正文
I think I found an error in what I have written here in the past and insatisfaction of questions and debates in PM, I am going to correct somemistakes I have presented in the past. The discussion in PM has beenbeneficial in that it has adusted my thinking somewhat.
I haverepeatedly discussed housing in comparing starts with sales over thepast. I found that starts and sales are 2 different figures as startsinclude homes built for rent as well as homes built on property ownedby the owner either by the owner or by a contractor. Thus, if you or Iowned a lot and we decided to build on it, though the contractoractually sold us a house, it wouldn't count as a sale. That is asurprise to me, but that is how they do it. Starts don't equalcompletions, but they are almost equal.
about everything you would want to know about housing history
Mybest guess is that Octobers seasonally adjusted 884,000 SFR start wouldbe roughly equal to building for 600,000-650,000 sales. I havecontended that 884,000 was closer to a boom level than a bust level,but there have only been 5 years that home construction fell below 1million since 1979. This is clearly a mistake that I called this levelof constuction a boom level. This idea was based upon the historic high water in new home sales being 819,000 prior to 1997. This 819K figure has been exceeded every year since 1998 and will beexceeded again in 2007. 819,000 was a record that stood for 21 yearsand the 1980's had 1 year that exceeded 700,000 new home sales, yetsome people seem to think that the most recent 770,000 represents abust.
Though I was wrong in calling 885K starts a boom figure,I will say that it is far from a bust. I am not going to search, butfrom that I have seen in data, about 50% of all new home sales arebuild jobs, meaning about 385,000 of those 885,000 housing starts on anannual basis are going directly to new home sales. That puts about250,000 back into the spec market and it should draw the inventory alittle. I expect this to go bust, aka the internet bust, the telecombust and all the other busts we have seen. The experienced guys in MFresidential here sold out this time around when prices went crazy. Werethe experienced guys wrong and the inexperienced guys right this time?SFR is being supported in the same fashion, newbies looking to get richbuying what I think are falling knives. The low in new home sales was436,000 in 1981 and 412,000 in 1982. Starts for those years were705,000 and 663,000 respectively. The percentage of homes built on theowners property has fallen since then and if sales get this bad again,starts will get at least this low.
What would keep sales fromdropping this low? We are still selling at boom levels, the 770Kseasonally adjusted level having only been exceeded 37 months prior to1997, mainly in 1977, 1978 and 1996. It was only exceeded 4 times inthe 1980's. People born in 1955 turned 30 in 1985 and people born 10years later turned 20. This was the largest group of people to becomeadult in a 10 year period in history, yet the resulting homes saleswere actually very poor for the demographic. This is if you compare itto the past 10 years, 10 straight record years for a business that hasbeen going for 200 years. Comparatively though, 650K had only beenexceeded twice between 1963 and 1976 and 600K 4 times so the 1980'swith 7 years of sales in excess of 600K weren't exactly depressionyears compared to history.
Thus we aren't at boom levels ofstarts as I contended due to a mistaken idea of what starts were, butwe are far from a bottom in starts or sales as the worst is yet tocome.
The period before the effect of the post war baby boomis not even represented in what I write except in the figures prior to1977, when there were so few years that sales exceeded 600K. Even then,in 1977, people born in 1946 were hitting 30 years old. The Viet Namvets with their zero down mortgages were into the game. Thedemographics for new home sales between about 1972 and 1995 have neverbeen and probably will never will again be better. There should havebeen a bust, not a boom after the bulk of the boomers were housed. Oneof the contentions raised in this PM debate was there were 30 millionplus people added to the US population in the 1990's, the largestnumber ever in a decade. The last big birth year in the boomer era was1964 or 1965. In either case, the new home sales were 565K and 575Krespectively. These were years where unemployment was under 4% andinterst rates were as low as they are now. You might check the records,but I venture more babies were born that year than in the 1990's.
