Dad, Housing Ain't Gonna Bounce Back

Along with religion, politics, and your early sex life--you can add money to the list of "things you can't talk about with your parents." Just when it seemed my dad was about to succumb to the lure of paid work, my stepmom let it slip..."until we can get back into real estate again."

GAHHH!

My father is an incurable entrepreneur. In his mind, he has made and lost a thousand fortunes. He's had scads of business ideas, plans, and schemes. This is not to say that some of them weren't smart, or on the level, or had potential...it's just that entrepreneurship is a risky career, and few people have the chops to pull it out. My dad isn't one of them. He's always a step behind the curve, one of the millions of dreamers who decide to plunk money down on a "sure thing" just when the smart money is running for its life. Despite his stated intention to make a million before he leaves this earth, I suspect I'll bury the old bear penniless.

But I can't say any of this to him.

Even when I see charts like this.

Or read stuff like this:

"The idea that housing doesn't go down turns on its head when you actually calculate in the real-world costs of interest, taxes, insurance, etc. For instance, before those costs are counted, it looks like 16 out of the 17 top real estate markets in the 1990s were in the black. Once you add them in, however, it turns out that not one of the top property markets went up. They were all negative.

"In the 2000s, up to May 2007, you get something similar…three markets that, in unrealistic terms supposedly shot up 18%, 33%, and 36% during that period, are all actually net losers…down 10.5%, 13.4%, and 28.2%. As in negative. The gains were phantom stats from the fantasy world of no-cost property ownership.

"Running through the rest of the list, the other major markets did still make money. But instead of the astounding triple-digit gains property owners love to point to as proof that this bubble was the real deal, you find out that only two of the markets - net of costs - actually crossed the 100%-gain mark (instead of 10 markets). And annualized, only two markets were even a little above 10% gains in property values.

"Not bad, but not a miracle by any stretch.

"Two more of those top markets just barely squeaked past the annualized 8.5% gains in the S&P 500 for the same period. All the rest of the top 17 markets looked at in this article did worse than the S&P. During what was supposed to be the biggest property boom of all time.

"Again, this isn't to say there wasn't a bubble. Just that it truly was an event completely devoid of sanity."

Mish caps it off with:

"The excesses of the current cycle have never been greater in history. The odds are strong that we have seen secular as opposed to cyclical peaks in housing starts and new single family home construction. With that in mind it is highly unlikely we merely return to the trend. If history repeats, and there is every reason it will, we are going to undercut those long term trendlines.

"There will be additional pressures a few years down the road when empty nesters and retired boomers start looking to downsize. Who will be buying those McMansions? Immigration also comes into play. If immigration policies and protectionism get excessively restrictive, that can also lengthen the decline.

"Finally, note that the current boom has lasted well over twice as long as any other. If the bust lasts twice as long as any other, 1012 just might be a rather optimistic target for a bottom."


Sigh...