A thought to ponder Anyone?

You are simply wrong on this issue.

Look at the inventory rates as they drop from ~7.4 to ~6.6 months on market. This corresponds perfectly with the halt in the 9-month slide of existing home sales. The leveling trend actually started in December, which shouldn't happen. December and January are not pickup months, they are slowdown months. So the real rise in the health of real estate is probably larger than what I am seeing in the data. You will see these number continue to rise into the summer, even though prices will stagnate, or even continue to fall a little. Again, this is the single step back from 30 forward, only someone with your bias could come away thinking this is a bad thing.

And please, stop throwing me numbers that compare a correction period with a bubble period. I implore you. This is intellectually dishonest and beneath you. Surely you are smart enough to understand what I'm talking about here.

 

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Actually it is you who are not understanding and are “cheery picking” to support your case.

Yes the 2006 high was your 7.4 months for the month of October only. Fall is when houses that were not able to be sold all summer are taken off the market - If house stays on the market all summer and does not sell, people take it off the market, if they can, and wait for spring. This even you, at age 31, should understand.

Here in 2006‘s data, by the months, is this standard seasonal pattern for supply of homes (number of months, on average, of homes remaining on the market for selling at current sales rate):
Jan….5.1
Feb…5.2
Mar…5.6
Apr…6.1
May…6.4
Jun….6.9
Jul …7.3
Aug…7.3
Sep…7.3
Oct….7.4
Nov….7.3
Dec….6.6
Jan07..6.6
Or look at the annual averages:
2004...4.3
2005...4.5
2006...6.5 all from the same National Association of Realtor's Table (right side) I gave before:

http://www.realtor.org/Research.nsf/files/totalsalesreport.pdf/$FILE/totalsalesreport.pdf

Speaking of “intellectually dishonest at best” you provide a good example by “cheery picking” the highest value in the year (October’s) when houses have been coming on the market all summer and some are still unsold from May and June, and then comparing it to the winter’s 6.6 month value when almost every one who can has taken their unsold house off the market and is waiting until spring to put it back up for sale.

Your comparing "October apples" 7.4 to "winter's snowmen" 6.6 is very dishonest. If you want to be honest, compare Jan06 and Jan 07. I.e. compare 5.1 months to 6.6 months and see that the average time on the market has increase 29.4%! - Not dropped as your dishonest "cheery picking" data falsely implies!

Perhaps you are not intellectually dishonest - just ignorant of the realities of the very seasonal housing market?

 

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You have the seasons backwards.

http://www.builderonline.com/industry-news.asp?sectionID=26&articleID=449574

It was bad during the normal "selling" season last year, and now it is good during the normal "non-selling" season this year. Which is why I said that the reality is probably even rosier than the numbers indicate. You are 180 degrees from reality.

If you denigrate my intelligence by referring to my age one more time, it will be the last time I read your posts, as that sort of ad hominem fallacy lands you straight on my "ignore list". Please don't do this, because I really enjoy our back-and-forth banter.

The best thing to do with this debate is to rejoin it on a monthly basis, and see who is correct. I predict that existing home sales will see small increases for the next 10 months straight, with a fall in median home prices each month. By this time next year, the market will have corrected, and we will get back to ~7% yearly gains in real estate prices, unless inflation rises, which will create higher (seeming) gains.

Since you foresee the collapse of the American economy in the next year, if our future communication is impossible due to the inexistence of an American infrastructure, I will honor your correctness as I starve to death in a crumbling economy.

 

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WRONG AGAIN Here is what your reference HOPES:

"....after more than a year of falling sales and sinking prices, home and condo sellers and local real estate brokers are looking with ANTICIPATION to this year's spring market.

A strong spring market COULD put an end to the real estate downturn that has cast a long shadow across the state, from downtown Boston to the Berkshires, as sales have slowed and prices have gone south.

And SOME are already seeing grounds for optimism, with possibly the most telling statistic the number of homes and condos being put up for sale in this year's budding spring market. ..."