Thatis the point, that population growth in a decade or a period reflectsbabies, not grown people. Now babies increase the propensity of acouple to go out and buy a house, but the population growth brought onby babies only increases the number of people under a roof. Babiesdon't buy houses, grown people buy them. The last or trough year of thebaby bust was 1976, which makes that trough 31 years old. This bubbleoccurred while this declining generation became adult, which makes iteven more of a bubble, that greater sales at greater prices occurredwhen a diminishing number of people entered the age of first homeacquisition. The anticiptation of another huge generation is one thing,but the actual building for it several years early doesn't make a lotof sense, especially in light of the idea that a massive number ofhomes are going to be abandoned for smaller homes by the aging babyboomers who are going to die in accellerating numbers for the next 25years. 1946, I hate to say is 61 years old now. 1955, my year will be77 in 25 years, one foot on the platform and another on a banana peel.We might get some equality in size of the generations between 1946 and1965 and the ones between 1980 and 2000, but they will in some ways bereplacing each other. The boomer generation, on the other hand replaceda much smaller generation.
Then we come to the financing. Howmany sales of the future have been moved to the past? 1981 and 1982were bad years, not only because they were recession years, but becausemuch fewer people could qualify for financing. We are about to see thesame effect and I venture there is a huge chance interest rates aregoing up, not down from here. Down payments are going up and theentities like Ditech that offered 125% financing are quite likely goingbankrupt. The subprime market is gone, the PMI insured stuff is goingto be more stringently underwritten and quite likely real down paymentsare going to be needed and the upper end market is going to findfinancing tough. The 770K figure has a long way to go down, maybe forseveral straight years.
There are a lot of questions. Whenlooking back to 1981 and 1982, there were very few foreclosures, thusthese poor sales figures or new home figures were accomplished withlittle coming back on the market. the real bust here was literallycreated by building for high sales which diminished. Building alsodiminished and population increased significantly, but housing stillwent bust. Foreclosures started piling up and compounded the problem.Builders would build to suit for a sale cheaper than they would in thespec market a few years prior. The mess fed on itself.
The bigquestion is what is legitimate demand and what is the real supply outthere? The biggest sales gimmicks are done by builders, not byRealtors. Bring the appraisor and the chemistry man or loan officer andlets get a deal done. We will match numbers to make the deal. Thisworks fine in a booming market, but the uglies come out of the woodworkin a slowdown. My contention is that sales have been way out of kilterin comparison to normality. We have had 10 straight years, including2007 that exceeded the prior 1 year record. The 770K posted forSeptember had never been exceeded on an annual basis but twice prior to1997, both at the height of the inflationary and baby boom generationfed boom of the late 1970's.
So why were home sales roughly50% above normal for 10 straight years? Why did they break the recordof every year prior every year in this boom period? Why are theycalling boom level sales a bust? 770k annual sales is a boom, not abust. Regardless of the misundestanding of the start figures and whatthey represented, the sales figures are still boom level, boom level incomparison to a pretty strong era of housing, the era that housed theboomers. How can the bust generation create a higher demand than theboomers?
My contention is this is a bubble and it is afinanced and speculative led bubble and both of these influences areturning against the market as days go by. We have only seen the tip ofthe foreclosures and the bulk won't be of the subprime type, but theFNMA, FHA, VA and Non-conforming market that conforms to FHLMCstandards. There are tens of thousands, if not hundreds of thousands ofspeculators in this market and they will have to fold their hands aswell. Every day I see a new sign around here or another car sign thatsays I buy houses. These people might be right, but DFW had a 3%decline in prices locally last month. We are being told in the papersthat the MI companies aren't afraid of this market going down, but Ithink we have our own housing bubble here, as construction was in the50,000 unit area for a significant period of time and has fallen to25,000 recently. Foreclosures have been near record levels for wellover a year now. 300,000 SFR's for an area that saw its primaryindustries go bust is a lot of houses over 8 years. It is quite likelyDFW will add 1 million or more in population this decade, so it isquite likely any excess will be mopped up, as long as buildingcontinues to subside. The 1980's here saw roughly 1 million inpopulation gain, but SFR construction was no where near what we haveseen this time around.
