November 2021 OC Housing Report - Inventory Catastrophe

usctrojancpa

Well-known member
I've been reading some very interesting reports and analysis on the Orange County real estate market and this report by Steven Thomas really nailed what's going on.  It's a great read with a good amount of data that details what is going on and what we can expect in the near term.
 

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Ivy Zelman predicted the housing crash in 2005 and again called the bottom in 2012. 

Steve Thomas was more of a kool-aid drinker when he started his firm in 2004, and still is judging by USC's report.


Ivy Zelman: Housing Demand ?Grossly Exaggerated?
The hot housing market has been attributed to historically low-interest rates, Millennials reaching homebuying age, and a desire for spacious living created by the pandemic.

Across the industry, experts agree that all of this has been exacerbated by a shortage of houses that started with underbuilding in the aftermath of the 2008 financial crisis.

Everyone except Ivy Zelman, the housing analyst who foresaw the financial crisis in 2005. In a report, her firm, Zelman and Associates, claims that housing demand is overblown and that the country is already on a path to building too many houses.

?The perception that housing is drastically undersupplied and that a strong demographic picture lies ahead is creating a false sense of security,?? the report reads.

?By our math, both single-family and multi-family production are already ahead of normalized demand and estimates of a housing deficit are grossly exaggerated.??

But Zelman says any predictions of real demand are flawed because there are so many new types of buyers in the market. Private equity firms are buying and building properties to rent out. iBuyers upset the traditional buying process by using algorithms to make purchases quickly.

In this landscape, Zelman argues, making claims of future demand is a bad bet. If the market continues building at its current rate, rising mortgage rates and an aging population may coincide with an oversupply of homes, leaving inventory unsold.
https://www.themortgagenote.org/ivy-zelman-housing-demand-grossly-exaggerated/

Steve Thomas doesn't once mention the effect that institutional purchases are having on the way he calculates inventory, demand, or market time.  His methodology has essentially been stuck in time since 2004 and hasn't kept up with modern innovations in the market.
 
Liar Loan said:
Ivy Zelman predicted the housing crash in 2005 and again called the bottom in 2012. 

Steve Thomas was more of a kool-aid drinker when he started his firm in 2004, and still is judging by USC's report.


Ivy Zelman: Housing Demand ?Grossly Exaggerated?
The hot housing market has been attributed to historically low-interest rates, Millennials reaching homebuying age, and a desire for spacious living created by the pandemic.

Across the industry, experts agree that all of this has been exacerbated by a shortage of houses that started with underbuilding in the aftermath of the 2008 financial crisis.

Everyone except Ivy Zelman, the housing analyst who foresaw the financial crisis in 2005. In a report, her firm, Zelman and Associates, claims that housing demand is overblown and that the country is already on a path to building too many houses.

?The perception that housing is drastically undersupplied and that a strong demographic picture lies ahead is creating a false sense of security,?? the report reads.

?By our math, both single-family and multi-family production are already ahead of normalized demand and estimates of a housing deficit are grossly exaggerated.??

But Zelman says any predictions of real demand are flawed because there are so many new types of buyers in the market. Private equity firms are buying and building properties to rent out. iBuyers upset the traditional buying process by using algorithms to make purchases quickly.

In this landscape, Zelman argues, making claims of future demand is a bad bet. If the market continues building at its current rate, rising mortgage rates and an aging population may coincide with an oversupply of homes, leaving inventory unsold.
https://www.themortgagenote.org/ivy-zelman-housing-demand-grossly-exaggerated/

Steve Thomas doesn't once mention the effect that institutional purchases are having on the way he calculates inventory, demand, or market time.  His methodology has essentially been stuck in time since 2004 and hasn't kept up with modern innovations in the market.

The buyer demand is really exists, I see it first hand both on the buy and sell side.  His theory that iBuyers are disrupting the market is overblown as I've never had an offer on any of my listings by an iBuyer or an institutional buyer.  iBuyers typically re-list the home onto the market shortly after they purchase it.  The reality is that buyer demand is swamping the supply of homes on the market.
 
how about small time mom and pop investors? like people who find a way to use PPP loan money to buy investment houses? the money supply inflated by the Fed has to go somewhere, right? and when there is inflation expectation and people have extra money, old school people buy hard assets like real estate to hedge and younger generation would buy cryptos, NFTs, Gamestop and AMC stocks?

