Housing Market Inventory At Extreme Lows [Dec 2012]

[jimbobway]

So housing is another market not commonly discussed in the Speculation forum but I thought I'd reveal some things that have been happening.  Earlier this year housing prices were really low.  The fed decided to lower interest rates, which made it easier to borrow money to buy homes.  In San Diego from around March to December the housing inventory has been steadily dropping because people have been buying.  Because there is now a lower supply of homes the prices of the homes have now gone up.  (This is basic supply and demand logic.)

It appears housing prices will continue to go up if the supply of homes continues to decrease.  But, there are some conspiracy theories out there.  One theory is that banks could be holding onto foreclosed homes and not selling them, thus keeping the supply low.  Some people are theorizing that there could be a flood of foreclosed homes on the market next year when Obama goes back into office.  (This same theory was mentioned early this year but it never materialized near the end of the year.)

So, will the housing market continue to inflate?  Or, will there be a flood of homes put on sale next year?  What is going on here?  Speculate!

[adamstgBit]

well if the banks are holding to artificially increase the price of homes, they will continue to do just that... so no worries there

I guess it all depends on whether or not the economy recovers.

if it recovers, then people will continue to pay their mortgages and more and more people will be buying homes, even if the interest rates rise a little.

If the economy doesn't recover, and people start to default on their homes once again, this will create deflation. If deflation happens, paying the mortgage will become increasingly difficult, making even more people default,  creating even more deflation!

if the government tries to combat deflation by printing money like crazy, that wont help because cost of living will increase, and home owners will be no better off.

so everything hangs by a thread as we wait for the economy to recover.

did i get it right? lol

[adamstgBit]

You can still buy a house for a dollar!

Ill Buy them all!

[myself]

if you want to get a house at a low price better use tax lien certificates that to buy one, the risk reward is awesome

[Qoheleth]

One theory is that banks could be holding onto foreclosed homes and not selling them, thus keeping the supply low.

That's not a theory, that's common sense. If they put everything they have on the market at once, they'd flood it and recoup pennies on the dollar instead of dimes. Better to empty their queue at steady, careful pace.

(Of course, that means they won't flood the market next year either.)

[smoothie]

The inventory is only low because the banks that own the majority of the bad asset homes are keeping them off the market to help keep the prices propped up.

Nuff said.

[SgtSpike]

You can still buy a house for a dollar!

Not in Oregon!  

What time period are we speculating on? If the Fed is holding interest rates low and essentially re-inflating the bubble (and probably stimulating the housing market through inflation of the currency) then short - medium term prices would probably rise, but they can't artificially hold rates low forever can they? Well perhaps they can if the Fed just keeps expanding the money supply, but that is unsustainable. Long term when rates inevitably rise and /or the economy weakens then more people will be underwater on their mortgages and supply will rise causing prices to fall.

But if the "normal" state of the economy is one of inflation (3%), then when we achieve that inflation rate again, can you really call it a bubble?

Regardless, these waves of booms and busts seem to be a normal part of the economy.  A way of self regulating and testing the boundaries.  I don't think we'll see another recession as bad as this one for a while, but you never know... it could happen.  I think many people (with exception of the government) have learned their lesson about taking on too much debt with this 4 years of lowered incomes.

[Comodore]

We will see extreme lows in real terms. In terms of nominal values... hahaha helicopter Bernanke

[cypherdoc]

http://www.nytimes.com/2012/12/02/business/in-an-fha-checkup-a-startling-number.html?emc=eta1&_r=1&

[SgtSpike]

http://www.nytimes.com/2012/12/02/business/in-an-fha-checkup-a-startling-number.html?emc=eta1&_r=1&

Interesting article.  I'm an FHA borrower myself (big mistake), and recently refinanced my home to take advantage of much better loan rates.  When we bought in late 2008, the mortgage insurance cost was about $50/month.  When we refinanced, that went up to $150/month.  Yikes!  On the upside, the difference in interest rate still made it a worthwhile deal, given that we pay almost $200 less per month and about $50 more per month is going to principle.  It just sucks to have that $150 tied up as well, because that could be an extra $150/month in our pocket (and for 5 years, even if we pay off more than 25% of the loan in that time!).  Oh well...

