Post by jeffolie on Mar 3, 2013 16:37:30 GMT -6
Housing, R.I. bottom or bounce?
" .... currently very little investment in offices, malls and lodging. And residential investment is starting to pickup, but from a very low level ... Now it appears activity bottomed in 2009 through 2011 (depending on the measure) and house prices bottomed in early 2012.
my jeffolie view: housing surge for buying houses inorder to create rental income for Type 1, the upper 20% of income/wealth continues in large part as an alternative investment to capturing divedends or interest income while the remaining 80% can not qualify nor have saved a 20% downpayment. Type 1 house buyers often pay cash now more so than ever before rather than find better investments. ... The overwhelming collapse of marriage, crashing birthrate and outright decline in real household wages makes the Type 2, 80% of incomes/wealth unwilling to buy single family houses. ... type 1 consumers will continue to create single family house rental incomes and purchases as long as the bull market in financial assets such as stocks and bonds continues, then when the next down leg in financial assets such as stocks and bonds becomes significant the surge will become a new decline in single family houses ... creating yet another new bottom in real estate investments as happened in the last long sideways secular bear market with my most likely prediction of an economic and political bottoming period starting about 2016.
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March 03, 2013 Housing: The Two Bottoms Bill McBride 3/03/2013
Last year when I wrote The Housing Bottom is Here and Housing: The Two Bottoms, I pointed out there are usually two bottoms for housing: the first for new home sales, housing starts and residential investment, and the second bottom is for house prices.
For the bottom in activity, I presented a graph of Single family housing starts, New Home Sales, and Residential Investment (RI) as a percent of GDP.
When I posted that graph, the bottom wasn't obvious to everyone. Now it is, and here is another update to that graph.
3.bp.blogspot.com/-1tDGOCHRx1c/UTNsv6O1s4I/AAAAAAAAZRQ/9Vr6BOJ2HWA/s1600/StartsSalesRI.jpg
The arrows point to some of the earlier peaks and troughs for these three measures.
The purpose of this graph is to show that these three indicators generally reach peaks and troughs together. Note that Residential Investment is quarterly and single-family starts and new home sales are monthly.
For the current housing bust, the bottom was spread over a few years from 2009 into 2011. This was a long flat bottom - something a number of us predicted given the overhang of existing vacant housing units.
We could use any of these three measures to determine the first bottom, and then use the other two to confirm the bottom. But this says nothing about prices.
3.bp.blogspot.com/-XYkZc8hVKXg/UTNs8Ov90MI/AAAAAAAAZRY/5hf3QnSddnY/s1600/HousingTwoBottoms.jpg
The second graph compares RI as a percent of GDP with the real (adjusted for inflation) CoreLogic house price index through December.
Although the CoreLogic data only goes back to 1976, look at what happened following the early '90s housing bust. RI as a percent of GDP bottomed in Q1 1991, but real house prices didn't bottom until Q4 1996 (real prices were mostly flat for several year). Something similar happened in the early 1980s - first activity bottomed, and then real prices - although the two bottoms were closer in the '80s.
Now it appears activity bottomed in 2009 through 2011 (depending on the measure) and house prices bottomed in early 2012.
Read more at www.calculatedriskblog.com/2013/03/housing-two-bottoms.html#7lzGIuaYuHoQEYvK.99
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March 03, 2013 Q4 2012 GDP Details: Commercial Real Estate investment very low, Single Family investment increases Bill McBride on 3/03/2013
Here is some investment data from the BEA (Note: The BEA released the underlying details for the Q4 second GDP report on Friday). The first graph shows investment in offices, malls and lodging as a percent of GDP. Office, mall and lodging investment has increased slightly, but from a very low level.
Investment in offices is down about 55% from the recent peak (as a percent of GDP). With the high office vacancy rate, investment will probably not increase significantly (as a percent of GDP) for several years - even though there has been some increase in the Architecture Billings Index lately.
4.bp.blogspot.com/-tpbhAAFSDQc/UTO_8smqOaI/AAAAAAAAZRo/9mzC4DKiX7M/s1600/OfficeHotelMallQ42012.jpg
Investment in multimerchandise shopping structures (malls) peaked in 2007 and is down about 63% from the peak (note that investment includes remodels, so this will not fall to zero). The vacancy rate for malls is still very high, so investment will probably stay low for some time.
Lodging investment peaked at 0.32% of GDP in Q2 2008 and is down about 73%. With the hotel occupancy rate close to normal, it is possible that hotel investment will increase this year.
3.bp.blogspot.com/-Ox38rFIighg/UTO__soXKBI/AAAAAAAAZRw/tfHCsPfHIwg/s1600/RICompQ42012.jpg
The second graph is for Residential investment (RI) components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories (dormitories, manufactured homes).
Usually the most important components are investment in single family structures followed by home improvement.
Investment in single family structures is now increasing after mostly moving sideways for almost three years (the increase in 2009-2010 was related to the housing tax credit).
Investment in home improvement was at a $159 billion Seasonally Adjusted Annual Rate (SAAR) in Q4 (about 1.0% of GDP), still above the level of investment in single family structures of $143 billion (SAAR) (or 0.9% of GDP). Single family structure investment will probably overtake home improvement as the largest category of residential investment later this year.
Brokers' commissions increased slightly in Q4 as a percent of GDP. And investment in multifamily structures increased in Q4. This is a small category, and even though investment is increasing, the positive impact on GDP will be relatively small.
