Dr Housing Bubble 08/18/14

[Crewleader]

Will the young buy homes? Student loans holding some young buyers back and household formation remains weak in the face of stagnant incomes.

Household formation is an important indicator of future housing demand. One of the big reasons why home builders have been tepid about building homes in the face of a growing population and rising prices is that first time home buyers are a small portion of the housing market. The reality is, you need household formation to justify bigger developments instead of investors looking for deals to flip or rent out. Home builders have been busy building multi-family units but these are clearly slated for rentals (the number of growing renting households would justify this). The odd dynamics in the current market have forced millions to live at home. In California 2.3 million adults live at home because of financial reasons, not because it is the new hip thing to do. In San Francisco, even well paid tech workers double or even triple up in apartments or homes to make the high rent affordable. What is probably more troubling in the data is that this trend is holding steady across the nation. Quality employment growth absolutely matters in the face of household formation. In the past, a boom in employment led to natural demand for housing. Today, you would have some believe that juiced up real estate and investor lust is somehow going to be the drawing force that lures cash strapped young buyers into the market. So far, those figures are not materializing.

Nationwide household formation requires quality employment

http://www.doctorhousingbubble.com/young-home-buyers-young-living-at-home-household-formation-demand/

[Demeter]

1. There is this annoying trend in Ecomonists and their Elitist Overlords

to look at some artificial, statistical result or index: housing market, GDP, stock prices

and think that the underlying fundamentals: wage levels, job prospects, entry costs

have nothing to do with these indices of outcomes.

Then they try to goad, bribe and beat the artificial, derivative numbers into submission to their will.

Since the artificial indices are created by the underlying fundamentals, which are starved to death, literally, all the stimulus in the world will not move those indices a jot. but they keep trying.


How does that definition of insanity go?

[Crewleader]

2. That covers it well Demeter~here's today's cartoon

[Demeter]

3. And that's the other aspect of this Elitist paradigm

It's hard to imagine that such smart great thieves and crooks as we have in this country, stealing all the money and hoarding it,

produce such stupid and uneducated offspring as to think this massive exploitation of theirs is going to work

...or the alternate plan, which is robotic minions, without provision for producing and repairing and designing and mining the raw materials and...to make the minions!

[Crewleader]

4. Message posted yesterday from Robert Reich on facebook

I’m not predicting an imminent collapse of the stock market but I am sounding an alarm. Consider: Retail sale are flat, median real wages are flat, nearly half the revenues of large U.S. companies come from foreign sales but markets abroad are going nowhere, and the ratio of stock prices to company earnings is higher than it's been since before the 2008 crash.

The only reason stock prices continue to advance is they’re being pumped up temporarily by (1) corporate stock buy-backs and mergers, (2) anticipated tax reductions through “inversions” (companies planning to desert the U.S.), (3) low bond yields that continue to drive pension funds and other institutions into stocks, and (4) capital flows from the rest of the world, for which the U.S. stock market is a safe haven compared to tumult and uncertainty abroad. But this can’t go on much longer. Watch your wallets.

https://www.facebook.com/RBReich