The Difficult Search for the Housing Bottom

Maybe when the average home buyer can afford a home without spending 30%-50% of their income on a house payment will the market correct itself. Homes are still unrealisticly high in a number of markets...they have to come back down to levels that a majority of people can afford, so I tink we are in for more pain overall, especially those places that simply had overheated markets..

Looks like credit swaps derivatives are approximately 1/2 the entire planets GDP. I read the planet - all nations collectively are approx 130 Trillion. Further I've read collectively all derivatives are over 560 trillion but you have me thinking now that if so many transactions are via black box - how can I rely on the 550-560 trillion estimate. You've taken some time to put forth a meaningful contribution - so I should try to do the same. If anything, you encourage constructive criticism - so as to the 65 Trillion estimated for credit swaps, I have to stop and ask who estimates this, and what are the contributing causal factors. I always liked the scene in China Syndrome with Jack Lemmon where he's tapping the water level meter -and they 'think' there is an emergency in the nuclear reactor so they dump the water, THEN he finds out it was a faulty meter, and tapping it again it drops - at that point he realizes he came close to a fission meltdown. Your thoughts here on integrity of data, further, the means and ways even of gathering data (you did leave out the analytics side, but hey, what good ARE analytics I suppose [this might be your point as well] if the data isn't reliable) do raise question as to necessity of good data before anything else. Dubious Data is a fine way to put it if you ask me, I suspect there is room for an entire book on this. Same is true in any analysis, medical, economic, if the data isn't there, or able to be consolidated, we're in dartboard mode. I WILL say on oil futures mentioned above I really do think one serious impact on futures is the shift of investments prior from the stock market into futures. I saw the head of Sallie Mae speaking on c-span regarding their student loan dilemma and he pointed out so many pensions used to ride on the backs of the student loans (neat idea if you ask me, that the young would in turn be helping the retirees portfolios, providing it worked, and it did up to the point where 160 basis points wasn't enough according the CEO of SM for maintain profitability), and he got me thinking, ok, if pensions USED to ride on loan products such as these, and these are drying up ? where will they shift to ? Gold ? too volatile ? I think they in part shifted to petro. Oh well Considering I got banned from MarketWatch today for promoting a bit TOO much that Fox News is now calling the shots for MarketWatch, I end up here - to which MacDonald PROBABLY says - 'oh great, lucky me !' ha. Well, I find this authors insights and passion to their work as good as it gets. Hey Liz, I know where you could go and make a difference (if say, indictments come down the chain stemming from Ailes), but it might not be such a public position, I bet Buffett would pick you up (COMPANY wise I mean, although 1/2 his age, ok, 1/3 his age, you two WOULD make a darn cute couple). I recall something Warren said once regarding his higher paid employees - he goes "We like to keep people we care about" I bet you'd rock at Berkshire Hathaway, and I bet they'd keep paying you more not to leave. Not sure if Fox would do that. In fact, I don't see your picture on the Fox Business News team there of 20 or so people, and darn it, you're at the core of what integrity comes through from that network - granted Cavuto is likely over 135 IQ, but he tends to get personally involved in his messages. I'll NEVER forget when he interviewed Alan Greenspan, said 'we have to take a break' Alan said something like 'You mean, you have to sell a commercial' And guess what the commercial was ? CountryWide (this was this year - AFTER CW fallout). Shame on you Neil. Shoulda let Liz interview Alan. I've never seen MacDonald ever be disrespectful.

Kudos - an analyst that analyzes the shortcomings in data rather than stringing together bad data. Data collection & analysis isn't sexy & consumers of the data often don't know how to question it. Your article addresses the problems quite well. Is anyone doing anything to collect better, more real time data? This isn't rocket science.

I totally agree with what "wayout" says about people being able to afford their home. One of the key factors I see is that the affordability stems from folks not getting paid any more at work as necessary goods are rising. Both family members have to go out and work whether that is the way they want it or not. All this talk about less spending at the clothing store or at your favorite restaurant would change if there would be better, higher paying jobs. I think what is happening around us is horrible and probably hurting a lot more families than we all know. On another note, maybe we could stop funding "some" space craft to get closer than we have ever been to the sun and use that money to create a few jobs for some analyst to straighten out the numbers for "The difficult Search for the Housing Bottom." Nah, that would be too genius for our Government.

Your article is full of data that sets me afire. Here are two things that need more transparency. l. Builders profit on a singe housing unit. 2. Real Estate commissions. Builders sre walking away from home closings making a whopping 35 to 50 percent markup per home sold. This is far too much. Real Estate Brokers pick up a check a home closings for 4 to 10 percent based on gross selling price. This is not only stupid, but downright white collar theft in my opinion. Not one builder or Relator earns a fraction of the money dolled out by the purchaser of one of their homes; these greedy profiteers keep hordes of first time buyers in apartments and not in the home they deserve in this Nation. I say you guys that have the ability to "spill" out these horiffic profits being made by builders and Relators should make it public so all will be aware of how bad they are being ripped off. Sad situation that no one seems to have the will to address.

@Dave: That's misguided. Every manufacturer has to make a profit on their products, or they stop making them. If the profit is unreasonably large, there will be many competitors, and some segment of producers will make the product more cheaply. House construction is not patented. Yes, quality of construction has gone waay down in the last few decades, but it's because customers (you and me, though probably not You and definitely not Me) are demanding giganto things that we don't need, can't afford to build well, and lately can't even afford to build poorly. Builders will build whatever the market asks for, and make as much profit as they can. Like every other business in the modern world. And, look a little deeper and you'll find that after several years of huge profits (due to govt policy and lax lending restrictions), builders have overbuilt their products, have overbuilt their companies, and will be trying to dig themselves out of this hole for many years. Now is an awful time to be a builder, especially if you specialize in faux-lux. Those huge crappy houses will be around for DECADES, long after they're firmly established as embarrassingly unfashionable. OTOH, we agree that real estate commissions are silly. The Nat'l Ass'n of Realtors owns the MLS database (local associations own local MLS), which is 90% of the value RE brokers offer. It's a classic disparity of information problem, and it has been the mainstay of the real estate business for decades -- a huge disservice to both buyers and sellers. It has survived surprisingly well in the wake of the Internet. Still, it won't be long before public (or at least openly-licensed) MLS-like data exists. Now is an awful time to be a real estate agent. Home-seekers have options: you can build a reasonable and responsible house that fits your needs, or you can buy an appropriate (probably older, 20-30 yrs or more) house that is for sale by owner. Either option will let you avoid being a part of the ugliness and inequality that is status quo out there. Either option would require much more active participation on the buyer's part. We pay for convenience, and in many cases we accept substandard and overpriced services, as long as they're convenient. This is no different.