These graphs show there is currently very little investment in offices, malls and lodging. And residential investment is starting to pickup, but from a very low level
Read more at www.calculatedriskblog.com/2013/03/q4-2012-gdp-details-commercial-real.html#PXtv6Ca1eFGu9Lcl.99
" .... currently very little investment in offices, malls and lodging. And residential investment is starting to pickup, but from a very low level ... Now it appears activity bottomed in 2009 through 2011 (depending on the measure) and house prices bottomed in early 2012.
my jeffolie view: housing surge for buying houses inorder to create rental income for Type 1, the upper 20% of income/wealth continues in large part as an alternative investment to capturing divedends or interest income while the remaining 80% can not qualify nor have saved a 20% downpayment. Type 1 house buyers often pay cash now more so than ever before rather than find better investments. ... The overwhelming collapse of marriage, crashing birthrate and outright decline in real household wages makes the Type 2, 80% of incomes/wealth unwilling to buy single family houses. ... type 1 consumers will continue to create single family house rental incomes and purchases as long as the bull market in financial assets such as stocks and bonds continues, then when the next down leg in financial assets such as stocks and bonds becomes significant the surge will become a new decline in single family houses ... creating yet another new bottom in real estate investments as happened in the last long sideways secular bear market with my most likely prediction of an economic and political bottoming period starting about 2016.
=====================================
March 03, 2013 Housing: The Two Bottoms Bill McBride 3/03/2013
Last year when I wrote The Housing Bottom is Here and Housing: The Two Bottoms, I pointed out there are usually two bottoms for housing: the first for new home sales, housing starts and residential investment, and the second bottom is for house prices.
For the bottom in activity, I presented a graph of Single family housing starts, New Home Sales, and Residential Investment (RI) as a percent of GDP.
When I posted that graph, the bottom wasn't obvious to everyone. Now it is, and here is another update to that graph.
3.bp.blogspot.com/-1tDGOCHRx1c/UTNsv6O1s4I/AAAAAAAAZRQ/9Vr6BOJ2HWA/s1600/StartsSalesRI.jpg
The arrows point to some of the earlier peaks and troughs for these three measures.
The purpose of this graph is to show that these three indicators generally reach peaks and troughs together. Note that Residential Investment is quarterly and single-family starts and new home sales are monthly.
For the current housing bust, the bottom was spread over a few years from 2009 into 2011. This was a long flat bottom - something a number of us predicted given the overhang of existing vacant housing units.
We could use any of these three measures to determine the first bottom, and then use the other two to confirm the bottom. But this says nothing about prices.
3.bp.blogspot.com/-XYkZc8hVKXg/UTNs8Ov90MI/AAAAAAAAZRY/5hf3QnSddnY/s1600/HousingTwoBottoms.jpg
The second graph compares RI as a percent of GDP with the real (adjusted for inflation) CoreLogic house price index through December.
Although the CoreLogic data only goes back to 1976, look at what happened following the early '90s housing bust. RI as a percent of GDP bottomed in Q1 1991, but real house prices didn't bottom until Q4 1996 (real prices were mostly flat for several year). Something similar happened in the early 1980s - first activity bottomed, and then real prices - although the two bottoms were closer in the '80s.
Now it appears activity bottomed in 2009 through 2011 (depending on the measure) and house prices bottomed in early 2012.
Read more at www.calculatedriskblog.com/2013/03/housing-two-bottoms.html#7lzGIuaYuHoQEYvK.99
==========================================
March 03, 2013 Q4 2012 GDP Details: Commercial Real Estate investment very low, Single Family investment increases Bill McBride on 3/03/2013
Here is some investment data from the BEA (Note: The BEA released the underlying details for the Q4 second GDP report on Friday). The first graph shows investment in offices, malls and lodging as a percent of GDP. Office, mall and lodging investment has increased slightly, but from a very low level.
Investment in offices is down about 55% from the recent peak (as a percent of GDP). With the high office vacancy rate, investment will probably not increase significantly (as a percent of GDP) for several years - even though there has been some increase in the Architecture Billings Index lately.
4.bp.blogspot.com/-tpbhAAFSDQc/UTO_8smqOaI/AAAAAAAAZRo/9mzC4DKiX7M/s1600/OfficeHotelMallQ42012.jpg
Investment in multimerchandise shopping structures (malls) peaked in 2007 and is down about 63% from the peak (note that investment includes remodels, so this will not fall to zero). The vacancy rate for malls is still very high, so investment will probably stay low for some time.
Lodging investment peaked at 0.32% of GDP in Q2 2008 and is down about 73%. With the hotel occupancy rate close to normal, it is possible that hotel investment will increase this year.
3.bp.blogspot.com/-Ox38rFIighg/UTO__soXKBI/AAAAAAAAZRw/tfHCsPfHIwg/s1600/RICompQ42012.jpg
The second graph is for Residential investment (RI) components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories (dormitories, manufactured homes).
Usually the most important components are investment in single family structures followed by home improvement.
Investment in single family structures is now increasing after mostly moving sideways for almost three years (the increase in 2009-2010 was related to the housing tax credit).
Investment in home improvement was at a $159 billion Seasonally Adjusted Annual Rate (SAAR) in Q4 (about 1.0% of GDP), still above the level of investment in single family structures of $143 billion (SAAR) (or 0.9% of GDP). Single family structure investment will probably overtake home improvement as the largest category of residential investment later this year.
Brokers' commissions increased slightly in Q4 as a percent of GDP. And investment in multifamily structures increased in Q4. This is a small category, and even though investment is increasing, the positive impact on GDP will be relatively small.
These graphs show there is currently very little investment in offices, malls and lodging. And residential investment is starting to pickup, but from a very low level
Read more at www.calculatedriskblog.com/2013/03/q4-2012-gdp-details-commercial-real.html#PXtv6Ca1eFGu9Lcl.99