Evaluations 1, Appraisals 0

[Randolph Kinney]

When rents increase, tenants double up in a house or apartment. Where did I read that 40% of millennials receive financial support from parents.

https://www.investopedia.com/articl...arental-support-young-millennials-get-lot.asp

According a study which was conducted by the Institute for Social Research Transition Into Adulthood, a whopping 40% of young adults between the ages of 22 and 24 receive significant financial support from their folks. These Millennial twentysomethings collect an average of $3,000 in handouts from Mom and Dad each year. That comes out to about $250 a month – enough to cover nearly 30% of rent in most U.S. metro areas. While some use the money to cover housing costs, many use the parent-provided dough to fund a business startup or as a down payment on a home.

I don't believe the millennials can recover to the point of adding the same or greater demand of the parents to the economy.

 

[Randolph Kinney]

Half of the 50 largest metropolitan areas were overvalued relative to incomes in November, compared with 36 percent two years earlier, according to an analysis by data provider CoreLogic.

“If we see mortgage rates at more historical levels, house prices can’t stay where they are,” Stack said. Corp

A rate rise from 4 to 5 percent for a 30-year loan would drive up monthly mortgage costs by 12 percent. For buyers, that’s on top of the annual median price gain -- 7 percent for existing homes in November, according to CoreLogic. By comparison, disposable income, or earnings adjusted for taxes and inflation, increased just 1.9 percent, according to data from the Bureau of Economic Analysis.

https://www.bloomberg.com/news/arti...bernate-as-u-s-homebuilders-swagger-into-2018

What's wrong with the above graph?

 

[Terrel L. Shields]

Trends for increase start from the inside (close to employment centers) and work their way out to the rural areas;

A very Von Thünen concept. I did a regression analysis once that showed land prices inverse correlation to distance from nearest Walmart and land prices jumped in an area with a new store.

 

[Terrel L. Shields]

Lawrence Yun was saying everything is fine all the way down to the bottom.

He spoke at our board a few weeks ago. Missed it but the ones who went said he is a very good speaker and enjoyed the talk.

 

[Evincere]

Half of the 50 largest metropolitan areas were overvalued relative to incomes in November, compared with 36 percent two years earlier, according to an analysis by data provider CoreLogic.

“If we see mortgage rates at more historical levels, house prices can’t stay where they are,” Stack said. Corp

A rate rise from 4 to 5 percent for a 30-year loan would drive up monthly mortgage costs by 12 percent. For buyers, that’s on top of the annual median price gain -- 7 percent for existing homes in November, according to CoreLogic. By comparison, disposable income, or earnings adjusted for taxes and inflation, increased just 1.9 percent, according to data from the Bureau of Economic Analysis.

https://www.bloomberg.com/news/arti...bernate-as-u-s-homebuilders-swagger-into-2018

What's wrong with the above graph?

“It is 2005 all over again in terms of the valuation extreme, the psychological excess and the denial,” said Stack, whose fireproof files of newspaper articles on bear markets date back to 1929. “People don’t believe housing is in a bubble and don’t want to hear talk about prices being a little bit bubblish.”

 

[Joe Flacco]

He spoke at our board a few weeks ago. Missed it but the ones who went said he is a very good speaker and enjoyed the talk.

Can't believe anybody wants to hear him speak. What a joker.

 

[George Hatch]

“It is 2005 all over again in terms of the valuation extreme, the psychological excess and the denial,” said Stack, whose fireproof files of newspaper articles on bear markets date back to 1929. “People don’t believe housing is in a bubble and don’t want to hear talk about prices being a little bit bubblish.”

As always, "valuation extreme" is an abstract that has no real meaning unless we add context. Prices are high? High compared to what?

This is why i don't really like to watch pricing in isolation of mtg interest, wage and population trends.

BTW, "bubble" has been defined as pricing that exceeds 2 standard deviations from the trend. If the normal cycle peaks at +25% and bottoms out at -15% or -20% relative to the trend then those highs and lows are really typical of what's occurred in previous cycles. An actual bubble would start at +40% at the very least. I don't think we're anywhere near trend+40% yet.

 

[Randolph Kinney]

There are two ways of looking at residential housing: First would be the cost of shelter either owning or renting. Second would be investment compared to other asset classes and the opportunity cost.

With zero interest rate policy and up to 100% financing, buying a home beats any leverage that the stock or bond market will allow (50% margin loans) thereby maximizing gain or loss on sale.

The Fed anticipates hiking rates three times in total in 2018, part of an ongoing move away from the extraordinary measures it took to stimulate the economy during and after the Great Recession. But the central bank opened the door to potentially doing four hikes. Higher rates are likely to be welcomed by savers but not by borrowers, who will face more expensive loan terms.

U.S. interest rates are still far lower than the historical norm of about 5 percent.

https://www.washingtonpost.com/news...a-decade-amid-stronger-economy/?noredirect=on

At some level, interest rates will limit any demand for borrowed funds by the private sector because debt must be serviced. The government gets first call on servicing its debt, crowding out the private sector.

The pattern for recessions is that interest rates are rising before going into a recession.

 

[Randolph Kinney]

Stockman warns that “the U.S. economy is an exceedingly fragile house of cards,” and “it will buckle like a lawnchair in the face of rising interest rates, a multi-trillion drain of cash from the bond pits and the end of the Fed’s price-keeping operations at anything remotely close to current stock index levels.”

When the unwinding begins and stocks get pummeled, Stockman predicts the Fed will scramble to reinstate some form of QE, but it’ll be way too late.

All eyes on the 10-year Treasury as it stretches for a 3% yield — at one point in the Europe session, it topped 2.995%. Why? “Even a small deterioration in sentiment could trigger a selloff for global equities as yields threaten the upside potential,” says Konstantinos Anthis at ADS Securities.

https://www.marketwatch.com/story/i...-the-brink-of-the-dot-com-collapse-2018-04-23

The FED is selling off its balance sheet of bonds bought under QE thereby reducing the money supply.

The Fed's balance sheet for the week ending December 6, released Thursday, completes the second month of the QE-unwind. Total assets initially zigzagged within a tight range to end October where it started, at $4,456 billion. But in November, holdings drifted lower, and by December 6 were at $4,437 billion, the lowest since September 17, 2014:



As part of the $10-billion-a-month unwind from October through December, the Fed is supposed to unload $6 billion in Treasury securities a month plus $4 billion in mortgage-backed securities (MBS) a month.

The Fed doesn't actually sell Treasury securities outright. Instead, it allows some of them, when they mature, to "roll off" the balance sheet without replacement. When the securities mature, the Treasury Department pays the holder the face value. But the Fed, instead of reinvesting the money in new Treasuries, destroys the money - the opposite process of QE, when the Fed created the money to buy securities.

This happens only on dates when Treasuries that the Fed holds mature, usually once or twice a month.

http://www.businessinsider.com/fed-balance-sheet-normalization-is-happening-2017-12

 

[Joe Flacco]

This Stockman?