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EScroogeJr (< 20)

multifamily starts is a wake-up call for housing bears



May 16, 2008 – Comments (6)

Sure, they will now say that this is a random fluke and that the multifamily market doesn't matter at all. But when the same multifamily starts were contracting, did any of these bears tell us to disregard these numbers because multifamily starts don't matter? So either way we have been exposed to some "extra" cries that the sky is falling: either now or several months ago. My personal take is that Chicken Little is dramatically wrong NOW, and I will be very much surprised if April 2008 does not go down in history as THE BOTTOM of the housing market. I think the next three months should justify my bullish take on housing and by the end of  August everybody will be saying the same things that I'm saying now. Meanwhile, I like it how my HB stocks are behaving in this market, and congratulate myself with not heeding floridabuilder's advice to wait till the end of May or beginning of June.

6 Comments – Post Your Own

#1) On May 16, 2008 at 5:15 PM, cabuilderboy (83.42) wrote:

While I like a 2008 bottom call, I don't know if I am completely on your April bandwagon. But, I do think when we talk about this 5 years from now, the market will say 2008 was the bottom. I just think we have to wait for the spike in ARMS (May and June) to reset and the corresponding  foreclosure to hit the market for a couple of months, before a real bottom will be reached.


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#2) On May 16, 2008 at 5:58 PM, DemonDoug (31.17) wrote:

If 2008 is the bottom, then we're going to have a big "L" bottom instead of a "V" or a "U."  Escrooge, NOD's are way, way up - this is your future foreclosures.  1000/day in california and RISING.  How exactly does that mark a market bottom?  An actual respected economist recently said "You will know we have hit the bottom in housing when housing prices have gone up for 6 months" (Christopher Thornberg, one of the very few non-REIC shills that is well respected by media and nationally recognized as a leading economist.)

Oh hell, because I can't resist, let me get the most recent stats for vacant homes out there...

PDF file on recent home vacancy and housing supply data

Would you like some highlights, in case you are too lazy to go beyond NAR and NAHB talking points?

-18.56 MILLION vacant houses

-4 million vacant for rent, 2.28 million vacant for sale

(all records from what I can ascertain)

-Homeowner vacancy rate: 2.9% (highest on record since 1995)

-Rental vacancy rate: 10.1% (near record high of 2004)

Comment: So where is all the demand from household formation, hmmm?  Seems like household formation is either flat or maybe even negative based on these numbers

-Homeownership rate: 67.8% (still nearer the high of 69.1 than the low of 63.6 of the past 25 years)

And all those thousands of foreclosures adding to an way oversupplied market already.  Did we start talking about affordability yet, which is still near historic lows?  A condo in my neighborhood here in Hollywood costs 4 times as much as renting a similar sized apartment.  Simply put, without neg-am loans and crazy credit expansion, the housing market still has a long way to go.  All that M3 stuff to me looks like banks lending to banks - not to consumers of housing units.

BTW if this was good news then why didn't the HB's rally today?  XHB and ITB both down today.

Also, the sky won't fall if every single publicly traded HB goes out of business.  I'd prefer homes to be built by local builders like cabuilder instead of the mccrapshackboxes these big crappy national builders where the homes fall apart 2 weeks after you move into them.  The house I grew up in was built by a local builder, and my neighborhood didn't have some retarded name like Arrowhead or Fox Run or The Airs or whatever.  I miss the days when HB's just built houses and didn't force HOA's and stupid silly names on developments.

Escrooge and CABuilder: what's your take on HOA's?  I personally would never in a billion years ever buy a home with an HOA (maybe a condo in retirement or something but definitely not a SF residence or townhome). 

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#3) On May 16, 2008 at 6:40 PM, FourthAxis (< 20) wrote:

"I will be very much surprised if April 2008 does not go down in history as THE BOTTOM of the housing market."

(Mental Note 5/16/08: Scrooge says april was most likely housing bottom - in capital letters.  Got it.)

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#4) On May 16, 2008 at 6:53 PM, EScroogeJr (< 20) wrote:


I seldom (if ever) bother to read the spin from the NAR and NAHM. A Caps post from someone like Bent, floridabuilder, or DemonDoug will usually provide all the quotations and other relevant data that I need to know.

Your point about the cost of renting vs. owning is well taken. The only trouble is, rental rates can quadruple faster than you think, and homebuyers can also anticipate this future change much better than you seem to give them credit for. ISRG is always overpriced...people expect it to become available at PE=20 and never get their buy-in price because others begin to anticipate an increase in future earnings as early as when PE=40. Next year they realize that PE=40 did in fact represent the deep value they were looking for, which they failed to see back then because they couldn't look one year ahead. But the new PE is 40 again, and they miss the stock again for the same reason they missed it the first time. So it is with Californian housing.

As to the HOA's, my view is very simple. They are parasites who make their money off homeowners by convincing them that a bureacratic structure that forces everybody to mow the lawn can somehow increase property values. For some reason, homeowners are willing to buy into this crap, just like shareholders, for some reason, let themselves be convinced by CEOs that you have to pay millions for simple management services.

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#5) On May 18, 2008 at 4:47 PM, TDRH (96.93) wrote:

Scrooge, would like to preface this by stating I hoping you are right and that I am wrong.   With the continuing reset of ARM's, increasing foreclosures, 10 month supply of homes on the market I believe we are in for a long and painful road.  

Tighter lending standards are forcing a shift in the demand curve, not just movement along it as prices fall.   Fewer qualfied buyers for high priced homes will continue to pressure the market.   The homebuilder industry as we know it today will be 1/2 to 2/3 the size it is by the spring of 2010.  

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#6) On May 18, 2008 at 7:19 PM, EScroogeJr (< 20) wrote:


And I hope that you're right and that I am wrong. Although, hope is the wrong word, I really hate to use it in this context because I don't want to look more naive than I am.

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