Also, lol @ FHA... go figure, you loan to people with sub-600 credit scores and they default at a very high rate!   

[cypherdoc]

http://www.nytimes.com/2012/12/02/business/in-an-fha-checkup-a-startling-number.html?emc=eta1&_r=1&

Interesting article.  I'm an FHA borrower myself (big mistake), and recently refinanced my home to take advantage of much better loan rates.  When we bought in late 2008, the mortgage insurance cost was about $50/month.  When we refinanced, that went up to $150/month.  Yikes!  On the upside, the difference in interest rate still made it a worthwhile deal, given that we pay almost $200 less per month and about $50 more per month is going to principle.  It just sucks to have that $150 tied up as well, because that could be an extra $150/month in our pocket (and for 5 years, even if we pay off more than 25% of the loan in that time!).  Oh well...

Also, lol @ FHA... go figure, you loan to people with sub-600 credit scores and they default at a very high rate!   

well that's the thing.  everyone thinks the banks are lending again but they're not.  they only have lent to students whose debts are guaranteed by Sallie Mae (gov't) and lent to homebuyers who qualify for Fannie/Freddie/FHA (gov't).  they never hold the loans cuz they know they're bad and only want the fees generated by the loans.

personally, i think its a very risky time to buy a house b/c interest rates are at all time lows.  if you qualify and i doubt you will if you can't get a gov't subsidized loan, make sure its fixed rate otherwise when interest rates rise you will be crushed.  the reason prices have been rising is that the banks have been keeping foreclosures off the market and any price rise will see an increased release of these foreclosures/REO's back onto the market acting as a price suppression mechanism that's built in.  also, much of the buys made the last few years have been cash buys from big investors whose goal is to flip these things when the price is right; if it ever gets there.

http://www.acting-man.com/?p=20728

http://www.acting-man.com/?p=20622

[cypherdoc]

btw, the author of those 2 articles i posted above is Ramsey Su; from San Diego.

[jimbobway]

well that's the thing.  everyone thinks the banks are lending again but they're not.  they only have lent to students whose debts are guaranteed by Sallie Mae (gov't) and lent to homebuyers who qualify for Fannie/Freddie/FHA (gov't).  they never hold the loans cuz they know they're bad and only want the fees generated by the loans.

personally, i think its a very risky time to buy a house b/c interest rates are at all time lows.  if you qualify and i doubt you will if you can't get a gov't subsidized loan, make sure its fixed rate otherwise when interest rates rise you will be crushed.  the reason prices have been rising is that the banks have been keeping foreclosures off the market and any price rise will see an increased release of these foreclosures/REO's back onto the market acting as a price suppression mechanism that's built in.  also, much of the buys made the last few years have been cash buys from big investors whose goal is to flip these things when the price is right; if it ever gets there.

http://www.acting-man.com/?p=20728

http://www.acting-man.com/?p=20622

Thanks for the links.  I wish I had hard data on what the bulk buyers and banks are holding.  All of this could be speculation.  It is possible there is low inventory because people don't want to sell for a loss?  Everyone is waiting for the market to go back up and home prices to go up.  When the market does go back up then will everyone sell at the same time?

[cypherdoc]

well that's the thing.  everyone thinks the banks are lending again but they're not.  they only have lent to students whose debts are guaranteed by Sallie Mae (gov't) and lent to homebuyers who qualify for Fannie/Freddie/FHA (gov't).  they never hold the loans cuz they know they're bad and only want the fees generated by the loans.

personally, i think its a very risky time to buy a house b/c interest rates are at all time lows.  if you qualify and i doubt you will if you can't get a gov't subsidized loan, make sure its fixed rate otherwise when interest rates rise you will be crushed.  the reason prices have been rising is that the banks have been keeping foreclosures off the market and any price rise will see an increased release of these foreclosures/REO's back onto the market acting as a price suppression mechanism that's built in.  also, much of the buys made the last few years have been cash buys from big investors whose goal is to flip these things when the price is right; if it ever gets there.

