Dow tops 9000 as home sales rise

[Quincy K]

Re: Dow tops 9000 as home sales rise

You can have an era of rising rates, and house prices as in the seventies. This period when looking back, 2000-2016? might turn out to have been like that in retrospect. That means: No funny gains, just a inflation hedge, as with gold, and the other things that have risen.

An inflation hedge only works when the commodity you are buying doesn't go down in value due to decreased demand and an increase in supply.

The US has over twice the CRE per capital than most developed nations. I don't care how far the price falls or the price of building materials rise because it is all about the demand(future and present) and the CAP.

Pretty much the only way that most CRE(nation-wide) and RRE(CA, NV, FL, AZ) does not continue to go down is because of hyperinflation or devaluation.

If you are holding onto office or warehouse space right now with no long-term leases...you are toast.

[Glenn Black]

Re: Dow tops 9000 as home sales rise

I was speaking to a real estate agent this week in a major metropolitan area (Hamilton ON Canada, 350,000 people). She said real estate has been dead for 10 months, never had such a tough time. In last 3 months, starter homes have taken off to a huge market, volume, bidding up homes above asking price, just like in the "good 'ol days" of a few years ago. She interprets this to mean that the new home buyers had waited for house prices to drop, and are tired of waiting for lower prices and lower interest rates. They're snapping them up while they last.

It's still a buyer's market. The sellers have lost 10% to 20% off what their house was worth last year, but they're still well above what they paid when they bought, so they can cover all their real estate fees & expenses, and still have some profit from the sale. A fraction of these sellers of starter homes become buyers of homes at the next level up. Most don't realize that apartments and rental housing is now cheaper and a better buy for the first time in ~50 years.

The McMansions are sitting with no buyers, no lookers, no nothing.

[thunderdownunder]

Re: Dow tops 9000 as home sales rise

Nero, may I add a bit to this conversation on Housing.
It does not matter where you live, Housing is the largest single,private expense you will undertake in you life. Food clothing and shelter are, and always have been, the 3 things that keep living beings alive.

but as humans we complicate and add above what is really needed.

My observations are,

Housing depreciates - if you spend no money "updating" a house will last about 50 years, after that time the house is really "zoned" D7 = bulldozer. @2 % / year it rots and ages - Temporal. There are exceptions but the rule holds. Land remains the sole asset and is inflation adjusted

Housing is paid for by after tax income. If wage and salary do not rise housing becomes more and more expensive as a proportion of income. why? Inflation is a killer. It happens as a by-product of the monetary system (P+I). Workers ask for a wage rise equal to inflation and they settle for for close to it. Tax takes its share and higher wages mean goods become more expensive. The inevitable outcome is we become poorer and are less able to meet the bills.

Housing equity has been and will for ever be, the foundation of small (and if successful - big business). Every one who starts out puts it up as collateral (unless of course daddy is rich) I would bet that a couple who put their shelter up to a bank has a very strong incentive to make it work. Can you not see the small problem that is brewing. EJ might shoot me in the foot but I would hazard a guess that the reason Japan has been so idle, is that declining property prices have weakened the ability of the small business in Japan to leverage. Thats why he is right but can't put his finger on it.
on second thought!
EJ is so right. If equity falls so does the ability to raise capital. Why do you think the banks are so unwilling to lend. They have HUGE reserves thanks to the tax payer but they are UNWILLING to accept Housing/ land/ stocks as collateral because they are holding a whole basket of Pledges that are rotting. Big Business is in the same pickle - What they own is unknown in future value or true value.
A little known fact - A buyer of property (or asset) is the only one who brings money to the table. Its a fact - learn from it
Truly a catch 22 situation.

Dyslexia (Yes I'm dyslexic) may be my problem in getting my "clarity" across and if I get it mixed up thats a good thing. I see things other people can't and it has proven a gift.

[nero3]

Re: Dow tops 9000 as home sales rise

In my opinion Germany and Japan have an advantage in that they was never a part of the housing bubble. They can enter spring, and start to leverage up, increasing private demand in a way the US and large parts of the west can't do. In those countries it will rather be the government that plays a large role. Germany and japan is in a position similar to the US in 1950. The US is suffering a debt overhang similar to when the pound lost is reserve status. The dollar just keeps dropping lately against the NOK. now it's 6,14. When the crisis was at it's worst, in nov last year, it was far above 7. My guess is that the dollar could be heading to between 4 and 5. The dollar have been dropping a 1% or more each day for quite some time now. What's strange is that gold is not reacting.

