How near to the housing bottom are we?

[william the wie]

The easy answers to this question are:

Take a least squares analysis, if you are using the right measuring tools and have a long enough trendline then you can make a fairly good guess at where the housing market is and where it is likely to be headed.

A check figure involves asset allocation of all financial assets: stocks, bonds, real estate, cash and precious metals in equal portions. You compare cashflow in and out of real estate to the flows in and out of the other assets.

One wild card is financial leverage:

Free cash reserves by definition involve zero leverage.

Bonds are usually unleveraged but can be leveraged by up to 95%.

Precious metals have storage costs and therefore are usually unleveraged financially but are often leveraged by means of futures contracts.

Stocks can have leverage of up to 50% and this relatively common.

Real estate is the only financial asset that is usually financially leveraged and at more than 80% of value.

Second wild card, price discovery:

Real Estate is the only financial asset that is not fungible as in any 10 year treasury that matures in June 2020 is like every other June 20 10 year treasury of the same denomination.

Because of leverage price swings in real estate are usually much greater than in other asset markets. Also because of real estate and non-recourse laws in most states margin calls are made by the borrower not the lender, the exact opposite of other asset markets.

So when enough homeowners decide that housing is not coming back and stop paying on the house or simply can't afford to pay on the house it goes into foreclosure. It is stopping payments that the owner can afford to pay that has not yet gone viral when will this happen? And what will be the result?

 

[sparky]

take it a step further willie, what's the average Joe involved in an adjustable mortage's stance going to be if the $$$ tanks?

 

[Toro]

The easy answers to this question are:

Take a least squares analysis, if you are using the right measuring tools and have a long enough trendline then you can make a fairly good guess at where the housing market is and where it is likely to be headed.

A check figure involves asset allocation of all financial assets: stocks, bonds, real estate, cash and precious metals in equal portions. You compare cashflow in and out of real estate to the flows in and out of the other assets.

One wild card is financial leverage:

Free cash reserves by definition involve zero leverage.

Bonds are usually unleveraged but can be leveraged by up to 95%.

Precious metals have storage costs and therefore are usually unleveraged financially but are often leveraged by means of futures contracts.

Stocks can have leverage of up to 50% and this relatively common.

Real estate is the only financial asset that is usually financially leveraged and at more than 80% of value.

Second wild card, price discovery:

Real Estate is the only financial asset that is not fungible as in any 10 year treasury that matures in June 2020 is like every other June 20 10 year treasury of the same denomination.

Because of leverage price swings in real estate are usually much greater than in other asset markets. Also because of real estate and non-recourse laws in most states margin calls are made by the borrower not the lender, the exact opposite of other asset markets.

So when enough homeowners decide that housing is not coming back and stop paying on the house or simply can't afford to pay on the house it goes into foreclosure. It is stopping payments that the owner can afford to pay that has not yet gone viral when will this happen? And what will be the result?

Excess supply of housing should be cleared away by 2013 at the latest.

 

[william the wie]

Toro I'm going to call you on that one. REITs are something I spent 15 years playing with due to their normal 3-5% discount for buying stock straight from the Treasury. Call me tight but a low risk 22.45% return makes me happy. Last time I did a quick check of all forms of housing to see if it was safe to get in the pool about 18 months ago. Total housing stock of all forms was at that time at least 130% of households and equilibrium is assumed to be 111%.

So, no 2013 is way too soon to clear a 17% oversupply of capital stock.

 

[Big Fitz]

Toro I'm going to call you on that one. REITs are something I spent 15 years playing with due to their normal 3-5% discount for buying stock straight from the Treasury. Call me tight but a low risk 22.45% return makes me happy. Last time I did a quick check of all forms of housing to see if it was safe to get in the pool about 18 months ago. Total housing stock of all forms was at that time at least 130% of households and equilibrium is assumed to be 111%.

So, no 2013 is way too soon to clear a 17% oversupply of capital stock.

And doesn't the timeline extend even farther with the shenanigans the Feds are playing by backing mortgages with taxpayer money or has that finally stopped completely?

