Housing Hype: Recovery Turns to Relapse?

[Parsad]

CNBC article on housing.  Cheers!

 

http://www.cnbc.com/id/46855457

[ubuy2wron]

The housing mkt HAS turned end of story. In almost any mkt of any consequence if you bought a distress sale in the last 12-18 months you can turn it for a profit today in some instances a large one. At the same time the housing stocks have doubled off of their October lows but then that is what they do when the mkt turns. I will be adding to my TOL on a pull back to 20 and I will add to my BAC on any meaningfull weakness and I am kicking myself for my limit vs Mkt order on PULTE which was ericoplys idea. its almost trippled. The increase in the fortunes of the housing mkt is the surest way to keep the US economy growing. I am absolutely convinced that you can not have a growing US economy with housing starts in the sub 500k. The US economy IS housing and cars the autos are back so now is housing.

[jay21]

This chart was a little stunning to me: http://1.bp.blogspot.com/-vEs4Uy0Vf6I/U6cdCUMkOjI/AAAAAAAAfo0/I25uvslJdWM/s1600/SHelter+CPI.PNG

 

Somehow, shelter has increased faster than the rate of inflation during one of the biggest housing slumps.  It appears that rent has been driving this.  What can be the cause other than zoning restrictions?

 

Full link: http://soberlook.com/2014/06/rental-housing-shortage-is-americas.html

[Vish_ram]

This chart was a little stunning to me: http://1.bp.blogspot.com/-vEs4Uy0Vf6I/U6cdCUMkOjI/AAAAAAAAfo0/I25uvslJdWM/s1600/SHelter+CPI.PNG

 

Somehow, shelter has increased faster than the rate of inflation during one of the biggest housing slumps.  It appears that rent has been driving this.  What can be the cause other than zoning restrictions?

 

Full link: http://soberlook.com/2014/06/rental-housing-shortage-is-americas.html

 

The author is incorrect;

 

http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=E1d

 

Check out the graph above where I'm showing both the CPI's. Both have fallen. The reason for less steeper fall in housing is due to the stickiness on way down (people freeze up and sell less when prices are down, the volume drops a lot).

 

In the longer term, they play catch up most of the time.

 

[no_free_lunch]

I follow the calculatedrisk blog, it is an economic blog heavily focused on housing.  The guy called the housing bubble, called the GFC as not being the end of the world and in general is completely non-sensational.  He still thinks the housing market is okay.

 

The two key numbers in the existing home sales report right now are: 1) inventory, and 2) the percent of distressed sales.

 

The most important number in the report each month is inventory.  This morning the NAR reported that inventory was up 6.0% year-over-year in May.  This is a smaller increase than other sources suggest, and it is important to note that the NAR inventory data is "noisy" (and difficult to forecast based on other data).  A few other points:

 

• The headline NAR inventory number is NOT seasonally adjusted (and there is a clear seasonal pattern).

• Inventory is still very low, and with the low level of inventory, there is still upward pressure on prices.

• I expect inventory to increase in 2014, and I expect the year-over-year increase to be in the 10% to 15% range by the end of 2014 (maybe even higher).

 

 

..

 

Another key point: The NAR reported total sales were down 5.0% from May 2013, but normal equity sales were probably up from May 2013, and distressed sales down sharply.  The NAR reported that 11% of sales were distressed in May (from a survey that is far from perfect):

Distressed homes – foreclosures and short sales – accounted for 11 percent of May sales, down from 18 percent in May 2013. Eight percent of May sales were foreclosures and three percent were short sales.

Last year the NAR reported that 18% of sales were distressed sales.

 

A rough estimate: Sales in May 2013 were reported at 5.15 million SAAR with 18% distressed.  That gives 927 thousand distressed (annual rate), and 4.22 million equity / non-distressed.  In May 2014, sales were 4.89 million SAAR, with 11% distressed.  That gives 538 thousand distressed - a decline of 42% from May 2013 - and 4.35 million equity.  Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales up slightly (even with less investor buying). 

 

http://www.calculatedriskblog.com/2014/06/comments-on-existing-home-sales.html

[yadayada]

how do the banks play into this. It seems they take almost no risks with mortgages at the moment. Once that picks up again (what could be the catalyst for that?) you should see the housing market pick up? Is this because of the new regulations?

[jay21]

Vish_ram - I apologize.  I think I inaccurately summarized the author, but I believe the author to still be correct.

 

no_free_lunch - I think calculated risk is great.  I don't think I have seen too much on rentals from him however.

 

 

[no_free_lunch]

No, more focused on construction than rental prices.  He does post multi-unit construction, which is probably relevant.

 

For instance:

 

This means there will be an increase in multi-family completions in 2014, but probably still below the 1997 through 2007 level of multi-family completions.  Multi-family starts will probably move more sideways in 2014.

 

http://www.calculatedriskblog.com/2014/04/a-comment-on-housing-starts.html