Real Estate Recovery Is Only a Mirage

[Unobtanium]

I have also long thought that we still have a way to go before the US housing market bottoms, despite some pockets of localized recovery.

Additionally, despite the mid 2000's US housing bubble, there are housing bubbles in many other countries waiting to pop:
http://www.stock-market-crash.net/housing-bubble/

Real Estate Recovery Is Only a Mirage
By: Rick Ackerman, Rick's Picks
-- Posted Thursday, 21 June 2012
http://news.goldseek.com/RickAckerman/1340283600.php

As the Great Recession drags on, albeit without official sanction, each and every silver cloud of economic news continues to harbor a dark lining. Most recently, amidst the mainstream media’s hubris over a supposedly stabilizing housing market, we read yesterday in the Denver Post that the region is bracing for yet another painful round of foreclosures. “Despite reports of a thawing housing market,” the paper noted in a front-page article, “yet another wave of foreclosure appears to be looming.” The fact that lenders are gearing up for this is apparent in the sharp spike in deed-of-trust assignments in Colorado. Compared to 2011, they’ve more than doubled in the first five months of this year. Deeds of trust convey ownership rights of mortgages and the ability to foreclose on them, and they are therefore a reliable indicator of foreclosure activity to come. According to the Post, if only half of the filings become actual foreclosure cases, foreclosures could spike to 2007’s crisis levels.

We have long predicted that home prices would eventually fall by at least 70% as debt deflation ran its course globally. This would imply that, despite the unprecedented drop in residential real estate values since 2007, residential values in the U.S. are only halfway to a bottom. .......

....And that is why a wave of foreclosures here would be bad news for other cities whose economies have been merely muddling along. Despite this, the mainstream media have taken an activist role in promoting the illusion of a housing recovery. A front-page story in the Wall Street Journal yesterday offered statistics from Zillow to support a picture of spotty recovery in real estate prices across the U.S. But guess which city was near the top of the list, with home values rising over the previous three months in more than 90% of zip code neighborhoods? Answer: Denver. Considering what was being reported in the Denver Post on the same day (see above), we should take the Wall Street Journal’s good news with a grain of salt. As Denver goes, so goes the nation? It’s a possibility worth considering as the mainstream media continues to obsess over a recovery that isn’t, –and never was.

All Contents © 2011, Rick Ackerman. All Rights Reserved.www.rickackerman.com

[PMBug]

There is still a huge backlog of foreclosed homes (so called shadow inventory) that have not hit the market yet:

http://www.pmbug.com/forum/f4/oh-shi...out-burst-766/

[69mach351]

I think that we have hit the bottom, but it is going to be a very...very long time to start "recovering" from it. There are a lot of factors that go into home prices/sales/building/etc. and all of them need to have some sort of recovery before the housing market really picks up. A lot of it will depend on where you live. My area of the country did not get hit as hard as others, but if you are smart and have the assets, now is the time to make a move when it comes to real estate.

[DSAbug]

My area of the country did not get hit as hard as others, but if you are smart and have the assets, now is the time to make a move when it comes to real estate.

Every part of the country will have their 08 moment. It's starting to happen in Texas (due to natural gas falling) so don't plan on buying a new home for a few more years.

[69mach351]

Every part of the country will have their 08 moment. It's starting to happen in Texas (due to natural gas falling) so don't plan on buying a new home for a few more years.

It is all relative. The better things are when times are good, the harder they will crash if things go bad. Some people saw the value of their home fall 50-70%+. Others saw only a small fraction of that. If prices never got artificially inflated, then they can burst as big. I am not necessarily talking about Texas, but the midwest in general.

[DoChenRollingBearing]

Everyone I have talked to over the past couple of years or so tells me that nothing has really gotten any better for them. No green shoots. That includes most forms of real estate.

But, mine are only anecdotes from people I know. YMMV!

[Unobtanium]

There is still a huge backlog of foreclosed homes (so called shadow inventory) that have not hit the market yet:

http://www.pmbug.com/forum/f4/oh-shi...out-burst-766/

We have been hearing about this shadow inventory a couple times a year, threatening to be released. There are reports that a tidal wave of foreclosures are about to be released, and then you hear nothing about it for a while. I have not kept up close enough to know what percentage of this has actually hit the market yet.

Everyone I have talked to over the past couple of years or so tells me that nothing has really gotten any better for them. No green shoots. That includes most forms of real estate.

But, mine are only anecdotes from people I know. YMMV!

My area actually lagged a bit from the national bust, and is now seeing some significant price reductions in homes, especially larger homes.

