Home Prices Residential Real Estate

8/7/2019 Home Prices Residential Real Estate

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Pacific Asset Management Direct (206) 933-1600 Toll Free (877) 637-2767 Fax (206) 600-3175

Pamria, LLC Pacific Asset Management WA State & SEC (Pend) Reg. SIPC, FDIC through C.S. & Co., Inc.

Home Prices:

Here is the chart presented as a possible time and price model for housing:

A few months later, literally at the top of the housing bubble in early 2007, I suggested that a

mere 4% of homeowners defaulting could trigger a collapse of the entire U.S. housing market.

That is pretty much exactly what happened, for when the 4% who couldn't pay their subprime mortgages

folded, they took down an exquisitely corrupt and vulnerable banking sector and the FIRE (finance,

insurance, real estate) economy which had come to depend on it.

Can 4% of Homeowners Sink the Entire Market? (February 21, 2007)

As noted in Phase Shifts, Stick/Slip and the Demise of Our "Socialist" Housing Policy (February 26, 2010),

the "recovery" in housing visible in the chart below was entirely the result of a 99% "socialist" Central

State intervention/prop job: the Federal Reserve bought $1.1 trillion of dodgy mortgages to mask the bad
http://www.oftwominds.com/blogfeb07/pareto-housing.htmlhttp://www.oftwominds.com/blogfeb10/stick-slip-housing02-10.htmlhttp://www.oftwominds.com/blogfeb10/stick-slip-housing02-10.htmlhttp://www.oftwominds.com/blogfeb07/pareto-housing.html


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debt and keep interest rates low, and the Federal government flooded the housing market with fee money

via subsidies and absurdly cheap, central State-guaranteed FHA loans.

Now that this massive Central State intervention has ended, housing sales and values are

succumbing to gravity.home sales and prices fall:

The National Association of Realtors said Monday that sales of previously occupied homes fell last month

to a seasonally adjusted annual rate of 4.88 million. That's down 9.6 percent from 5.4 million in January.

The pace is far below the 6 million homes a year that economists say represents a healthy market.

Nearly 40 percent of the sales last month were either foreclosures or short sales, when the seller accepts

less than they owe on the mortgage.

One-third of all sales were purchased in cash - twice the rate from a year ago. In troubled housing

markets such as Las Vegas and Miami, cash deals represent about half of sales.

The median sales price fell 5.2 percent to $156,100, the lowest level since April 2002.

Sales of new homes tumbled 16.9% in February from the prior month to a seasonally adjusted annual rate

of 250,000, the lowest level since the series began in 1963.

The median price for a new home sold in February fell 13.9% from the prior month to $202,100, the

lowest since December 2003.

Here we see the first phase shift decline and the "recovery," which is now rolling over.
http://www.dailyfinance.com/story/real-estate/existing-home-sales-fall-9-6/19886244/http://www.dailyfinance.com/story/real-estate/existing-home-sales-fall-9-6/19886244/http://www.dailyfinance.com/story/real-estate/existing-home-sales-fall-9-6/19886244/http://online.wsj.com/article/SB10001424052748704050204576218433856476292.htmlhttp://online.wsj.com/article/SB10001424052748704050204576218433856476292.htmlhttp://www.dailyfinance.com/story/real-estate/existing-home-sales-fall-9-6/19886244/


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We submit that the forces acting on price are mutually reinforcing to the point that price will drop rapidly

in a second phase shift, with the target noted on the chart: a return to the price levels of 2000.

Once we get into the 2012-14 timeframe, then some expect a third phase shift will drop prices back to

1987 levels. As many observers have noted, bubbles don't retrace to historical averages--they over-

correct to extremely low values.

We would take a less extreme view, but yields must rise to entice buyers, and a drop in price is the fastest

way to generate higher yield in the absence of income.

Shawn A. Mesaros

Pacific Asset ManagementTwo Union Square601 Union Street, Suite #4200Seattle, WA 98101(206) 933-1600 Direct(206) 600-3175 Fax

(877) 637-2767 Toll Free+852-8199-9853 Hong Kong

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Home Prices Residential Real Estate