“SOME” real-estate salespersons are always optimistic. - Being otherwise is not good for their business. (You do not expect them to say: “Buy this house now, it will be worth 20% less next year.” do you?) I base my view on the facts reported by the National Real-estate Association, not the salesperson’s hopes, but they are also probably putting the best possible view forward. (I had to go three links deep into their report to find the non seasonally adjusted data.)

I join you in this prediction, emphasis that the increase in volume will be at ever declining prices. I even recommended to you a few post back to sell and then rent, not buy, for at least two years.
There will be a flood of homes coming on the market this spring - people either forced to sell as can not pay the mortgage or wise enough to get out before their home falls lower in value. Also bank foreclosures are running highest rate in many years. - Banks putting houses on the market and willing to sell (rather than try to manage them as a landlords renting) for any price that will cover the mortgage debt* is part of the reason why single family home prices are falling. (More than 5% in real terms in last 12 months, nation-wide average, and this fall is accelerating.)

SUMMARY: High and growing volume is a sign of approaching panic, not a recovering market.

No, never suggested that by my comments about IN THE NEXT DECADE OR TWO at the most. Please do not put words in my mouth. I did not mean to offend by ONCE repeating your publicly disclosed age. I will not do it again. I note however that several time you have directly attack my character and motives and did so for at least the third time recently with a list of what I think, had wrong, motivates me etc., which I ignored this time, unlike the first two times, when I defended myself in two replies, both of which began: "You have my psychology all wrong ..."

I will look these character attacks up and cite the posts numbers if you wish. - You claimed I "hate America" and made many other false claims about me. I have never replied in kind with any attack on you or your motives. I did observe that, even at your age you should understand that the real-estate market is very seasonal and in recent post, by way a defense against your latest personnel attack, proved that you, not I was guilty of "cheery picking"

I did not even call you "intellectually dishonest, as you did me, but noted that it was either that or ignorance of the very seasonal nature of the housing market, which made you compare October data to January data to support your POV when an honest comparison is Jan06 to Jan07. That honest comparison shows a 29.4% INCREASE in the number of months the housing supply now extends, compare to a year ago, not the decline your “cheery picking” “apples to oranges” data falsely implies .

I am growing tired of this, especially your character attacks. My intention is not to try to persuade you of anything. Now I just want to chronicle the major events occurring during the US's unavoidable (now) slide down with the now declining and later the collapsing the dollar.

I wish my efforts over the last 5 years had been able to make a difference. (“Efforts” being mainly the book I wrote and being active here, out of love for US and my grandchildren living in US. I was trying to get some others to also recognize the danger. That is the first step towards the cure - just as it is for alcoholics; but I have failed and now conclude it is too late for anyone to dispel the black cloud approaching much of the western world. I hope my foresight is wrong this time, but thus far it is unfortunately going much as I expected and wrote, five years ago.
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* Banks have no motivation to try to get a higher price, especially if that would delay the sale. They only get to keep the unpaid mortgage and some modest fees. The lawers, as usual, take a big bite, as does the auctioner, the county tax people, the local newspapers for the legally required notices, and several others I probably have forgotten. - The owner, last on the list, will be lucky if he gets cab fare to his mother's house. It is really very sad. - I have been to several auctions, but my bottom fishing bids were to low.

 

I have one question, wouldnt the people in power know about this if it were true, and therefore take steps to prevent it from happening? What do you know that they don't? Wouldn't Americas leaders not take steps to avoid this if it was true?

 

One would like to think that were the case, but the people "in power" are only human, in most cases. Humans tend to look out for #1 first. If they are high up in the power structure, they made a lot of promises along the way to get there. Did you notice that Halliburton just transfered it HQ out of US? etc. I admit to doing the same. I.e. took steps that have turned out to be very profitable as I began buying ADRs five years ago, but I have sincerely tired to drive away the black cloud I saw coming mainly as the US has been very good to me, especially Cornell and Johns Hopkins, and my grandchildren all live there still.

All this is as true in Brazil as it is in the USA, if not more so, so please do not think this an attack on the USA even though I will now illustrate with the current US administration.