I sincerely believe this is problemthat is much greater than is being let on. FHLMC is going to try toissue $5 billion in preferred stock to raise capital. There is adelusion they will be able to lower their risk by slowing downacquisition of loans. They are goign to let attrition restore theircapital ratios. This means in part that they aren't going to stay inthe market in the way they have in the past. I am sure FNM is going todo the same thing, as they are not being allowed to swallow the marketthis time. FHLMC's problems are being called subprime. To my knowledge,they were never in the subprime business. I am looking at prime goingbad, not subprime. That is what went bad here in the 1980's, primemortgages. There wasn't any subprime.
How many too many homeswere built in the bubble? I think a good question to ask is when thebubble got started? I mention 1997 because that was the year that newhome sales first went beyond 800,000, a figure not seen since the1970's. But, prior to the late 1970's 550,000 to 600,000 unitsindicated a boom year. There were 4 years prior to 1977 that salesexceeded 600K units. Sales have not failed to exceed 600,00 units since1991. I would venture to say that 1995 was post boomer as far as thehousing market goes, though the last boomers were 30 in 95 and manywere having their first children. They had been having their firstchildren for 30 year then.
A good case could be made that thehousing bubble started when the stock bubble started, in 1992. Saleswere 610K in 1992 and they increased almost every year from that poitnforward. Even 1994, a year of higher rates produced higher sales than1993, which was higher than 1992. In any case, any reasonableexamination of these figures would conclude that a demand of 700,000 to750,000 units annually would define the upper end of a trend. Thus,upper end real demand has been exceeded every year since 1995. Housingtallied 10.708 million for the 11 years between 1996 and 2006. In thepeak baby boom years, lets say between 1977 and 1987, the tally for the11 years was 7.109 million units. Thus the recent period produceddemand 3.599 million units higher than what would logically be the highhousehold formation period in US history, the period corresponding tothe time most boomers reached 25 year of age. Put another way, new homeconstruction tallied almost an additional 6 years supply onto themarket in this 11 year period over what should have been the best homeconstruction period in US history. Old farts were getting older backthen, divorce had already changed the landscape and every argument thatdemand should be higher now hardly holds water. The only explanationwould be that boomers failed to get married, have children and buyhouses until they were on average 38 years old and that one is tough toargue. That and divorced people didn't buy homes back then but they donow.
What would happen if this is true, that we are reallysitting on about 3.6 million spare houses in the US? This articlementions clearly that there are now 2.1 million vacant homes in the US,a 40 year high vacancy rate. It might be sound confirmation for myestimates above, though I didn't create this argument out of thisarticle, which just came to mind after I added up the figures I usedabove (I write most of this stuff on the fly)
2.1 million vacant homes (seeking alpha.com)
Somethingtells me we are in unique times. No other time since the South Seas andMississippi bubble has what has gone on over the past 10 to 20 yearsever gone on before. As I look at the website I posted the abovearticle from, it says, Bill Miller: Stocks are "Very Attractive". Iwould guess whores on the street can be attractive too, but not toogood for your health or pocketbook. Under no conditions are stocksattractive at these prices other than in a period when excessive creditcan be extended over excessive times and give the appearance of aboveaverage performance. They are no more attractive than at the peak ofthe dotbomb bubble, a period that has yielded rough zero appreciationacross the board and below t-bill dividends. Everything else beingbulled is being bulled under the same premesis, that wild creditextension will go on forever. That is how home prices came to look sogreat an investment as well. The difference between homes and stocks isto some extent, you can wait out stocks. Homes, you pay over and overuntil the price rebounds, you sell, die or get foreclosed. Even so, thelong run for homes is better than the long run of the typical stock.Homes are merely more painful if you need to get rid of them.
Asfor the man I had the debate with. I apologize for any misunderstandingor insult I might have sent back. I learned something new out of this Ididn't know, something I didn't realize was being pointed out to me. Itdoes change my opinion of current supply against current demand. Itdoesn't change my idea that the bottom in starts and sales is a lowerdown the drain than right now.
