate at solid affordablity measures will kick in AFTER jobs. As far as those "marks" go-ahead and try to get those prices as an individual homeowner. There's a reason the builders are still building, and selling.

I've done just fine in my chicken-chit ownership of BAC this last two years and look forward to letting the long loose later this summer. And I'm looking for flat RE for a decade. Yeah, SadSack Moynihan may not make it and this beached whale may have to be cut up. So be it. The last casualty of the Best of All Possible Depressions.
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

"Non-Agency Prime the only increase in delinquencies...." So much for the "sub-prime" crisis. Bring on Hi-Yield, Agencies can, and did, go to hell.

Inflation-adjusted prices at the bottom of the post 1970 channel? Isn't that where they should be, and stay, provided that retirement-house has retired???
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Today is the Tomorrow you worried about Yesterday!

[nodoodahs]

http://www.soa.org/files/pdf/2011-ny-invest-a4-blecher.pdf
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[HenryTo]

Historical trend of the inflation-adjusted US median single-family home price:

http://www.chartoftheday.com/20110422.htm?T

[rffrydr]

_________________
Today is the Tomorrow you worried about Yesterday!

[nodoodahs]

Compared OER from CPI to OFHEO index, with 1991 as base.

Peak OFHEO was 118% gain at YE 2006 (5.3% annualized). Down mid-teens percentage since then.

Peak OER from CPI was 60% gain at YE YE 2008 (2.8% annualized). Basically flat since then.

Difference in growth rates didn't really manifest itself until 1998 and was very high through 2005.

Assuming a nationwide relationship between rents and prices, and assuming that the mid-1990s was at the stable point, then ... back of the napkin, prices need another mid-teens percentage drop to meet rental increases.
_________________
I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[HenryTo]

Bridgewater on the trend of housing prices:

[nodoodahs]

http://online.wsj.com/article/SB10001424052748703384204575509402085458256.html

[nodoodahs]

[rffrydr]

...13% multiplied by the eight duplicate units you can carry with your cash hoard, Li Ka Shing Jr.

Point only being that the cash hoard is exactly what the typical investor DOESN'T have. Indeed, the cash out at retirement is the goal in itself. Lotsa slippage in that rental game, esp during great recessions.

Housing will soon become an epi-phenom and that's when you'll know the economy is "on track."

Right on cue, "Cash-In Refi." File this one under "The Paradox of Thrift."

http://www.cnbc.com/id/39342652
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Today is the Tomorrow you worried about Yesterday!

[nodoodahs]

[rffrydr]

...Except that SFD would not have been purchased at cash. Not even 2/3 cash. There's some big "premia." And it's not the small fry, it's the small family. It's really the only time that the ordinary take a shot at becoming extraordinary.

For the most part women buy houses (which is why the kitchen trumps all value-added content) and it's the one singular moment in a husband's life when dice are allowed to really roll. In the "home" we have managed to unify all-too-domestic strains of "safety," "security" "shelter"; setting down "roots" (the corollary of which means the house can't get up and walk away--from the woman) with a degree of leverage and capital risk which would make a craps-shooter blanch. The "nest egg." For this reason alone, housing will never find its "market price."

The happy ending? A one-million-dollar "home on wheels."

Add in to all this social policy, the mathematics of pre-payments in the investability of the loan and structural land constraints and you have an Asset. Long-term. Now we still have to turn homes into houses.

London, a place that combined our house culture and their land restrictions, is scarcely off 10% "bubble highs" (see Martin Wolf below).

Depressed new home sales stats out this morning: RYL up 5%.
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Today is the Tomorrow you worried about Yesterday!

[nodoodahs]

Home prices and consumer spending are tertiary to the real economic issue facing aggregate GDP, which is changes in private investment. While it's a smaller percentage of GDP, it's much more volatilie, and year to year percentage changes in private investment correlate better with year to year changes in GDP. There's not been a year since 1947 where GDP declined that private investment didn't also decline, which is more than I can say for the consumer.

Two add'l data points to add to the discussion:

Housing prices have been distorted by any number of things, made clearer by the crash, not the least of which are "consumer protection laws" limiting leverage available in some states, and land restrictions creating artificial scarcity of buildable property. States which allowed the most speculative loans for both owner-occ and landlord, and had the most restrictive urban planning (or the most BLM ownership of land), got the worst of the bubble.

Tangentially, the other night I ran the numbers on typical notional rental residential SFD purchased for cash ten years ago, including tax benefits, appreciation, rents, costs, etc., and came up with an ROE between 8-9%. By the same token, buying and holding the IYR for ten years, ten years ago, and reinvesting dividends would have netted an ROE between 8-9%. For the small fry, it seems there is no idiosyncratic risk premium attached to "doing it yourself."
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

[rffrydr]

This POV is getting long in the tooth. Prices are and have recovered where they matter: California. In Manhattan they're on their merry way. Much of the midwest and Texas they've barely been dented by this greatest of recessions. Much of the shadow inventory is a symptom of moving populations/industries. Those VALUES were low to begin with.



That the first-time buyer credit could so distort home prices is a willful distortion itself. $8000 on an average SoCal home last summer on a 350K home inherently unaffordable for first-time buyers anyway. Lennar and Co. continue to build; continue to find buyers in face of this wave of shadow inventory. There is also a wave of shadow demand as families have bundled up. Banks are getting comfortable in the absentee landlord role and nothing is being dumped. The house remains the only way to leverage up as a household which has always, and will always keep an "above market" bid on houses. There may not be much appreciation out there to come. And the mindset has further to adjust to the concept of house as home vs. bank account. But stabilization is all we need--and what we got.

This Bridgewater account is just another instance of mistaking our summer BP-induced shock for structural tail-spin. At SP 1100 that's not goin' to happen. September surprise, on the other hand, IS happenin'.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Bridgewater on U.S. housing prices: