New home sales plunge a record 11.2% in January. Most readers in the forum were not alive the last time we saw numbers like this. I know I was in diapers.
I don’t think it should be considered too complicated a problem.
Economic distortion was caused by government-sponsored entities having programs to snap up mortgages which didn’t meet traditional financial standards.
This caused banks to profit from writing such loans, with no risk to themselves of loss. And besides this, if they didn’t write “enough” loans for every demographic the Justice Department was worried about, they could be sued.
So out came the loans where no money down was required, or they even added cash for taking the loan (lending 105% of the purchase cost, for example), proof of income was not required, etc.
Of course this increased rate of home sales, and drove up price.
Add in the adjustable-rate loans with very low initial rates, and no requirement of it being even plausible that the person could pay the longer-term rate, and now very ordinary people were buying second or even third homes so as to re-sell in two or three years and make a killer profit.
Up go the prices yet more.
Up goes the BUILDING yet more.
What happens when you have lots of rather ordinary people (and there were lots) owning 2 or 3 homes, with the extras intended only to be held for a short time and resold?
You have more homes than you have people and families to fill them.
Now what happens when the ARM’s run out on the low rates? And few people are thinking it’s a great strategy to have mortgages on three houses when needing only one?
Well, obviously there’s now a glut on the market.
But hooray, we have the government to solve problems such as the slump in home-building resulting from there already being more homes than people to live in them.
Stimulate more new-home-building!
Correction:
In the first post, I said that I was just in diapers the last time new home sells were this low. Actually, the year was 1963, so I was still four years from being born. This was 47 years ago. It boggles the mind.
Government makes poorer decisions on what should be built and what should not than does – or these days, would – the free market.
I probably could have written my above post more clearly.
It is no wonder that when government distortion of the marketplace has produced a glut of houses, resulting in there being a very large number of empty houses on the market and staying on the market for a long time, that when YET MORE HOUSES are built on top of that, with this encouraged by government stimulus, that they aren’t going to sell so well.
The correction was for myself.
Your diagnosis was spot on.
It will take at least five more years to come close to cleaning up the housing mess.
Yet somehow my county assessor raised my assessed value and thus my property taxes. Assholes.
I think more in the neighborhood of three years but I agree with your basic point.
JEATON, that was exactly how I read your post.
I just realized after reading your post that I could have boiled things down to a shorter summary.
Fundamentally it may well take population growth exceeding building of new homes to such an extent as to finally match up the number of people and families wanting homes to the number of homes.
I tried to explain this about a year ago or so in a conversation about a year or so ago on the topic of how soon home prices would go back up, but to no avail. The idea just didn’t seem to compute that there are now simply many more homes than there are households, and there are now few people who want to hold mortgages on homes they don’t live in, and so therefore there is a glut and this glut cannot rapidly be corrected.
Especially when Wile E. Obama and the rest of the supergeniuses are determined to pump up new home building.
[quote]JEATON wrote:
New home sales plunge a record 11.2% in January. Most readers in the forum were not alive the last time we saw numbers like this. I know I was in diapers.
[/quote]
What do 1932, 1982, and 2002 all have in common?
They were the bottoms in stocks. The bottom of this stock market will come in 2012, as the Great Depression of the 21st Century takes hold.
Dow will hit 1500, SP500 to 225, gold between $8000 and $10,000 per ounce.
$200,000 will buy 5 of what $200,000 will buy today in terms of homes.
"But then I think the whole stock market bottom will be reached in 2012. The only reason I am picking 2012 is I am a huge fan of a great cycles guy who died in 1955, called W. D. Gann.
TGR: Oh, yes.
IG: He did a lot on anniversaries and so on, and 2012 happens to be the 30th anniversary of the 1982 bottom, which was the beginning of the big speculative Autumn bull market. And it’s the 10-year anniversary of the first bottom, in 2002. The market peaked in 2000 and dropped in 2002. It’s also the 80th anniversary of the 1932 Winter bear market bottom, after the Dow had dropped 90% from its 1929 high.
That’s why I wrote a piece on my website called “This is It” in 2007, and one of the things that convinced me was when I saw those Bears Stearns funds sort of going bankrupt in July 2007. That was the 20-year anniversary of the '87 crash, the 100-year anniversary of a big market crash back in 1907, the 150th anniversary of a big 1857 crash. All these Gann kinds of numbers came in at the same time in 2007. That was so compelling that I was absolutely convinced that 2007 was the end. And that’s proved to be correct.
TGR: So you’re saying the market is going to be drop by half this year.
IG: Yep. I think we’re going to have a crash in stock prices this year. But I am staying long in my gold stocks."
This mixed economy(fascist economy) is about to die.
I’ve read some info on Gann. Liked his work.
Prechter, one of the guys I like to read, predicts virtually the same bottom numbers as above with the exception of gold. The only way you can get there, however, is with a deflationary depression.
That is why I do not think gold will go anywhere near $8000, $5000 or for that matter $2000.
Deflation attacks all assets, not necessarily equally, but all. Also, if it were headed that way the gov would make it’s possession illegal before one could benefit.
If you are thinking about buying real estate it’s best to wait because prices are still falling. Nobody wants to risk buying a new home when they may be able to pick it up cheaper in 6 mos to a year. Mortgages and credit for builders have also dried up and you can’t count on rising prices to help you out as many did since the late 80’s. 2012 if we are lucky. Bottom may be much further out.
[quote]Headhunter wrote:
[quote]JEATON wrote:
New home sales plunge a record 11.2% in January. Most readers in the forum were not alive the last time we saw numbers like this. I know I was in diapers.
[/quote]
What do 1932, 1982, and 2002 all have in common?
They were the bottoms in stocks. The bottom of this stock market will come in 2012, as the Great Depression of the 21st Century takes hold.
Dow will hit 1500, SP500 to 225, gold between $8000 and $10,000 per ounce.
$200,000 will buy 5 of what $200,000 will buy today in terms of homes.
"But then I think the whole stock market bottom will be reached in 2012. The only reason I am picking 2012 is I am a huge fan of a great cycles guy who died in 1955, called W. D. Gann.
TGR: Oh, yes.
IG: He did a lot on anniversaries and so on, and 2012 happens to be the 30th anniversary of the 1982 bottom, which was the beginning of the big speculative Autumn bull market. And it’s the 10-year anniversary of the first bottom, in 2002. The market peaked in 2000 and dropped in 2002. It’s also the 80th anniversary of the 1932 Winter bear market bottom, after the Dow had dropped 90% from its 1929 high.
That’s why I wrote a piece on my website called “This is It” in 2007, and one of the things that convinced me was when I saw those Bears Stearns funds sort of going bankrupt in July 2007. That was the 20-year anniversary of the '87 crash, the 100-year anniversary of a big market crash back in 1907, the 150th anniversary of a big 1857 crash. All these Gann kinds of numbers came in at the same time in 2007. That was so compelling that I was absolutely convinced that 2007 was the end. And that’s proved to be correct.
TGR: So you’re saying the market is going to be drop by half this year.
IG: Yep. I think we’re going to have a crash in stock prices this year. But I am staying long in my gold stocks."
http://www.marketoracle.co.uk/Article17422.html
[/quote]
Okay I know you are a well known troll but assuming you actually believe this then you should be stupidly rich by the end of 2012, right? I mean if you short the DOW down to 1500 and ride gold futures up to $8,000 that could turn a small amount of money into a fortune.
So in 22 months you’re going to come on here and show us all the pics of your newly gained wealth, right?
[quote]hedo wrote:
If you are thinking about buying real estate it’s best to wait because prices are still falling. Nobody wants to risk buying a new home when they may be able to pick it up cheaper in 6 mos to a year. Mortgages and credit for builders have also dried up and you can’t count on rising prices to help you out as many did since the late 80’s. 2012 if we are lucky. Bottom may be much further out.[/quote]
I tend to agree with you on if you are buying a house for yourself to live in, but if you are looking to buy a house to rent out that is a different story.
I believe if you buy a rental that gets you $200 per month profit, then you will do just fine if you buy now. You might get a better price a couple of years from now but you would loose the lost income, and tax shelter from the rental property.
[quote]JoeGood wrote:
[quote]Headhunter wrote:
[quote]JEATON wrote:
New home sales plunge a record 11.2% in January. Most readers in the forum were not alive the last time we saw numbers like this. I know I was in diapers.
[/quote]
What do 1932, 1982, and 2002 all have in common?
They were the bottoms in stocks. The bottom of this stock market will come in 2012, as the Great Depression of the 21st Century takes hold.
Dow will hit 1500, SP500 to 225, gold between $8000 and $10,000 per ounce.
$200,000 will buy 5 of what $200,000 will buy today in terms of homes.
"But then I think the whole stock market bottom will be reached in 2012. The only reason I am picking 2012 is I am a huge fan of a great cycles guy who died in 1955, called W. D. Gann.
TGR: Oh, yes.
IG: He did a lot on anniversaries and so on, and 2012 happens to be the 30th anniversary of the 1982 bottom, which was the beginning of the big speculative Autumn bull market. And it’s the 10-year anniversary of the first bottom, in 2002. The market peaked in 2000 and dropped in 2002. It’s also the 80th anniversary of the 1932 Winter bear market bottom, after the Dow had dropped 90% from its 1929 high.
That’s why I wrote a piece on my website called “This is It” in 2007, and one of the things that convinced me was when I saw those Bears Stearns funds sort of going bankrupt in July 2007. That was the 20-year anniversary of the '87 crash, the 100-year anniversary of a big market crash back in 1907, the 150th anniversary of a big 1857 crash. All these Gann kinds of numbers came in at the same time in 2007. That was so compelling that I was absolutely convinced that 2007 was the end. And that’s proved to be correct.
TGR: So you’re saying the market is going to be drop by half this year.
IG: Yep. I think we’re going to have a crash in stock prices this year. But I am staying long in my gold stocks."
http://www.marketoracle.co.uk/Article17422.html
[/quote]
Okay I know you are a well known troll but assuming you actually believe this then you should be stupidly rich by the end of 2012, right? I mean if you short the DOW down to 1500 and ride gold futures up to $8,000 that could turn a small amount of money into a fortune.
So in 22 months you’re going to come on here and show us all the pics of your newly gained wealth, right?[/quote]
I am completely out of non-gold stocks. My wife has stocks that her grandfather left her, which she is obviously very reluctant to pare down (like many of you, she thinks I’m a little ‘off the wall’. What the hell, you all think I’m nutz - there, I said it).
[quote]dmaddox wrote:
[quote]hedo wrote:
If you are thinking about buying real estate it’s best to wait because prices are still falling. Nobody wants to risk buying a new home when they may be able to pick it up cheaper in 6 mos to a year. Mortgages and credit for builders have also dried up and you can’t count on rising prices to help you out as many did since the late 80’s. 2012 if we are lucky. Bottom may be much further out.[/quote]
I tend to agree with you on if you are buying a house for yourself to live in, but if you are looking to buy a house to rent out that is a different story.
I believe if you buy a rental that gets you $200 per month profit, then you will do just fine if you buy now. You might get a better price a couple of years from now but you would loose the lost income, and tax shelter from the rental property.[/quote]
Good to hear cause I was thinking about purchasing soon.
If you guys had to guess, when do you think it will hit the bottom?
[quote]dmaddox wrote:
I believe if you buy a rental that gets you $200 per month profit, then you will do just fine if you buy now. You might get a better price a couple of years from now but you would loose the lost income, and tax shelter from the rental property.[/quote]
Obviously, different markets can differ, but where I live for example the glut extends to the rental market as well.
Any house offered for what would be a profit relative to interest cost of loan, insurance, and property tax would be overpriced and would sit empty.
If your market is one where, as is now common, there are very many more dwellings than there are households, then a lot of them ARE going to sit empty.
Instead, the question is how much of a loss must be taken so as to get any revenue at all.
[quote]JoeGood wrote:
Okay I know you are a well known troll but assuming you actually believe this then you should be stupidly rich by the end of 2012, right? I mean if you short the DOW down to 1500 and ride gold futures up to $8,000 that could turn a small amount of money into a fortune.
So in 22 months you’re going to come on here and show us all the pics of your newly gained wealth, right?[/quote]
Although I think projecting long term outcomes in dynamic systems is akin to mental masturbation (fun in the moment, but kind of empty when your done), I think this statement assumes too much.
Even if you did believe the DOW could go down to 1500 in the next two to five years (very possible from a deflationary perspective) it is unlikely that one could profit from the fall after a certain point. Banks and brokerages would be failing so quickly at some point that the possibility of getting paid on your “bets” would be virtually zero. Also, if the gov made the ownership of gold illegal, as it has proven itself capable of, one would again find themselves “right” but as poor as ever.
Also, I have been dead on right about the eventually outcome of an event literally hundreds of times without getting the exact time frame correct. In the end I could say “I told you so”, but I could not show you the money.
A very short list:
Global Crossing
GM
Exodus
Enron
Fannie
Freddie
and many more.
Another thing that I will try to find and post just for kicks, if you take our March 2009 low in the DOW and adjust it in value to gold rather than dollars, we have already hit 1500.
Why precisely would the price of gold have more “truth” to it as a representation of value than the price of, say, titanium, steel, oil, copper, or wheat?
Or for that matter, fractional ownership of an index of companies?
(Other than citing that many people think so.)