May 25th, 2018

Renters Become Majority in More than 20 Major US cities – The Millennials are Not Coming to Save the Market.

The notion that somehow an affluent set of Millennials is going to shift the housing market is not happening.  What is happening is rather clear; historically low housing inventory is causing prices to inflate in the face of what has been very low new home building.  If you want to buy, your options are usually an outdated crap shack that is already at an inflated price or in some new areas, glorified condos where builders are trying to max out every square inch of development where you can smell what your neighbor is cooking.  The fact remains the same, over the past decade there has been a dramatic shift of renter household formation (not homeownership).  For Millennials, tastes are dramatically different.  Sure, you have Taco Tuesday baby boomers glued to Fox, MSBC, or CNN (typical age of viewers is 60+) so many are simply out of touch with the wants of younger Americans.  Builders however understand this dynamic and multi-family unit construction has been running briskly for the last few years.  Many large cities have now converted into renting majority locations.

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April 30th, 2018

Homeless in L.A. – homeless population surges 75% in past six years. 

There is a homelessness crisis in Los Angeles County.  The homeless population has surged by 75% in the last six years all the while home prices are back to peak levels.  Yet the home ownership rate still hovers near generational lows. California has seen massive growth in rental household formation.  Surveys continue to find that Millennials prefer different living styles than their baby boomer parents.  Forget about surveys, just look at the actual market.  Record low inventory is being driven by baby boomers staying put and the lack of home building thanks to hardcore NIMBYism.  So it is no surprise that we now have a homeless crisis in L.A. County.  Recently, in Orange County a large group of homeless encamped in various areas where set to be moved into affluent areas of the county and people went ballistic.  So where do we go from here?

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April 11th, 2018

The Housing ATM is back – Cash-out share of all refis hits pre-crisis levels.

It was only a matter of time that people started using their homes as ATMs.  It is clear that the housing cheerleaders are drinking a mega dose of housing Kool-Aid and somehow think that people are immune from repeating past mistakes.  But here we are seeing cash-out refis hitting pre-crisis levels.  And this assumption is based on the underlying mentality that yes, a home is really worth that amount and now people are locking in these high price levels.  But guess what?  You have to pay that money back on your glorified crap shack.  This was one of the many reasons for the last housing bubble where people believed the hyped and went into deeper debt because of this notion that a home was an ATM with a roof on it.  The overall tone is incredibly housing positive even though there are major issues in the housing market.  For example, the homeownership rate is near generational lows and much of the household formation since the bubble burst has come in the form of rentals.  Now homes are being used as ATMs.  What can go wrong?

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March 23rd, 2018

Total value of U.S. homes is $31.8 trillion – Los Angeles homes now valued at $2.7 trillion, the size of the U.K. economy.  Chinese home buyers in the U.S.

Housing values in the U.S. have reached a new peak.  In total, U.S. homes are valued around $31.8 trillion according to Zillow.  That is 1.5 times the GDP of the U.S. and close to three times the GDP of China.  Crap shacks in Los Angeles are now worth $2.7 trillion, which is more than the United Kingdom’s GDP. What is very telling is that real estate values across the country in virtually every large metro area are near peak values.  In places like San Francisco, they are in a new stratosphere.  The allure of real estate is now fully engulfing the nation and flipping rates are at decade highs.  People want to get a piece of the action.  You also have many ex-pats now taking their money abroad and retiring in more affordable countries where they can stretch those Taco Tuesday dollars while money from China is flowing the other way and boosting prices in some areas dramatically.

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