Angry Saver writes:
That chart is missing the 2001 recession bar. What gives?
Angry Saver | 05.07.08 - 12:59 pm | #

GillianX writes:
I was getting anxious waiting for the next CR post. Thank god its here.
GillianX | 05.07.08 - 1:02 pm | #

Average Joe writes:
Gotta find what this "expert" was saying about the housing market in 03, 04 and 05...i'll be back.
Average Joe | 05.07.08 - 1:03 pm | #

IrvineResident writes:
1st?
IrvineResident | 05.07.08 - 1:04 pm | #

David Pearson writes:
The real question regarding the price bottom in housing is this:

Will further price declines lead to stable volumes, or steeper volume drops?

The "Classic" model of a bottom holds that housing is price elastic: a bottom occurs when prices fall far enough to entice more buyers into the market, and inventory clears.

The "Feedback" model is different: price declines cause expectations of further declines. Since the cost of housing includes potential FUTURE price depreciation, buyers get spooked and shy away from the market. Further, REO's increase as underwater borrowers walk away. So in the "feedback" model, as prices fall:

-volumes decline
-inventory rises

If the "Feedback" model is correct, what eventually breaks the loop and clears the market? If prices fall far enough, a set of buyers comes in that is unafraid of future depreciation: investors that are enticed by CURRENT income from high rental yields.
David Pearson | 05.07.08 - 1:08 pm | #

Unsympathetic writes:
Of course he's wrong. Exactly who gave this buffoon the title of "leading expert" on the housing market?
Unsympathetic | 05.07.08 - 1:08 pm | #

jim a writes:
Since new inventory (red bar, second graph) is correlated to starts with a ~6 month lag, we can see that homebuilders are only a small part of the inventory overhang. Therefore saying that starts =~1000 means that we've hit bottom is very silly indeed.
jim a | 05.07.08 - 1:08 pm | #

franz writes:
Let the bottom calling continue. I expect a lot more bottom calling until we finally get there. Cheers.
franz | 05.07.08 - 1:09 pm | #

Shnaps writes:
First, I think any article discussing the housing "bottom" should start by defining what they mean by "bottom". Are they talking about starts? New home sales? Residential investment? Housing prices? Or some other metric?

Good point, CR. We can only hope they mean we've hit bottom in terms of shitty real estate reporting.
Shnaps | Homepage | 05.07.08 - 1:10 pm | #

Carlomagno writes:
Is that Case as in Case-Schiller?
Carlomagno | 05.07.08 - 1:16 pm | #

Geoff writes:
Looks like the crapper RE reporting is really just getting started. Wrong on the way down, wrong again now. Just plain wrong, and so obviously shill-like that you just have to wonder if there is any purpose to it at all. Disgusting and a blight on the analytical professions. I mean, what kind of crap is it that someone says hey, this line hit this point on the y axis and every time that happens it means a bottom? Good grief. It doesn't get much more simplistic and idiotic than that.
Geoff | 05.07.08 - 1:17 pm | #

NSA writes:
Methinks the Spinal Tap song "Big Bottom" is appropriate here.
NSA | 05.07.08 - 1:18 pm | #

Yal writes:
How bad is this Bid to cover ratio:

http://www.treasurydirect.gov/ in..._20080507_1.pdf

and why arn't mortgage rates go up with TNX ?
Yal | 05.07.08 - 1:19 pm | #

Adan Lerma writes:
i'd also like to add that as a consumer, i tend to think of a bottom not only as price, but a price i also feel comfortable won't still go down

ie, the bottom of the bottom for housing is a psychological-price bottom that's confirmed over the succeeding months or year

otherwise, others still waiting will see that the prior buyers still got took, paid more'n they needed to've, and themselves wait a bit longer

this is in general of course; i'm always looking for that deal on a great place i can brag i got before the bottom at bottom prices :-)
Adan Lerma | Homepage | 05.07.08 - 1:21 pm | #

W.C. Varones writes:
Supply = new units added - units sold + existing units for sale

You forgot

- units burned in debtor arson
- units bought and bulldozed by communities with federal grants
W.C. Varones | Homepage | 05.07.08 - 1:23 pm | #

12th Percentile writes:
They sure are working this angle hard at the old WSJ. Might make one think they have some sort of agenda they are pushing.

And don't tell the people in Buffalo NY this is a bottom. The market up there is scorching hot!
12th Percentile | 05.07.08 - 1:24 pm | #

Anonymous writes:
Housing will bottom on 200 dollar oil.
Anonymous | 05.07.08 - 1:25 pm | #

Alec writes:
Interesting tidbit:
Pinal County resales rebound

Pinal County include the lovely Maricopa that we all know and love. Sales volume are near ATH's, but median price($156k) dropped 24% YoY and 29% from the ATH.

New homes median price($174k not including discounts) dropped 31% YoY.

Now I don't think with gas being $3.59(plus opportunity costs of commute and crap schooling) that your monthly nut has changed, but at least there's a trend forming.

The other point that's scary is that basically everybody who bought in the last 3 years is underwater in their valuations.

Maricopa County report should be in Friday or Monday.
Alec | 05.07.08 - 1:27 pm | #

John writes:
David wrote:
"The "Feedback" model is different: price declines cause expectations of further declines."

No, that's a feed-forward model. The "classic" model you described is a feedback model.
John | 05.07.08 - 1:28 pm | #

Average Joe writes:
I think we are near the bottom for sales volume....but when the Nasdaq headed south from 5000 who cared about volume?


It's the price that matters to everyone including the FED.

Just because volume is up doesn't mean prices are rising.

You won't hear that anyone though.
Average Joe | 05.07.08 - 1:30 pm | #

ajn writes:
Well back when I was a young trader my mentor used to say the only thing you will get when you try to pick a bottom is a smelly finger so I guess that still applies.
ajn | 05.07.08 - 1:32 pm | #

Kiron writes:
Just a thought: The last few times housing starts hit the highs that are shown in the plot, baby boomers were first-time home buyers and starting families. This time as the start-rate boomed, the reverse was coming into play. Instead the boom occurred because of low interest rates and low lending standards. I am wondering if the excess capacity in housing was relatively higher (in terms of what can be reasonably supported by incomes) than the other times, even though it appears to be similar in magnitude.

The "expert" is assuming that housing starts are hitting a bottom here because that is where it has been in the past. If the oversupply is relatively larger, the "bottom" might be lower this time. There is nothing magic about the one million number.

I know it is dangerous to say that "things are different this time", but that is what I am wondering.
Kiron | 05.07.08 - 1:33 pm | #

Terry writes:
How quickly they've forgotten the mantra that was so popular when the bubble was inflating: "But it's different this time!"
Terry | 05.07.08 - 1:33 pm | #

texalope writes:
Amazing how upset this group gets that we may have hit bottom. What will make you happy- A DEPRESSION?- that should bring collective glee.

Whenever I feel like getting depressed I turn to this blog.
texalope | 05.07.08 - 1:37 pm | #

doug r writes:
I can see the WSJ writer's point. However, the upramp was twice as long this runup, so it's gonna stabilize a little lower. I call 775,000 bottom.
doug r | 05.07.08 - 1:40 pm | #

barely writes:
The bottom will be in once the bailouts are shelved and market trades on merits instead of a bailout premium.
barely | 05.07.08 - 1:42 pm | #

TCA writes:
texalope writes:
Amazing how upset this group gets that we may have hit bottom. What will make you happy- A DEPRESSION?- that should bring collective glee.

Sorry, there's no way we've hit bottom. Housing is still UNAFFORDABLE. Until it becomes affordable again, prices will continue to fall. What you are witnessing are falling-knife catchers about to lose a few digits.

When the average person can afford a house using a traditional 30-year fixed mortgage, I'll be happy. Until then, I look forward to more pain for the economy.
TCA | 05.07.08 - 1:43 pm | #

TCA writes:
Carlomagno writes:
Is that Case as in Case-Schiller?

Yep.
TCA | 05.07.08 - 1:43 pm | #

MarkS writes:
The Fed's not pushing on a string, it's pushing on a lever. Regrettably, USO is on the other end of that lever.
MarkS | 05.07.08 - 1:44 pm | #

Canadaman writes:
As an assman, all this bottom calling is making me excited.

When people start telling me house prices will go down for forever, just like they said house prices will go up forever, then I will buy.

Until then I will sit back and see if I can join in on some bottom calling just for sh**s and giggles.
Canadaman | 05.07.08 - 1:45 pm | #

Elvis writes:
"So even if housing starts are near a bottom, there will no quick recovery for starts, and prices will continue to decline, until the total inventory is reduced."

This is the important info (although starts really or haven't bottomed). Prices will continue to decline until they bottom sometime in 2010. Then prices will remain flat for several years along with starts. Margins and jobs will remain putrid and little economic benefit will be realized from housing until the market finally rebounds in 2014 or so. If housing is the economic engine that gets us out of the severe recession/depression, life will be miserable for many for quite some time.
Elvis | 05.07.08 - 1:46 pm | #

John Wheaton writes:
These stats adjusted for population and available housing units? Likely not, so when you have Xm more people and Xm more units, the numbers don't compare accurately. Also most of those turn arounds were fueled by low rates (we have) and unique financing tools (we no longer have). Bottom? Hardly.
John Wheaton | 05.07.08 - 1:47 pm | #

Interesting Times writes:
Until then I will sit back and see if I can join in on some bottom calling just for sh**s and giggles.
Canadaman | 05.07.08 - 1:45 pm | #

That's it! I'm going long bottoms.
Interesting Times | 05.07.08 - 1:47 pm | #

energyecon writes:
Oil dinged $123.56/bbl... curiouser and curiouser (what Alice said)
energyecon | 05.07.08 - 1:48 pm | #

Canadaman writes:
....Can't we all just.....call a bottom????????????
Canadaman | 05.07.08 - 1:48 pm | #

Tom writes:
"First, I think any article discussing the housing "bottom" should start by defining what they mean by "bottom"."

