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Beware Real Estate False Bottoms

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dacolan

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In my April 30th report entitled ‘Housing (bottom) Update' I highlighted the reasons why some of the hardest hit MSA's might do well over the near-to-mid term:

    * artificially depressed supply through gov't and bank-specific foreclosure moratoria;
    * artificially low rates and temporary tax benefit;
    * foreclosure mix-shift creating an artificial skew higher in reported
    * median and average prices;
    * And fleeting seasonal demand.

Essentially, everything is artificial and so should the bottom that comes out of it. I have been looking for this false bottom phenomenon to play out bottom for months and believe it is here.
...
There have been more new Notice-of-Defaults each month for the past five months than properties sold.
...
Bottom Line: Headlines are about to get wild, as the age of false bottoms in real estate is upon us.
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June 05 - US
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lrryjrry

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It's a truly false bottom, especially in Northern CA.

http://www.boston.com/realestate/news/blogs/renow/2009/06/a_foreclosure_f.html
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June 05
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Michael Russell, "real estate mike"

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We'll know the bottom after the fact. If any of the people preaching to buy now based on lower rates they won't have that arguement to help them soon, my opinion. What would cause rates to settle down? Definitely not our banking system printing money like there's any fundamentals there to back it up. Can the U.S. produce more and provide more services that create jobs in the near future?  
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June 05
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Roberto Ribas, "azrob"

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There is not enough cash in the US to both A. buy all the government debt being floated, and B. buy all the homes going into foreclosure. Something has to give! Rates up? Prices down? I vote both!
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June 05
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Lady Chattel

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Essentially, everything is artificial and so should the bottom that comes out of it.

 Beautiful, just perfectly said.
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June 05
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aapostrophe

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Sir Mix A Lot might have something to say about false bottoms.  
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June 05
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daveyjones2007

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I posted this in another thread but it's relevant here too:  http://jeffmatthewsisnotmakingthisup.blogspot.com/
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June 06
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jal74

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There is not enough cash in the US to both A. buy all the government debt being floated, and B. buy all the homes going into foreclosure.

While technically true, its actually close.  From Page 102 of the most recent Flow of funds report (Z.1 report from the federal reserve) as of March 31, 2009 total Deposits outstanding held by US residents equalled 7.6 trillion - add the 100 million or so treasury holdings to that you get 7.7 trillion of cash (i treat treasury holdings as if they were cash)

Total debt outstanding held by non-affiliates is currently 5.99 tillion with foreclosures approximating 2 trillion currently - it comes out just north of total cash on hand

Regards
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June 06
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jal74

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Edit:

As an aside the $2 trillion is homes already foreclosed.  Does not inlcude value of homes in process

Kind Regards
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June 06
 

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