patrick.net

You had one aggressive move in rates in this cycle and that changed the PITI factor so much that everyone whiffed on their 2014 sales call

I thought everyone has whiffed on their sales calls for 3 years running? And it was because prices are too high-isn't that your thesis?

Regardless, if your argument is that spikes in interest rates can have short term effects on demand--I will grant you that is possible. But, looking at historical data over long periods, there is no correlation between rates and demand. Hell, even after the spike you posted above, rates were still very low.

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_ 2015 Jun 13, 5:11pm

I'm commenting on the data you already posted. Do you really need me to repost it? Why?

This is your tactic,

.....

This is just a guess

You're a female, from Hawaii or the islands and I am going to say you're a baseball fan because you like stats?

How did I do?

See, I come with data first ... and then show the relationship factor

You just come out of no where

Seriously, as a friend, I am telling you, you say things that make no sense what so ever.

It's ok, because you're not an economist, you're not a housing analyst, you don't write about housing and you hide behind a fake name which means it's ok because you don't need to be right

This is all fine, nothing wrong with what you're doing

However, you say things that just aren't realistic

Hint: Narcissism is your enemy not your friend

I myself am only bounded by math, facts and data if I said the things you have said on Patrick I would be laughed at. It's not your fault, this isn't what you do for a living.

However, don't think for a second this mickey mouse stuff works on someone who lives off numbers. :-)

What was the demand curve during the lowest interest rate cycle ever in 10's

Here

Math

Facts

Data

Matter.... you have to know why something happens... that's the only way you get to the truth

82

tatupu70 2015 Jun 13, 5:40pm

Seriously, as a friend, I am telling you, you say things that make no sense what so ever.

However, you say things that just aren't realistic

Instead of continuing to repeat this nonsense, why don't you just have a discussion about the data and interpretations? You always want to distract trying to make it personal, either about me or you. Let's just discuss the data.

So, again, what am I saying that is not realistic? What am I saying that makes no sense.

In case you forgot, here's what I'm saying. If you look at historical data, there is no correlation between interest rates and nominal house prices. This is because incomes are the main driver in house prices, and income is strongly correlated (negatively) with interest rates. That relationship overrides the expected dependency between prices and interest rates. So, what doesn't make sense there?

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_ 2015 Jun 13, 5:50pm

Instead of continuing to repeat this nonsense, why don't you just have a discussion about the data and interpretations? You always want to distract trying to make it personal, either about me or you. Let's just discuss the data.

Your tactic... it doesn't work with me

If you look at historical data, there is no correlation between interest rates and nominal house prices

Another tactic, change subject, I am talking about demand curve "COME ON" seriously, I have home prices going up for years now...

This tactic you do doesn't work on me...

Miss ... I presume...

My lady, you're dealing with someone who looks at every single data possible every day of his life.. Not just housing but every economic indicator here and over seas

When I post demand curve numbers that means demand curve not prices... Really....come on my lady you know better....

Since inventory levels broke under 6 months that gives pricing power in almost every cycle unless the inventory level shifts above 6 months or you get front loaded with distress sales

We have inventory under 6 months
We have traditional sales rising and distress sales falling
With unemployment claims hovering at a 15 year low there is no recession sign what so ever

My lady I am trying to make the point that I am not the person you should be trying these tactics with... There are plenty of people here that would love to go back and forth on non mathematical statistical trends

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tatupu70 2015 Jun 13, 5:55pm

Your tactic... it doesn't work with me

lol--you're kidding, right? You do it again on the last post!

Miss ... I presume...

Another tactic, change subject, I am talking about demand curve "COME ON" seriously, I have home prices going up for years now...

OK, let me remind you what we were talking about:
Logan Mohtashami says

tatupu70 says

Please tell me specifically which economic assumption of mine is not supported with the data. I'm all ears.

That rates don't matter...

Do you remember now?

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tatupu70 2015 Jun 13, 5:58pm

Yep, but to see if there's a correlation you need to look at a time period when rates are rising to see if prices fall. Not to mention that prices fell significantly during as rates fell in the late 2000s. Doesn't look like a correlation to me.

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_ 2015 Jun 13, 6:05pm

lol--you're kidding, right? You do it again on the last post!

My lady... seriously... this tactic isn't working...

I am talking about main street America demand curve and how it's been a renting cycle and you're talking only about nominal prices and I just gave you
my thesis on what to do look for on prices and why it's increasing

Distress sales only come in recession my lady

Come on....let it go.... So many more people you can chat with that are better suited for you style of debate

On another level.. in the next recession I don't believe you're going to see a massive correction in prices because of the lack of speculation in this cycle on non capacity owning debt

My lady, still, I got nothing but love for you as always I do enjoy our chats

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tatupu70 2015 Jun 14, 10:08am

The past 25 years isn't long enough for you to see a trend??

To see a trend, yes. To attribute causation, clearly not.

You want to cherry pick a small segment where artificial and unreaslistic financiing took place which caused the bubble to pop as your argument?

Of course. I let the data speak for itself.

Of course it doesn't, that would blow up your false narrative that you've spewed through out this thread.