The Japanese and German economy will almost for sure enter a boom from high private demand. Real estate prices in Germany are very depressed.

What seems logical for me, is that the housing boom, all the way back to 1992 here in Europe, and the wave of cheap foreign goods, will reverse. That's more or less the complete opposite of deflation. The price to save the banks and the rich people will be that everything down to the food we eat gets expensive.

[flintlock]

Re: Dow tops 9000 as home sales rise

I was speaking to a real estate agent this week in a major metropolitan area (Hamilton ON Canada, 350,000 people). She said real estate has been dead for 10 months, never had such a tough time. In last 3 months, starter homes have taken off to a huge market, volume, bidding up homes above asking price, just like in the "good 'ol days" of a few years ago. She interprets this to mean that the new home buyers had waited for house prices to drop, and are tired of waiting for lower prices and lower interest rates. They're snapping them up while they last.

It's still a buyer's market. The sellers have lost 10% to 20% off what their house was worth last year, but they're still well above what they paid when they bought, so they can cover all their real estate fees & expenses, and still have some profit from the sale. A fraction of these sellers of starter homes become buyers of homes at the next level up. Most don't realize that apartments and rental housing is now cheaper and a better buy for the first time in ~50 years.

The McMansions are sitting with no buyers, no lookers, no nothing.

A lot of that upswing in starter homes is investors getting back into the game. Some of those homes can be bought very, very cheap. That price range was one of the hardest hit, so the prices have the most to bounce back. Some see them as deals now and potential money makers. Frustrated stock market investors may be looking for some better returns. I say they'd better be careful as rents are low and the laws favor the renter when they don't pay.

[nero3]

Re: Dow tops 9000 as home sales rise

I think what calculated risk write about new home sales bottoming first, as I think is happening now, and home prices, up to years later is correct.


However, I think this could be in a high inflation cycle, and then this lag is bound to be much less.

[flintlock]

Re: Dow tops 9000 as home sales rise

What I am seeing is the opposite. The starter homes are being bought by real owner occupants. They are using the tax credit, up to 6% consession from sellers, FHA and Freddie financing. They are locking in low interest rates all of which have been 30 year fixed rates. Traffic is up, investors are not a big part of the traffic. Also lenders are not lending unless you have a proven income stream in the form of w-2 wages. They are not lending to the self employees even with good credit scores. They are not lending to investors at high loan to values. So I think the pent up demand is real qualified buyers sensing a bottom in house prices taking advantage of seller consessions, tax credits, low 30 year fixed rates and they are buying within their current means with money that they have saved. The investors are buying large packages from distressed banks and developers at a significant discount to the current retail value. These are typically private transactions that involve the sale of the debt or the ability of the home builder to recapture losses from their profits during 05 and 06.

That's interesting. I'm sort of surprised the lower income buyers have the higher down payments I've heard were required.

I've just been doing more work on rental homes lately . And others are homes that people moved out of for a new home, then found they couldn't sell, and now they've decided to just rent them out. So not really investors in that case.

I know one investor in particular was paying cash, so no loans needed there. He was a real newbie to it. Vastly underestimating the refurbishing costs. He's bought two so far and failed to sell either. So I suspect that didn't work out so well for him. The contractor said he was tired of losing in the stock market and so was going to give RE a try.:rolleyes:

Local talk show host Clark Howard was going on and on about buying investment homes on his radio show. People were breathless talking about buying opportunities.

A friend is trying to buy a home on a short sale. He keeps getting bid up by "investor types" supposedly. So some of this is still going on. And I suspect by novices because that house he wants is a POS for the money when brand new luxury homes sit empty down the street for money very close to what he'll end up with in his by the time its refurbished.

[cjppjc]

Re: Dow tops 9000 as home sales rise

That's interesting. I'm sort of surprised the lower income buyers have the higher down payments I've heard were required.

Heard that where?:p Very little barrier to entry exists.

[flintlock]

Re: Dow tops 9000 as home sales rise

Well a few years ago we were being told by our government we needed low down payments and EZ financing so low income people could afford housing. That's what helped get us into this mess in the first place, right? Now suddenly they can come up with $20k (?) or more in cash? What the heck was all the fuss about then?

