Forum Replies Created
-
AuthorPosts
-
(former)FormerSanDiegan
Participant[quote=CA renter]
An example of “shadow demand” would be the existence of 500 million Chinese with massive amounts of USD who plan to buy up our real estate as the dollar crashes. That would be an unusual and extraordinary demand variable that would qualify as “shadow demand.” ;)[/quote]Sure, let’s put the shadow Chinese buyers in the same category as the shadow inventory due to potential future NODs for prime ARM loans that reset in 2013.
You stated that all the items I point out are normal demand. My point is that shadow inventory zealots do not account for any possibility of increased demand from any source (normal or “shadow”). They point to things like permanent 30% unemployment sapping all future demand and spiraling cycles of price declines due to increased supply. There is no consideration of the impact of price elasticity of demand or other basic concepts that impact the supply/demand relationship among these zealots.
I agree that there will be significant supply coming from recycled homes over the next couple of years due to foreclosures. But to understand its impact on price one has to compare this rate of recycled homes to demand as well as to the potential for displacing new-built product with recycled product.
Participant[quote=Arraya]
Sometimes you have to integrate common sense with analysis. The housing bubble fueled employment. It was not unpredictable that employment would plummet as the bubble did. The bubble was the economy.
Pent up demand depends on job growth. Unless you count demand as somebody that wants to buy a house and can’t you have a problem. Sideline money is dwindling + job contraction=Lower demand
Lower demand + pent up inventory =
See how easy this is[/quote]
Actually, despite record unemployment and the other factors you mentioned, demand was significantly higher in 2009 than the preceding two years, due to a huge improvement in affordability.
If I integrate in my common sense that in some places it might be cheaper to own than rent, I see a limit to pricing downside. Granted, as rents slide (impacted by employment) this downside bar may slide lower.
My posts here reflect being fed up by shadow inventory zealots (not saying you are one, since you did point out at least some factors affecting demand) tend to leave out, forget or otherwise ignore the other side of the supply-demand relationship.
Participant[quote=Arraya]
Sometimes you have to integrate common sense with analysis. The housing bubble fueled employment. It was not unpredictable that employment would plummet as the bubble did. The bubble was the economy.
Pent up demand depends on job growth. Unless you count demand as somebody that wants to buy a house and can’t you have a problem. Sideline money is dwindling + job contraction=Lower demand
Lower demand + pent up inventory =
See how easy this is[/quote]
Actually, despite record unemployment and the other factors you mentioned, demand was significantly higher in 2009 than the preceding two years, due to a huge improvement in affordability.
If I integrate in my common sense that in some places it might be cheaper to own than rent, I see a limit to pricing downside. Granted, as rents slide (impacted by employment) this downside bar may slide lower.
My posts here reflect being fed up by shadow inventory zealots (not saying you are one, since you did point out at least some factors affecting demand) tend to leave out, forget or otherwise ignore the other side of the supply-demand relationship.
Participant[quote=Arraya]
Sometimes you have to integrate common sense with analysis. The housing bubble fueled employment. It was not unpredictable that employment would plummet as the bubble did. The bubble was the economy.
Pent up demand depends on job growth. Unless you count demand as somebody that wants to buy a house and can’t you have a problem. Sideline money is dwindling + job contraction=Lower demand
Lower demand + pent up inventory =
See how easy this is[/quote]
Actually, despite record unemployment and the other factors you mentioned, demand was significantly higher in 2009 than the preceding two years, due to a huge improvement in affordability.
If I integrate in my common sense that in some places it might be cheaper to own than rent, I see a limit to pricing downside. Granted, as rents slide (impacted by employment) this downside bar may slide lower.
My posts here reflect being fed up by shadow inventory zealots (not saying you are one, since you did point out at least some factors affecting demand) tend to leave out, forget or otherwise ignore the other side of the supply-demand relationship.
Participant[quote=Arraya]
Sometimes you have to integrate common sense with analysis. The housing bubble fueled employment. It was not unpredictable that employment would plummet as the bubble did. The bubble was the economy.
Pent up demand depends on job growth. Unless you count demand as somebody that wants to buy a house and can’t you have a problem. Sideline money is dwindling + job contraction=Lower demand
Lower demand + pent up inventory =
See how easy this is[/quote]
Actually, despite record unemployment and the other factors you mentioned, demand was significantly higher in 2009 than the preceding two years, due to a huge improvement in affordability.
If I integrate in my common sense that in some places it might be cheaper to own than rent, I see a limit to pricing downside. Granted, as rents slide (impacted by employment) this downside bar may slide lower.
My posts here reflect being fed up by shadow inventory zealots (not saying you are one, since you did point out at least some factors affecting demand) tend to leave out, forget or otherwise ignore the other side of the supply-demand relationship.
Participant[quote=Arraya]
Sometimes you have to integrate common sense with analysis. The housing bubble fueled employment. It was not unpredictable that employment would plummet as the bubble did. The bubble was the economy.