As usual CR ably identifies the next wave of fog as it rolls in on us....
Tom | 05.07.08 - 1:48 pm | #

Canadaman writes:
bottom.......1st (
Canadaman | 05.07.08 - 1:49 pm | #

sdtfs writes:
Amazing how upset this group gets that we may have hit bottom

I don't think anyone here thinks we've hit a bottom except maybe you.
sdtfs | 05.07.08 - 1:50 pm | #

rich writes:
To me, the interesting thing isn't where or when the bottom is. Nobody knows this stuff better than CR, and if he says it's a long way off, that's enough for me.

To me, the incredible thing (pretty interesting, too) is how many educated, intelligent people feel compelled to try to call bottoms, when everyone who has gone before them has been so wrong.

I work with a variety of people in the financial world, from big time asset managers to hedge funds. It's amazing how many of them still refuse to acknowledge (at least in public) that anything unusual is going on, anywhere. They don't want to be bothered by the type of "noise" we talk about here. It's not important in their big picture of upward-and-onward economic growth and success.

I never thought I'd live to see this happen. I thought enough people would wake up in time, and they would be led by the more intelligent. When you think about it, people are waking up. But it's not the wealthy, intelligent people.
rich | 05.07.08 - 1:52 pm | #

BottomCallTabulatorMatrix writes:
i think tabulator is overloaded...
#1382 by last count.
BottomCallTabulatorMatrix | 05.07.08 - 1:58 pm | #

Elvis writes:
"When you think about it, people are waking up. But it's not the wealthy, intelligent people."
rich

Speak for yourself.
Elvis | 05.07.08 - 1:58 pm | #

giacutter writes:
First!
giacutter | 05.07.08 - 1:59 pm | #

Econoclast writes:
Yal writes:
How bad is this Bid to cover ratio:
and why arn't mortgage rates go up with TNX ?

By itself, B/C doesn't tell you much. 2.21 isn't a particularly high ratio, although it might be for 10yr, I don't follow it closely. I've seen quite a bit higher, but mostly short bills. Even when you look at median/low price, you're still guessing as to the shape of the bid curve. Treasury auctions are just auctions, the low ball offer doesn't cost you anything, you just don't get the item if somebody wants it more. Bid low, and you might get lucky, but every winner gets the same yield.

As to the question, Treasuries mark the absolute bottom of long term rates (for now), but the higher risks on mortgages now means the two have diverged quite a bit. I wouldn't put too much emphasis on short term changes, especially since this one is a fave of FCBs.

2¢ opinion - free today
Econoclast | 05.07.08 - 2:00 pm | #

Cal writes:
Fannie Mae said yesterday they are matching jumbo conforming rates with what TBA pools are pricing at, then today there is a discussion by a broker over on Piggington saying he is seeing Jumo conforming rates drop but doesn't know why.
Cal | 05.07.08 - 2:00 pm | #

Elvis writes:
"But it's not the wealthy, intelligent people."
rich

Sorry, I got it. "Handsome" is the key. If you would have said "wealthy, intelligent, and handsome people," I would have been offended.
Elvis | 05.07.08 - 2:04 pm | #

tv writes:
calculated risk is excellent

Talk about the Prof that wrote the article getting schooled....wow

Amazing that a 'vaulted' academic allows so many holes in such a public "call"
tv | 05.07.08 - 2:06 pm | #

Gary writes:
"Vaunted"

Gary, representing the unoffended intelligent and handsome CR demographic.
Gary | 05.07.08 - 2:09 pm | #

Cobradriver writes:
"Sorry, there's no way we've hit bottom. Housing is still UNAFFORDABLE. Until it becomes affordable again, prices will continue to fall. What you are witnessing are falling-knife catchers about to lose a few digits."

TCA,
This is one of those statments you need be careful of. Here in SW Florida,depending on what you are looking for,prices have come down a bunch. 3 years ago 100k in Charlotte County got ya a dumpy trailer in a park. As of now...580+ listings under 100k. Heck,there are like 150 3/2's under 100k and a handful under 50k. I do know this. At 25k a 3/2 will dissappear off the MLS in 3 days...
My price point is 8k an acre. Will it go lower...Sure. But I am willing to forgo some cash to get into some land pretty soon. I am going nuts not having a shop to work in(4 years w/o)...

Chris
Cobradriver | 05.07.08 - 2:10 pm | #

Journeyman writes:
No wonder I see early '70s tract homes everywhere I go.
Journeyman | 05.07.08 - 2:11 pm | #

barely writes:
Gary, I have the wager payout date set on my calendar. CR gets a chaching either way, and it's a good cause you'll be contributing to, in my honor ;)
barely | 05.07.08 - 2:17 pm | #

ShortCourage writes:
This article lost any semblance of intelligent analysis when it laid out three reasons why prices might not get much cheaper.

First, there are too many other bargain hunters out there.

