Saturday, February 12, 2011

Graph of the day: Government propping up the housing market

This graph from The Wall Street Journal shows the number of new mortgages backed by the government vs. those not backed by the government.


  1. As I have said before, without government intervention, the housing market has no legs. It was comical to see the full page ad in today's Washington Post paid for by the NAR begging the public to urge Congress to not eliminate government support for mortgages. A year ago they did not like proposed regulations applicable to the housing industry and now they want government meddling in housing. You cannot have it both ways real estate PIGS!

  2. Quote: "You cannot have it both ways real estate PIGS!"

    They can if they are OK with being hypocrites or idiots (or both). Neither seems out of character.

  3. The NAR is completely self-serving. They have no principles. They are neither for government intervention nor against it -- they only seek what will help them generate sales and try to hinder actions which stymie sales. View their actions through the lens of self interest, and everything makes sense. Don't overthink the NAR's actions by assuming a "grand vision" or ideology. You only give them too much credit.

  4. Even though mortgage payments are on the rise,I'm hoping to see some positive signs in the real estate industry soon.

  5. I don't want to start an endowment showdown or be told to watch and learn or anything, but the numbers put out by Redfin for the area don't appear to support the immunington thesis...and my suspicion that many sellers are keeping their place off the market appears to be confirmed...

  6. JAC - sellers keeping their home off the market is common in any bottoming situation. During the last downturn, in 1992 sales prices bottomed. However, inventory remained very very thin as people remained leery of the market. Eventually they returned, in dribbling out, bit by bit, but it wasnt until 4 years later, in 1996 that inventory returned to full strength.

  7. Anon

    Of course in the last down turn people had home equity and as such were in a better posture to stay off the market.

    If you have serious equity say 40% and you think the market turn down is just a year or two, you can delay sales until the market improves.
    Even if that pushes you into being a landlord, the property can remain
    as a rental and be a decent investment.

    but here, it's a different macro cycle. 29% of DC homeowners are underwater on mortgages, and nationally the banks own 55% of all housing stock.

    What's the situation for them?

    Would you go through the BS of being a Landlord or would you mail the keys to the bank? Would you support a cash flow hit on something
    20% underwater?

    It's why the banks are sitting on inventory, they are afraid of the whack if they release shadow inventory

  8. "It's why the banks are sitting on inventory, they are afraid of the whack if they release shadow inventory"

    And with MTM suspended indefinately, why do we think that they are going to release that inventory "soon"?

    Additionally, when they do, why do they decide to DUMP that inventory on the market and destroy the price support they have been able to enjoy for the last 2+ years? Why do they not just keep on doing what they have been doing since early 2009? Releasing the shadow inventory drip by drip by drip?

  9. "JAC said...the numbers put out by Redfin for the area don't appear to support the immunington thesis:"

    JAC, im curious how you come to that conclusion, especially given that your redfin report says this:

    "On the pricing front, the market continues to stay strong in the closer-in areas of DC (+14.7%), Montgomery (+10.2%), Fairfax (+5.1%) and Alexandria (+6.5%), all with solid price gains since January 2010. Jeremy continues to see a tremendous chasm between prices in the farther-out areas compared to areas inside the beltway: “I’m advising my clients that there appears to be two markets out there–the outer band and inner band. The farther-out areas are starting to stabilize at or slightly below last year’s prices, while prices in areas closer to DC are increasing.”

  10. When supply increases, prices will fall. It is obvious that supply is artificially low at the moment.

  11. Thanks IBC, an entirely fair point, I think I was not reading that portion properly and may have had the month-on-month number in mind, which obviously doesn't make sense to focus on given seasonal issues. However, I would respond that if you look at inventory and sales volume, both appear to be down. My thesis is that the average or median sales price is climbing because folks with more expensive properties on the market are less sensitive to price (they are wealthy) and therefore will accept a lower price for their already high value place, and more of those units are selling. Down the ladder a bit, fewer units are selling because folks can't get the price they want/need. As a result, a somewhat misleading median price stat comes out. That's my theory anyway, and I'm acting on it by lowballing the shit out of all my offers....haven't got anything yet, so maybe I'm all wrong on this... But I feel like I see lots of decent properties in north Petworth that have been sitting on the market for ages...

  12. JAC,

    You are on point! Examine the type of properties that are selling and you will see that they are indeed the high-valued properties skewing the statistical average.

  13. Maybe. I personally am loathe to take that position as I used to ridicule the bulls who said that "declines" in the immunozones (07-08) was due to lov value properties skewing the statistical average.

    Still, im sure there is some element of truth to both.