Comments
Transcript
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PBPaints a very real picture on the Property Market plumbing Finance.
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SRexcellent
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WGI confess I don't know what to do about all of this... dismiss it/ forget it because sorting it out would require so much work? Seize it and size it, understand it well enough to act on it... because if Mr. Jurow is right, it should have profound implications? There are questions below, wondering how such losses could be carried/buried for so long. Why aren't losses transparent for the banks/servicers? While I have no idea, I'd start with the suspension of mark-to-market accounting rules. My understanding is that FASB had it's arm twisted by Congress in a committee meeting held March 15, 2009, and as a result, suspended FASB rule (I think 187) effective April 1, 09. Its easy to confirm the basic story around FASB suspension of mark-to-market; it's harder to understand just how ludicrous the consequences may be.
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gcIf this is true, this is a huge thing. But I have some difficulties to believe that they can hide losses on real estate for 10 years now. If RV can find some other sources to confirm that, that would be great.
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VMOne thing not taken into account is the 1.3M+ immigrants coming into the US... along with the lack of new supply for almost a decade ( much of which has been apts ). I do not think this is a debacle but likely means if you are betting on hitting it big as a flipper, watch out. Best comment is all markets are local. I see the move to lower priced states out of CA, IL and the Northeast as one way people are dealing with this. Just don't be the one to turn out the lights!
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TWNow THAT's valuable content.
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KFWhen I first saw Keith's interview it was like a light bulb going on. I was a RE appraiser in the 2000's and I saw the bubble first hand and the crash. I sold in 2007 at the top because it was obvious to me but not to anyone else. Then the crash just seemed to disappear. I thought I might pick up a foreclosure but couldn't find any good deals. I am old enough to remember the Resolution Trust Corp and the unwind of the real estate crash from the late 1980's and what it took to move through all of those properties. It was a huge deal and I knew this bubble was way bigger. Everything just disappeared. Now I know why. Amazing what can be hidden from view. We live in a crazy world right now and I have no idea how this is all going to end. Everything you are saying Keith, totally matches my experience of how this all went down.
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TCI guess most all of Keiths bearish housing premise rests on the idea that the banks are hiding a huge amount of defaulting "modified" mortgages from us? But everything else this time is VERY different from pre-2008: -the last 10 yrs have seen the tightest loan underwriting for many decades (very hard to get a loan, down payments much bigger, record numbers bought with all cash) -we are at all time low for cash out refi's, helocs, and equity extraction and have been for 10 yrs n (meaning most people have equity in tact) -builders have added almost no supply this go around - no one is building - new home construction is WAY off previous recoveries (less supply means less inventory) -probably what 90% of homeowners have a 30 year fixed fully amortizing loan with a rate that begins with a 3 or a 4? Fully amortized means every payment pays down big chunks of principle -lack of labor to build new supply of homes
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PDAs a DC real estate investor I can’t help but think that this guy’s numbers are way off on homes not foreclosed on. Most pre-foreclosures get snatched up by investors. Is he accounting for this? Based on the numbers you showed I can’t imagine he is. There are certainly plenty of cases of people staying in their home not paying and/or doing modifications, but 20k+ In this market. I seriously doubt that these are not properties that are getting picked up by investors and the data is not being properly reflected.
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WSCan’t make this up. I actually bought the single Nashville house foreclosed and put on the market for over $300k. What a story in itself. Excellent video even without the personal connection to a chart. Happy New Year to RV land.
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dpHow have these banks been able to carry these for so many years w/o impacting their cash flow, balance sheet and profitability?
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AHYou know. I have not finished a single video since they started advertising at the end of their videos. Getting a little sick of the constant marketing. Still a good platform, but also getting pretty watered down and promotional at times.
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CSGreat interview. Two features would be useful: 1. Ability to add your own bookmarks and private notes at those bookmarked moments on any video. 2. Ability to create your own sub-folders within "My Videos" to better categorize the videos anyone adds to their list.
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AHThe strongest argument are the millennials. That is the key! First of all, they are bigger then the boomers. What happened with the economy when boomers came into play? Do they stay with their parents or are they going out and build families and firms! Its always the same: Older generations do not believe in younger generations! And that is always a mistake! (I am an Xer).