 

[sparky]

for those diehard capitalists among us that are ever eager to eat each other, i would caution of bigger fish>


Beyond Foreclosuregate - It Gets Uglier | Truthout

 

[Care4all]

all i know is that we bought our house in late 2006, at the peak of housing prices and we have lost about 30k on the house's value....we paid cash and do not have a mortgage, so we are not underwater on a mortgage but none the less, we have lost 30k....it's depressing.

 

[Valerie]

all i know is that we bought our house in late 2006, at the peak of housing prices and we have lost about 30k on the house's value....we paid cash and do not have a mortgage, so we are not underwater on a mortgage but none the less, we have lost 30k....it's depressing.

Take heart as that loss is not realized unless or until you sell the house at which point you'd be subject to capital gains taxes, depending... Not to mention all the money you saved by not paying interest. People are throwing away that much in interest every few years...



Good to see you, my friend!

 

[B. Kidd]

Whose gonna eat up the inventory? There are only so many foreigners to buy up houses once owned by Americans, and many of them have already bought.

 

[Care4all]

Whose gonna eat up the inventory? There are only so many foreigners to buy up houses once owned by Americans, and many of them have already bought.

And unless all of those people that went through foreclosure can buy another home with their bad credit rating, we have lost a huge portion of the american potential buyers....

 

[AllieBaba]

Toro I'm going to call you on that one. REITs are something I spent 15 years playing with due to their normal 3-5% discount for buying stock straight from the Treasury. Call me tight but a low risk 22.45% return makes me happy. Last time I did a quick check of all forms of housing to see if it was safe to get in the pool about 18 months ago. Total housing stock of all forms was at that time at least 130% of households and equilibrium is assumed to be 111%.

So, no 2013 is way too soon to clear a 17% oversupply of capital stock.

I agree.

 

[boedicca]

The easy answers to this question are:

Take a least squares analysis, if you are using the right measuring tools and have a long enough trendline then you can make a fairly good guess at where the housing market is and where it is likely to be headed.

A check figure involves asset allocation of all financial assets: stocks, bonds, real estate, cash and precious metals in equal portions. You compare cashflow in and out of real estate to the flows in and out of the other assets.

One wild card is financial leverage:

Free cash reserves by definition involve zero leverage.

Bonds are usually unleveraged but can be leveraged by up to 95%.

Precious metals have storage costs and therefore are usually unleveraged financially but are often leveraged by means of futures contracts.

Stocks can have leverage of up to 50% and this relatively common.

Real estate is the only financial asset that is usually financially leveraged and at more than 80% of value.

Second wild card, price discovery:

Real Estate is the only financial asset that is not fungible as in any 10 year treasury that matures in June 2020 is like every other June 20 10 year treasury of the same denomination.

Because of leverage price swings in real estate are usually much greater than in other asset markets. Also because of real estate and non-recourse laws in most states margin calls are made by the borrower not the lender, the exact opposite of other asset markets.

So when enough homeowners decide that housing is not coming back and stop paying on the house or simply can't afford to pay on the house it goes into foreclosure. It is stopping payments that the owner can afford to pay that has not yet gone viral when will this happen? And what will be the result?

Excess supply of housing should be cleared away by 2013 at the latest.

That is incredibly optimistic.

My estimate is 2018.

 

[B. Kidd]

all i know is that we bought our house in late 2006, at the peak of housing prices and we have lost about 30k on the house's value....we paid cash and do not have a mortgage, so we are not underwater on a mortgage but none the less, we have lost 30k....it's depressing.

And here's more bad news for you (not that you need it!). You could lose up to 27% more if a neighbor forecloses within 250 feet of you.



damage-property-home-value-mainstreet: Personal Finance News from Yahoo! Finance

 

[Care4all]

all i know is that we bought our house in late 2006, at the peak of housing prices and we have lost about 30k on the house's value....we paid cash and do not have a mortgage, so we are not underwater on a mortgage but none the less, we have lost 30k....it's depressing.