Really? With millions of unaffordable vacant homes and rental properties, plus many more foreclosed ones coming on the market, you think bargain hunters outnumber that supply? Hmph.

Second, the falling dollar has made these homes even cheaper to foreigh buyers.

This is always a favorite of the promotional media. Sorry, the number of foreigners who want to invest in a declining asset are not going to number in the millions.

Third, interest rates are low right now.

Yep, just ask recent borrowers how comforting it is to have very low rates on your home loan as the value of your home declines below the loan amount.
ShortCourage | 05.07.08 - 2:17 pm | #

Journeyman writes:
Varones has a point. How many units are removed from inventory via destruction each year? And I mean tornados, condemnation, voluntary demolition, whatever.
Journeyman | 05.07.08 - 2:18 pm | #

tj & the bear writes:
Whenever I feel like getting depressed I turn to this blog.

Reality is depressing. If you want Goldilocks, go watch CNBS.
tj & the bear | 05.07.08 - 2:19 pm | #

ShortCourage writes:
PS> Another thing about bargain hunters...they typically demand a bargain before they will buy, and they become a little timid when yesterday's bargain looks like a goof today.
ShortCourage | 05.07.08 - 2:20 pm | #

Paul writes:
I think all this talk of "bottoms" is an attempt to change home buyer psychology, not an analysis of actual trends. We must, at some point, convince ourselves the worst is over before we can start recovering.
Paul | 05.07.08 - 2:20 pm | #

tj & the bear writes:
ShortCourage,

Yeah, the "bargain hunters" line is a laugher, isn't it?
tj & the bear | 05.07.08 - 2:21 pm | #

tj & the bear writes:
It's going to be a b!tch to change psychology with deteriorating economic prospects. People don't like taking on long-term commitments when they fear for their jobs.
tj & the bear | 05.07.08 - 2:23 pm | #

Gary writes:
barely, it's in my blackberry. [shakes on it]
Gary | 05.07.08 - 2:23 pm | #

Gary writes:
I think tj hits one of the most important points of buyer psychology.

Beyond affordability, there is the fear factor. It was fear of being priced out, now it's fear of being stuck.
Gary | 05.07.08 - 2:25 pm | #

JS writes:
I think a more interesting topic than whether the housing bust is over is whether the bear rally is over.
JS | 05.07.08 - 2:27 pm | #

ZIRP-USA writes:
I know this is a shocker, but did anyone here ever consider that RE markets are local? I would pick a bottom in Charlotte in late 2009 and LA in probably 2013. Maybe also because markets peaked at different times. This aint the NASDAQ folks, it isn't a liquid, national market.

For yet another shocker, housing markets are segmented by price point. You can, and do, have multiple bottoms depending on price point.

Who can explain the point of calling a national bottom?
ZIRP-USA | 05.07.08 - 2:28 pm | #

tj & the bear writes:
Unlike past busts, too, the magnitude of existing and potential losses on individual homes is still staggering.

I mean, if you bought too soon before you might go no more than a few 10K's into the hole; now it's more like a few 100K's. You don't easily recover from the latter.
tj & the bear | 05.07.08 - 2:29 pm | #

TCA writes:
Chris,

I don't doubt there are deals to be had in certain areas, but we are still a long way from returning to a sustainable housing market.

I bought my house in Chandler in 2001 for a tad under $200,000. At 2500 sq ft, it cost me around $78/sq-ft. At the height of the housing bubble(summer 2005), my model was selling for around $450,000. I won't deny that I considered selling at that point, but I love my house and its location, I have a ridiculously low small mortgage compared to virtually everyone else I know, and I want to raise my kids here. So I decided to stay put.

Since that high point, prices have proably come down 25-30% from the peak. In the meantime, the second house on my street in the past six months has been foreclosed. Things are getting worse even though prices continue to fall. Houses still are not moving even at these depressed prices. I am in a very bubbly location with a ton of debt waiting to unravel. Granted, my story is anecdotal, but it reflects the stories of most people I know and most stories I read. We still have a long way to fall. There is fear in the air but no desperation yet. Most people who own can still laugh nervously about price of their house. When we have reached the point of desperation, I'll be willing to talk about the bottom.
TCA | 05.07.08 - 2:30 pm | #

Charles J Gervasi writes:
Average Joe writes: I think we are near the bottom for sales volume....but when the Nasdaq headed south from 5000 who cared about volume? It's the price that matters to everyone including the FED.

And the Fed is not just focused on a single indicator. The Fed is concerned about real estate or the NASDAQ only to the extent that they affect the broader economy.

I have heard some people (not on this blog) talk as if the Fed is focused on only what affects them.
Charles J Gervasi | Homepage | 05.07.08 - 2:30 pm | #

jkiss writes:
I call a price bottom just as soon as the tidal wave of arms crash, banks foreclose, and clear their newly acquired inventory. Should be by end 2012 in CA/FL.
jkiss | 05.07.08 - 2:32 pm | #

MiTurn writes:
CR, can you generate supply-demand figures back to '72?
Thanks.
MiTurn | 05.07.08 - 2:35 pm | #

Tim writes:
jkiss writes:
I call a price bottom just as soon as the tidal wave of arms crash, banks foreclose, and clear their newly acquired inventory. Should be by end 2012 in CA/FL.