Pent up demand depends on job growth. Unless you count demand as somebody that wants to buy a house and can’t you have a problem. Sideline money is dwindling + job contraction=Lower demand
Lower demand + pent up inventory =
See how easy this is[/quote]
Actually, despite record unemployment and the other factors you mentioned, demand was significantly higher in 2009 than the preceding two years, due to a huge improvement in affordability.
If I integrate in my common sense that in some places it might be cheaper to own than rent, I see a limit to pricing downside. Granted, as rents slide (impacted by employment) this downside bar may slide lower.
My posts here reflect being fed up by shadow inventory zealots (not saying you are one, since you did point out at least some factors affecting demand) tend to leave out, forget or otherwise ignore the other side of the supply-demand relationship.
Participant[quote=Arraya]
Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]Sure, we should look at all those trends.
For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.
Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.
If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.
Participant[quote=Arraya]
Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]Sure, we should look at all those trends.
For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.
Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.
If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.
Participant[quote=Arraya]
Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]Sure, we should look at all those trends.
For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.
Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.
If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.
Participant[quote=Arraya]
Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]Sure, we should look at all those trends.
For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.
Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.
If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.
Participant[quote=Arraya]
Should we not look at these trends and extrapolate out? That is the wise thing to do?
[/quote]Sure, we should look at all those trends.
For example in 2004-2005 if one used current trends to extrapolate where the housing market and jobs were headed (extremely low unemployment, prices rising) one could have gotten themselves into a bit of trouble.
Shadow inventory is to bears what pent-up demand is to bulls. Both are loosely defined concept which have some truth to them but are impossible to measure.
If one wants to cite shadow inventory as a force on the markets they should be forced to address the potential of pent-up demand.
Participant[quote=DWCAP][quote=FormerSanDiegan]Some people will die next year and their heirs will sell their property. Those should be counted in shadow inventory as well.
Also, some people will move away, retire to the mountains or other scenarios. The future inventory from these sources should be investigated as well.[/quote]
Why? That is normal inventory flux. There will always be people dying and people moving.
Shadow inventory refers to the ABNORMAL current situation where property ‘owners’ are not fufilling their contractual obligations, and the banks are not acting upon it and taking the house to foreclosure and/or sale.
[/quote]
I apologize to those who took my suggestions literally. As tg suggests, there has been a gradual shift in the definition of shadow inventory. It was originally something that could be precisely measured. But once those numbers rolled out, we gradually expanded the definition to a point where we include items that are less easily measured.
I was simply taking this to its logical extreme to make a point.
For example, take analyst’s category #4
4. delinquent, NOD not issued, no short sale in progress .These are a long way from being on the market. Maybe a couple years at the current pace. To understand the impact, you’d have to know what fraction of these on average would have come to market as organic sales over the next couple years due to the normal reasons (deaths, divorces, job changes, etc).
These might be impossible to measure.
Participant[quote=DWCAP][quote=FormerSanDiegan]Some people will die next year and their heirs will sell their property. Those should be counted in shadow inventory as well.
Also, some people will move away, retire to the mountains or other scenarios. The future inventory from these sources should be investigated as well.[/quote]
Why? That is normal inventory flux. There will always be people dying and people moving.
Shadow inventory refers to the ABNORMAL current situation where property ‘owners’ are not fufilling their contractual obligations, and the banks are not acting upon it and taking the house to foreclosure and/or sale.
[/quote]
I apologize to those who took my suggestions literally. As tg suggests, there has been a gradual shift in the definition of shadow inventory. It was originally something that could be precisely measured. But once those numbers rolled out, we gradually expanded the definition to a point where we include items that are less easily measured.
I was simply taking this to its logical extreme to make a point.
For example, take analyst’s category #4
4. delinquent, NOD not issued, no short sale in progress .These are a long way from being on the market. Maybe a couple years at the current pace. To understand the impact, you’d have to know what fraction of these on average would have come to market as organic sales over the next couple years due to the normal reasons (deaths, divorces, job changes, etc).
These might be impossible to measure.
Participant[quote=DWCAP][quote=FormerSanDiegan]Some people will die next year and their heirs will sell their property. Those should be counted in shadow inventory as well.
Also, some people will move away, retire to the mountains or other scenarios. The future inventory from these sources should be investigated as well.[/quote]
Why? That is normal inventory flux. There will always be people dying and people moving.
Shadow inventory refers to the ABNORMAL current situation where property ‘owners’ are not fufilling their contractual obligations, and the banks are not acting upon it and taking the house to foreclosure and/or sale.
[/quote]
I apologize to those who took my suggestions literally. As tg suggests, there has been a gradual shift in the definition of shadow inventory. It was originally something that could be precisely measured. But once those numbers rolled out, we gradually expanded the definition to a point where we include items that are less easily measured.
I was simply taking this to its logical extreme to make a point.
For example, take analyst’s category #4
4. delinquent, NOD not issued, no short sale in progress .These are a long way from being on the market. Maybe a couple years at the current pace. To understand the impact, you’d have to know what fraction of these on average would have come to market as organic sales over the next couple years due to the normal reasons (deaths, divorces, job changes, etc).
These might be impossible to measure.
-
AuthorPosts