http://www.acting-man.com/?p=20728

http://www.acting-man.com/?p=20622

Thanks for the links.  I wish I had hard data on what the bulk buyers and banks are holding.  All of this could be speculation.  It is possible there is low inventory because people don't want to sell for a loss?  Everyone is waiting for the market to go back up and home prices to go up.  When the market does go back up then will everyone sell at the same time?

that certainly is a theory that is circulating.

just to present the other side of the story to be fair; Calculated Risk is bullish on housing even though i don't agree.

lots of clues can be gleaned from the stock market.  yes, i think we're in the process of rolling.  Toll Brothers had their earnings call yesterday at 11:00 AM and the stock went straight down a total of about 7% since by the end of today.

[SgtSpike]

http://www.nytimes.com/2012/12/02/business/in-an-fha-checkup-a-startling-number.html?emc=eta1&_r=1&

Interesting article.  I'm an FHA borrower myself (big mistake), and recently refinanced my home to take advantage of much better loan rates.  When we bought in late 2008, the mortgage insurance cost was about $50/month.  When we refinanced, that went up to $150/month.  Yikes!  On the upside, the difference in interest rate still made it a worthwhile deal, given that we pay almost $200 less per month and about $50 more per month is going to principle.  It just sucks to have that $150 tied up as well, because that could be an extra $150/month in our pocket (and for 5 years, even if we pay off more than 25% of the loan in that time!).  Oh well...

Also, lol @ FHA... go figure, you loan to people with sub-600 credit scores and they default at a very high rate!   

well that's the thing.  everyone thinks the banks are lending again but they're not.  they only have lent to students whose debts are guaranteed by Sallie Mae (gov't) and lent to homebuyers who qualify for Fannie/Freddie/FHA (gov't).  they never hold the loans cuz they know they're bad and only want the fees generated by the loans.

personally, i think its a very risky time to buy a house b/c interest rates are at all time lows.  if you qualify and i doubt you will if you can't get a gov't subsidized loan, make sure its fixed rate otherwise when interest rates rise you will be crushed.  the reason prices have been rising is that the banks have been keeping foreclosures off the market and any price rise will see an increased release of these foreclosures/REO's back onto the market acting as a price suppression mechanism that's built in.  also, much of the buys made the last few years have been cash buys from big investors whose goal is to flip these things when the price is right; if it ever gets there.

http://www.acting-man.com/?p=20728

http://www.acting-man.com/?p=20622

Anyone who buys a house on an ARM deserves exactly what they get.  Complete idiocy to even consider doing that...

It's a great time to buy because of the interest rates.  Has nothing to do with the risk of ARM's - that's a bad idea regardless when you buy.

[Kluge]

Not really sure why banks keeping foreclosures off the market would be considered a "conspiracy theory."

I spent a long, long time looking at short sales and foreclosures before settling a few months ago. Ask any realtor why the Hell banks are letting $300k+ homes suffer severe water damage, house abuse by gangs making foreclosures a hangout, and other effects of nobody giving a damn. In one house I looked at, it would've been worth well over $200k if the bank had bothered to maintain the house since it was foreclosed on over two years ago. Instead, it went into disrepair and was listed at a price of $25k, about the value of the land (the water damage was so bad, the subflooring had given out in some places during previous showings). I also don't see why banks wouldn't consider these houses as more of liabilities than assets given how many don't appear to even bother maintaining their properties. I'd be pretty eager to get a $150k current-value house with $6k/yr in maintenance and taxes far away from my hands, even if there was a $200k amount in default, rather than banking on a kind of supply-reducing oligopoly on the US housing market working out.

[johnyj]

... but they can't artificially hold rates low forever can they? Well perhaps they can if the Fed just keeps expanding the money supply, but that is unsustainable.