Sorry, but to the "low income" people I know, $20k is like hitting the powerball lottery.

Of course buying a starter home doesn't necessarily mean low income. They could just be smart and rode out the bubble as renters.

[cjppjc]

Re: Dow tops 9000 as home sales rise

Well a few years ago we were being told by our government we needed low down payments and EZ financing so low income people could afford housing. That's what helped get us into this mess in the first place, right? Now suddenly they can come up with $20k (?) or more in cash? What the heck was all the fuss about then?

Sorry, but to the "low income" people I know, $20k is like hitting the powerball lottery.

Of course buying a starter home doesn't necessarily mean low income. They could just be smart and rode out the bubble as renters.

Very easy to "get into a home with little down."

[flintlock]

Re: Dow tops 9000 as home sales rise

Really? I thought they put an end to that.:confused: Oh well, here we go again.

[pwcmba]

Re: Dow tops 9000 as home sales rise

It's all an impressive graph.


However, I think you are coming on to my side, I can sort of feel it in my gut. Today, what was it, 28 % rise in supower? (SPWRA)

It's possible the "green shots" or whatever to call it will begin slow, and maybe it will fizzle out, and you need another stimulus package for the economy to gain traction. However, you have guys like Soros, Faber, Rogers, all saying that the low in march will hold, even nobody believed me here when I was calling it at the time, here. So it is no suprise people think the housing market have much faller to fall.


Itullip is using charts, using the real dow, that are faulty, cause they don't resonate with the Q value, or the Dow/ Gold ratio. That gives a false impression to how much the dow should fall. That is a chart that give a false impression, on the front page of the site.

Since 2005 (in the seventies the similar time is 1972), you have had an inflationary housing bust, culuminating in a crash not that far from 1974, and now there are set to be more inflation, more like the mid to late seventies. Or WW2 era to 1950. I am not really sure how it will turn out, but I think a back-carpet of inflation, will make this a different experience than in the 1990-s.

A option I have been thinking of lately is the WW2-1950 era, is that you can have money printing that will bring the long term interest rates from around 3,5 to around 6 % for the 10 year, etc, and then the stock market will expand to let's say 10-14000 once again. Then, you get a hike in interest rates, that will ensure a boom similar to the 1950-1965 era.




One thing I have kept notice of.

When the nasdaq bubble faded in 2000, housing really started a run that lasted 5 years. In 2005, what basically happened was that China started to adjust their exchange rate. Fertilizer stocks, alternative energy,railroad stocks, gold, all suddenly got very hot.

I think those things, that heated up from 2005, is the current bubble. As western governments, print to compensate for weak private demand, you have stagnant food demand, and demand for commodities from the west. While, these printing, of course leads to a flow of investments into emerging economies, such as BRIC, as people try to protect from this inflation/printing. That then lowers interest rates in these emerging economies, more dollars all around these countries, that then have a further boom in consumer credit, fueling a further demand for food, etc, causing a squeeze..That's why fertilizers will boom, even demand in the west will be stagnant (or sticky). I think the fed will deal with inflation when it becomes a very obvious problem. However, I don't think they will attempt to kill it before the dow / gold ratio is between 2 and 1.

I just finished reading my favorite book again and I'm feeling it too!

http://www.amazon.com/Dow-36-000-Str.../dp/0609806998

[pwcmba]

Re: Dow tops 9000 as home sales rise

Yep - here we go again!

http://money.cnn.com/2009/04/07/news...tune/index.htm

http://www.ritholtz.com/blog/2009/05...irby-comments/

http://dealbook.blogs.nytimes.com/20...d-be-outlawed/

And we should get to "sustainable deficits" by 2013. What in the world is a sustainable deficit???

http://www.bloomberg.com/apps/news?p...d=aaVGe5smuZAU

[ThePythonicCow]

Re: Dow tops 9000 as home sales rise

And we should get to "sustainable deficits" by 2013. What in the world is a sustainable deficit???

Is it one that lets you sustain your time in public office (as opposed to a deficit that causes such an outrage you lose the next election)?

[dummass]

Re: Dow tops 9000 as home sales rise

What's a Senior iTuliper anyway?