Welcome Guest [Log In] [Register]


Reply
Lonely housing bear Mark Hanson Advisers predicts 20% crash in US house prices; Mark Hanson remarks that perhaps he is the only housing bear left
Topic Started: 10 Oct 2013, 10:13 AM (594 Views)
Admin
Member Avatar
Administrator

Quote:
 
A Lonely Housing Bear Predicts a Big Tumble

By Lewis Braham - Oct 8, 2013 2:18 AM ET

Talk to Mark Hanson about the housing market for five minutes and you may find yourself wanting to sell your home and park the cash in a suitcase.

Furniture and personal belongings sit in front of an abandoned house in Antioch, California. Photograph by Justin Sullivan/Getty Images

The Menlo Park, California, real estate analyst, blogger and founder of consultancy Hanson Advisers predicts a decline of 20 percent in housing prices in the next 12 months. Half the gains since the latest housing bottom in 2011 could be erased in the hot areas -- Florida, California, Nevada, Arizona and Georgia -- by rising interest rates and a thinner herd of speculative private-equity buyers, he says.

Less bearish real estate experts such as Stan Humphries, chief economist at Zillow and a Hanson fan, also see signs of froth. Existing home sales jumped 6.5 percent to 5.39 million this July, their highest level in three years. In August those sales fell 1.6 percent despite a surge in 30-year mortgage rates -- a move Humphries says was healthy because the market needed to cool off, and that relatively mild reaction showed there was still buying in the face of rising rates.

"There’s a strong distinction between a normal slowdown and the wheels coming off the housing recovery," says Humphries. "That's where I depart from Mark's take."

Deeply Misleading

Hanson's critical view of the housing market, which he shares with mutual fund and hedge fund clients, extends down to how those very statistics are generated. A reporting lag makes existing-home sales stats deeply misleading, he says. The statistics are calculated 30 to 60 days after sales contracts are signed. July’s positive data, for example, were mainly for homes sold before most of the rate increase.

Digging into the data does, however, reveal one reason why Hanson is so leery of housing now. Some 58 percent of existing-home sales in 2013 have been made by all-cash investors purchasing large swaths of distressed properties to lease to renters. Hanson says private-equity firms caused about 50 percent of the price appreciation in cities like Phoenix and Las Vegas, and generally overpaid by 10 percent to 20 percent, according to his calculations.

With gains of more than 35 percent since the crash for properties in Las Vegas, Phoenix and other of the hardest-hit regions, these vultures will begin to lose interest, he figures. With property prices and interest rates both higher, they may find better opportunities in Treasury and high-yield bonds than in houses. That’s because as house prices rise the yield you can get from renting the house declines. The loss of some of these buyers will remove what Hanson sees as an artificial support for prices.

A lack of buyers for new homes is also part of Hanson's downbeat outlook. He points to new-home sales as a better indicator of the health of the housing market than existing-home sales. They're more current, reported as soon as sales contracts are signed, and 85 percent of sales are to traditional buyers with mortgages.

Such buyers have already begun to feel the sting of higher rates. “New-home sales fell 27.4 percent in July,” says Hanson. “The only other time they’ve ever fallen that much was when the home-buyer tax credit expired in May of 2010.” The adjusted Census Bureau numbers he tracks show new-home sales flat from July to August, but the number of new homes being sold is so low to begin with, he says, at 35,000, that they are "recession-level" sales numbers.

Rate Impact

Whether homes become unaffordable as a result of rising rates is a key question for the housing market. Zillow's Humphries points out that in markets such as Phoenix it costs only 13 percent of the average family’s household income to cover its 30-year monthly mortgage payments despite the rate increase. That compares with the 20 percent of income it used to cost in the years leading up to the housing bubble. So, in his view, houses in Phoenix are still very affordable.

Hanson says apples-to-apples comparisons of affordability for pre- and post-crisis periods are problematic. While home prices were higher and 30-year mortgage rates were typically above 6 percent prior to the 2008 crash, houses were actually more affordable back then because of the types of loans people had, he says -- such as loans with zero-interest teaser rates and adjustable-rate mortgages with lower rates than today's fixed ones.

Hanson's track record as a forecaster is mixed. He's made numerous good calls, including predicting the 2007 housing crash. Where he says he went wrong in recent years was in 2012, when he turned from bull to bear, not realizing the extent of the private-equity and all-cash buying that he says is propping up the market.

Bears often aren't popular with their peers, and Hanson is no exception. "I give him zero credibility," says John Burns of John Burns Real Estate Consulting. "For there to be a 20 percent decline we'd have to have a massive U.S. recession." Absolutely not, says Hanson: "You're going to have a cooling on the investor side and the buy-to-rent crowd, and that will be the catalyst for the downturn."

In one of Hanson's latest blog posts he remarks that perhaps he is the only housing bear left. But as anyone familiar with financial history knows, it’s when there are no more bears left that the bear market begins.

Read more: http://www.bloomberg.com/news/2013-10-07/a-lonely-housing-bear-predicts-a-big-fall.html
Follow OzPropertyForum on Twitter | Like APF on Facebook | Circle APF on Google+
Profile "REPLY WITH QUOTE" Go to top
 
herbie
Member Avatar


I know the feeling ... :D
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
Profile "REPLY WITH QUOTE" Go to top
 
Catweasel
Member Avatar


Catweasel say if it want to play anti-guru,

it need thick the skin.

Because it not perceive as thorn to white shoe,

and whole industries,

but also emotional reaction of mouse who have umbilical cord to system.

Anti-guru not a realize,

if gates are a open are open in sandpit,

mouzealots and rapscalls can the rabid.

Even if anti-guru unaware of exist of sandpit.
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
« Previous Topic · Australian Property Forum · Next Topic »
Reply



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy