The Housing Crash Has Already Resumed, Say Bears

Investor Whitney Tilson has another take on the August house-price numbers, which sent housing bulls into spasms of glee a few days ago.

Whitney's concern is that the sequential increase in prices in August was less than the sequential increase in July. This, Whitney believes, is the start of the seasonal downturn that will take house prices down another 10%-15% by the middle of next year.

Whitney has argued since the spring that the recovery in house prices has been a "head fake" and that this fall will bring us crashing back to reality. I think his argument has merit, although the housing recovery has been surprisingly strong thus far.

To back up his argument, Whitney uses a chart that shows the typical sequential pattern, which has monthly growth peaking in the spring and early summer and then turning down. You can check it out here >

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Comments

[MilwaukeeDan]

I don't really know too much about the rest of the country, but we had our realtor over for dinner last night, interesting conversation. The "official" unemployment rate here is over 16% with no companies moving in. She tells us, most of the homes on the market are short sales and foreclosures. We live in nice subdivision in the burbs. Whithin the 30 or so homes, 5 are for sale(4 foreclosures), 2 more homes are empty as the owners have given up months ago and we just had one family abandon their home. There are also appx 30 lots still for sale(there hasn't been any construction going on in over 4 years). This isn't Flint, MI, but it's getting close. Until the job market in this country improves drastically(and I'm not talking minimum wage), I don't give a sh*t about the numbers coming out of Washington. As grateful4thedead states below, you are wittnessing the slow demise of this country. It has been going on for decades and don't tell me about the great debt driven boom, it's over.

[watchTVgetSTUPID]

Wait til when the declining dollar makes gas go to $4 a gallon. Can't finance 2 wars and make whole the Wall Street manipullators at the Financial institutions without crashing the dollar.

[RedneckDem]

The problem I see with all of this "forecasting" is that a few areas of explosive growth and mismanagment (i.e. way overpriced) can skew the results for the rest of the country. Fla, CA, Las Vegas and AZ.

Northern VA makes the rest of the state look bad statistically, but my local market is pretty solid and making reasonable strides.

Master charts and national stats with up or down results have way too much influence.

[bluevase]

All you have to do is travel across this country to see the sad shape we're in. New England, East Coast, South, Midwest, West -- wasteland

[josephXY]

If still unknown, the famous video with Peter Schiff and a number of other financial experts,
each with a (extremely) different point of view, is a must - see. The viewer can instantly figure how the
property market, apart from the financial marktet also mentioned, really worked out, knows
for sure how the market went in the recent past:
http://www.youtube.com/watch?v=2I0QN-FYkpw

[noesis]

Many markets have a 25-30% shadow inventory that is keeping prices stabilized.

[Troubledwawa]

http://sacrealstats.blogspot.com/2009/07/deutsche-bank-sacramento-resale-market.html

At the bottom of the blog is a Deutsche Bank report that came out in June that reported what the shadow inventory was around the country. You'll find that 25%-30% is a conservative estimate, to say the least.

http://2.bp.blogspot.com/_OjftCEBUcYQ/Skt8o0J1ZHI/AAAAAAAAFUo/lQQu-KgwGEo/s1600-h/figure_18.PNG

From that report is a chart showing US cities, local MLS listings versus distressed inventories. And a comparision between bubble and non-bubble markets.

[Bobotheclown]

I think eveybody knows that the current market upturn is a classic bear rally. What else could it be? The last implosion took $2 Trillion out of the economy and that value is gone. The effects of it are still moving through the system and since it involves mortgages that reset slowly these effects will reveal themselves slowly. But housing prices will correct one way or another. Consider:
1. Without the financial crisis housing was already set for its greatest downturn in history due to the demographics of an aging baby boom. This will be the last effect the boomers will have on the market and it will be memorable.
2. Housing prices are very resistant to reduction because owners can wait out the market for a long time and they are encouraged to do so by local governments who base tax revenues on value of housing stock.
3. The price of housing will be defacto reduced by devaluing the currency by about 40%. This is already happening as an effect of the stimulus which is printing money that all know cannot be paid back. This simply devalues the dollar without inflation since unemployment will keep wage price inflation (all that is really measured) low. This devaluing is being accepted politically across the board. It will takes years before mainstream commentators start to talk about it and by then the smart money will be safe.

[grateful4thedead]

housing is not even close to bottoming.

as fannie and freddie did before it, the FHA will implode before housing has a remote chance of reaching its bottom.

no problem though...the completely bankrupt USA will continue to be ably assisted by the Fed in printing more earthworm dollars to continue to buy 20 cents on the dollar bad mortgage debt from the banks who will continue to make fees as a mortgage broker on new loans and offload these soon to default new loans on the USA. we can keep doing this until the dollar goes from 76 to 50, 40 whatever.

you are witnessing the collapse of the USA.

[outnow]

The bottom on housing is yet another 10 to 15%. IMHO.