The Bush family (father and current US president) have been supported mainly by the house of Saud, but Tom Hicks, owner of about 800 small (very local) radio stations (called the clear channel network) has come to their aid, especially GWB, many times.

It is hard to so mismanage an oil company in Texas that your father gave you that is going bankrupt, but GWB was up to the task. It was going bankrupt until, Hicks stepped in and started bidding up the stock so GWB could unload his holding before the company did go bankrupt. (Why GWB became a millionaire, first time.) The SEC's computers detected this strange behavior of the stock price and flagged it automatically for investigation. Fortunately, for W, this was while his father was president and "someone" decided to archive the investigation. (The Democrates, finally back in power, are probably holding the reopening of the case for some particularly damaging monument.)

Then there was W's first act when he became governor of Texas - he decided that the U of T's endowment fund should no longer be managed by a university committee (or how ever it was - I forget) and that it was counter productive to tell where it as invested. Guess who became the manager of these millions (billions?) - your right - Tom Hicks.

Then there was the Texas Rangers, I know little about sports, but think it was a baseball club. W was able to force the land owners of the site for a new stadium to sell against their wishes using the Law of emanate domain (that is for essential things like roads sewer plants and of course baseball stadiums.

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W as an investor, about 1% of the club, of his own money, but when he then also got the town's tax payers to pay for the stadium, instead of the club owners, the other owners gave W some shares to bring his interest in the Texas rangers to 10% - I don't know what happened to them, as do not follow sports, but I know the Texas Rangers left town or died or something and the tax payers are still with higher taxes for the stadium. Not entirely sure, but think T. Hicks was one of the "investors" that bought W's 10% for several millions more.

The essence of the three decade deal with the Saudi Royal family is they get the 82 Airborne and its jets etc to insure that they stay in power and US gets oil sold only for dollars. - When Saddam tried to sell oil for Euros, the Saudies flooded the market and oil went below $10/ barrel. Saddam understood, and got back in the "dollar only line," but just to be sure no one else, not even Iran, was ever so foolish again, Iraq was invaded twice. (You probably do not know that Kuwait was originally a part of Iraq and Saddam invading Kuwait was quite like Lincoln trying to recover the South, except Saddam failed.)

Now just to show briefly how this is a "power corrupts" problem, not exclusive to the US, - every one elected in Brazil leaves office millions of dollars richer than when they were elected. No one has yet gone to prison, but if part of the minority and too stupid about how you do your gains (Newspaper explains it all), some have recently been bared from politics for ten years. (Allowed to keep their ill gotten gains of course - never can tell - after the next election, you might be in the minority. - its an unspoken rule - no need to give the money back.)

The main problem is how to justify their fantastic increase in wealth. One of the common solutions is to pay a little more to the real winner of the weekly national lottery than the winning ticket is worth and then cash it in. One of the Brazilian congressmen is very lucky. - He has "won" the national lottery 51 times! - quite a feat as often several weeks go by without any main prize winner (must get 6 out of 60 numbers right.)

W's latest corruption is a terrible trick - a delusion of the US population. Alcohol from corn. It will not decrease oil imports, (hurt his long term supporters) but will divert public attention from simple measures that would.* Not only that, but now an entirely new source of campaign funds is opening in the alcohol industry. When W leaves office he will give many paid speeches. - The fee will be several times what Al Greenberg or "Firing Jack" gets (I forget** Jack’s last name just now. - the well known, and quite good, CEO of GE, until a few years ago.)
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*For example, an annual tax of $10,000 times the Gallons/ mile ratio on the cars original sticker. I.e. if that sticker said 20 miles /gallon, you pay $500/year; if it said 40mpg, your pay $250/year; If it a Hummer and said 5mpg, you pay $2000/year. This is just one idea that requires no new technology and could be done in a month if the powers were serious about reducing (1) oil consumption, (2)air pollution, (3) man's contribution to global warming, (4) the national deficits, (5) corn prices rise and most food prices also, etc. for some other "lesser benefits," like making the US have a government of, for and by the people, instead of, for, and by the oil industry (and now the rapidly growing alcohol from corn industry.)