Fed is printing money to buy those foreclosed homes (or indirectly, mortgage backed securites), and they keep it as a reserve

These homes will worth a little if all goes to the market. But, like FED could destroy money as well, when the economy is fully recovered, they could sell these homes at a later time to cool down the economy (just like they sell the government bonds, home or government bonds, which has higher credit?),

[cypherdoc]

http://www.nytimes.com/2012/12/02/business/in-an-fha-checkup-a-startling-number.html?emc=eta1&_r=1&

Interesting article.  I'm an FHA borrower myself (big mistake), and recently refinanced my home to take advantage of much better loan rates.  When we bought in late 2008, the mortgage insurance cost was about $50/month.  When we refinanced, that went up to $150/month.  Yikes!  On the upside, the difference in interest rate still made it a worthwhile deal, given that we pay almost $200 less per month and about $50 more per month is going to principle.  It just sucks to have that $150 tied up as well, because that could be an extra $150/month in our pocket (and for 5 years, even if we pay off more than 25% of the loan in that time!).  Oh well...

Also, lol @ FHA... go figure, you loan to people with sub-600 credit scores and they default at a very high rate!  

well that's the thing.  everyone thinks the banks are lending again but they're not.  they only have lent to students whose debts are guaranteed by Sallie Mae (gov't) and lent to homebuyers who qualify for Fannie/Freddie/FHA (gov't).  they never hold the loans cuz they know they're bad and only want the fees generated by the loans.

personally, i think its a very risky time to buy a house b/c interest rates are at all time lows.  if you qualify and i doubt you will if you can't get a gov't subsidized loan, make sure its fixed rate otherwise when interest rates rise you will be crushed.  the reason prices have been rising is that the banks have been keeping foreclosures off the market and any price rise will see an increased release of these foreclosures/REO's back onto the market acting as a price suppression mechanism that's built in.  also, much of the buys made the last few years have been cash buys from big investors whose goal is to flip these things when the price is right; if it ever gets there.

http://www.acting-man.com/?p=20728

http://www.acting-man.com/?p=20622

Anyone who buys a house on an ARM deserves exactly what they get.  Complete idiocy to even consider doing that...

It's a great time to buy because of the interest rates.  Has nothing to do with the risk of ARM's - that's a bad idea regardless when you buy.

that's really not true at all.  those who speculated on homes during the run up who had ARM's have been "bailed out" essentially by the rest of us as Ben has lowered interest rates over the last 4 yr.  their monthly payments have actually decreased allowing many to stay in their homes.  

look at municipalities that were duped into buying ARS's which were essentially bets that interest rates would rise.  these were sold by Wall St as a hedge against the muni bonds which municipalities sold.  Jefferson County and many others have lost millions if not billions on these bets.  a conspiracy theorist would say that Wall St sellers of these instruments knew that Ben would be there with the free money to bail them out via further suppression of rates as the bubble popped.  they have made fortunes at the expense of the municipalities.

[cypherdoc]

Not really sure why banks keeping foreclosures off the market would be considered a "conspiracy theory."

I spent a long, long time looking at short sales and foreclosures before settling a few months ago. Ask any realtor why the Hell banks are letting $300k+ homes suffer severe water damage, house abuse by gangs making foreclosures a hangout, and other effects of nobody giving a damn. In one house I looked at, it would've been worth well over $200k if the bank had bothered to maintain the house since it was foreclosed on over two years ago. Instead, it went into disrepair and was listed at a price of $25k, about the value of the land (the water damage was so bad, the subflooring had given out in some places during previous showings). I also don't see why banks wouldn't consider these houses as more of liabilities than assets given how many don't appear to even bother maintaining their properties. I'd be pretty eager to get a $150k current-value house with $6k/yr in maintenance and taxes far away from my hands, even if there was a $200k amount in default, rather than banking on a kind of supply-reducing oligopoly on the US housing market working out.

if you were a bank and were faced with going thru the normal foreclosure process and losing money in a declining market vs. keeping those homes on your books and getting bailed out by the Fed at mark to model prices (inflated) which would you do?  who cares about the homes anymore?  they've essentially been bought by the rest of us via the debasement of our currency.

[cypherdoc]

https://bitcointalk.org/index.php?topic=68655.msg1382461#msg1382461