If all of this does indeed come to fruition, I think that the "rebound" will be long and slow. I think the stock market will bottom this year though
Tim | 05.07.08 - 2:35 pm | #

ron writes:
from the MSM:

With Treasury Secretary Hank Paulson and Merrill's John Thain chiming in, there's now near unanimity of opinion on Wall Street: The worst of the credit crisis is over.

Such comments seem outrageous given the latest batch of scary headlines from UBS, Fannie Mae, Legg Mason, Lazard, et al. But hope springs eternal on Wall Street, and the reality is the crisis in the debt markets has eased since JPMorgan's Fed-engineered purchase of Bear Stearns, which Paulson called "an inflection point." (Critics have used similar terms, but with a far different meaning.)

Meanwhile, even Henry "Mr. Sunshine" Blodget is starting to come around to the idea that the housing market may be hitting bottom, thanks to an op-ed by Cyril Moulle-Berteaux, managing partner of Traxis Partners, in The Wall Street Journal.

In making the case for a housing-market bottom, Moulle-Berteaux notes house price affordability has improved dramatically and the inventory of new homes is falling. (The piece appeared prior to Wednesday's weak report on pending sales of existing homes for March.)
ron | Homepage | 05.07.08 - 2:36 pm | #

Sonic Seuss writes:
Today's oil inventories data shows up 45% higher than last week. No significant new geopolitical worries on the supply front. Latest signals from the Fed are more hawkish than before.

So why the $%#@ is oil up another dollar and change?!?! Is Krugman still convinced there's no speculation going on?
Sonic Seuss | 05.07.08 - 2:38 pm | #

BottomMan writes:
I'm hear to call a bottom to all bottoms. Now, where can I get some more bottom
BottomMan | 05.07.08 - 2:39 pm | #

energyecon writes:
This ought to induce some squealing...

SEC to Make Wall Street Banks Reveal Capital, Liquidity Levels
By Jesse Westbrook

May 7 (Bloomberg) -- The U.S. Securities and Exchange Commission will require Wall Street investment banks to disclose their capital and liquidity levels, after speculation about a cash shortage at Bear Stearns Cos. triggered a run on the firm, SEC Chairman Christopher Cox said.

The disclosures will be ``in terms that the market can readily understand and digest,'' Cox said today during a speech in Washington. The SEC will require the disclosures ``later this year,'' he said.

[snip]
energyecon | 05.07.08 - 2:39 pm | #

vfsv writes:
We're a long way from any "bottom" in Silicon Valley. Even with the comparatively-low rates, it's still cheaper to rent, as explained at
http://www.viewfromsiliconvalley....com/ id412.html

Thanks!
vfsv | Homepage | 05.07.08 - 2:40 pm | #

Gary writes:
CR, can you generate supply-demand figures back to '72?
Thanks.
MiTurn | 05.07.08 - 2:35 pm | #

Heh.
Gary | 05.07.08 - 2:41 pm | #

Charles J Gervasi writes:
If housing is the economic engine that gets us out of the severe recession/depression, life will be miserable for many for quite some time.

Even if that happens, life will be fine. We've had a few quarters of almost-zero GDP growth, and it's a catastrophe for people who count on higher growth. I can't see how it's so bad for a society to be producing the same amount this year as last year.

I want growth, of course, but IMHO all the problems are felt by those who fail to plan on the normal ups and downs of the economic cycle.

I also don't think a new housing frenzy will bring about the next growth cycle any more than Internet companies led us out of the last recession.
Charles J Gervasi | Homepage | 05.07.08 - 2:41 pm | #

Tim writes:
When did Rick Santelli become a cheerleader?
Tim | 05.07.08 - 2:41 pm | #

barely writes:
SP500 couldn't hold 1400 and the programs kicked in. WHOOOSHHHH
barely | 05.07.08 - 2:42 pm | #

Raph writes:
Hi there

What about the bottom on homebuilders' stocks? What does usually drive their performance? Units, price?

Thanks for your insights. Great great blog.

R.
Raph | 05.07.08 - 2:44 pm | #

Bizarro writes:
Waaaah!!!! Where's my PPT? This is likely totally unfair!
Bizarro | 05.07.08 - 2:44 pm | #

barely writes:
"Where's my PPT"

They come in 1/2 hr before the close and start buying futures.
barely | 05.07.08 - 2:45 pm | #

BottomMan writes:
Bottom!!! Give me a Bottom NOW!!!
BottomMan | 05.07.08 - 2:45 pm | #

Sonic Seuss writes:
SP500 couldn't hold 1400 and the programs kicked in. WHOOOSHHHH
Time for some game-changing momentum. I'm liking this.
Sonic Seuss | 05.07.08 - 2:47 pm | #

Sparhawk writes:
Yep, just ask recent borrowers how comforting it is to have very low rates on your home loan as the value of your home declines below the loan amount.