**Its Welsh, Walch, or somethng like that. He is still doing very well - settled in with smart beautiful blond, 30 years his junior after dumping his long term wife - further illustration of what I have been saying: i.e. that most humans look out for #1. Yes, I am a cynic -but I am old and have seen a lot and remember much of it still.

But despite my best efforts here for a few years, and in my book‘s web page, few understand any of this.

 

Not a conversation that I want to have, but I must respond.

You didn't belittle my age once. You first told me that I will understand something better when I get older, which is why I revealed my age (and belief that there is no correlation between age and intelligence) and then you threw it in my face a second time.

My comments about your personality are comments about your bias. Which I deduce from your posts, which are 100% negative and 100% anti-American. You pay lip service to being pro-American, but since everything you say belies the opposite, I choose to believe the overwhelming data set, and not the self-referential apology. Nobody can read your posts and not sense the glee you are going to feel if the American economy tanks. I pity you for feeling this, but despise you for lying about it.

It has been entertaining, if not illuminating. Good day.

 

It's Jack Welch. And I tend to agree with much of what you say. There are dark clouds gathering... though you'd be a fool to think it's a "Republican" thing. It's a "sad... sad blindness thing" NOT just of the American people, but of people in general.

There is so much out there that points towards the USA as the issue here. The real issue here is that no one can possibly understand the dark hands at work here. Economies are so intertwined-- where on goes (Japan, Europe, USA, China) the others are sure to follow.

~String

 

Thanks, & I tend to agree with you. Certainly not a Republican thing. (I am a registered Republican - one of the “compassionate, but fiscally responsible” types.)
Nor a USA thing. I clearly identified it a "human" thing, (Power corrupting & looking out for #1) Also why in last post I mention my believe that the Democrates were holding re-opening the SEC archived stock manipulation case against GWB and T. Hicks until they can milk it for the most political advantage. Why I mention the corruption in Brazil. (A country much more advanced than the USA in this field.

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) BTW, the Brazilian congressman who has won national lottery 51 has only been collecting on tickets that got 5 (not grand prize’s 6) of the 60 numbers correct. Typically there are a few dozen people each week guessing 5 correctly and their tickets are worth between 10 and $20,000 each.

As US is the most powerful nation, and as I am most concerned about it, most of the comments I make are critical of the USA's foolish policies. Some missunderstand this as hate for USA. I think they are very blind - they are just like those who were telling Vietnam protestors to "love it or leave it." - People courageous enough to speak out and point to the mistakes a nation is making are its best friends, not those who are too blind to see any of its flaws.

Despite agreeing completely with you that global economics is very complex and intertwined, I do think it is possible to make a reasonable accurate prediction of the trading structure the world will have two decades hence:

Asia, not USA and EU, will be the main producer of high value added goods and very dependant upon what are now called "emergent countries" for raw materials and food stocks. The US will be relatively unimportant, having declined, very much like once world dominant England did (main difference is that the time scale of US's decline will be compressed by at least a factor 4 as everything (but making babies) happens much more rapidly in this "information age". The one thing the US will have (If the stupid alcohol from corn industry is not in control of the mid west's fertile land) is great agriculture production potential and can join Brazil and a few others in feeding Asia.
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I have a low opinion of GWB's mental gifts, so in his case I tend to agree that it is a "sad blindness thing," but I am much too cynical to not think that many of his advisors understand quite well that they are "feathering their nests" at the expense of the American people. - If this were not the case why would not the US, instead of Japan, be signing up long-term (15years) contracts to take all the cheap alcohol Brazil can produce? Answer: Their nests are feathered by oil and, from sugar cane, it only takes one barrel of oil to produce six or seven barrels of alcohol. (Factor of 5 energy gain, vs. at best a factor of 1.1 gain if the alcohol comes from cold Iowa's corn.).

