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(The Atlantic)   Much like the Titanic, home construction has stabilized at the bottom   (theatlantic.com) divider line 28
    More: Obvious  
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649 clicks; posted to Business » on 17 May 2011 at 11:02 AM (3 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2011-05-17 11:31:05 AM  
Sorry NAHB, Toll Brothers, etc. You overbuilt and took advantage of the housing bubble. Now you have to pay for it. Maybe we ought to just tear houses down to keep prices high and demand exceeding supply.
 
2011-05-17 11:43:53 AM  
It's important, however, to have a good foundation, right?

Wait...the other bottom, you mean?
 
2011-05-17 11:49:54 AM  

wolvernova: Now you have to pay for it. Maybe we ought to just tear houses down to keep prices high and demand exceeding supply.


Ah, the DeBeers strategy.

"Bury your loved ones with all their diamonds. It's what they would have wanted."
 
2011-05-17 11:51:48 AM  
Every month or so the econ-heads declare the housing market has hit bottom, then next month it goes a little lower and THAT is the bottom. I suspect the bottom is a little lower. Check back in 2013 or '14. That's when the bottom will be found.

www.funkmysoul.gr

"She's goin' down, Captain!"
 
2011-05-17 11:52:37 AM  
They pulled about 3 years of buyers forward, then the idiotic tax credit pulled another year or so forward. Counting from 2007, we'll be out of this mess by around 2013-2014.
 
2011-05-17 11:54:45 AM  
Incontinent_dog_and_monkey_rodeo

They pulled about 3 years of buyers forward, then the idiotic tax credit pulled another year or so forward. Counting from 2007, we'll be out of this mess by around 2013-2014.

We arent in a mess. The mess was 2004-2008. Now we are right, or close to it.
 
2011-05-17 12:10:36 PM  
Mission Accomplished?
 
2011-05-17 12:13:27 PM  

tricycleracer: wolvernova: Now you have to pay for it. Maybe we ought to just tear houses down to keep prices high and demand exceeding supply.

Ah, the DeBeers strategy.

"Bury your loved ones with all their diamonds. It's what they would have wanted."


Monopolies and cartels are horrible. The housing market teeters between "free market" and "cartel".

Tjos Weel: Now we are right, or close to it.


www.funnypictureblog.com
 
2011-05-17 12:16:40 PM  
transitory
 
2011-05-17 12:59:15 PM  
www.rffi.org

approves
 
2011-05-17 01:04:23 PM  
While it might be scary to see a chart do a short term tank, like this one, what does the 20 year chart look like? Where does a straight line average put us on that chart compared to where we actually are?
 
2011-05-17 01:46:51 PM  
wolvernova

Not sure if serious

We are much closer than 2006. And, really, I dont care about any market but my own and looks like we bottomed in late 2008 or early 2009.

Interesting factoid: KY had a land bubble in 1979 that was worse than the recent one. In 1979, land share was 16.1% of home value. In late 2003, in hit 14.2%, which was the peak of the bubble here.

DC, btw, peaked at 81.7% in 2006Q1. As of 1010Q3 (last data I have split out this way), it was only down to 77.0%. DC had the same bubble in 1979, hitting 51.5%!!!, before falling to 40% in 1983.
 
2011-05-17 01:51:12 PM  
You said "we" were right, implication being the nation as a whole.
 
2011-05-17 01:57:01 PM  
wolvernova

You said "we" were right, implication being the nation as a whole.

1. Royal we :)

2. Most of the nation is. Close enough for government work anyway. I dont think we are at the very bottom, but relative to the top, its close enough. (Note: may not apply in CA, AZ, FL, NV or DC)

For the other 46 states, yeah, close enough.
 
