

The Next Leg Of The Housing Crisis In Five Simple Charts - limist
http://www.zerohedge.com/article/next-leg-housing-crisis-five-simple-charts

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jcromartie
So maybe I shouldn't buy this $200K foreclosure?

Some actual actionable advice from a comment there:

"" If you are agonizing about whether to buy real estate now or later, maybe
you'd better define "real estate"

It's hard to see the value in buying a "suburban middle class home in CT"
right now, or a year or three down the line if/when prices dive again. You may
as well rent it and save a lot of money (and headaches) if all you are gonna
do is park your car, watch TV and sleep there. Call that "fake estate"

If you want your real property to produce anything of real value, the best
time to buy was yesterday, and you could already be at work building the soil,
planting fruit trees and garden beds, installing some distributed energy
source like solar or wind, and improving the structure. It takes a few years
at least to get this sort of thing going, especially if you are doing it after
work and on weekends. Invest in infrastructure during this so-called
"deflationary period" and take advantage of gov't subsidies and tax breaks for
energy efficient appliances, insulation, solar panels, whatever.

If things really are gonna be so grim, you are probably soon going to be at
best "underemployed" and maybe even a little hungry...

Here's another idea - rent your house, and buy some cheap agricultural land
within an hour's drive or less (go in with your friends and/or family maybe
and it'll be even cheaper) and lease it to an organic farmer. That property
may actually appreciate quite a bit in the coming years.

Or if you are not cut out to be a farmer, buy a multi-unit that you can fix
up, live in and rent out the other units.

The whole point of real estate ownership used to be that it was a factor of
production, not a financial abstraction that magically provides some rate of
return while you rent it from the bank. If you are not going to improve the
property in some way, and realize some income from it, don't bother buying it.
If all you are willing to invest in life is fiat currency, you may eventually
get lucky and get it back by the wheelbarrow full, with many more zeroes on
it. ""

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euroclydon
If you plant fruit trees, be prepared to kill every squirrel in a two mile
radius!

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CWuestefeld
For sure. The little buggers are robbing me blind. Somehow they know when I
think to myself "the peaches are almost ready, I'll start to harvest them
tomorrow".

For some reason they mostly leave the plums alone. So go with the plums.

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gchpaco
Big problem with plums is that as far as I can tell the entire tree goes ripe
the same millisecond, and you have about three days to pick them all and
figure out what the hell to do with a million plums before the birds get to
them and they fall off the tree and make these terrible little lumps on the
lawn.

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angelbob
Sauces and alcohol. Plums are good for both. Oddly, plum-coriander sauce is
pretty good (try a small amount before you take my word for it -- I love it,
but YMMV).

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nathanwdavis
The last point seems to indicate he thinks less new home sales volume leads to
lower prices on houses in general.

This makes no sense to me. I see that as a good thing for home prices. If less
new homes are sold then more existing homes will sell which means more demand
and rising home prices.

The fact that there is less new home sales is just a result of home builders
starting fewer communities out of realization that there is too much inventory
already.

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yummyfajitas
I think he believes that the lack of new homes is _evidence_ that people don't
expect prices to go up in the future.

It is a "good thing" for home prices, but it is also evidence of a much larger
"bad thing".

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nathanwdavis
Yea, I think you are right that that is his thinking, but I still think the
logic is flawed.

Sales of homes by homebuilders are under a much different dynamic than
existing homes sold by homeowners. Homebuilders can and will reduce supply
while they wait for the prospect of better profit margins even while existing
home sales are showing increased demand.

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joelhaus
No one has mentioned this, but if you buy into the argument that the housing
market is in for another downturn, there is plenty of opportunity to cash in.
Not sure what the CDS market is like these days, but I know that congress
hasn't got around to regulating it yet and a small number of investors made
out really well by taking large positions last time around.

Some additional data on current housing trends here:
<http://www.nnnrent.com/2010/02/housing-crash-profits/> ...charts galore too.

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steveplace
Take zerohedge with a HUGE grain of salt.

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miked
Evidence?

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dminor
The ratio of existing to new homes makes sense since no one's been building
the last couple of years, but that shadow inventory is definitely worrying.

~~~
maukdaddy
Take the shadow inventory stuff with a grain of salt. Mostly speculation.

Keep in mind that Zero Hedge is a very controversial finance blog, and the
writer has a dubious past.

~~~
anigbrowl
I half agree. Yes, it's speculation absent access to banks' actual balance
sheets. But we do know that a good many such homes are in foreclosure due to
official filings, and that a high proportion of those have yet to be brought
back to market, plus we can speculate that banks are generally sticking to
their policy of not forgiving debt - although they may recover less than the
outstanding loan value by selling the house, they don't want to set a
precedent of wiping out (say) 25% of the debt on mortgages by mutual
agreement, because then everybody will try to take advantage of it, even those
who are not yet underwater.

Anecdotally, I've been househunting for a few months, and just in the last few
weeks I've started getting calls from real estate agents to inform me that the
asking price for property X or Y has dropped, and would I care to make an
offer? I find this startling - I'm looking around the low end of the market
(by San Francisco standards...it's still expensive here) and only a few months
ago the typical attitude was 'at this price, everything goes fast - better
increase your bid a little if you really want it'. Now I'm getting called at
least once a week about 3-5% price cuts.

Some of this is doubtless due to the public perception that the first-time
homebuyer's tax credit was expiring in November (in fact it was extended to
April). But the ratio of new properties on sale to foreclosures has been < 1
for a while now. I think the increasing pain of the commercial real estate
market is creating a glut of inventory for banks, which they are increasingly
anxious to get off their books.

~~~
Empact
Take a look at Redfin trends for San Fran:
<http://www.redfin.com/city/17151/CA/San-Francisco>

Specifically, # Sold, # For Sale. If I'm reading this right, seems the market
peaked in mid-December, has dropped 25% in the past 1.5 months and now
inventory is coming back up.

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joe_the_user
_...the sole reason why mortgage rates have been as los as they have, has been
due to the Fed's constant manpulation of the MBS market via the $1.4 trillion
MBS/Agency QE purchase program. With this program set to expire in 2 months,
rates are set to explode._

Uh, yes but it's old story - when the end of a program would mean the end of
the economy ... the chance are they'll continue the program(duh).

That's not saying this crash isn't coming, it's just saying you can't be sure
it will come on schedule. The US economy is becoming depend on more and more
things - the state injecting money, China buying bonds. This kind of situation
_can_ go on, it can go on longer than you'd think. It just will eventually go
under. The housing boom lasted five years. While the present ad-hoc,
artificial economy seems much more fragile, we could plausibly give it a
couple years to crumble. 2011, better watch out...