And here's more bad news for you (not that you need it!). You could lose up to 27% more if a neighbor forecloses within 250 feet of you.



damage-property-home-value-mainstreet: Personal Finance News from Yahoo! Finance

we've got about 4 homes for every square mile in my neck of the woods, so no neighbors within the 250 feet, but I would presume if it is an abutting neighbor, even if it is 2000 feet from my home, it will bring my home value down, if they were foreclosed on.... ???

 

[boedicca]

Your assumption is correct. Foreclosed homes in one's "comps" bring down one's property value.

And your situation represents the true victims of the government's Everybody Deserves A House Policy: those who were financially prudent and played by the traditional rules.

A friend of mine's sister paid cash for a house out in the valley which has lost 2/3's of it's value (a loss of $400,000). And now her neighborhood has quite a few empty and deteriorating (vandalized) properties, meaning her house is continuing to decrease.

The people who put nothing down live rent free during foreclosure proceedings.

 

[Truthmatters]

Hey Care good to see you.

Dont sweat it too much its a temporary situation, the market will recover and you will see the money again.

 

[B. Kidd]

Hey Care good to see you.

Dont sweat it too much its a temporary situation, the market will recover and you will see the money again.

In TM's time warp, temporary is, say, a decade or longer.......

 

[william the wie]

What scares me worst is what happens when the Chinese bubble crashes? China has had zero non-construction GDP growth for close to a decade. In the meantime China has spawned huge bubbles in Australia, Canada and Brazil among other places. When the Canadian bubble pops there goes the Canadian retiree demand for US houses, when Brazil pops there goes demand for south FL real estate and CA & HA is beginning to feel the leading edge of the Australian burst. This will get bad.

 

[Valerie]

Prices are down considerably and interest rates are still historically low... The longer you wait for prices to drop even more, the more likely the interest rates will tick up over time.

So the PRICE of the property may go a little lower but over the lifetime of the loan even at a slightly higher interest rate, your COST would be much higher...


IMO - BUY BUY BUY!

If all the noise you're hearing about housing has you totally confused, join the crowd. One day you'll read that owning a home has never been more affordable. The next day you'll see news that housing starts have plunged to nearly their lowest level in half a century, as headlines announced in March. After four years of falling prices and surging foreclosures, it's hard to know what to think. Even Robert Shiller and Karl Case can't agree. The two economists, who together created the widely followed S&P/Case-Shiller Home Price indices, are right now offering sharply contrasting views of housing's future. Shiller recently warned that the chances were high for a further double-digit drop in U.S. home prices. But in an interview with Fortune, Case took a far brighter view: "The lack of new home building is a huge help that a lot of people are ignoring," says Case. "People think I'm crazy to be optimistic, but housing is looking like the little engine that could."

Real estate: It's time to buy again - Fortune Finance

 

[Mr Liberty]

Prices are down considerably and interest rates are still historically low... The longer you wait for prices to drop even more, the more likely the interest rates will tick up over time.

So the PRICE of the property may go a little lower but over the lifetime of the loan even at a slightly higher interest rate, your COST would be much higher...


IMO - BUY BUY BUY!

If all the noise you're hearing about housing has you totally confused, join the crowd. One day you'll read that owning a home has never been more affordable. The next day you'll see news that housing starts have plunged to nearly their lowest level in half a century, as headlines announced in March. After four years of falling prices and surging foreclosures, it's hard to know what to think. Even Robert Shiller and Karl Case can't agree. The two economists, who together created the widely followed S&P/Case-Shiller Home Price indices, are right now offering sharply contrasting views of housing's future. Shiller recently warned that the chances were high for a further double-digit drop in U.S. home prices. But in an interview with Fortune, Case took a far brighter view: "The lack of new home building is a huge help that a lot of people are ignoring," says Case. "People think I'm crazy to be optimistic, but housing is looking like the little engine that could."

Real estate: It's time to buy again - Fortune Finance

I'll sell you a house. I buy foreclosures. I especially like short sales. Some of these homeowners have not made a payment since 2008 and have been living rent free.