Today’s Housing Bulls are pumped full of antibiotics and steroids, corn fed, genetically modified creatures from a lab. They are not natural; They are not grass fed, free-range, organic Angus cattle. They are unnatural, not found in the wild. These artificial constructs are a joint project of Congress and the Attorney General’s office and the FOMC.

Consider the Case Shiller data — up 2.2% monthly and down 1% year over year — disappointed slightly. But to really understand where Housing is in the cycle, we need to do more than merely look at the chart; we needs to put those data points into broader context. We need to imagine what an organic housing sector would look like versus the Frankenstein creature we have today.

In order to get these flat to negative numbers, an extraordinary amount of firepower has been thrown at Housing:

 1. First time home buyers tax credit

2.FOMC QE, Twist, driving mortgage rates down 100+ bps

3.Foreclosure abatements during robosigning

You can see the impact of these efforts reflected in the annotated chart:

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Contextualizing Case Shiller Housing Data

 

 

Non-annotated origianl Case Shiller charts after the jump

Case Shiller:

Data through May 2012, released today for S&P/Case-Shiller1 Home Price Indices  showed that average home prices increased by 2.2% in May over April for both the 10- and 20-City Composites.

With May’s data, we found that home prices fell annually by 1.0% for the 10-City Composite and by 0.7% for the 20-City Composite versus May 2011. Both Composites and 17 of the 20 MSAs saw increases in annual returns in May compared to April . . . This is an improvement over the -17.0% annual decline recorded in April 2012. All 20 cities and both Composites posted positive monthly returns. No cities posted new lows in May 2012.

Click to enlarge:

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Source:
S&P Dow Jones
July 31, 2012

Category: Data Analysis, Foreclosures, 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.

19 Responses to “Antibiotic Steroidal GMO Corn-Fed Housing Bulls”

  1. VennData says:

    Housing is not like stocks 1) The momentum factors are much more consistent

    http://www.uwyo.edu/hskiba/web/papers/skiba_re_momentum.pdf

    2) seasonal adjustments must be understood.

    http://www.calculatedriskblog.com/2012/07/house-price-comments-real-house-prices.html

    And “…This was better than the consensus forecast and it is now possible that prices will turn positive year-over-year in June…”

    http://www.calculatedriskblog.com/2012/07/case-shiller-house-prices-increased-22.html

    Looks like instead of shopping at Nordstroms, people are shopping for real estate and the behavioral effects of rising prices are well understood.

  2. BennyProfane says:

    Sooooo……..how many millions of “homeowners” who have been stuck in their palace for four years, waiting for an up swing in prices, will now be calling up a realtor and putting a sign on the front lawn? What’s that going to do to inventory?

  3. whskyjack says:

    Bulls don’t get the don’t get the “Antibiotic Steroidal GMO Corn-Fed” treatment, only steers do. But like the “housing bulls, steers(equally non productive) stand around gorging themselves until they are lead off to slaughter

  4. JJ Butler says:

    Financing for housing is artificial in our rate surpressed world and McMansions are still in oversupply. But decent affortable housing stock is very scarce, almost unavailable. The cruddy town next to mine has a 1% vacancy rate, and what is vacant is junk. The rental meme could be early ininings.

  5. wannabe says:

    I knew the news readers excitement wasn’t warranted this AM, but couldn’t remember exactly why, so, thanks for keeping us all grounded here.

  6. JMelville says:

    JJButler –
    I guess it depends on the locaton. My TX neighbor just took her modest 3 br $150k house off the market. Lots of interest, but she said all the loans apps fell through. Not a good sign…

  7. kek says:

    Sometimes stuff justs stops going down in price. It usually drives the data wonks crazy, and ends up causing many sore fists through pounding the table and screaming “this shouldn’t be happening!”.

    ~~~

    BR: Not some, all asset classes eventually find a bottom.

  8. rktbrkr says:

    Pretty remarkable that so many have trouble qualifying for mortgages at these record low interest rates. If/when interest rates spike nobody will qualify for nuttin!

  9. oblom says:

    VennData, thanks for injecting a good response. I don’t understand Barry’s negativity on housing this year at all. Price-to-rent alone is a dead giveaway that we are either at the bottom or very close to it.

    The inventory debate misses another point. High quality inventory that’s reasonably priced is gone. Yes, there are a lot of McMansions, and there are plenty of crappy houses. However, in good neighborhood quality houses priced for middle-class are moving very fast. Yes, first hand knowledge as a buyer.

    There is plenty of financing from *regional* banks. The mortgage brokers are working overtime these days (yes, refi’s are part of the picture). Yes, you need to have a job.