 

8March 07 comments by David Walker, comptroller general, Government Accountability Office:

“Our country is now the world’s largest debtor nation and our mounting debt is undermining* our ability to deal with a range of current and emerging challenges in the 21st century. If we stay on our present path, the United States faces a prolonged period of debt and decline.”

"Financial burdens caused by entitlements rose from about $20 trillion to $50 trillion over the past six years, equaling a $440,000 obligation for each American household," Walker said. “In 2005, personal savings rates dipped to negative numbers for the first time since the Depression. The federal trade deficit hit a record $763 billion in 2006. The meaning is clear: A crunch is coming,” Walker said.

From: http://www.fcw.com/article97955-03-16-07-Web
Much more there also, especially how the economics slide threatens US military power.
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*I give a very current example of this, widely commented upon in local Brazilian newspapers:
In the last few years Chavez has given other south and central American counties 6 billion dollars in aid, and will be the main financer of the "Bank of the South" now being created to displace the IMF, which the US basically controls. (Brazil paid off all debts to the IMF last year and will be a minor financer of BoS.)

When GWB was here about 10 days ago, mainly trying to counter Chavez’s growing influence, his main aid offered was: (1)free English lessons for some students in the US & (2)the loan of a hospital ship to teach doctors. - Less teaching than Cuba has done in Africa alone! Cuba has aided Chavez with doctors and equipment to establish free medical centers for all of the population Venezuela , most of who have never before in their lives been seen by a doctor. The newspapers were polite, but the fact that US is overextended and cannot do more was clearly indicated.

 

Well, from what Billy T tells me, I should invest in the yen?

I dunno, there has got to be something the U.S. can do to stay on top, so to keep our markets flowing, there must be something BESIDES another depression....

no sollutions? despair and deppresion is inevitable? Well DAMN

 

I checked your bio - see you are a student in US - Your best investment is in you at your age. Study hard. It would not hurt to include a few courses in Chinese, if available. (At your age I was on full need scholarship and washing dishes so I could eat.)

Five years ago, when I first became concerned about the dollar (I live in Brazil so dollars in US and dropping hurts me financially) I began buying ADRs,* only been trying to protect my purchasing power, not gain, but it has great investment as many are now following in my footsteps for average 300% gain.
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*Mainly in India, Australia, New Zeland, as I like to read reports in English. My biggest holdings are in Brazil, as I have lived here for nearly 15 years now and could read Portuguese well 5 years ago. (Best and largest of my ADRs is Sao Paulo's water company, SBS. Who would have thought a water company would be up 700% & still paying nice dividens in 5 years! (But that is the gain in dollars and they do not buy as much now, so in purchasing power the gain is only about 450%) - I was only trying to protect myself, not lead a crowd of later US investors.

PS Yen will probably rise more as the Carry trade unwinds. (People/funds borrowed Yen at essesntially 0 interest and even if just placed in Brazil Bank CD got >10% real interest until a few months ago {now about 9% real interest} but now that Yen is rising they are buying Yen to pay off those loans - adding to the upward pressure on the Yen, but BoJ will try to keep Yen from rising too much.) I.e. You may be a few months late on buying yen.

I know you were not serious, perhaps being

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, but I like to teach, give advise to students, etc. - still an old professor at heart.

 

Dollar falls, Chinese reserve comments boost yen

Wow, a rumor that China would stop stockpiling dollars causes the dollar to fall. Imagine, in the unlikely case in the near future, what would happen if the Chinese actually did that AND started unloading their treasuries?

Absolute meltdown in the global economy. I wouldn't mind, just to see what would happen.