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BGThis was one of the most shocking videos from RV I've watched yet. As a millennial who ISN'T struggling... between the information presented here and the gross disconnect between prices and reality in my local market I cannot see myself becoming a homeowner anytime soon unless required by life circumstances. But certainly not as an investment. I've never owned a home so I might be missing some key nuance, but the biggest question to me is what happens to all the deeply defaulted mortgages in the end. The banks can control whether to foreclose or not so they're not going to make a mass run on themselves and cause crash... So these houses stay off the market, the price remains artificially high, no one can afford anything, buyers continue to dwindle until there's a huge correction anyway?
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DCSuppose I'm in the minority on this board but I remain completely unconvinced. Too much data was anecdotal and not terribly convincing ("lots of millennials are still living at home" and "some people are still living in their houses after not paying for 5 years"). Ok... millennials are picking up household creation and somebody's always got a scam - doesn't mean it affects the market as a whole. Remarkably little was said about rates, regulation, employment, or specific marketplaces. And of course, that's what drives most of the real estate action.
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JPI really enjoyed this presentation and this week. Even after working 4 years in commercial real estate I still have no idea where this market will go. I thought 2016 would be a peak yet here I am on the eve of 2020 with even more savings waiting for a buy opportunity. While I have a good income and plenty of capital from investments, I cannot fathom how anyone around me is able to afford or wants to own at prices of 650k to 1 million. With interest rates so low and prices so far above wages, I feel like buying a house is less about owning the asset and more of a short dollar, long inflation trade.
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ATVery clear and insightful :)
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VPSobering analysis and also believable given how this entire recovery has been engineered by bankers and politicians. To sum this up, the US economy has a hollow core. Thank you.
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ATThank you Keith. Just curious about your thoughts on how best to track the markets in San Francisco Bay Area? Things definitely seem extremely expensive. How should one decide whether to own or rent in these over priced markets?
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EKKeith - are you saying the purchases by private equity are not significant (or not significant enough) to be a factor?
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MAConfusing median with mean?
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DILooking for more details on US housing market, which is 100X bigger (?) that Aussie one.
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WBTough to look at RE through a national lens. Most of Chicago where I live is trading well below peak prices from 2005-6 era so tough to say that we've re-inflated prices all that much here. I'm shocked he didn't talk about how the removal of SALT deduction is affecting prices. It's pretty obvious that high tax states are losing people to low tax states and we are seeing a bifurcated RE mkt because of this. Interesting take but I think there is a bit of recency bias from 08 housing crisis. I just completed a refinance and I can say that mortgage standards now are much more strict than pre-crisis. With Millennials just entering the age where they will start buying homes en masse it's tough to be real bearish on housing. I'm not bullish by any means but it wouldn't surprise me to see housing prices remain stable at the very least.
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TRKeith - does your research on the discrepancy of foreclosed homes to homes put up for sale include the large bulk sales that were bundled up and made? I was familiar with the Phoenix market, actually picked up 10 houses myself in 2009/2010 all of which I subsequently sold in 2015/2016. I looked into bulk purchases but did not have the resources nor was I willing to take the risk that the big players did. These bulk purchases never hit MLS.
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CdWould be nice if they had explored some parts of Europe as well during this week. The situation in Munich is very difficult. Tons of immigrants and very short supply of apartments. I have already noticed that buying an apartment would be better than paying rent (short term), but I believe that any downturn in the economy would make a lot of immigrants leave Germany and supply would increase a lot. But every time I say something like this all the germans say things are very stable here compared to other European countries and the economy would never fail (they believe it so much that I have the feeling Germans spend all their money traveling and don't save any).
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MRClassic example of Greed before Logic, Want before Needs...
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AKThis week was great, loved to widen my knowledge of what is happening in the US and Australian housing market. The view seemed to be rather in line with the macro analysts, meaning that we most likely are heading into a storm, and one better buckle up so to say. The fact that people are not paying and can still live in the house for years as well as refinancing due to appreciating value seems like nothing short of a true mess. Thanks for your time Keith, and thanks RV.
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JBhave we learnt nothing? rhetorical big picture question on society. Not aimed at RV :-) Great interview.
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MEExcellent interview.