Dean Baker - Robert Samuelson Oversells The Case For Economic Optimism + CR's Comments on the Housing Vacancies and Homeownership Survey

[mEDITate-OR:
assume that The Numbers are, in fact numbers...
and not "projections"
aka, wild arse guesses.
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JGBellHimself

3 Jan, 01:09 AM

There are some minor, if you think so, things missing in Dean's comment.

While his point in Para 3 about single family starts is correct, he missed a far more significant fact, repeatedly pointed out by Bill@CR, namely that 2010 was the worst year on record for single family starts and sales = 323K. Worse, 2011 is now even less than that = about 305K.

If those numbers show U.S. getting better, we sure in Hades (AZ?) wouldn't want to see worse ones, either. So, let's all of U.S. simply not look at them.

In the 4th para, there are three problems:

FIRST, Steven Hansen @ Econintersect point out that even NAR's numbers simply do not support that "cancellations" argument - it simply is not happening.

See: http://econintersect.com/wordpress/?p=17389

SECOND, what everyone seems to disregard is the fact that NAR gets its "pending sales data" from the same local MLSs that they get there "existing home sales data". They just admitted that their EHS numbers were very badly overstated, and they revised them down. They did not, however, admit that PHS data suffers from the same problem(s).

THIRD, trying to compare mortgage apps to Pending homes sales is almost as irrelevant as it is impossible. While it might be true that there is a close relationship between new home sales and mortgage apps, bcuz few buyers pay cash - new home apps are not separated from existing sales apps, nor foreclosure purchase apps, nor short sales apps. Bcuz "all cash investors" are now a HUGE part of the foreclosure market - to include them in "existing home sales" is totally misleading.

Recently there has been both a huge decline in "foreclosure sales" to "all cash investor/buyers" AND a large decline in mortgage apps - so, where precisely are all these new, additional pending home buyers getting the money? Explain, please - NAR, or anyone?

Fourth, in para 5 the contention that "recent construction levels have been well below the number needed to keep even with household growth" is made. But, the author also points out the new construction is not single family homes, but "apartments".

There is a disconnect here. There is evidence, such as in a Seattle Times article, that we now are about to overbuild "apartments". What you do not factor in is that when condo sales stopped, they began to rent them out - to foreclosure evictions? Now, if they cannot rent all these new apartments, they can, can they not, simply sell them as condos.

And, that does not even consider the price to rent ratios that make buying a home less expensive than renting costs U.S. now.

FIFTH, in para 7 Dean points to the loss of "wealth" to suggest that to assume those people will rush back in to buy homes is misguided. What he either forgot or missed is that the loss of wealth, in de-leveraging was in two major areas: homes and credit.

With the massive lost equity in foreclosures and short sales and strategic defaults, many, if not most, of those people now can NOT buy any home - new or used. While some of U.S. have been paying down our mortgages, you did NOT mention how many of them (now 50%) are underwater (now by 50%) - and can neither sell nor buy.

With the possible exception of student loans and autos, there has been a huge decline in "other debt" - especially credit cards. However, regularly it is pointed out that was due to credit card issuers writing off and cutting off U.S. equal to the decline. While some did pay down, most were cut off. How many of them went through BKs? Will any of them qualify for a mortgage RE loan? How many years will they not be able to do that?

And, deleveraging does not even address the 20+% of U.S. who have lost our jobs, and cannot find a new one. Even if they do, will THEY qualify for a new mortgage loan, with that job history?

And, those who graduate with huge student loan obligations, will they qualify for a new mortgage loan - assuming they can, someday, even find a job?

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JGBellHimself

3 Jan, 01:52 AM

In paras 5 & 6 Dean attempts to address the problems with the Census "housing vacancy" numbers. Nice try, but no cookies.

For an in-depth analysis, and a disagreement with Dean Baker, you should see Bill@CR's and Lawler's comments on this article:

http://www.calculatedriskblog.com/2012/01/comments-on-housing-vacancies-and.html

Which states: "this report (HVS) is commonly used by analysts to estimate the excess vacant supply for housing, but - because the vacancy rates do not match the Census data (or the much larger ACS data) - it doesn't appear to be useful for that purpose.

However, as we have pointed out to Bill, the Census data is also very suspect, for a number of reasons.

For example, when the Census "counted" U.S. they did not ask if we were in default on our mortgages, and about to be foreclosed or evicted. Some will say that isn't important. In THIS foreclosure environment it isn't? Why?

Millions have been foreclosed on, and many more millions will shortly be foreclosed on, that the Census "assumes" were not and are not now vacant.

Similarly, with the huge increase in job losses, and the large increase in household "consolidations" - kids moving back with parents and parents moving in with kids - did either the 2010 Census, or the CVS survey, OR the current projections of the changes now taking place, assume that this is, or that is it not, happening?

As Bill point out the CVS is "benchmarked" to the 2010 Census. But, does the way they do that match what changed in the few years before the Census was taken, or to reflect the changes that are still taking place? Or, to they make assumptions based upon the differences between 2000 and 2010? They are very different.

The Census just issued new population "estimates" that say AZ is 9th in new growth. How was that computed - using decennial adjustments, or does it adjust for the last few years. What AZ did between 2000 and 2010 is VERY different from what happened between 08 and 11. Which was used, a decennial growth adjustment, or the recent contraction adjustment?

Are both the Census (along with the projections based on it) and the CVS numbers as inaccurate as NAR's numbers? Why should we assume they are not.

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JGBellHimself

3 Jan, 02:02 AM

Oh, and oddly, there is a much better measure - current and an accurate count.

As we pointed out to Bill@CR, worrying about how many angels among U.S. are dancing on the head of a pin - assuming that they really ARE angels...

making their mortgage/rent payments, and not illegal aliens in a drop house.

why not use..., drum roll, please:

The US Postal Service count of "deliverable homes"...
that they provide each and every month to "bulk mailers".

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Dean Baker - Robert Samuelson Oversells The Case For Economic Optimism
http://seekingalpha.com/article/316989-robert-samuelson-oversells-the-case-for-economic-optimism
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CR's Comments on the Housing Vacancies and Homeownership Survey
http://www.calculatedriskblog.com/2012/01/comments-on-housing-vacancies-and.html
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