I read through the usual suspects in the mainstream media yesterday after the Case Shiller numbers were released and see headlines such as "Home Prices Flatten in October After 5 Months of Gains" and "Mortgage insurers rally after housing data" and wonder just how many of these reporters and analysts actually bothered to look at the data versus repeating sound bites. This has been a bad three quarters for the fundamental bears, but there is absolutely no macro or fundamental reason to turn bullish. As a matter of fact, the only reason I can see to buy stocks is that the stock prices are going up. That, in and of itself, should give one pause.

Let's take a close look at the "raw" Case Shiller numbers, not the seasonally adjusted ones for which I cannot source the method of adjustment for seasonality. Don't worry, if one looks at the data over a long enough time frame, you can easily recognize the patterns of seasonality, and more importantly notice how dramatic they have become, leaving open to question how effective the seasonal adjustments are, whatever they are.

Starting with a bird's eye view of key markets over two decades you can see that the housing boom was enormous and the crash was severe, but nearly all major markets ticked up significantly over the last few months, although we are still at roughly 2003 pricing levels, having lost about 7 years appreciation. The question is why. Well, the US government has put more money and resources into re-blowing the residential housing bubble than any other time in its existence.



Published in BoomBustBlog
Wednesday, 30 December 2009 00:00

The Spanish Banks Start to Unload

From the WSJ:

Spanish savings banks have begun selling off the large property portfolios they acquired as collateral from loan defaults, in an effort to improve solvency ratios, a move that risks further falls in property values that could impair the value of their asset books.

In Spain, the global financial crisis that erupted in 2007 ended a real-estate and construction-based asset boom, plunging the country into a recession that has yet to end, even as many other European economies have returned to growth.

As the unemployment rate has soared to more than 19%, residential-property buyers have defaulted on loans in massive numbers, as have property developers, overleveraged in a moribund market. As lenders have assumed the collateral on defaulted loans, local financial institutions—particularly unlisted savings banks—have collected properties valued at about €8.5 billion ($12.2 billion) over the past 12 months.

I was fairly confident this would come to pass. Readers should reference this post from January: "Reggie Middleton on the New Global Macro - the Forensic Analysis of a Spanish Bank ". The first quarter was profitable, but that big bear rally really threw this off. The investment thesis is still sound, though. I may update this if the opportunity presents itself.

Published in BoomBustBlog

I read through the usual suspects in the mainstream media yesterday after the Case Shiller numbers were released and see headlines such as "Home Prices Flatten in October After 5 Months of Gains" and "Mortgage insurers rally after housing data" and wonder just how many of these reporters and analysts actually bothered to look at the data versus repeating sound bites. This has been a bad three quarters for the fundamental bears, but there is absolutely no macro or fundamental reason to turn bullish. As a matter of fact, the only reason I can see to buy stocks is that the stock prices are going up. That, in and of itself, should give one pause.

Let's take a close look at the "raw" Case Shiller numbers, not the seasonally adjusted ones for which I cannot source the method of adjustment for seasonality. Don't worry, if one looks at the data over a long enough time frame, you can easily recognize the patterns of seasonality, and more importantly notice how dramatic they have become, leaving open to question how effective the seasonal adjustments are, whatever they are.

  Starting with a bird's eye view of key markets over two decades you can see that the housing boom was enormous and the crash was severe, but nearly all major markets ticked up significantly over the last few months, although we are still at roughly 2003 pricing levels, having lost about 7 years appreciation. The question is why. Well, the US government has put more money and resources into re-blowing the residential housing bubble than any other time in its existence.

I read through the usual suspects in the mainstream media yesterday after the Case Shiller numbers were released and see headlines such as "Home Prices Flatten in October After 5 Months of Gains" and "Mortgage insurers rally after housing data" and wonder just how many of these reporters and analysts actually bothered to look at the data versus repeating sound bites. This has been a bad three quarters for the fundamental bears, but there is absolutely no macro or fundamental reason to turn bullish. As a matter of fact, the only reason I can see to buy stocks is that the stock prices are going up. That, in and of itself, should give one pause.

Let's take a close look at the "raw" Case Shiller numbers, not the seasonally adjusted ones for which I cannot source the method of adjustment for seasonality. Don't worry, if one looks at the data over a long enough time frame, you can easily recognize the patterns of seasonality, and more importantly notice how dramatic they have become, leaving open to question how effective the seasonal adjustments are, whatever they are.