    Here is another one. Remember the Mortgage Rate Reset chart with projections? Guess what, we are at the end of the journey. (http://www.economicpopulist.org/files/images/arm_reset_schedule.jpg)

    Lastly, for those who care, buying a house with a 30-year fixed is the same as shorting treasuries and hedging the hyper-inflation tail-risk at the same time. Oh, and you know your monthly margin call amount ahead of time. :-)

    ~~~

    BR: If you want to iunderstand my negativity on housing this year at all, See these 3 discussions for an explanation:

    1. Spring brings signs of hope and renewal — except in the housing market (April 7, 2012)
    http://www.washingtonpost.com/barry-ritholtz-on-investing-house-prices-are-down-mortgage-rates-are-low-but-is-the-real-estate-market-ready-to-rebound/2012/04/05/gIQAnveZzS_story.html

    2. Foreclosure machinery creaks back to life (JUne 23 2012)
    http://www.washingtonpost.com/2012/06/23/gJQASAQOyV_story.html

    3. Yeah! The Housing Bottom Is Here! (PWBC™) (May 31, 2012)
    http://www.ritholtz.com/blog/2012/05/the-housing-bottom-is-here/

  10. Michael Rulle says:

    One of the reasons the Bulls are wrong, is because of policies, not in spite of them. The natural result without intervention (Tarp, subsidies, foreclosure restrictions, Dodd-Frank, etc.) would likely have been a sharper faster drop in prices followed by a price recovery more in line with the long term “trend” without the 4 year spike. We would be in the middle of a true housing recovery. To some extent, the market is “locked” as both buyers and sellers do not believe we yet have true price discovery.

  11. kek says:

    Michael, I don’t know about you, but when I am putting an offer in to buying an asset, my “price discovery” is all that matters. Buying with a cusion 30%+ under replacement cost, along with cash on cash rental returns 9%+ are what many real estate markets are currently presenting. Buying land at 10-20% of sunk improvement costs, and the ability to hold for 5+ years also is appealing.

  12. Joe Friday says:

    Glenn Kelman, the CEO of online brokerage Redfin:

    …some people believe there’s a vast backlog of foreclosed homes that are about to hit the market.” “Every conspiracy theorist in real estate believes that there’s a huge chunk of inventory that the banks have just been holding back, waiting for our hopes to rise so that they can dash them again, and I just don’t believe it.

    How does one ignore 10+ million homes in the shadow inventory, not to mention that banks have resumed foreclosing, and at rates not seen for years ?

    Some conspiracy.

  13. rj chicago says:

    Barry:
    Mark Hanson’s stuff you posted last week is still the guiding light in this mess of a housing market.
    Thanks for that post – and this seems to back it up a bit.
    All I know is here in Chicago – it is just dismal contrary to the daily ups and downs we get in the news cycle via Crains and other tomes. One only need drive around and see what is going on to get a fairly good feel for how deep this is and how far we have to go.
    rj chicago

  14. Charles says:

    @Joe Friday:

    I was curious about your post so I googled “housing shadow inventory” and thought it was amusing that these two opposed readings of the data were in the top 3 results:

    http://www.bloomberg.com/news/2012-06-14/home-shadow-inventory-falls-to-lowest-since-2008.html

    http://www.forbes.com/sites/afontevecchia/2012/06/26/10-million-underwater-mortgages-and-shadow-inventory-worth-246b-mean-housing-trouble/

    Separately: they list shadow inventory as 1.5 million, not 10+ million (the latter # is for underwater homeowners).

    Living in the Bay, rentals have gone haywire, I don’t think housing can fall locally in this kind of environment. The difference in monthly payments is too large.

  15. wally says:

    Housing is certainly coming back in my area; I see it every day. I’m not sure what motivates all the denial writers but I see they now are resorting to name-calling.

  16. philipat says:

    The last of the ARM’s reset in July/August, which will add to supply again. Then the Banks will release more foreclosed inventory so IMHO we will have probably then seen the bottom by end 2013. But we will probably then slide along the bottom for at least another 2-3 years. If things start to improve by 2016-2017, that would be consistent with the average duration end of the current secular bear market, which makes sense.

  17. Joe Friday says:

    Charles,

    Separately: they list shadow inventory as 1.5 million, not 10+ million

    Try here:

    US Housing Inventory Requiring Deleveraging

    (the latter # is for underwater homeowners)

    No, that metric would be the ‘Ghost Inventory’.

  18. howardoark says:

    anecdotal, but one of my co-workers hasn’t paid his mortgage in a year (he has a $600,000 mortgage on a $300,000 condo in Petaluma (Bay Area)) and no one from B of A has been calling to ask when they can expect some rent from him.