Posted on 07/31/2009 11:42:43 AM PDT by ReadTheLaw
HOUSING BOTTOM? NO, THE MOTHER OF ALL HEAD FAKES From The Business Insider, July 31, 2009:
Housing bears immediately tried to poke holes in the surprisingly good numbers in the May Case Shiller report.
The most widespread bear argument, that the rise was just seasonal, is weak: Even the seasonally adjusted numbers were the best in three years.
Two other arguments, however, are more persuasive.
Whitney Tilson of T2 Partners calls the May numbers "the mother of all head fakes." He--and the two analysts below--think house prices will resume their decline in the fall. We're in that camp, too...
Bear Case 1: The Seasonal Adjustments Are Too Weak
The first argument against reading too much into the May numbers, made by Calculated Risk, is that the "seasonal adjustment" factor used by Case Shiller is not strong enough. Under this theory, a more appropriate seasonal adjustment would have showed a steeper decline in seasonally adjusted May numbers.
To support this argument, Calculated Risk plots the non-seasonally adjusted Case Shiller numbers (blue) and the seasonally adjusted ones (red). He notes that, during the 1990s, the seasonally adjusted numbers smoothed the seasonal variations to a relatively flat line (as they should). In the nutty 2000s, however, the seasonal adjustments produced wild swings that almost tracked the non-seasonal adjustments--thus defeating the purpose of attempting to "seasonally adjust" the numbers at all.
Thus, in Calculated Risk's opinion, house prices will start falling sharply again in the fall, when the seasonal boost peters out.
Bear Case 2: It's Just A Mix Issue
The second bear argument, made by Mark Hanson, is even more persuasive. In a nutshell, Hanson argues that the strong Case Shiller numbers were just due to a temporary seasonal change in the mix of houses (Go to Yahoo Finance to see the rest)
(Excerpt) Read more at finance.yahoo.com ...
Hard to see how prices won’t go lower, just given the huge number of foreclosures that are yet to hit the market. More of them to come in 2010-12, too, as teaser rates on yet more mortgages (ones written before the 2008 collapse of that sort of deal) reset upward.
In other words, SUPPLY is going to go WAY UP (and it’s already very high). Even if demand picks up some, I doubt it will suffice to keep prices steady.
Thank you for this link, it is worth saving.
2) Huge numbers of foreclosed homes banks have deliberately kept off the market so as not to depress things even worse
3) Multiple State moratoria on home foreclosures (in CA alone around 135,000 more homes) expiring soon
4) Individuals who wanted to sell their homes before the meltdown but weren't able to get the prices they wanted or needed.
Add these four up and that means bad news.
I hate to sound uncaring but to some people the lower prices of houses (i.e. young first time home buyers) this drop in prices is a good thing. I know at least in my old hometown it was getting to the point where a shack would cost you over 300k. I think the housing bubble had to burst.
Taxes up. Fees up. Wages down. Unemployment up. Fewer dollars in consumer hands and less credit available to consumers... yep. Supply is up. Demand is down. Prices fall.
When home prices were high, we had a "housing crisis" because it was harder to afford a home.
Now that they're in a steep decline, we have a "housing crisis" because they're -- well, I guess they're TOO affordable?!
I am closing on 13 acres in Kentucky with a new home for $98k. And I filed for an extension on my 2008 taxes and will be receiving a TAX CREDIT of $8,000.
The Federal Government is paying for almost 10% of my home.
This may be one reason sales are up.
You mean, the rest of us are paying 10% of your home. There is no “Federal Government” that has its own money.
“Seasonal Adjustment”: Government-speak for “Wild Ass Guess That’s Probably Wrong”
>>You mean, the rest of us are paying 10% of your home. There is no “Federal Government” that has its own money.<<
What I mean is that $8,000 of the overpayment of taxes I have made will be paid back to me! I pay five figures in taxes every year.
It is only others paying if I get back more than I pay. ;)
It is my little LEGAL revenge against the IRS. I’m in two bands, I LOSE about $4,000 a year just in mileage to practices. It’s good for three years then I have to show a profit. It is all legal and above board.
It is like a game. You just have to play by the rules and shame on you for leaving money on the table. :)
And regarding rules, by having a small pasture with two calves in it, as well as a large garden, I cut the property taxes in half because it is a farm. My homeowners insurance is more than my property taxes.
The market was out of equilibrium because the previous inflated demand was entirely artificial (by loaning to people who shouldn’t be borrowing). Prices should come down to restore balance.
Every time the government sticks it’s nose into something, it only makes things worse.
It is appalling how many people (including “economists”) who don’t grasp the basics of macroeconomics.
My son is biding his time, he thinks that the lowest will be 1 year from November.
I love the first comment on the page though: “So when the data shows you’re wrong, you have to make up reasons for why you’re right. Right?”
LOL!
Simple Fact No. 1: There are more foreclosures in the wings simply due to the fact that .gov programs kept houses in the hands of deadbeats, thus influencing the market in an untrue representation of fair price and expectations.
Simple Fact No. 2: As long as job losses continue, so to will the foreclosures.
Simple Fact No. 3: ARM resets will not be pretty, thus intensifying the storm.
I'd say you're getting a good deal.
Considering I was just looking at a new quality pickup truck that is going for $58,690.......Before taxes.
Either that, or something is really wrong with this picture.
He may be right.
The question becomes, what strain will we see on interest rates on long bonds which drive the interest on mortgages?
For those that aren’t payment buyers and have the capital to wait, bottom fishing is best. For those that lack capital, trolling for the best mix of 20% down, good equity, a house in the area you want, one that will appraise for higher than the sale price, and a decent interest rate, it’s still not easy.
>>Hi! mr welfare person!!!!<<’
Stop it! You make me blush... :)
>>Hi! mr welfare person!!!!<<
Oh, and check out my post 11. ;)
reference ping
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