2011-05-17 02:07:01 PM  
Actual state by state breakdown:

States still seeking bottom: AL, AZ, CA, CO, CT, DE, FL, GA, HI, ID, ME, MD, MA, MT, NJ, NM, NY, NC, OR, RI, SC, UT, VT, VA, WA, WY

I few more than I expected. Big suprise, NV didnt make that list. The state, AS A WHOLE, has hit bottom, even if LV hasnt yet. 2nd surprise, DC didnt make it. Both MD and VA did though.

26 on list
25 not on list.
 
2011-05-17 02:19:12 PM  
For the 46 metro areas that I have data for:

Seeking bottom: Balt, Birm, Char, Hart, KC, LA, Mem, Mil, NO, Norf, Phi, Port, Prov, Sac, SLC, Sea, StL, Tam

Found bottom: Atl, Bos, Buff, Chi, Cin, Clev, Col, Dal, Den, Det, FW, Hou, Indy, Mia, Minn, NY, Oak, OKC, Pho, Pitt, Roch, SAnt, SBern, SD, SF, SJ, SAna, DC

Much harder to make the determination for cities than for states. Lots of cities were on the border (in both directions). The stupid 8k credit screws up about a year of recent data, which makes it tough. I didnt put them in the bottom unless there was a clear bottom before the tax credit bump.
 
2011-05-17 02:26:11 PM  

Tjos Weel: I few more than I expected. Big suprise, NV didnt make that list. The state, AS A WHOLE, has hit bottom, even if LV hasnt yet. 2nd surprise, DC didnt make it. Both MD and VA did though.


Agree, NV has bottomed. Whatever amount they have "overcorrected" will revert back to the mean in short time, and allow some new homeowners to get in at substantially generous terms.

Not sure where you're getting your info or basing your conclusions, but DC prices aren't sustainable. They might not be falling every month, but they're out of parity with rental prices in the area.

Tjos Weel: Found bottom: Atl, Bos, Buff, Chi, Cin, Clev, Col, Dal, Den, Det, FW, Hou, Indy, Mia, Minn, NY, Oak, OKC, Pho, Pitt, Roch, SAnt, SBern, SD, SF, SJ, SAna, DC


SF and NYC for sure have not bottomed. If I could short home prices anywhere in the country, it would be those two places. Again, what are you basing this on?
 
2011-05-17 02:35:28 PM  
wolvernova

what are you basing this on?

http://www.lincolninst.edu/subcenters/land-values/

Ive posted this before, I thought you were aware. It hasnt updated past 2010Q3 yet.

SF and NYC were two border cases, both surprised me.

SF hit 73.6% (land value percent of total home value) for two quarters in early 2009. That is the LOWEST for SF since the dataset started in 1984. If it isnt sustainable in the mid 70s, then it has been unsustainable for 27 years now.

NYC is much more questionable, I could have put it in top list, but looks like it has flattened out at about 54%. NYC spend the 90s in the high 40s, so if you want to tell me that it has another 5% to drop, I wont argue.
 
2011-05-17 02:40:59 PM  

Tjos Weel: Ive posted this before, I thought you were aware.


I know you've mentioned this in the past. I'm concerned with total home price and rent ratios, not just the land. Need to compare apples to apples.

Tjos Weel: SF hit 73.6% (land value percent of total home value) for two quarters in early 2009. That is the LOWEST for SF since the dataset started in 1984. If it isnt sustainable in the mid 70s, then it has been unsustainable for 27 years now.


That's fine, but it means that coupled with the home sale prices of the SF area, people are overpaying for the structures on top of the land, something not supported by their incomes, hence the prices will inevitably fall. Same with NYC.
 
2011-05-17 02:41:29 PM  
DC hit 46.8% in 2009Q1 which like for the SF data, is the lowest for DC in the entire dataset.
 
2011-05-17 02:44:51 PM  
wolvernova

That's fine, but it means that coupled with the home sale prices of the SF area, people are overpaying for the structures on top of the land, something not supported by their incomes, hence the prices will inevitably fall. Same with NYC.