Not only that, but as interest rates rise to more historically-appropriate levels, it's going to slaughter the values of the homes people bought at low interest rates, since real estate is more or less entirely payment-driven.

A given person can generally afford a given particular house, at low or high interest rates. If you buy at low interest rates, then rates go up, you eat the payment differential out of your equity.

Buying at high interest rates, though, you can always refinance later when rates drop. Try "refinancing" a loan on a home that's underwater because rates are 2% higher.
Sparhawk | 05.07.08 - 2:47 pm | #

hammerhead writes:
With 18.6 million vacant homes in the US, and the mortgage wholesalers, that are still standing, having had their come to Jesus moment, if this is the bottom, it could be a very long bottom. Japanese housing has been at the bottom for around 18 years.
hammerhead | 05.07.08 - 2:48 pm | #

Bizarro writes:
Thanks Barely. I was worried there for a while. I'll add here on this dip then and be up big in less than two hours. Awesome!
Bizarro | 05.07.08 - 2:49 pm | #

crispy&cole writes:
I went all in on the S&P based on Sebastians call. I lost everything. UHG!!!

:)
crispy&cole | Homepage | 05.07.08 - 2:50 pm | #

Anonymous writes:
Why would anyone work for a living? The market manipulators have gotten so predictable.
Anonymous | 05.07.08 - 2:51 pm | #

JS writes:
Bizarro-world still holds: there wasn't really any bad or unexpected economic news today so of course there is a big sell off.
JS | 05.07.08 - 2:53 pm | #

barely writes:
"I'll add here on this dip then and be up big in less than two hours"

Be sure to peg your margin limit. That's the way to play this game.
barely | 05.07.08 - 2:54 pm | #

Sonic Seuss writes:
I went all in on the S&P based on Sebastians call. I lost everything. UHG!!!

Somebody forgot to replace the batteries in the Wright Model B. ;)
Sonic Seuss | 05.07.08 - 2:54 pm | #

Alec writes:
Citi offering another $2bn in preferred shares in addition to the $3bn it was asking for less than a month when they said they didn't think they'd need to raise any more capital.

Color me suprised.[/snark]
Alec | 05.07.08 - 2:55 pm | #

ShortCourage writes:
Geez, maybe we'll get the PE ratio on the S&P500 below 25 before the weekend.
ShortCourage | 05.07.08 - 2:58 pm | #

tieornot writes:
Weren't triple digit losses outlawed in the last Fed release?
tieornot | 05.07.08 - 3:05 pm | #

Mel writes:
Many here talk of a PPT for stock prices and that got me to wonder why they don't try to re-ignite the housing boom. Anyone here have an idea how an unscrupulous government might try this?
Mel | 05.07.08 - 3:05 pm | #

barely writes:
Ding! Get ready for the PPT to push on the sp500 to get it over 1400.
barely | 05.07.08 - 3:09 pm | #

Fish writes:
if it hasn't been said already, this is only Case's chart/data being used by the author to speculate on a bottom based on similar turns at this level in the past.

This is not Case calling a bottom.
Fish | 05.07.08 - 3:09 pm | #

Anonymous writes:
hyperinflation?
Anonymous | 05.07.08 - 3:09 pm | #

jin writes:
OT, but what is happening right now?

Why all the sudden is there a downward spike?
jin | 05.07.08 - 3:11 pm | #

ShortCourage writes:
I don't profess to know why the market is declining today, but I have a theory.

What moves the market these days is bailout news. Here's some from the WSJ:

Bush Says Democrats' Bill
Would Reward Speculators

WASHINGTON -- President Bush threatened in brief remarks Wednesday morning to veto Democrats' broad housing rescue package, saying it won't help struggling homeowners.

ShortCourage | 05.07.08 - 3:11 pm | #

Gamma writes:
Mar Consumer Credit $15.3 bln vs $6.0 bln consensus

das goode righhhte?
Gamma | 05.07.08 - 3:11 pm | #

Joe Klein's conscience writes:
Paulson just said that the worst of the credit crisis is over. If only wishing so would make it go away.
Joe Klein's conscience | Homepage | 05.07.08 - 3:13 pm | #

barely writes:
"Mar Consumer Credit $15.3 bln vs $6.0 bln consensus "

BULLISH! Just think - More bailout opportunities!
barely | 05.07.08 - 3:13 pm | #

Anonymous writes:
CR your are so right. These educated morons (college prof & WSJ) well know, what they are talking but it is all about "me-me". They do dis-service to society.
Anonymous | 05.07.08 - 3:14 pm | #

Sonic Seuss writes:
Remember that consumer credit includes credit that is repaid before any interest accrues (i.e. it's not just consumer debt). I wonder to what extent people are charging purchases they didn't used to and thinking they will defer the payment until next month. Running as fast as they can just to stand still, if you will.
Sonic Seuss | 05.07.08 - 3:15 pm | #