I haverepeatedly discussed housing in comparing starts with sales over thepast. I found that starts and sales are 2 different figures as startsinclude homes built for rent as well as homes built on property ownedby the owner either by the owner or by a contractor. Thus, if you or Iowned a lot and we decided to build on it, though the contractoractually sold us a house, it wouldn't count as a sale. That is asurprise to me, but that is how they do it. Starts don't equalcompletions, but they are almost equal.
about everything you would want to know about housing history
Mybest guess is that Octobers seasonally adjusted 884,000 SFR start wouldbe roughly equal to building for 600,000-650,000 sales. I havecontended that 884,000 was closer to a boom level than a bust level,but there have only been 5 years that home construction fell below 1million since 1979. This is clearly a mistake that I called this levelof constuction a boom level. This idea was based upon the historic high water in new home sales being 819,000 prior to 1997. This 819K figure has been exceeded every year since 1998 and will beexceeded again in 2007. 819,000 was a record that stood for 21 yearsand the 1980's had 1 year that exceeded 700,000 new home sales, yetsome people seem to think that the most recent 770,000 represents abust.
Though I was wrong in calling 885K starts a boom figure,I will say that it is far from a bust. I am not going to search, butfrom that I have seen in data, about 50% of all new home sales arebuild jobs, meaning about 385,000 of those 885,000 housing starts on anannual basis are going directly to new home sales. That puts about250,000 back into the spec market and it should draw the inventory alittle. I expect this to go bust, aka the internet bust, the telecombust and all the other busts we have seen. The experienced guys in MFresidential here sold out this time around when prices went crazy. Werethe experienced guys wrong and the inexperienced guys right this time?SFR is being supported in the same fashion, newbies looking to get richbuying what I think are falling knives. The low in new home sales was436,000 in 1981 and 412,000 in 1982. Starts for those years were705,000 and 663,000 respectively. The percentage of homes built on theowners property has fallen since then and if sales get this bad again,starts will get at least this low.
What would keep sales fromdropping this low? We are still selling at boom levels, the 770Kseasonally adjusted level having only been exceeded 37 months prior to1997, mainly in 1977, 1978 and 1996. It was only exceeded 4 times inthe 1980's. People born in 1955 turned 30 in 1985 and people born 10years later turned 20. This was the largest group of people to becomeadult in a 10 year period in history, yet the resulting homes saleswere actually very poor for the demographic. This is if you compare itto the past 10 years, 10 straight record years for a business that hasbeen going for 200 years. Comparatively though, 650K had only beenexceeded twice between 1963 and 1976 and 600K 4 times so the 1980'swith 7 years of sales in excess of 600K weren't exactly depressionyears compared to history.
Thus we aren't at boom levels ofstarts as I contended due to a mistaken idea of what starts were, butwe are far from a bottom in starts or sales as the worst is yet tocome.
The period before the effect of the post war baby boomis not even represented in what I write except in the figures prior to1977, when there were so few years that sales exceeded 600K. Even then,in 1977, people born in 1946 were hitting 30 years old. The Viet Namvets with their zero down mortgages were into the game. Thedemographics for new home sales between about 1972 and 1995 have neverbeen and probably will never will again be better. There should havebeen a bust, not a boom after the bulk of the boomers were housed. Oneof the contentions raised in this PM debate was there were 30 millionplus people added to the US population in the 1990's, the largestnumber ever in a decade. The last big birth year in the boomer era was1964 or 1965. In either case, the new home sales were 565K and 575Krespectively. These were years where unemployment was under 4% andinterst rates were as low as they are now. You might check the records,but I venture more babies were born that year than in the 1990's.