 

A few things regarding new home sales in the U.S.:

It's true that inventory levels rose throughout much of 2006, and the largest national and regional builders were, and maybe still are overstocked right now with spec homes. This has resulted in steep discounts and incentives (addendum items) for buyers. While the big boys make take a hit on a particular house with regards to margin, when they slash prices like they have it can result in stimulated sales in a particular price range. Remember that many of them were forced to increase prices starting in Sept. 2005 as the industry was hit with massive price spikes due to Katrina. Many of those price hikes were unfounded, and the last I recall, the FTC was looking at several industries for evidence of collusion. The price spikes couldn't have been justified at that time, because in the immediate wake of the hurricane, the supply just wasn't there for new materials. The damage was so utterly complete, and the insurance mess so slow to progress, that re-construction couldn't really begin in earnest. That didn't stop speculation on OSB, pine framing and spruce stock, not to mention vinyl, asphalt and gypsum. This caused many builders to re-estimate their homes going forward, and many of them made a pre-emptive price increase to offset rising costs. This inevitably slowed sales.

Fast forward 18 months and prices are stable. OSB is cheap right now, as are studs and most pine framing members. 2X10's and 2x12's have spiked in recent weeks, but are starting to stabilize. Drywall has actually come down, as has vinyl. We're seeing better pricing on almost everything right now, due to numerous factors, but most of all an agressiveness on the part of subs and vendors to get in while things are a bit slow, and try to hold on if it picks up to previous levels. This is making it possible for us to actually reduce the price of our homes, should we so desire. In most cases we're not doing that, but rather offering addendum items at n/c to complete the deal. This seems to work better in a regional market where we don't have the pressures of the largest markets. Regardless, sales are skyrocketing again, to levels of activity we haven't seen since last june.

With that being said, the middle range market is still slower. I think it's that middle range of home (in my region, $300K-$500K) that is a decent barometer of where the market is right this second. Those are the buyers that are either upwardly or downwardly mobile, and have plenty of money, but gauge their decisions on the market, and the health of other investments. The most market savvy, outside of the true high-end buyer. They are still waiting on the sidelines to see how it all shakes out. Meanwhile, the entry level buyer ($159K-$249K) is as optimistic as ever.

I'm seeing another hot spring. Maybe not as hot as '05 and '06, but nonetheless, a clear sign of economic stability. Not the gloom and doom so many love to preach.

But what do I know? I only do this shit for a living...

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New starts were up and Bloomberg had forcast they would be down - Unintentionally, I think you have given part of the reason.

There is of course the fact that starts are always low in mid winter and turn up in the spring, but surely Bloomberg has that factored in when making their predictions.

What you are telling us is that some guys make their livings from building houses, and will start (optimistically) to do so again this spring. Some of the big builders are more able to sit on the side lines and wait - why some are only building to order, not spec homes. The critical test comes when it is time to find a buyer for the spec house, late summer. That will to a large extent depend upon how serious the FED is about controlling inflation. - The "tea leaves" will be out for all to see in less than an hour. (I am assuming the actual rate remains 5.25%)

Instead of "tea leaves" to read, I think we should ask Baron Max to take his gun into the woods, kill a deer, spill its entrails out on the ground, take a photo and post it here - so we can get a better forecast of the economic future, like in the old days.

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Great post, and I agree. My father builds houses in Colorado, and he is seeing an upturn already. I think they had 6% growth over the last month in his area. I work in the trades in Virginia and we are amazed at the number of houses going up, and how few "For Sale" signs we see now compared to a few months ago. I asked a Realtor-friend if she thought this was because people are pulling them off the market due to lower prices, and she said the opposite. They are feeling the upswing as well.

I wonder how much of the recent correction was due to the cover of every-other Time and Newsweek talking about the "Looming housing crash"? Last year this headline was EVERYWHERE. Sometimes the market creates self-fulfilled prophecies. I definitely think this correction was needed to slow building down, and linking a cause and effect is near-impossible in economics, but I wouldn't be surprised if all the talk about a crash is what caused the temporary slow-down.

It is like traffic slowing to a crawl on 95 North of Miami because of an overpass. Cars can't see the what is down the interstate, so they check their brakes a little as they rise up the incline, then resume speed on the other side. This small check-up creates ripples which result in traffic coming to a dead-stop half an hour later.

I would not be surprised if the irresponsible reporting of major media outlets, and Jeremiads like those in this very thread, are causing much of the misery that they so adore. Perhaps they are as harmful as they are grating. ?