Housing about to Blowup

USCTrojanCPA said:
test said:
Big Investors Quietly Slip Out The Back Door On Housing As "Stupid Money" Jumps In
http://www.zerohedge.com/news/2013-...slip-out-back-door-housing-stupid-money-jumps
Those 0hedge guys are funny, they always cry that the sky is falling.  Sure, some of their articles are interesting and informative but they keep saying the same thing.  Basically whoever traded on their recommendations or warnings would have gone broke shorting the market.

They have articles on Bloomberg and Calculated Risk now.
http://www.bloomberg.com/news/2013-...-buying-u-s-rentals-as-blackstone-adding.html
http://www.calculatedriskblog.com/


From Bloomberg:
"Losses Reported
Companies that release financial results for single-family rental investments have reported losses as they acquired homes faster than they can renovate and find tenants.
Colony American Homes Inc., a division of Thomas Barrack Jr.?s Colony Capital LLC, has found tenants for only 51 percent of the 9,931 homes it bought for $1.4 billion, according to a filing yesterday with the U.S. Securities and Exchange Commission."

?We just don?t see the returns there that are adequate to incentivize us to continue to invest,? [Bruce] Rose, 55, chief executive officer of Carrington Holding Co. LLC, said in an interview at his Aliso Viejo, California office. ?There?s a lot of -- bluntly -- stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.?

"?Gold Rush?
?All the people who made money during the gold rush in California, they were selling the buckets and shovels,? Gordon said. ?I think there is gold in them there hills, but you?re going to have to dig deep. And hopefully you?re going to need more than one shovel.?
Carrington may start buying rental homes again when other large investors decide to sell after learning they can?t make returns that justify the prices they paid, Rose said.
?We?ll sit back in the weeds for a while and wait for a couple of blowups,? he said. ?There?ll be a point in time when we?ll be happy to get back into the market at levels that make more sense.?
 
Renovations can't be based on a no brainier template. Since no two homes are alike an unique approach and strategy are needed. Unlike an assembly line approach each neglected home like a person requires extensive rehabilitation. This just can't be done in massive scale just like developers can't produce a bunch of good design without serious talents.


quattroporte said:
USCTrojanCPA said:
test said:
Big Investors Quietly Slip Out The Back Door On Housing As "Stupid Money" Jumps In
http://www.zerohedge.com/news/2013-...slip-out-back-door-housing-stupid-money-jumps
Those 0hedge guys are funny, they always cry that the sky is falling.  Sure, some of their articles are interesting and informative but they keep saying the same thing.  Basically whoever traded on their recommendations or warnings would have gone broke shorting the market.

They have articles on Bloomberg and Calculated Risk now.
http://www.bloomberg.com/news/2013-...-buying-u-s-rentals-as-blackstone-adding.html
http://www.calculatedriskblog.com/


From Bloomberg:
"Losses Reported
Companies that release financial results for single-family rental investments have reported losses as they acquired homes faster than they can renovate and find tenants.
Colony American Homes Inc., a division of Thomas Barrack Jr.?s Colony Capital LLC, has found tenants for only 51 percent of the 9,931 homes it bought for $1.4 billion, according to a filing yesterday with the U.S. Securities and Exchange Commission."

?We just don?t see the returns there that are adequate to incentivize us to continue to invest,? [Bruce] Rose, 55, chief executive officer of Carrington Holding Co. LLC, said in an interview at his Aliso Viejo, California office. ?There?s a lot of -- bluntly -- stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.?
 
Prices have risen 20% since 6 months ago.  Investors have stopped buying because it looks like a market top.
 
zubs said:
Prices have risen 20% since 6 months ago.  Investors have stopped buying because it looks like a market top.

think about how absurd this sounds.  the 20% increase in price in the last six months approximates 5 years worth of traditional increases/growth in real estate - do you think it makes sense to buy in irvine right now?
 
qwerty said:
zubs said:
Prices have risen 20% since 6 months ago.  Investors have stopped buying because it looks like a market top.

think about how absurd this sounds.  the 20% increase in price in the last six months approximates 5 years worth of traditional increases/growth in real estate - do you think it makes sense to buy in irvine right now?

Depends on whether the bottom was a proper price point to begin with. 
 
qwerty said:
zubs said:
Prices have risen 20% since 6 months ago.  Investors have stopped buying because it looks like a market top.

think about how absurd this sounds.  the 20% increase in price in the last six months approximates 5 years worth of traditional increases/growth in real estate - do you think it makes sense to buy in irvine right now?

Absolutely NOT!