USCTrojanCPA said:
Liar Loan said:
Ivy Zelman predicted the housing crash in 2005 and again called the bottom in 2012. 

Steve Thomas was more of a kool-aid drinker when he started his firm in 2004, and still is judging by USC's report.


Ivy Zelman: Housing Demand ?Grossly Exaggerated?
The hot housing market has been attributed to historically low-interest rates, Millennials reaching homebuying age, and a desire for spacious living created by the pandemic.

Across the industry, experts agree that all of this has been exacerbated by a shortage of houses that started with underbuilding in the aftermath of the 2008 financial crisis.

Everyone except Ivy Zelman, the housing analyst who foresaw the financial crisis in 2005. In a report, her firm, Zelman and Associates, claims that housing demand is overblown and that the country is already on a path to building too many houses.

?The perception that housing is drastically undersupplied and that a strong demographic picture lies ahead is creating a false sense of security,?? the report reads.

?By our math, both single-family and multi-family production are already ahead of normalized demand and estimates of a housing deficit are grossly exaggerated.??

But Zelman says any predictions of real demand are flawed because there are so many new types of buyers in the market. Private equity firms are buying and building properties to rent out. iBuyers upset the traditional buying process by using algorithms to make purchases quickly.

In this landscape, Zelman argues, making claims of future demand is a bad bet. If the market continues building at its current rate, rising mortgage rates and an aging population may coincide with an oversupply of homes, leaving inventory unsold.
https://www.themortgagenote.org/ivy-zelman-housing-demand-grossly-exaggerated/

Steve Thomas doesn't once mention the effect that institutional purchases are having on the way he calculates inventory, demand, or market time.  His methodology has essentially been stuck in time since 2004 and hasn't kept up with modern innovations in the market.

The buyer demand is really exists, I see it first hand both on the buy and sell side.  His theory that iBuyers are disrupting the market is overblown as I've never had an offer on any of my listings by an iBuyer or an institutional buyer.  iBuyers typically re-list the home onto the market shortly after they purchase it.  The reality is that buyer demand is swamping the supply of homes on the market.
 
The California Court Company said:
how about small time mom and pop investors? like people who find a way to use PPP loan money to buy investment houses? the money supply inflated by the Fed has to go somewhere, right? and when there is inflation expectation and people have extra money, old school people buy hard assets like real estate to hedge and younger generation would buy cryptos, NFTs, Gamestop and AMC stocks?

USCTrojanCPA said:
Liar Loan said:
Ivy Zelman predicted the housing crash in 2005 and again called the bottom in 2012. 

Steve Thomas was more of a kool-aid drinker when he started his firm in 2004, and still is judging by USC's report.


Ivy Zelman: Housing Demand ?Grossly Exaggerated?
The hot housing market has been attributed to historically low-interest rates, Millennials reaching homebuying age, and a desire for spacious living created by the pandemic.

Across the industry, experts agree that all of this has been exacerbated by a shortage of houses that started with underbuilding in the aftermath of the 2008 financial crisis.

Everyone except Ivy Zelman, the housing analyst who foresaw the financial crisis in 2005. In a report, her firm, Zelman and Associates, claims that housing demand is overblown and that the country is already on a path to building too many houses.

?The perception that housing is drastically undersupplied and that a strong demographic picture lies ahead is creating a false sense of security,?? the report reads.

?By our math, both single-family and multi-family production are already ahead of normalized demand and estimates of a housing deficit are grossly exaggerated.??

But Zelman says any predictions of real demand are flawed because there are so many new types of buyers in the market. Private equity firms are buying and building properties to rent out. iBuyers upset the traditional buying process by using algorithms to make purchases quickly.

In this landscape, Zelman argues, making claims of future demand is a bad bet. If the market continues building at its current rate, rising mortgage rates and an aging population may coincide with an oversupply of homes, leaving inventory unsold.
https://www.themortgagenote.org/ivy-zelman-housing-demand-grossly-exaggerated/

Steve Thomas doesn't once mention the effect that institutional purchases are having on the way he calculates inventory, demand, or market time.  His methodology has essentially been stuck in time since 2004 and hasn't kept up with modern innovations in the market.