[BigJim]

3.7% 30 Year Rate & still in the tank.
No JOBS!!! Doesn't matter if 0%,noJOBS or the fear of losing one's job the housing mkt will continue to tank.
JMHO

GOD BLESS OUR TROOPS!!!

[DoChenRollingBearing]

@ BigJim. Yes.

No jobs, that explains it.

I am reading a brand new book called The Coming Jobs War, by Jim Clifton, the head of Gallup, the polling company. The book is far more interesting than the title might lead you to believe. There ARE ways that cities can create good jobs, most are doing it wrong...

Gallup did a HUGE STUDY and asked people all over the world what their single biggest issue was. The plurality was getting a good job. Every country responded that way.

[benjamen]

Interesting article:
http://www.thedailybell.com/4023/For...t-No-One-Needs

Essentially, there is slightly more demand for small homes and condos that existing inventory, while there are massively less demand for large homes than existing inventory.

[Unobtanium]

@BigJim, DoChen,

And Taxmageddon muddies the jobs/real estate waters even more:

http://www.heritage.org/research/fac...on-the-horizon
Taxmageddon Is Huge

Unprecedented Tax Hike For 2013:
Starting January 1, 2013, Americans will face a $494 billion tax increase, the highest ever in one year. Obamacare’s tax increase over 10 years barely edges ahead of Taxmageddon at $502 billion. The average American household would see its taxes rise by $3,800 in 2013 alone. And this is just for one year. Taxpayers would see even higher tax hikes in succeeding years.

Expiring Tax Cuts and Obamacare’s New Taxes:
Almost 34% of the tax increases from Taxmageddon come from the expiration of the 2001 and 2003 Bush tax cuts. Another 25% comes from the expiration of the payroll tax cut. Most of the remaining increases come from Obamacare, notably from the start of the hospital insurance 3.8% surtax on all forms of income over $250,000.

Taxmageddon Hits the Middle Class:
Taxmageddon falls primarily on middle- and low-income Americans. That’s because 60 percent of the Bush tax cuts went to middle and low-income taxpayers. The expiration of the patch on the Alternative Minimum Tax (AMT) will cause these taxpayers to pay a tax they were never supposed to be hit with, and the expiration of the payroll tax cut is a tax hike almost exclusively on middle- and low-income families. That’s just the direct impact. Americans at all income levels will feel the pain of Taxmageddon because it will slow job creation and wage growth.


Businesses Already Preparing for Higher Taxes

Holding Off on Hiring:
Although these taxes don’t start until January 1, 2013, they are already having a negative impact on the economy. This just continues to slow job creation and stop many unemployed Americans from going back to work.

Uncertainty Harms Everyone:
Families, businesses and investors need to know how much more they’ll pay in taxes next year before they make important economic decisions. This means they, and the rest of the economy, are stuck in neutral while they wait to see if Congress and the President will act.


Congress Must Stop This Fiscal Disaster

Last-Minute Actions Are Dangerous:
Congress and President Obama have a penchant for waiting until the last minute to act on pressing tax legislation. In 2010, they waited until late December to extend the expiring Bush tax cuts for two years. At the end of 2011, they again waited until late December to extend the expiring payroll tax holiday. All the while, businesses and families suffered from the uncertainty that Washington created.

Remove the Threat Now:
Congress and President Obama should remove any threat of Taxmageddon from the American people’s future. Businesses, investors, and families need to know now that they will not be hit with a massive tax increase on New Year’s Day 2013.

[Unobtanium]

I think that we have hit the bottom, but it is going to be a very...very long time to start "recovering" from it. There are a lot of factors that go into home prices/sales/building/etc. and all of them need to have some sort of recovery before the housing market really picks up. A lot of it will depend on where you live. My area of the country did not get hit as hard as others, but if you are smart and have the assets, now is the time to make a move when it comes to real estate.

Mach, you and Mish are in agreement:

http://globaleconomicanalysis.blogsp...ot-coming.html

Let's put it all together and look at the picture from the point of view of housing.

1.Kids are graduating from college deep in debt with poor job prospects.
2.Those with too much debt and too little income are sharing apartments or moving back home, not buying homes and starting families.
3.Boomers are looking to downsize, not buy more toys and larger houses.
4.Shadow inventory of sellers waiting for higher prices is immense, yet generation X and Generation Y represent small pools of potential buyers

Nonetheless, I believe housing is bottoming. I made the case in New American Dream is Renting; Reflections on Renting Houses, Cars, Books, Clothes; Will Rentership Fuel the Next Boom? What About Home Prices?

However, even "if" housing is bottoming, don't expect either housing or the economy to go anywhere fast. Prospects for family formation are fundamentally very weak and overall economic fundamentals are very weak as well.