Thatis the point, that population growth in a decade or a period reflectsbabies, not grown people. Now babies increase the propensity of acouple to go out and buy a house, but the population growth brought onby babies only increases the number of people under a roof. Babiesdon't buy houses, grown people buy them. The last or trough year of thebaby bust was 1976, which makes that trough 31 years old. This bubbleoccurred while this declining generation became adult, which makes iteven more of a bubble, that greater sales at greater prices occurredwhen a diminishing number of people entered the age of first homeacquisition. The anticiptation of another huge generation is one thing,but the actual building for it several years early doesn't make a lotof sense, especially in light of the idea that a massive number ofhomes are going to be abandoned for smaller homes by the aging babyboomers who are going to die in accellerating numbers for the next 25years. 1946, I hate to say is 61 years old now. 1955, my year will be77 in 25 years, one foot on the platform and another on a banana peel.We might get some equality in size of the generations between 1946 and1965 and the ones between 1980 and 2000, but they will in some ways bereplacing each other. The boomer generation, on the other hand replaceda much smaller generation.
Then we come to the financing. Howmany sales of the future have been moved to the past? 1981 and 1982were bad years, not only because they were recession years, but becausemuch fewer people could qualify for financing. We are about to see thesame effect and I venture there is a huge chance interest rates aregoing up, not down from here. Down payments are going up and theentities like Ditech that offered 125% financing are quite likely goingbankrupt. The subprime market is gone, the PMI insured stuff is goingto be more stringently underwritten and quite likely real down paymentsare going to be needed and the upper end market is going to findfinancing tough. The 770K figure has a long way to go down, maybe forseveral straight years.
There are a lot of questions. Whenlooking back to 1981 and 1982, there were very few foreclosures, thusthese poor sales figures or new home figures were accomplished withlittle coming back on the market. the real bust here was literallycreated by building for high sales which diminished. Building alsodiminished and population increased significantly, but housing stillwent bust. Foreclosures started piling up and compounded the problem.Builders would build to suit for a sale cheaper than they would in thespec market a few years prior. The mess fed on itself.
The bigquestion is what is legitimate demand and what is the real supply outthere? The biggest sales gimmicks are done by builders, not byRealtors. Bring the appraisor and the chemistry man or loan officer andlets get a deal done. We will match numbers to make the deal. Thisworks fine in a booming market, but the uglies come out of the woodworkin a slowdown. My contention is that sales have been way out of kilterin comparison to normality. We have had 10 straight years, including2007 that exceeded the prior 1 year record. The 770K posted forSeptember had never been exceeded on an annual basis but twice prior to1997, both at the height of the inflationary and baby boom generationfed boom of the late 1970's.
So why were home sales roughly50% above normal for 10 straight years? Why did they break the recordof every year prior every year in this boom period? Why are theycalling boom level sales a bust? 770k annual sales is a boom, not abust. Regardless of the misundestanding of the start figures and whatthey represented, the sales figures are still boom level, boom level incomparison to a pretty strong era of housing, the era that housed theboomers. How can the bust generation create a higher demand than theboomers?
My contention is this is a bubble and it is afinanced and speculative led bubble and both of these influences areturning against the market as days go by. We have only seen the tip ofthe foreclosures and the bulk won't be of the subprime type, but theFNMA, FHA, VA and Non-conforming market that conforms to FHLMCstandards. There are tens of thousands, if not hundreds of thousands ofspeculators in this market and they will have to fold their hands aswell. Every day I see a new sign around here or another car sign thatsays I buy houses. These people might be right, but DFW had a 3%decline in prices locally last month. We are being told in the papersthat the MI companies aren't afraid of this market going down, but Ithink we have our own housing bubble here, as construction was in the50,000 unit area for a significant period of time and has fallen to25,000 recently. Foreclosures have been near record levels for wellover a year now. 300,000 SFR's for an area that saw its primaryindustries go bust is a lot of houses over 8 years. It is quite likelyDFW will add 1 million or more in population this decade, so it isquite likely any excess will be mopped up, as long as buildingcontinues to subside. The 1980's here saw roughly 1 million inpopulation gain, but SFR construction was no where near what we haveseen this time around.