  Starting with a bird's eye view of key markets over two decades you can see that the housing boom was enormous and the crash was severe, but nearly all major markets ticked up significantly over the last few months, although we are still at roughly 2003 pricing levels, having lost about 7 years appreciation. The question is why. Well, the US government has put more money and resources into re-blowing the residential housing bubble than any other time in its existence.

Housing sales and prices come in lower than estimated??? What??? Estimated by who? BoomBustBloggers knew what was coming. See "Residential Lending Credit Losses Worsen as Unstainable Government Support Proves... Unsustainable"

All one really needs to do is to take a look a housing from a bird's eye view, whether adjusted for inflation or not, and it is quite obvious that not only are we still in a housing bubble, but we have a while to go before we reach equilibrium. Those insurer's, lenders, and investors highly levered to residential and commercial real estate had better be prepared for another 30% or so drop.

Dollar Rally Stalls After Weak US Housing Data:

Figures on Wednesday showed sales of new homes unexpectedly fell 11.3 percent in November, hitting their lowest level in seven months and serving as a reminder that any economic recovery would be bumpy.

Published in BoomBustBlog

Housing sales and prices come in lower than estimated??? What??? Estimated by who? BoomBustBloggers knew what was coming. See "Residential Lending Credit Losses Worsen as Unstainable Government Support Proves... Unsustainable"

All one really needs to do is to take a look a housing from a bird's eye view, whether adjusted for inflation or not, and it is quite obvious that not only are we still in a housing bubble, but we have a while to go before we reach equilibrium. Those insurer's, lenders, and investors highly levered to residential and commercial real estate had better be prepared for another 30% or so drop.

Dollar Rally Stalls After Weak US Housing Data:

Figures on Wednesday showed sales of new homes unexpectedly fell 11.3 percent in November, hitting their lowest level in seven months and serving as a reminder that any economic recovery would be bumpy.

Housing sales and prices come in lower than estimated??? What??? Estimated by who? BoomBustBloggers knew what was coming. See "Residential Lending Credit Losses Worsen as Unstainable Government Support Proves... Unsustainable"

All one really needs to do is to take a look a housing from a bird's eye view, whether adjusted for inflation or not, and it is quite obvious that not only are we still in a housing bubble, but we have a while to go before we reach equilibrium. Those insurer's, lenders, and investors highly levered to residential and commercial real estate had better be prepared for another 30% or so drop.

Dollar Rally Stalls After Weak US Housing Data:

Figures on Wednesday showed sales of new homes unexpectedly fell 11.3 percent in November, hitting their lowest level in seven months and serving as a reminder that any economic recovery would be bumpy.

As many people focus on commercial real estate exposure, they forget that we are only about halfway or so through the residential crash. The $8k homebuyer tax credit did serve to support the lower end of the residential market (from my anecdotal observations), but did very little to solve the problem. Basically, prices must fall, credit must be loosened or incomes must rise in order to stabilize home prices. With 10% plus unemployment (incomes have actually dropped since the initial bubble burst) and banks holding on to cash tighter than Fido grips his steak bone, you know what prices really need to do to reach equilibrium. Click the graphs below to expand.

Published in BoomBustBlog

As many people focus on commercial real estate exposure, they forget that we are only about halfway or so through the residential crash. The $8k homebuyer tax credit did serve to support the lower end of the residential market (from my anecdotal observations), but did very little to solve the problem. Basically, prices must fall, credit must be loosened or incomes must rise in order to stabilize home prices. With 10% plus unemployment (incomes have actually dropped since the initial bubble burst) and banks holding on to cash tighter than Fido grips his steak bone, you know what prices really need to do to reach equilibrium. Click the graphs below to expand.

As many people focus on commercial real estate exposure, they forget that we are only about halfway or so through the residential crash. The $8k homebuyer tax credit did serve to support the lower end of the residential market (from my anecdotal observations), but did very little to solve the problem. Basically, prices must fall, credit must be loosened or incomes must rise in order to stabilize home prices. With 10% plus unemployment (incomes have actually dropped since the initial bubble burst) and banks holding on to cash tighter than Fido grips his steak bone, you know what prices really need to do to reach equilibrium. Click the graphs below to expand.