31 replies to this topic

[CHAx]

Guys you make a fair point that the market is unlikely to move higher BUT I think you underestimate the primary mover of the multi family housing market: cashflow. He has one vacancy right now at just over one and a half months. That puts him near 99.8 percent occupancy for the past year. His cashflow is ridiculously good. Another point you may be missing is that with inventories of multifamily housing dropping and occupancies rising..... Single family homes should start filling over time. The mechanism? Rising rental rates from high occupancy drive ownership.

Edited by CHAx, 26 January 2009 - 12:08 PM.

[IndexTrader]

I doubt you're going to see "rising rental rates from high occupancy", at least in my market, and my guess in a lot of markets. Part of the problem is that all this government stuff going on is stiffling the way the market would normally work. Normal would be that people lose houses in foreclosure, then go rent. That isn't happening. People can't make payments, government lowers payments, reduces principal, keeps them in the house. Rental says vacant. Government is distorting markets. IT

[marco]

I think that enough folks have lived through 1987 and 2002 who will move money out of MM's in droves when they think it's safe to. There are lots of managers who will as well. There's no other choice for them, at this point.

Why do you assume people will put their money in the stock market? Everyone I know is jumping into bonds -- high-yield, TIPs, total bond market....

[cycletimer]

We are actually in the market for a home. I sold my primary residence in January '06 (what great timing!) and have been renting ever since with no reservations. Since November my wife and I have been carefully looking at homes (in Keller, TX...zip code: 76248) and we are narrowing down ouor selections. One of them is a newly-built 2008 home that was lived in only 4 months before it was foreclosed! It is in immaculate shape as the unfortunate souls left the home in a very respectful way. This house was sold to them for in the low $200,000's...we are bidding $150,000....with no other bidders! Imagien this....I don't mind moving the bid up a few thousand if we need to but the fact is, this has been in bank's invemtory since September! There are many examples liek this one....especially in this area. Many big companies are laying off.

[OEXCHAOS]

I think that enough folks have lived through 1987 and 2002 who will move money out of MM's in droves when they think it's safe to. There are lots of managers who will as well. There's no other choice for them, at this point.

Why do you assume people will put their money in the stock market? Everyone I know is jumping into bonds -- high-yield, TIPs, total bond market....

Actually, they'll got into bonds, too. But some money has to go into stocks vs. bonds and some of us say, if bonds are good, stocks are better.

Mark

[Shazzam]

It really depends on where you seek to buy. I have lived in NY city, Boston, Seattle, SF and now Houston in the past 15 years. The only place I bought was Houston. We live in the heart of the city and paid over 500k for our home, over the past few years many developers have bought properties around us and built homes which they try to sell for $1M+. The slowdown has just begun here, where property taxes are high and the drop in commodities is slowing things down. One reason I'm short XOM, if Houston goes south, I'm not going down with it

[Gary Smith]

Unlike most here on this board I don't have a clue where the market is going. If I had my druthers and for purely selfish reasons, I would love to see the bears, and there sure seems to be a lot of them around, prove correct. If we take out the old lows as many here appear to think is a certainty, that could provide one of those proverbial buying opportunities of a lifetime. However, if the bears have it all wrong, I think their undoing will be their failure to appreciate the narrowing in credit spreads we have seen since mid December. It was the same scenario seen in early 2003.

Edited by Gary Smith, 26 January 2009 - 01:04 PM.

[dcengr]

I doubt you're going to see "rising rental rates from high occupancy", at least in my market, and my guess in a lot of markets. Part of the problem is that all this government stuff going on is stiffling the way the market would normally work. Normal would be that people lose houses in foreclosure, then go rent. That isn't happening. People can't make payments, government lowers payments, reduces principal, keeps them in the house. Rental says vacant.

Government is distorting markets.

IT

IT has it right on the head folks. Government intervention is distorting the market quite a bit. All my historical correlation shows the markets bottom only after assets change hands. They aren't because government is not allowing it.

This is unprecedented time in history. The only other example of modern times is the great depression and that ended in failure twice and resulted in a major war.

At this time, the road map looks similar even if price structure has distorted somewhat.

After every major bubble burst, asset prices usually fall below book value. Far below. People get irrational on the downside as much as upside and toss good stuff away.

By my calc, we are above fair value based on affordability. Homes should sell for a discount in a recession. In fact, the bubble is so big I dare say we should see home prices below what it costs to build it (ie land for free). That's what I'm looking for. When people throw homes away and I can't lose.

Recall the 2002 bear market. Stocks were selling below book value. Thats where value is, not before.

[OEXCHAOS]

By my calc, we are above fair value based on affordability. Homes should sell for a discount in a recession. In fact, the bubble is so big I dare say we should see home prices below what it costs to build it (ie land for free). That's what I'm looking for. When people throw homes away and I can't lose.

Recall the 2002 bear market. Stocks were selling below book value. Thats where value is, not before.

Isn't that a bit arbitrary? When stocks sell below "book value" do they go up more or less often than when they're at or above book value?

I ask because I've gotten some rotten performance buying below book. There seem to be other metrics there that are equally important to apply. Maybe interest rates?

More interesting to me are your calculations for fair value of home prices. How are you figuring that?

I think a home is more affordable now than at any time in my adult life, at least out this way.

Mark

[IndexTrader]

More interesting to me are your calculations for fair value of home prices. How are you figuring that?

I think a home is more affordable now than at any time in my adult life, at least out this way.

Mark

Houses are very affordable on a payment basis, in large part due to interest rates.

On the other hand, if you are interested in a house at a price level, or some other factor that requires 20% down, that may be a chink in the affordability argument.

There is FHA, and with that program down payment is not an issue either. But all houses, and all borrowers don't necessarily qualify the FHA.

IT