I sincerely believe this is problemthat is much greater than is being let on. FHLMC is going to try toissue $5 billion in preferred stock to raise capital. There is adelusion they will be able to lower their risk by slowing downacquisition of loans. They are goign to let attrition restore theircapital ratios. This means in part that they aren't going to stay inthe market in the way they have in the past. I am sure FNM is going todo the same thing, as they are not being allowed to swallow the marketthis time. FHLMC's problems are being called subprime. To my knowledge,they were never in the subprime business. I am looking at prime goingbad, not subprime. That is what went bad here in the 1980's, primemortgages. There wasn't any subprime.
How many too many homeswere built in the bubble? I think a good question to ask is when thebubble got started? I mention 1997 because that was the year that newhome sales first went beyond 800,000, a figure not seen since the1970's. But, prior to the late 1970's 550,000 to 600,000 unitsindicated a boom year. There were 4 years prior to 1977 that salesexceeded 600K units. Sales have not failed to exceed 600,00 units since1991. I would venture to say that 1995 was post boomer as far as thehousing market goes, though the last boomers were 30 in 95 and manywere having their first children. They had been having their firstchildren for 30 year then.
A good case could be made that thehousing bubble started when the stock bubble started, in 1992. Saleswere 610K in 1992 and they increased almost every year from that poitnforward. Even 1994, a year of higher rates produced higher sales than1993, which was higher than 1992. In any case, any reasonableexamination of these figures would conclude that a demand of 700,000 to750,000 units annually would define the upper end of a trend. Thus,upper end real demand has been exceeded every year since 1995. Housingtallied 10.708 million for the 11 years between 1996 and 2006. In thepeak baby boom years, lets say between 1977 and 1987, the tally for the11 years was 7.109 million units. Thus the recent period produceddemand 3.599 million units higher than what would logically be the highhousehold formation period in US history, the period corresponding tothe time most boomers reached 25 year of age. Put another way, new homeconstruction tallied almost an additional 6 years supply onto themarket in this 11 year period over what should have been the best homeconstruction period in US history. Old farts were getting older backthen, divorce had already changed the landscape and every argument thatdemand should be higher now hardly holds water. The only explanationwould be that boomers failed to get married, have children and buyhouses until they were on average 38 years old and that one is tough toargue. That and divorced people didn't buy homes back then but they donow.
What would happen if this is true, that we are reallysitting on about 3.6 million spare houses in the US? This articlementions clearly that there are now 2.1 million vacant homes in the US,a 40 year high vacancy rate. It might be sound confirmation for myestimates above, though I didn't create this argument out of thisarticle, which just came to mind after I added up the figures I usedabove (I write most of this stuff on the fly)
2.1 million vacant homes (seeking alpha.com)
Somethingtells me we are in unique times. No other time since the South Seas andMississippi bubble has what has gone on over the past 10 to 20 yearsever gone on before. As I look at the website I posted the abovearticle from, it says, Bill Miller: Stocks are "Very Attractive". Iwould guess whores on the street can be attractive too, but not toogood for your health or pocketbook. Under no conditions are stocksattractive at these prices other than in a period when excessive creditcan be extended over excessive times and give the appearance of aboveaverage performance. They are no more attractive than at the peak ofthe dotbomb bubble, a period that has yielded rough zero appreciationacross the board and below t-bill dividends. Everything else beingbulled is being bulled under the same premesis, that wild creditextension will go on forever. That is how home prices came to look sogreat an investment as well. The difference between homes and stocks isto some extent, you can wait out stocks. Homes, you pay over and overuntil the price rebounds, you sell, die or get foreclosed. Even so, thelong run for homes is better than the long run of the typical stock.Homes are merely more painful if you need to get rid of them.
Asfor the man I had the debate with. I apologize for any misunderstandingor insult I might have sent back. I learned something new out of this Ididn't know, something I didn't realize was being pointed out to me. Itdoes change my opinion of current supply against current demand. Itdoesn't change my idea that the bottom in starts and sales is a lowerdown the drain than right now.
評論
目前還沒有任何評論
登錄後才可評論.