You might as well say pork bellies are correlated to low interest rates or beef prices. Both have risen over the last 25 years too.

In order to show correlation, you must show it holds during both up and down periods.

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Strategist 2015 Jun 14, 6:52pm

In case you forgot, here's what I'm saying. If you look at historical data, there is no correlation between interest rates and nominal house prices. This is because incomes are the main driver in house prices, and income is strongly correlated (negatively) with interest rates. That relationship overrides the expected dependency between prices and interest rates. So, what doesn't make sense there?

Yep, but to see if there's a correlation you need to look at a time period when rates are rising to see if prices fall. Not to mention that prices fell significantly during as rates fell in the late 2000s. Doesn't look like a correlation to me.

Tatu does have a point with his second comment. When interest rates rose in the late 70's, it was due to inflation. Real Estate is a hedge against inflation. The "real" interest rates were not necessarily high, therefore real estate prices would move up.
If Tatu is stating home prices cannot increase with falling interest rates, that would be wrong, as both, interest and wages determine affordability of a home.

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tatupu70 2015 Jun 14, 7:23pm

If Tatu is stating home prices cannot increase with falling interest rates, that would be wrong, as both, interest and wages determine affordability of a home.

I think I've been pretty clear with my statements. There is no correlation between interest rates and housing prices.

There is, however, a strong correlation between income and house prices.

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Strategist 2015 Jun 14, 7:29pm

Strategist says

If Tatu is stating home prices cannot increase with falling interest rates, that would be wrong, as both, interest and wages determine affordability of a home.

I think I've been pretty clear with my statements. There is no correlation between interest rates and housing prices.

There is, however, a strong correlation between income and house prices.

Question for you. If the 30 year fixed rate mortgage jumped to 12%, with no change in income or inflation, would real estate prices be negatively affected?

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tatupu70 2015 Jun 14, 7:48pm

http://www.usatoday.com/story/money/personalfinance/2015/06/14/credit-dotcom-renting-american-dream/71053284/

Question for you. If the 30 year fixed rate mortgage jumped to 12%, with no change in income or inflation, would real estate prices be negatively affected?

I would expect so. Empirical correlation doesn't worry about hypotheticals though--it's a simple calculation based on historical data.

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_ 2015 Jun 14, 8:06pm

Speaking of which quoted on USA Today today

"Renting the New American Dream"

In regard to rates and inflation. All we have is pocket inflation and debt has to be serviced at lower rates because the demand curve is just dreadful for most of America in this cycle.

Even with the lowest interest rate curve since 1941-1945 you have the weakest demand from main street America.

But.. and this is the big but.. you have the strongest demand curve ever from wealthy Americans, wall street, foreign buyers, cash buyers, fund buyers, re mod buyers ever seen.

Speculation factor is very little here because there is no way for main street to speculate in big numbers and this is a very good thing for this country. We should proud as Americans to not allow garbage back into the system

Net worth which is highly top end heavy .. really the 1% is getting screwed by the 0.01%

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_ 2015 Jun 14, 8:14pm

#Globalization
#Technology
#Debt
#Demographics

The good part about America is that we do have a young workforce coming on-line soon and we have 2 solid decades plus of working force that will get better wage inflation that what we saw in this cycle... this is more a 2020-2024 story line

Year 7 of the cycle... 2-4 years left before the next recession .. so the next recovery cycle will look better as prime working age workforce is now growing

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_ 2015 Jun 15, 6:15am

There is, however, a strong correlation between income and house prices.

Has not recovered to pre cycle recessions highs (variables in these equation)

New home prices

Nominal way over the pre bubble peak... adjusted to inflation we just past it last month

Existing home prices

This is what happens when you have 30% plus cash buyers in an economic cycle, 20% above historical norms and over 50% of all homes being bought by the reach.

I don't like to use the term bubble for home prices in this cycle, just major disconnection from main street America and this is why the demand curve has been the worst we have ever seen from main street but the strongest demand curve from wall street, rich, Foreign buyers, hedge funds... this even with the lowest rate curve on 10's since 1941-1945

In reality and in lending terms the size of the debt (PITI) inflation model... this is the missing algorithm PITI +DTI +LTI = (HC)

Inventory very key on home prices because the asset itself has capacity to grow in asset value ... like all debt instruments the subsidization factor for housing has been very helpful for growth in nominal price values as well.

So there are legs to grow as long as inventory stays below 6 months and there is a lack of distress sales in the market, both are here to stay this year and even next year as well

95

tatupu70 2015 Jun 15, 9:26am

http://video.cnbc.com/gallery/?video=3000388493

The charts above dispute that....

No they don't. I don't know how much more simple I can make this for you.

Now, notice what housing prices did during high the inflation times of the mid/late seventies through 1982. Housing went up. A lot. Then it actually leveled off as interest rates were falling after 1982 before picking up again. Tell me how that is a correlation. Interest rates low--sometimes prices rise, sometimes they fall. Interest rates high, housing prices rise. Where exactly is the correlation there, again??

