Monday, December 30, 2013

Bill McBride asks good questions 6-9

Bill's questions for 2014 are about housing.  Interesting that they are about "housing" not "real estate."  There's a difference and keep that in mind as you read.  

6) Residential Investment: Residential investment (RI) picked was up solidly in 2012 and 2013.  Note: RI is mostly investment in new single family structures, multifamily structures, home improvement and commissions on existing home sales.  Even with the recent increases, RI is still at a historical low level. How much will RI increase in 2014?

A:  Rather a lot really.  The category of deferred maintenance in particular will be fueled by residential reinvestment and increased materials prices.  The rule of thumb is that repair costs 3-4 times what upkeep costs and there has been a lot of ignored upkeep.

7) House Prices: It appears house prices - as measured by the national repeat sales index (Case-Shiller, CoreLogic) - will be up about 12% or so in 2013.   What will happen with house prices in 2014?

A:  Momentum will carry through until the spring selling season where flat to slightly down will continue through summer.  By then it will all depend upon any Fed response to the stalling market.

8) Housing Credit: Will we see easier mortgage lending in 2014? Will we see positive mortgage equity withdrawal (MEW) after six years of negative MEW?

A:  Yes.  If only for the reason of long time owners using equity to buy a downsized home and then renting out the original property in the good school district where you raised the kids now gone.  Renting the Dawghaus would yield enough to keep paying off the place and buy another more modest abode.

9) Housing Inventory: It appears housing inventory bottomed in early 2013.  Will inventory increase in 2014, and, if so, by how much?

A:  Y-o-y listings will grow steadily but slowly through the spring selling season and then get the same clamp we see now at a maybe 10%+ 2013 through the rest of the year.  Again depending upon the Fed response to slowing in the second half.


What do you guys think?

Coming up: Bill's final question.  Deserving of an entire post all its own. 


Son of Brock Landers said...

Calculated Risk reminds me of my dad giving dating advice. Way out of the game but has a decent framework to build on.

If the FHFA changes go into place, the spigots might be turned on thru Fannie/Freddie again giving a solid year boost to home sales. Then it's sayonara.

Anonymous said...

I think outside of a few markets where jobs are being
created or resort areas, housing will be flat. Part of the
Momentum over the last two years were low rates and
people reassessing where they needed to be. I think that
momentum is fading. Condos
and townhomes should be bright spots.

TJandTheBear said...

If I could predict interest rates I could predict housing, since I expect they'll move inversely.

Rob Dawg said...

We might keep the sales rate up at the expense of price increases but I believe there is an outsized impact from even modest interest rate changes in either direction. You can have sub 4% mortgages driving sales AND prices or you can have 5% mortgages driving sales OR prices.

Rob Dawg said...

:fistoffury: TJ!

Unknown said...

In Sonoma County? Inventory up, prices flat to down by June.
I think we are close to the bottom for prices on the high end, but not quite there.
Biggest inventory increases in the mid range in 2014.
Drought and the number of unemployed who have had their benefits eliminated are wildcards. It will be interesting.

Rob Dawg said...

I can believe your Sonoma prediction. A real black swan would be another tech crash that causes a lot of your gentleman landowners to pull in their horns. Best to watch the tax roll delinquencies for possible cash flow squeezed wanna be types.