Even Kyle Bass didn't think housing had much more downside. I dont see the catalyst for much upside though. What happens when rates eventually go up?

HXM has been acting well, yep.

N/not investment advice

It is end the end all local. I am sure there are parts of the country that are ripe, but places like CA still have a ways to go.

I think builders and REITs are foolish investments at the moment.

However at the same time, I think the housing stats will improve.

Heres why I think the investments are poor;

1) There are many more dwellings than people.

A lot of multi-family/apartments/etc. have been built in the last few years. This IMO was in response to everyone getting foreclosed or short selling their home and having ruined credit and thus having to rent or move into an apartment. "Downsizing" was very common.

Also.. young families were/are afraid to buy and are instead either renting or moving into larger 2-3 bedroom apartments.

Many of the foreclosed and short sale homes are sitting empty while these families have moved to other homes.

What happens when these families have improved credit and wish to buy again?

They will simply refill a lot of empty homes. This requires no building and will leave empty apartments in their wake. Yet the sales numbers will look better and prices may improve. But this situation is neither good for REITs or builders.

2) The builders will increase building dramatically into improving numbers and will make the above problem worse. This phase will negatively affect prices after the realization is made by the builders of what is actually occuring.

3) Multi-family apartments will attempt to turn apartments into condo conversions in response to the above. This will have the same effect as #2. Worsening the problem and negatively affecting prices.

In the end, there's simply no way around the fact that there is too many homes for not enough people. And improving data will likely make things look better for a bit and home builders will ramp up, but eventually the true nature of whats going on will be clear.

The last few years there has been a cyclical trade with home builders. They start tanking in May, and bottom in September-October, then rise until about January-Feb.

It's probably just the hopium trade, as everyone thinks that this spring selling season will be "the one" to finally make a turn. By May when the stats are inarguably a suck-fest, it's back to the toilet for the homies.

This sounds like hedgies front-running it. Probably too late to get in; they'll be distributing into your bid at the first whiff of crappy spring sales.

Quote:

In the end, there's simply no way around the fact that there is too many homes for not enough people.

Isn't there some 'law' of economics that applies to this sort of situation, to bring things back into equilibrium? It's on the tip of my tongue...

From a purely demographic standpoint, the picture is bright for the housing market.

The low-point of the birth-dearth that was Gen X happened in 1976. The average age of first time home buyers is 32. Add those two numbers and you get 2008 - exactly the year of our crash. I don't think that's a coincidence. I suspect one of the lobbying points of the finance industry back in 1999 to loosen up bank capital requirements was to deal with the small number of Gen X buyers coming through the pipeline. They tried to expand the number of people who would qualify for loans as a response to the decreased absolute number of qualified buyers. Massive fail.

Millenials, born 1981-2000 are as numerous as the boomers. Add 32 to 1981 and you get 2013. Had we not had massive fraud in so many aspects of the mortgage market or the accumulation of so much debt or the gutting of our production, we would expect the housing market to boom for the next 20 years. With so many foreclosures still to come through the pipeline, along with so much student loan debt, that start point will be delayed for some time.

If we ever get this straightened out, there will be a housing boom like we've never experienced.

Mo, the problem is those millenial 32 year olds aren't like your father's 32 year olds. They're loaded down with student debt, living in their parents basements or tripled/quadrupled up in rentals with other millenials.

They're also less likely to marry. I expect household formation to suck for quite a while.

Zappafan, I realize that.

The answer is to crush the higher ed sector to free the millenials from their debt burden.

The economy would boom - except for the college professors and administrators.

How much of housing is supported by healthcare workers, military, public sector workers, etc? What happens when that stuff gets cut?

Quote:

Mo, the problem is those millenial 32 year olds aren't like your father's 32 year olds. They're loaded down with student debt, living in their parents basements or tripled/quadrupled up in rentals with other millenials.

Plus they are trained to work in an unsustainable service economy. Even if they didn't have the debt what are they going to do with all these business degrees?

How many cashiers' hours earn a house?