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_ 2015 Jun 15, 1:38pm

Strategist says

Here for you buddy starts at 2:21

TOL company was my point but tried to get the builders index there for you

97

Strategist 2015 Jun 15, 2:02pm

Strategist says

Here for you buddy starts at 2:21

TOL company was my point but tried to get the builders index there for you

http://video.cnbc.com/gallery/?video=3000388493

Hey, that was pretty cool. Thanks.
I liked that guys answers. The 10 year yield shoots up, but the homebuilders go sideways. :) It's as if those ITB and XHB stocks are just waiting to get the expected higher interest rates out of the way before they too start moving up. Was stimulating. :)

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_ 2015 Jun 15, 2:06pm

Hey, that was pretty cool. Thanks

Lets say I was paid pusher for builders... the best thesis I would use is this

Adjusting to population growth sales are so historically low that the builders aren't pricing in the next waive of the housing buying cycle come 2020-2024 time frame. TOL brothers 2.5 soft trend is due to a lack of dual income buyers in the system

That's the best I can do... shifting the thesis from housing is nirvana to the normal trade cycle which makes the builders a good trading channel story until the front end demand curve shows up

99

_ 2015 Jun 15, 2:47pm

Key with builders in all cycles, got to get in early... late recession cycle trail end demand curve will start to swing positive.

Here in the U.S. is March of 2009 when the data come through positive and then the jobs picked up positive in early 2010

100

Strategist 2015 Jun 15, 6:17pm

Key with builders in all cycles, got to get in early... late recession cycle trail end demand curve will start to swing positive.

Here in the U.S. is March of 2009 when the data come through positive and then the jobs picked up positive in early 2010

Home building cannot get any lower. There is only one direction for it to go, and that is up. That makes home builders and their corresponding ETF's the best and the safest investment ever.

101

_ 2015 Jun 15, 6:26pm

That makes home builders and their corresponding ETF's the best and the safest investment ever.

102

_ 2015 Jun 16, 5:56am

There is only one direction for it to go, and that is up.

Did you see those permits number today... Holy rental cycle batman... wow

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_ 2015 Jun 16, 6:32am

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_ 2015 Jun 16, 6:41am

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_ 2015 Jun 16, 6:45am

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_ 2015 Jun 16, 6:49am

107

Strategist 2015 Jun 16, 7:46am

I love this graph. A picture is worth a thousand words, but this graph is worth a thousand pictures.
Look how high housing starts went in 1972. Even the recession that followed due to the first oil crisis did not kill housing starts as it did in 2009.
Even during the 17.5% mortgage rates of 1981 housing starts were better. We need more homes. There aren't enough caves for everyone.
Gentlemen, we are about to embark on a massive building boom.

108

Strategist 2015 Jun 16, 7:55am

Strategist says

Even during the 17.5% mortgage rates of 1981 housing starts were better. We need more homes.

No, we need more people who can afford and are able to BUY those homes...

People could afford 17.5% mortgage rates, but not 4%?
If they can't afford to buy, they will rent from a landlord who can afford to buy. Either way, that home MUST be built.

109

_ 2015 Jun 16, 8:00am

People could afford 17.5% mortgage rates, but not 4%?

Forget the nominal rate as the variable factor model, that has led to nothing but disaster sale estimates and the biggest misses on sales estimates we have seen in long time

PITI + DTI +LTI = (HC)

There is no

limf (x) =sky
x-a

Model

debt size grows the capacity to handle that gets challenged

Causation
Correlation
Representation

3 (X)

1.

110

_ 2015 Jun 16, 8:01am

2

Low rates, #ZIRP tax credit, 3% down mortgages on and on ... starts

111

_ 2015 Jun 16, 8:03am

Finally number 3

Horrid net demand from new homes which are tilted to the wealthy buyer

Even with an extreme high cash buyer profile and lowest rate curve post WWII

112

_ 2015 Jun 16, 8:03am

Housing is a process

The net demand curve looks a lot better but in years 2020-2024

Dual income college educated Americans having kids

That's a powerful economic force

113

_ 2015 Jun 16, 8:08am

It's year 7 now, economic cycles have a 7-10 year time frame .... so even if this becomes the longest expansion ever 11 years, that means you got 3 years left
before the profit margin cycle starts to curve the other way

This is why it's been a rental recovery and not a housing owning one

The purity of numbers is that they can't lie, they're as truthful to the equation as can be

114

_ 2015 Jun 16, 8:23am

https://research.stlouisfed.org/fred2/graph/?id=EXSFHSUSM495S,

chart of the volume of Existing home sales in the early 1980's?

Goes from 1989

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_ 2015 Jun 16, 8:38am

I saw that one, but I haven't been able to find a volume chart from earlier then that.

That's it for EHS, purchase apps go back to 1989 this is the best trend level I can give you

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Strategist 2015 Jun 16, 9:35am

http://www.tradingeconomics.com/united-states/existing-home-sales

Call it Crazy says

I saw that one, but I haven't been able to find a volume chart from earlier then that.

That's it for EHS, purchase apps go back to 1989 this is the best trend level I can give you

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Strategist 2015 Jun 16, 9:36am