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Gaming Housing Statistics or Time Reveals Truth

By Larry Doyle on November 20, 2009 at 2:00 PM in Current Affairs, Economy, Housing & Housing Crisis, Sense on Cents (Larry Doyle blog)

Time reveals truth.

I love that pearl of wisdom shared by Danielle Park, my guest this past Sunday evening on No Quarter Radio’s Sense on Cents with Larry Doyle. I find it very applicable to the recently released economic report on housing starts. What did that report indicate? Housing starts in October registered a supposed surprising decline of 10.6% to a seasonally adjusted 529, 000 annual rate.

Is this truly a surprise? Market analysts and government pundits who continually ‘oversell’ economic data as legitimate, when in fact that data is gamed via government props, need to show surprise when a report disappoints. If they do not act surprised, then they merely expose themselves and lose credibility.

The simple fact is the housing market in our country remains in decline. One merely needs to look at the continually increasing levels of delinquencies to understand that. I addressed this important data last May in writing, “The Most Critical Economic Statistic”:

Which economic statistic is the most important? Unemployment? Housing starts? Trade deficit? Inflation? Retail sales?

Well, they are all important . . . but as I review the many statistics, the economic data that I believe most significant are loan delinquencies. Now, mind you a delinquency does not mean that the loan has defaulted and been foreclosed upon. A delinquency is merely a late payment. Typically loans are classified as 30 day, 60 day, or 90 day delinquent. There is a very high correlation between delinquent loans and those that default.

Loans become delinquent for a whole host of fairly typical reasons. That said, in this economy the nature and array of reasons are growing. As a result, the ability of lenders to forecast and manage delinquencies is increasingly more challenging. Lenders will typically increase reserves as loans become more delinquent in anticipation of a natural rate of default.

Loan delinquencies will often occur even before unemployment hits or sales falter. As individuals or companies feel increasingly squeezed, the monthly loan payment becomes more difficult to make and delinquency results.

Delinquencies show no sign of abating. For a wealth of information on housing, I am happy to share a link to Mark Hanson Advisers, a site I recently found which provides true, cutting edge insights on housing.

While cheerleaders will look to parse each and every monthly statistic in an attempt to legitimize their work, do yourself the favor of looking at the major trend lines. Uncle Sam can attempt to ‘game this process,’ but I strongly recommend you do not ‘play’ his game. Why? The truth is not revealed in his game. When is the truth revealed? Over time.

Thank you Danielle. Thank you Mark.

Color from around the country as to developments within your local markets is very much appreciated.

Carlaforhillary

Thanks for this info and the link, L.D.
candymarl

In my local area in southern Georgia the repossessed/default list is steadily growing. The worrying part is it isn’t just the five bed/bath type that are being repo’d. It’s the houses that most would think were affordable. Those in the $30,000-60,000 price range.

To me that is a new and very bad trend.
**== SUPER GALT **==

House of cards metaphor applies, pun most intended indeed.
lark

My local market is my brain and I am glad you are posting this kind of information. The color of my brain is crimson red. The whole thing hinges on what kids are being taught in school if one wants to think about recovery, otherwise is just whatever benefits those with the privileges of having access to the interests as they emerge.

What will or can change the school system to revive it since it is dead? I guess only a depression, I mean a severe depression. Except a depression may just unravel the country. Well maybe is better that the country unravels and each part decide the best way to educate their youth.

BTW, education is not going to school. That seems to be what people think education is.
lark

I bet the members of the Board of Realtors in your area are really proud now. They lied and conspired within themselves and the mortgage companies and how happy they must feel now. Specially the top sellers.

Oh how much I hate residential real estate agents. As much as I hate so many other things.
lark

What I said but was zapped by the automatic zapper.
elaine

Funny thing is many major cities are still competing for federal funds to build more “affordable housing.” What’s that about?
FrenchNail

Larry,

Thank you so much for the link.

In Florida, the situation is still completly flat. The only market moving is the very low prices (under 100K) paid CASH. And yes, you can buy condos in Naples, FL for less than 50K which in 2006/7 moved for 270K. But ANYTHING financed is doomed. There is simply ABSOLUTLY no loans out there. When the buyer is qualified (meaning overqualified with plently of cash down, in the bank, and on his paycheck) and when the unit (condo/townhouse/single house) is qualified (meaning in good shape and appraising between 10 to 20% higher than the purchase price) the neighborhood kicks in, and everything falls apart.

The little known fact is that if there is more than a certain number of properties in default/short sale/forclosure in the building, development or surrounding streets, the loan cannot pass FHA standards. And right now in Florida, except some VERY FEW small pockets, every building, development and neighborhood is by far not meating the minimum FHA standards.

And even the short sales are now falling apart because even when the banks are accepting realistic prices (rare, they prefer keeping properties on their books at inflated values and pushing for foreclosure where they still can carry on the charade by owning the properties at made-up book values), they are now approving the sale on the condition that the seller sign a waiver accepting liablity for the bank loss on the transaction (not the loan only but the transaction, meaning they had all their fees on top of it)

Yep you read right. It is in fact redefining the very meaning of short sale.

The idea is again to be able to mitigate book value losses, thus creating a false appearance of financial health AND to preserve the possibility to go after the seller for whatever they can, once the seller has started to recover.

So long term, (5 years or more) all the people who could be reentering the real estate market, will be one more time on the hook with their banks instead.

I am loocking closely at the behavior of forclosure judges. I would not be surprised to see them soon holding forclosed owners liable for the bank loss.

And if you think that is not possible… Let me tell you about a close friend whose forclosure hearing is scheduled for DECEMBER 24!!! Happy Xmas America.
Patience

All I can say is our little apt. bldg. hasn’t had a vacancy for a very long time. And our tenants are professionals who can well-afford houses or condos. We get calls ALL THE TIME from those inquiring about vacancies. It’s quite the opposite scenario than that which existed as the bubble was inflating. Then, people felt compelled to jump into the housing market for fear of missing out on all that phenomenally rapid real estate appreciation. Now, they resist jumping in because they fear the market hasn’t bottomed out.
http://jbjd.wordpress.com There IS credible evidence

Why are they building housing? How do folks afford the housing without jobs?
Andy

More education:
We used to call them teachers, now we call them educators. Teachers teach students who want to learn. Educators fudge the numbers to get better pay and other perks.
I’m a Linda too

“Time reveals truth”. Aint that the truth. I just love history. You can’t paint it with “he could usher in that change”. It’s done. The result? Worse than Bush. At least we got a temporary climax with the housing bubble.

I just was cracking up this fall when reports were coming out “the housing crisis is over, analyssts say….it will bottome out by end of summer next year”. ???? will (guessing) bottom out next year so then, it’s not over.

And those folks got paid for that?
lark

They said that because they (not that I will defend one iota of what was said) bought into the notion that Fannie and Freddie are going to rent to defaulters (I guess for 20 to 25 percent of their mortgage payments) and somehow because of that foreclosed properties will command a better asking price. Ha! That was before Fannie and Freddie virtually declared bankruptcy. Oh, no; they will be bail out again. But I am pretty sure that this cyclical bail out will not support the rental deal. Or will it no? I don’t know. Maybe it will. But if it does, the stream of defaulters will ten-tuplex.

And to think that the answer resides on high schoolers that graduate knowing how to reduce a quadratic equation to its bare elements. (Not that I support reductionism.) The robots will come from afar and send the money they collect even farther.
lark

Crap, no pego!