The buyer demand is really exists, I see it first hand both on the buy and sell side.  His theory that iBuyers are disrupting the market is overblown as I've never had an offer on any of my listings by an iBuyer or an institutional buyer.  iBuyers typically re-list the home onto the market shortly after they purchase it.  The reality is that buyer demand is swamping the supply of homes on the market.
are you sure they can do that? don't you need to provide proof that the PPP money gets used towards payroll? Otherwise the loan is not forgiven.
 
I remember when the PPP loan started last year.
My bank called me and asked me to apply for it even though I did not need it.
They said we just had to claim it was to keep our employees.

I tried applying a week out, and the well had dried up, so I never got any PPP loan.

However, my thought process was I would use the loan to pay my employees, and then try to get it forgiven.  If it was forgiven...then FREE MONEY...if not, then I'd just pay it back...whatevs.  I'm guessing some people who didn't need the PPP loan got it forgiven...
 
exactly. you apply for PPP loan and use it legitimately, then find a way to get it forgiven...
boom free government money and why not use it to buy hard assets like real estate?
 
zubs said:
I remember when the PPP loan started last year.
My bank called me and asked me to apply for it even though I did not need it.
They said we just had to claim it was to keep our employees.

I tried applying a week out, and the well had dried up, so I never got any PPP loan.

However, my thought process was I would use the loan to pay my employees, and then try to get it forgiven.  If it was forgiven...then FREE MONEY...if not, then I'd just pay it back...whatevs.  I'm guessing some people who didn't need the PPP loan got it forgiven...

I think it takes some severe ignorance to not have known that you could use the PPP loan for payroll. It was all over the news. If your business is large enough to have employees, it's large enough to have someone advising you on your accounting/finance practices and it sounds like they dropped the ball.

We ended up taking six figures with each PPP draw, which was very helpful because we were bleeding money and our competitors were laying off staff. We decided to buck the industry trend, not lay off or cut anybody's salary, and retain our people with the help of PPP. It was relatively straightforward to have it forgiven, kind of like filing an additional tax return.
 
The California Court Company said:
exactly. you apply for PPP loan and use it legitimately, then find a way to get it forgiven...
boom free government money and why not use it to buy hard assets like real estate?
Maybe I?m misunderstanding it. You borrow $, use it for payroll expenses, then show proof that it was used for payroll. Loan is now forgiven. How are you able to use PPP loan to buy RE? that?s your own savings that you?re using right? Unless your point is you didn?t have to use your savings to pay for payroll and instead use the $ for RE. But that?s not using PPP money for RE.
 
Owner can take more profit from the business (pay himself), since PPP loan covers the payroll and use that to invest in RE? Or pay family members or friends as employee with PPP loan money without doing any work and they use that money to buy RE? I am pretty sure there were a lot of loopholes and many people would abuse it.

sleepy5136 said:
The California Court Company said:
exactly. you apply for PPP loan and use it legitimately, then find a way to get it forgiven...
boom free government money and why not use it to buy hard assets like real estate?
Maybe I?m misunderstanding it. You borrow $, use it for payroll expenses, then show proof that it was used for payroll. Loan is now forgiven. How are you able to use PPP loan to buy RE? that?s your own savings that you?re using right? Unless your point is you didn?t have to use your savings to pay for payroll and instead use the $ for RE. But that?s not using PPP money for RE.
 
The California Court Company said:
Owner can take more profit from the business (pay himself), since PPP loan covers the payroll and use that to invest in RE? Or pay family members or friends as employee with PPP loan money without doing any work and they use that money to buy RE? I am pretty sure there were a lot of loopholes and many people would abuse it.

sleepy5136 said:
The California Court Company said:
exactly. you apply for PPP loan and use it legitimately, then find a way to get it forgiven...
boom free government money and why not use it to buy hard assets like real estate?
Maybe I?m misunderstanding it. You borrow $, use it for payroll expenses, then show proof that it was used for payroll. Loan is now forgiven. How are you able to use PPP loan to buy RE? that?s your own savings that you?re using right? Unless your point is you didn?t have to use your savings to pay for payroll and instead use the $ for RE. But that?s not using PPP money for RE.
got it. thanks for clarifying!
 
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