I have been very unequivocal about my view of Housing market — its not anywhere people should be expecting ordinary year over year price appreciation. As the recent  Case Shiller data shows, this is still a market where despite record low mortgage interest rates, prices are falling. A normalized market is probably many years away still.

So I find it encouraging when Robert Shiller states a similar view:

BLODGET: A lot of people have just called the bottom in the housing market in the United States, and there’s been some okay data recently. Is that your take? That finally housing prices are bottoming?

SHILLER: When people phrase is that way, they say ‘we’ve reached the bottom.’ That suggests that we have the expectation of a major turning point right now. But I don’t see that. I don’t see any reason to think that prices are going to start heading up dramatically now. We do have some good news. Permits are up. Notably, the National Association of Homebuilders Housing Market Index is up and that’s a forward looking index. But it’s not up very much. If you look at the rate of change it looks dramatic but it’s still at a low level.

- Siller: A Housing Bottom? What Are They Thinking?


As the charts below show, there is an enormous difference between a reversal and merely scraping along the bottom . . .

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See also Video: Barry Ritholtz: A Housing Bottom Is Nowhere In Sight

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Click to enlarge:

Source: Bianco Research

Category: Real Estate, Really, really bad calls

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.

19 Responses to “Housing Bottom Calls Continue Despite Evidence”

  1. BennyProfane says:

    It’s simple. The next twenty to thirty years will be the Boomer die off, and the selling of their overpriced (at the moment) and oversized homes too far from urban cores to a younger generation that will never experience the standard of living those Boomers experienced. You do the math.

  2. Arequipa01 says:

    2032. So, as Clayton Williams* recommended (to such good effect): “Just relax and enjoy it.”

    *Genuine Grade-A Texas Genius. Thanks again Texas!

  3. wally says:

    “When people phrase is that way, they say ‘we’ve reached the bottom.’ That suggests that we have the expectation of a major turning point right now.”

    Shiller isn’t answering the question he was asked. He wasn’t asked when things were going to ‘turn up’.

  4. Wade says:

    House prices will fall until they are 2.4 times the yearly family income of the families buying them. This was true for about 100 years (prior to the bubble) because, if the lender loans more than this to a family, they probably won’t get paid back. More debt than this puts too much strain on the family finances and causes defaults.
    Whenever the lenders want to be paid back for house loans (instead of bundling them and selling them off to the next fool), I believe this multiple will hold true.
    Add this to the fact that the incomes of families that want to buy a house are generally in decline, and you can see that the future of house prices does not look good.

  5. Nuggz says:

    In urban areas with good public transit and amenities, the bottom occurred last year.

    That will not be the case for suburbia and exurbia.

    And while I agree with BennyProfane, my experience with new hires is that they do not want to live in the outer suburbs.

  6. Frilton Miedman says:

    Kyle Bass called it over five years ago, and it wasn’t just a generic or lucky call – he knew exactly what would cause it and why, for this reason, I can’t see looking at housing charts alone as a smart idea.

    Kyle’s rationale revolved around the simple premise that wages had to be growing at a rate fast enough to support pricing. because the booming housing market was only being boosted by consumer credit on the and fraudulently “triple A” rated CDO’s comprised of liar loans. (featured on CNBC’s “House of Cards” with Dave Faber – EXCELLENT documentary on the topic)

    I’ll stick with Kyle Bass’s logic, better to observe what effects demand – unemployment rates, wages, consumer debt (overall middle class net worth) to gauge what home prices will do next.

    Consumer debt to income is still ridiculously high relative to historic levels (debt is 160+% of income if memory serves, making the government deficit look silly by comparison), wages are falling as a result of globalization and lowered demand for American workers….this will take decades to level off, where currently an educated Chinese professional works at rates as low as 5% the wages an educated American needs to survive.

  7. Frilton Miedman says:

    We really need an edit function -

    “..housing market was only being boosted by consumer credit on the and fraudulently “triple A….””

    Should be:

    “..housing market was only being boosted by consumer credit and fraudulently “triple A….””

  8. ashpelham2 says:

    You all have hit the nail on the head: as far as I’m concerned, everyone here is more qualified to run out country’s finances than the people currently doing so.