However, the Chinese FCB's will still be buying though.
 
Hopefully this will mean more supply of homes on the market.  However, just like with the stock market there seems to be a lot "buy the dip" buyers out there waiting for prices to come down (including the institiutional big boys) so I doubt we would have a big price correction.  Like I said before, a neutral market is 3+ months of inventory (more like 4-6 months) and even with the current increase of inventory we are below 1.5 months of inventory (strong seller's market). 
 
USCTrojanCPA said:
Hopefully this will mean more supply of homes on the market.  However, just like with the stock market there seems to be a lot "buy the dip" buyers out there waiting for prices to come down (including the institiutional big boys) so I doubt we would have a big price correction.  Like I said before, a neutral market is 3+ months of inventory (more like 4-6 months) and even with the current increase of inventory we are below 1.5 months of inventory (strong seller's market).

The other part of this is that a significant portion (I believe last estimate was 40%) of the homes cannot be resold as they are underwater.  So you will continue to have low inventory unless and until people decide to walk away from money they put down (unlikely) or prices go back up.
 
Irvinecommuter said:
USCTrojanCPA said:
Hopefully this will mean more supply of homes on the market.  However, just like with the stock market there seems to be a lot "buy the dip" buyers out there waiting for prices to come down (including the institiutional big boys) so I doubt we would have a big price correction.  Like I said before, a neutral market is 3+ months of inventory (more like 4-6 months) and even with the current increase of inventory we are below 1.5 months of inventory (strong seller's market).

The other part of this is that a significant portion (I believe last estimate was 40%) of the homes cannot be resold as they are underwater.  So you will continue to have low inventory unless and until people decide to walk away from money they put down (unlikely) or prices go back up.
Where are you getting your 40% statistic from?  I also track foreclosure radar and I see that foreclosure activity keeps going down (could very well be due to an increasing economy and banks slowed down the foreclosure process).  I know that I have a handful of buyers who are waiting for more inventory to come onto the market.
 
USCTrojanCPA said:
Irvinecommuter said:
USCTrojanCPA said:
Hopefully this will mean more supply of homes on the market.  However, just like with the stock market there seems to be a lot "buy the dip" buyers out there waiting for prices to come down (including the institiutional big boys) so I doubt we would have a big price correction.  Like I said before, a neutral market is 3+ months of inventory (more like 4-6 months) and even with the current increase of inventory we are below 1.5 months of inventory (strong seller's market).

The other part of this is that a significant portion (I believe last estimate was 40%) of the homes cannot be resold as they are underwater.  So you will continue to have low inventory unless and until people decide to walk away from money they put down (unlikely) or prices go back up.
Where are you getting your 40% statistic from?  I also track foreclosure radar and I see that foreclosure activity keeps going down (could very well be due to an increasing economy and banks slowed down the foreclosure process).  I know that I have a handful of buyers who are waiting for more inventory to come onto the market.

My bad...the zilllow article says 25% underwater and 18% with low equity.
 
Rising Mortgage Rates, Home Prices a Lethal Brew
http://www.cnbc.com/id/100772471

It's over.  Housing bubble 2.0 has popped.  Rising interest rates is the nail in the coffin.  Nikkei is also down 15% from last week and still tanking today.  Stock market crash is the soil on top of the coffin.
 
Rates really have exploded.  After a long time of slowly trending lower, they are up about 5/8% over what they were a month ago or so.  I watched Amerisave daily, waiting for a $5k credit on 3.5% fixed.  One day the credit jumped to over $6k.  I said to myself I would give them a call the next day, but the next day the credit dropped to about $3k, so I waited.  Right now to get 3.5% I would have to pay $15k.
 
Loans over $417K are back above 4%.  The same size loan and payments have risen 10% in less than two months.

Rich on Piggington has a nice graphic. 

housing_valuations_april_2013-2.jpg




 
I'm gonna reprint a post from the DOW 14k thread in February because I think it is relevant  to this discussion.


Economy & Finance / Re: Dow at 14k
on: February 07, 2013, 08:35:52 PM

I too have put a hedge trade on with the VIX, and entirely left the long end of the bond market.  We all know the government is running out of steam with QE infinity and that the delusion of 0 inflation is another government lie (I can't eat my I-PAD).  The invisible hand will become a fist and force rates higher, eventually.  I do think this is a net positive intermediate term and will push some inventory back into the housing market.  Clear that overhang and things will normalize faster. The only thing the government has done is blow a ton of taxpayer money "prolonging"  the cycle not "averting" it.
 
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