Bizarro writes:
Hey Barely its getting worse. I should buy more here right? The PPT will be in soon right?
Bizarro | 05.07.08 - 3:18 pm | #

Turbo writes:
Looks like the equity market finally woke up to the fact that, unless you sell pure gold bathroom fixtures to Russian oil oligarchs, $123 a barrel oil is just not a good thing.
Turbo | 05.07.08 - 3:20 pm | #

wtf writes:
Study: New home sales outpacing construction

By NANCY SARNOFF
Copyright 2008 Houston Chronicle
Houston-area builders are selling more homes than they're building, leading to a shrinking supply of new homes on the market.
That's according to the latest survey by Metrostudy, a national consulting company that tracks housing.
Housing starts dropped year-over-year 28 percent to around 34,500 during the 12 months ending in March. But builders closed on 39,880 homes during the same period.
In the first quarter, the area's new housing supply fell to 2.7 months, meaning it would take that long to sell all the finished homes on the market based on prior sales activity. That's an amount experts consider stable, according to Metrostudy.
Brian Binash, president of the Greater Houston Builders Association and Wilshire Homes, said builders have scaled back so much that he's anticipating a shortage of homes as early as this summer.
The shrinking inventory, combined with low interest rates and continued job growth, could lead to higher prices if demand spikes.
"If you're thinking of waiting until this summer or later, I wouldn't," Binash said.
Prices already rose in the first quarter.
The median price of a new home was $202,287, up 15 percent over last year.
David Orlando, president of Brighton Homes in Houston, expects prices to remain flat this year or rise slightly.
"But I don't think we'll have to give the incentives, so we'll make it up there," he said.
wtf | 05.07.08 - 3:22 pm | #

Sippn writes:
CR - one issue with including "existing" as inventory as most of it is occupied. Only the unoccupied, new or resale satisfies any population growth, the rest is transfers.

In my market, bloggers are expecting all the REOs to reduce the need for new housing - same problem. All those who lost their homes need something, rental or otherwise.
Sippn | 05.07.08 - 3:22 pm | #

ShortCourage writes:
If oil price surge is the driving factor for the market downturn today, then please explain the 11% rally we've had (in the face of rising price of oil).

No, as I said in an earlier post, the markets are now driven almost entirely by news about market intervention, whether by the Fed, the gubmint or rich foreigners.

IMHO.
ShortCourage | 05.07.08 - 3:23 pm | #

barely writes:
"Hey Barely its getting worse. I should buy more here right"

Have faith. The bottom's in. Watch Kudlow for tips from Brian Wesbury - DOW 16,000.
barely | 05.07.08 - 3:23 pm | #

12th Percentile writes:
"honey, the bank sent us a letter. they've cut off the HELOC"

"What?! Are we going to have to get all old fashioned and start spending on our credit cards again?! Well, I guess as long as they keep sending offers we will be fine. Two tickets to Vegas!"
12th Percentile | 05.07.08 - 3:27 pm | #

Anonymous writes:
I get the feeling someone else wrote the Title of the WSJ article. It is clear to me that the author is referring primarily to the bottom/end of a recession/economic slow down and he is using new home starts as a barometer. I am not saying he is correct in his conclusions, but he makes a good argument. Yea, he does not take into account all the foreclousre inventory, but the 1,000,000 starts magic number is not adjusted for population growth either.
Anonymous | 05.07.08 - 3:31 pm | #

Gary writes:
Kudlow, pffft.

Take your tips from Glassman: DOW 36,000!
Gary | 05.07.08 - 3:32 pm | #

JS writes:
So is the bear rally/short squeeze officially over?
JS | 05.07.08 - 3:34 pm | #

Sonic Seuss writes:
So is the bear rally/short squeeze officially over?

Not sure if it's over, but it's drowning in the Red Sea with no life preserver.
Sonic Seuss | 05.07.08 - 3:37 pm | #

Yal writes:
any idea what is causing the sell off ?

SEC ? MBIA ?
Yal | 05.07.08 - 3:40 pm | #

Yalt writes:
energyecon writes:
This ought to induce some squealing...

SEC to Make Wall Street Banks Reveal Capital, Liquidity Levels

Am I right that this spike downward started immediately after Cox made his comments?

Damning, if so....
Yalt | 05.07.08 - 3:41 pm | #

Bizarro writes:
its coming back right on schedule. should finish up about 8 points minimum from here on the S&P. may even make up the whole days loss.
Bizarro | 05.07.08 - 3:44 pm | #

Tom Lindmark writes:
Callling the bottom is getting to be a cottage industry. You pointed out correctly that he missed an important part of the supply equation. I'm not sure anyone is paying enough attention to demographics. We had the boomers pulling us out of all of those previous downturns. Their influence is waning. Here are some interesting charts that break down age group trend-http://blog.metro-real-estate.com/?p=361.
Tom Lindmark | Homepage | 05.07.08 - 3:51 pm | #

Oil Equations writes:
Ya go have fun for half a dat, and yowza, oil at 123.5.

just remember CLF

for the pipes and rig structure.

what a Run.
Oil Equations | 05.07.08 - 3:51 pm | #

Interesting Times writes:
Well... judging from the market, I expect another rate cut.