    Suburbs and further out will continue to fall through the floor, to eventually be at the point where they will become the new “project” housing. Why? Oversupply is one. Job growth is another. Location is still another. Biggest reason though? Energy costs. Right now, OPEC is pumping more than any time since Oct 2008, per Bloomberg’s Katherine Hayes show this morning. Yet the price of crude is artificially held up by fears over Iran, refining concerns, “demand”, as they call it, what have you…

    Energy costs are killing my property values. The rules have changed rapidly since I purchased my home in 2003. I’m 9 years here now, and I’ve lost value since then. That says nothing to the folks that bought a few years after me, who paid even more.

    I”m sitting here wondering about a sale decision for myself. Is a home buy and hold when it needs repairs and market values are falling rapidly? Do I even bother?

  9. mark says:

    Japanese real estate and land prices topped in about 1990 give or take a couple of years depending on what part of Japan one was in. Twenty years later people are still asking the question: Have Japanese real estate prices bottomed?

    http://www.doctorhousingbubble.com/japan-lost-decades-reinventing-japan-economic-lost-decades-in-the-united-states-young-adults-real-estate-trends-stock-markets/

    The real question that needs answering is: Will we do better or worse than Japan? Personally I’ve yet to see any compelling evidence to suggest that the answer will be better.

  10. Old Rob says:

    In the late 1940s and early 1950s, you could still buy tax-title land (Depression bust property) for building a home in the northeast part of Massachusetts. That fact allowed many people coming home from WWII to build their small dream house. It is important to realize that these tax-title land lots were left over from the land speculators of the late 1920s. That was a 20+ year span. Things didn’t really pick until the mid 1950s to early 1960s in eastern Massachusetts.
    I don’t know what the situation was like in other parts of the country, but recovery will be in the future and may never return to the ‘good times’ of the early 2000s.

  11. Rightline says:

    BR on the Daily Ticker, had a link and prominent spot on yahoo finance home page 3:30 est…

    http://finance.yahoo.com/blogs/daily-ticker/barry-ritholtz-housing-bottom-nowhere-sight-181259409.html

  12. streeteye says:

    should have said, price to rent ratio hasn’t returned to long term average … ratio doesn’t really measure if cheaper to rent.

    Unclear if it’s generally cheaper to rent, hard to measure and depends on assumptions about maintenance, taxes etc. But with rates where they are, it might be getting there.

  13. Francois says:

    As long as wages stay low or, at the very least, refuse to grow, this economy isn’t rebounding. Oh! It has already rebounded for some, (and then some!) but since when do we judge an economic performance on the well being of a minority?

  14. Frwip says:

    No.

    The best argument against calling a bottom is to remember that Case-Shiller is NOT corrected for inflation.

    Adjusted for CPI-U, the Composite-10 for November 2011 stands at 113.34, back to its value of June 2001 (113.83) and 4.83% below the previous “bottom” of April 2009. The Composite-20 is at 103.33, back to its value of May 2000 (103.54), 6.26% down from April 2009. (All indexes normalized to 1/1/2000 = 100, as the original CS indexes)

    The good news is that the big fall (Der große Untergang) from mid-2006 to mid-2009 is over : -37% from the top in CPI-U adjusted terms for both composites, -14% year/year! Well, we are past the WHEEEEEEEE phase of the bust. And the fact that the market seems to be bouncing a bottom in nominal terms may seem petty but it can be important to bring back some confidence in prospective buyers.

    Yet, sure, in real terms, the market is still on a pretty “healthy” downtrend of 3 to 4% year/year. The proverbial Fat Lady is done singing but the Valkyries are still on the stage, surveying the destruction and picking up the dead…

  15. wally says:

    “The proverbial Fat Lady is done singing”

    That’s how I see it, too. It is bouncing along a bottom, could take a long time to start up…. but it is a bottom, nonetheless. When construction starts to upswing – as it will this spring due to tight vacancy rates and cheap money – the economy will be back to the races.

    Too many people now have a cognitive bias for pessimism; they’ll be left behind because they are looking backward.

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