The two big overhangs to the economy remain jobs and housing.

As the chart below makes clear, without extensive government subsidies, the artificially high prices of homes cannot be sustained.

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click for ginormous chart

courtesy of Bianco Research

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Category: Bailouts, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

14 Responses to “Home Sales Collapse w/o Government Support”

  1. philipat says:

    Thanks David Rosenberg and Barry!!

  2. The Curmudgeon says:

    That’s got to be the “Duh” headline of the year. Are you shitting me? You mean when the Fed quits buying houses at a $1.4 TRILLION

  3. The Curmudgeon says:

    oops…hit submit before I was through…

    but really. $1.4 Trillion? That’s not propping up housing prices? How ’bout $8,000 tax-free increase to your income for buying one? How ’bout $400 billion in subsidies to Fannie, Freddie, Ginnie Mae, etc.?

    There is no housing market w/out government price supports. It is all a fraud. The poster child for the new economy.

  4. Transor Z says:

    FYI, NAR is claiming that all-cash transactions have been making up about a quarter of sales in recent months. That’s based on “surveys.” So they claim that the MBA Purchases Index isn’t capturing those sales. Whatever. Thanks for this, Barry.

    Somewhat related: BoA to pay $108 million to Countrywide borrowers

    http://www.boston.com/business/articles/2010/06/07/bank_of_america_to_pay_borrowers_108_million/

  5. dwkunkel says:

    I don’t know about the NAR numbers, but here in the SF Bay Area four of our friends have bought condos or town houses for all cash. They reason that it’s a better use of their money than risking it the stock market or letting it sit in the bank collecting almost no interest.

  6. Thor says:

    dwkunkel – but is that wise? I’m from the SF Bay Area, and most of my friends and family are still up there. I’d hazard a guess that real estate is still hugely in bubble territory up there, especially in the City itself. Those friends must be confident the housing market isn’t going to finish it’s collapse. . .

  7. ashpelham2 says:

    Its simple: if you buy a house with cash, and the value declines, who cares? If you don’t lose your job and MUST sell the house or lose it, then you have no risk. Sit in it until the roof caves in. Who cares what the value is.

    The value of things like stocks and houses is only relative if you’re trying to sell it or are attempting to lever it. However, there are many people who could continue to pay on homes that are worth less than the note, or continue to hold stocks that are dropping in value, and get wigged out about it.

    No long term thinking at all in this country anymore. Everything is about “now”.

  8. The Curmudgeon says:

    Hmm. Putting cash into an asset whose price is underwritten by government largesse. That sounds an awful lot like a stock market investment. Not to fear. Uncle sugar will always be there to prop up the prices of houses. He sometimes neglects the stock markets.

  9. I totally agree with @The Curmudgeon, this is like in stock market investment. liked this post a lot. Thank you for sharing it.
    By the way I also consider @ashpelham2′s comment to be very good.

  10. sbcharo says:

    I’m a very active residential real estate broker in San Diego County. I can concur that the market has indeed slowed since the government stimulus stopped. Sales below 500k are still “ok” (kind of welcom actually as they have been insane and highly competitive for a couple years). Sales above 500k are much softer. However, the MBA purchases index is less reliable as a market indicator in an environment where high percentages of transactions are cash. You may find many sources for percentage of cash transactions in each metropolitan area. ” According to MDA DataQuick’s, Andrew LePage, an MDA analyst, said when looking at the transfer of San Diego property transactions that do not include a mortgage, these made up 27 percent of the resales in the (San Diego) county in February, compared with 28 percent in January and 23 percent in February of last year.”

  11. d4winds says:

    $8,000 is not nothing; it does take care of points, closing costs, etc. for the median home. But it’s not nearly enough to prop up sales very noticeably. It is, however, enough to affect the timing of purchases. So one can expect the drop-off in purchases to be more severe than otherwise.

  12. Sunny129 says:

    CASH FREE transactions!

    Sounds like bugle call for all the DRUG CARTEL MONEY from all over!

    America the land of opportunity, for those with wads of cash and don’t know how to laundry them!

    Don’t ASK, Don’t TELL Policy strictly observed! Violators will be taken care by the ‘depositors’!

  13. Sunny129 says:

    CASH ONLY but DOCUMENTS FREE!

  14. Kralizec says:

    As the chart below makes clear, without extensive government subsidies, the artificially high prices of homes cannot be sustained.

    Imagine with what little pity renters and aspiring homeowners watch prices fall, those who have for so long been caught between the high price of houses and paying the expenses of the bureaus administering “affordable housing” for others.