The bubble was in land. Structural prices thoughout the last decade followed the 1975 to current pattern, I havent looked at the cities in detail for that data, but I doubt SF or NYC bubbled in structure very much if at all.

Rent ratios may be off, but that may be due to rent being off. Land percent of total home price is best measure of the LAND BUBBLE (which is what we had). Actually, could just look at raw land prices too, but shows basically the same result as land percent.
 
2011-05-17 02:57:00 PM  
Using 85-99 growth rates, it looks like at its worst, the SF structural prices were overpriced by about 19k, its down to about 5k now.

In the grand scheme of things, thats negligible.

SF structural prices are fine.

Whether the income supports it is another thing altogether, I think the bigger worry would be CA government driving off all the people who can afford to live there. Ignoring that factor, there are plenty of people who can afford it who want to live there.
 
2011-05-17 03:00:56 PM  

Tjos Weel: Rent ratios may be off, but that may be due to rent being off


Rent is never "off". With the exception of rent-controlled areas, it almost perfectly tracks with incomes.
 
2011-05-17 03:04:30 PM  
wolvernova

With the exception of rent-controlled areas

So we can ignore rent ratios in NYC and SF. Check.
 
2011-05-18 02:24:57 AM  
What is the long term demand for new house anyways? Nary a mention of that in these discussions.

I would assume that whatever surplus was built up in the bubble will have to be a deficit in construction moving forward from the crash. Unless of course they do the bulldozing thing which just seems insane, destroying something that took work and resources to create would be a net loss for the society.

Perhaps such are bubbles though. Perhaps we can convince everyone that holes are very valuable, then when the bubble pops just fill all of the holes in. It sure seems like these bubbles are manufactured en masse to transfer wealth to the rich. They get bonuses on the way up, bailouts on the way down (while at the same betting on the crash), then move on to the next rage. Of course few things can hold as much cash as housing, but I think the pumping of gold is reaching maximum stimulation and the wad is about to be blown on that one.
 
2011-05-18 05:54:46 AM  

Tjos Weel: Using 85-99 growth rates, it looks like at its worst, the SF structural prices were overpriced by about 19k, its down to about 5k now.

In the grand scheme of things, thats negligible.

SF structural prices are fine.

Whether the income supports it is another thing altogether, I think the bigger worry would be CA government driving off all the people who can afford to live there. Ignoring that factor, there are plenty of people who can afford it who want to live there.


How does that compare to using 85-95 growth rates? From 95 forward SF was in the grip of the tech bubble.
 
2011-05-18 05:20:31 PM  

wolvernova:

SF and NYC for sure have not bottomed. If I could short home prices anywhere in the country, it would be those two places. Again, what are you basing this on?


NYC and SF pretty much have. There is a price premium to living there that falls outside bounds of typical economic models. In places where land is scarce and population is high, you will always get higher than expected prices.

I've seen at *most* a 5% drift down in the property comparable to mine over the last decade.
 
2011-05-19 10:01:50 AM  

LemSkroob: NYC and SF pretty much have. There is a price premium to living there that falls outside bounds of typical economic models. In places where land is scarce and population is high, you will always get higher than expected prices.


I've heard that excuse many times, even for my area, DC. "But this town is special, people want to live here, which is why housing prices are double what they were ten years ago, despite a corresponding increase of household income being less than 40%.

By that rationale, same used during the housing bubble at its peak, all economic models are discarded at the whim of a series of meaningless platitudes.

And the data does not support your claim that NYC and SanFran have bottomed. Prices have been falling almost every since month in NYC, and every month quite significantly in SanFran. Bubble-minded logic and a flippant attitude about the fundamentals (not supporting housing prices) is just as naive and careless now as it was five years ago. If anything, you ought to have your eyes open, where back then this sort of naivete didn't have the benefit of a recent historical reminder in the rear view mirror.

I've seen at *most* a 5% drift down in the property comparable to mine over the last decade.

In real dollars, that's pretty poor.
 
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