Mark Hanson Analysis

[lifeizfunhuh]

What is everyone’s reaction to this? Mark Hanson has always been at the top of his field.

11-27 HANSON: In 2008 Angelo Mozilo Said, “I Have Never Seen a Soft Landing”

[(former)FormerSanDiegan]

I’m still waiting for that next wave of foreclosures that he said was going to happen in 2009 …

[spdrun]

The foreclosures aren’t done in the Northeast — in CA, they kept coming well after 2009, till at least 2012-13.

[gzz]

Mark Hanson IS NOT at the top of his field. He is a permabear. What is the point of that?

I started looking for my first house in mid-2011 and purchased later that year. I did so because I saw prices were well below rents on a 30 year 5% down mortgage.

My $30,000 or so downpayment + initial renovations resulted in, so far, a $450,000 or so capital gain. Plus a mortgage payment far below local rents and a low property tax locked in for life.

So, this financial decision that turned my $30,000 in $450,000, what would he have said about it at the time?

All I see from him in 2011 was doom and gloom in the midst of the biggest buying opportunity of my adult life, possibly one that will never come again:

Here he is in May 2011:

“With respect to negative equity as it relates to the housing market and repeat buyers — the much needed but missing ingredient to a magic housing fix — effective negative equity is far greater. This is because to rebuy a homeowner has to sell, which means paying off the first (and second) mortgages, paying a Realtor 6% and putting 10% to 20% down on the new purchase. When you lower the negative equity thresholds to real life, effective negative equity is epidemic and will keep the organic buyer — especially at the mid-to-high end — at bay for a generation.”

That’s right, he predicted depressed prices, right before a massive appreciation, for “a generation” ie 25-30 years.

—

Here he is in October 2011, right before prices in my sub-market began a beeline to a near doubling in just the next 6 years:

“After nearly 5 years, if there was an easy fix (HAMP mods, HARP loans, HAFA short sales, printing trillions of dollars in order to try to create inflation) housing would be experiencing a v-shaped recovery already. Housing and mortgage are in a generational downturn for which the only cure is time. Anything done to prevent the market from clearing extends the duration and ultimately, the severity.”

Now let’s go to April 2012, when the take-off in housing prices was starting to clearly show up in the data. So he writes a very long post saying don’t trust the data:

“In conclusion, this is not a healthy housing market; rather an epic “stimulus” and “select supply driven” dash-to-trash trap, which will lead to housing market “paralysis” and lower sales volume and prices.”

[gzz]

Anyone like this guy who whines about “printing money” and how it causes inflation does not understand basic economic concepts I learned as a freshman in college: Liquidity traps, secular changes in velocity of money and desired savings, etc.

There is a lot of depth to these concepts that you do not learn as a freshman in introduction to macroeconomics, however the whole “HYPERINFLATION PRINTING MONEY OMG!!!!! CHINA WILL DUMP TREASURIES OH NO” crowd never showed any indication they even understood the very basics. They have been singing the same tune year in and year out from 2008 to 2017.

[gzz]

As further evidence this guy is a hack, notice he uses a non-standard measure of affordability: “increase in median income need to afford median house” rather than the standard mortgage payment to rent ratio.

Now there is nothing wrong with being innovative in choosing economic indicators. But the proper way to do this is (1) note what is happening with the standard accepted indicators (2) explain why alternative indicators may provide additional information not captured by the standard indicators (3) back test and compare the predictive power of standard and non-standard indicators.

He does not do a single one of these three steps.

On the other hand, you know you are dealing with a hack when someone just piles on these non-standard indicators, all of which support the same conclusions, and simply not acknowledge contrary data.

[Anonymous]

[quote=gzz]Anyone like this guy who whines about “printing money” and how it causes inflation does not understand basic economic concepts I learned as a freshman in college: Liquidity traps, secular changes in velocity of money and desired savings, etc.

There is a lot of depth to these concepts that you do not learn as a freshman in introduction to macroeconomics, however the whole “HYPERINFLATION PRINTING MONEY OMG!!!!! CHINA WILL DUMP TREASURIES OH NO” crowd never showed any indication they even understood the very basics. They have been singing the same tune year in and year out from 2008 to 2017.[/quote]

For many years there was a huge “Ron Paul Revolution” banner on I-15 somewhere between Vegas and Baker.

I recently noticed it’s not there any more.

[gzz]

I agree with Ron Paul’s views on foreign policy much more than Obama/Clinton/Bush/Trump.

I think it is a shame he also advocates crankish “End the Fed” stuff.

He also is honest in always voting for tax cuts and spending cuts, compared to the rest of his party that wants to cut taxes for the rich, raise military spending, and only advocates cosmetic spending cuts elsewhere.

Paul was right we should have stayed out of Iraq and Afghanistan. Those wars have cost us about $5 trillion, which is 25% of our $20 trillion national debt. For half that we could be almost completely converted to renewable energy, with a bit of natural gas generation for peak load periods or to account for random days without much wind or sunshine. Instead we got death, debt, pollution and destruction. On the biggest issue of the past 20 years, Ron Paul was one of the few people in public life who were right from the beginning.

[Rich Toscano]

[quote=lifeizfunhuh]What is everyone’s reaction to this? Mark Hanson has always been at the top of his field.

https://www.mhanson.com/11-27-hanson-2008-angelo-mozzilo-said-never-seen-soft-landing/%5B/quote%5D

“Bottom Line: Housing today is more unaffordable than in 2006, especially in the major Case-Shiller 20 metros.”

That statement — from the beginning of the OP’s linked article, and bolded there too — is wrong. Housing was WAY more expensive vs. incomes in 2006, both in terms of purchase prices and (especially) monthly payments. (Reference for SD).

So my reaction is: when the “bottom line” has a well known and documented fact completely backwards… well, that’s not a good start.

[jameswenn]

It’s apparent that our government is committed to keeping home prices up, so I don’t see anything changing.

[spdrun]

On the one hand, we have a borderline inept president and executive.

On the other hand, we have a lot of members of Congress and the Executive who LIKE the idea of soaking blue sanctuary states (where prices have primarily risen).

Neither of these facts are good news, but they might at least be exploitable.

[moneymaker]

Jobs,jobs, and or income! It’s all about affordability. When I first clicked on the link I thought he knew what he was talking about, then I read more and decided to skim the rest. In general I do agree with him, just not with his logic. It was interesting to see that the country as a whole has not gone insane, there are actually places where home prices are dropping. If I take my total monthly mortgage and divide it by total yearly household income, I get 1.17%, which in my opinion is affordable. If that percentage gets above 3% then I would say there could be trouble, 4-5% and you should seriously be thinking about if you are paying too much to keep a roof over your head.

[carlsbadworker]

This is an interesting perspective:

The GOP tax plan cap-gains provision would provide a “cap-gains escape mechanism” for unorthodox parties to liquidate an historical amount of Real Estate and to move capital into growth or higher yielding assets.

Thought?

[Author]

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