If it gets ugly next week, it might be another surprise.
Interesting Times | 05.07.08 - 3:56 pm | #

Matt writes:
Yes, but....

If you are looking to live in the house, not speculate, you are interested in the motion of construction, that is the determinate of bottom. As long a my income volatility is close to money volatility, I am OK, all parties share money risk.

If you are correlating price with housing cycles, a speculator, then you have to deal with the uncertainty of money, which is high at this point. So you get your bottom when money and housing both settle.
Matt | 05.07.08 - 3:58 pm | #

nanya writes:
You can't quite call this the top of the bear market rally yet. Let's see what happens tomorrow. The PPT might reach into the hat and find a mutant rabbit or two in there and pull them out for us.

In any case, the indexes have hit their 200-day moving averages. The 6-day RSI on the VIX and the VXO have scraped bottom for a month, and the 14-day RSI is pretty close to the "sell" line. Experts are calling bottom and saying that all is well in the world...

Like clockwork!

I love this market. It's better than watching a good thriller 'cause you almost don't know what happens next.
nanya | 05.07.08 - 4:05 pm | #

Milkman writes:
The sell-off is caused by the realization that the presidential contest will be McCain vs. Obama. Hillary will have to quit (after enough people tell her to stop before she loses all of her remaining dignity).

McCain vs. Obama = Greenspan vs. Volcker.

The markets are scared of Volcker like a kid smoking cigarettes behind the garage is scared that Dad will catch him.
Milkman | 05.07.08 - 4:06 pm | #

YLSP writes:
There is a lot of area under the more recent curve... looks like more area than were under the previous two curves combined.
YLSP | 05.07.08 - 4:13 pm | #

MarkS writes:
Am I right that this spike downward started immediately after Cox made his comments?

Damning, if so....

It would appear this market has an adverse reaction to sunshine.
MarkS | 05.07.08 - 4:29 pm | #

Darkness writes:
Because of the credit crunch, only one part of the equation is affordability. Or perhaps more accurately: the definition of affordable has changed radically (i.e., you must self-finance).

If Fannie and Freddy go under, 80% of the mortgage writing will go bye-bye. Can't think bleakly enough to imagine what the market will look like then.
Darkness | 05.07.08 - 4:34 pm | #

swampfella writes:
Doubting a bottom in Hampton Roads area of Virginia and we're generally a stable area buttressed by navy and gov't paychecks.
As of today we have about 10 months (single family & attached combined) re-sale inventory and 14 months new construction inventory, an increase over last month and a new high and this in the selling season. Months calculated by dividing present inventory by total past months closings.

Pending sales have increased .98% over a month earlier but the number of homes on the market have increased even more as of 05/07/08.
swampfella | 05.07.08 - 4:36 pm | #

jag writes:
Obama = Volker?

More like Obama = Marx

Hey, it might be an improvement!
jag | 05.07.08 - 4:48 pm | #

El Cliffo writes:
McCain vs. Obama = Nixon Vs. McGovern
El Cliffo | 05.07.08 - 4:59 pm | #

foo writes:
``McCain vs. Obama = Nixon Vs. McGovern

Hardly. Maybe McCain = Nixon ethically, but McCain
foo | 05.07.08 - 6:27 pm | #

Milkman writes:
I meant:

McCain adores Greenspan. He said if Greenspan died his body should be propped up, wearing sunglasses, Weekend at Bernie's-style, because Greenspan magically keeps the economy rolling.

Volcker, on the other hand, is highly critical of the Greenspan/Bernanke policies, and Volcker endorses Obama.

http://blogs.wsj.com/economics/2...-endorse-obama/
Milkman | 05.07.08 - 8:07 pm | #

El Cliffo writes:
But does Obama endorse Volcker as the next Fed chair? Not necessarily. (Bernanke's term expires January 2010.)
El Cliffo | 05.07.08 - 8:29 pm | #

Homer writes:
Gee, when I first saw this item I thought they were referring to this WSJ article:

http://online.wsj.com/article/ SB...4494869449.html

entitled "The Housing Crisis is Over."

Just in case you wanted something more definite, the author states that the market is bottoming right now, without any of these namby-pamby question marks.

I will leave it to others to pick this one apart. At least one obvious flaw is that for most of the article the author insists on talking about new home sales and new home inventory while saying absolutely nothing about the enormous and growing inventory of existing homes.
Homer | 05.07.08 - 9:42 pm | #

Elvis writes:
Last.
Elvis | 05.07.08 - 10:59 pm | #

Homer writes:
Or second to last. When I posted my previous message I had completely missed the article that had already been posted previously on the WSJ item I noted.

Well, just play the "dumb rube" theme as I exit. Dum dum de dum dum dum...
Homer | 05.08.08 - 2:12 am | #