Back on April 5th, a BLOG on economist.com picked up a story
on housing by an anonymous writer who only goes by the intials R.A.
The article entitled “The rebound is now” seems to rely heavily on
data from Trulia, a mix of odd and unnamed sources of data and
observations that are at best vague and thoroughly misleading.
The author then goes on to attempt to discredit the Case/Shiller
Index with deflecting information and a sales pitch from none other than…you guessed it, Trulia. Their supposed head economists, Jed kolko figures he has a new way of analyzing housing data that no one else has come up with! The Case/Shiller Index has been one of the most reliable price indicators since its inception.
Now for those who don’t know and the uninitiated, Trulia is one of the
most unreliable and unprofessional real estate analysis firms in the U.S. market. Outside of the NAR, Trulia and their ‘economists’ are about as
inept and myopic as those from the said NAR.
I will address the two data points that Trulia and R.A. sight as their so-called ‘claim’ to a housing rebound. by the way, (Housing is faltering again)
First is the “prices nationally are 19% below fair value” claim. Fair value
is typically an accounting term, that has little meaning in the valuation of
real estate assets. Market value is not fair value, though many confuse this term and notion. What is interesting is that while they throw this 19% below fair value number out there, they do not provide the formula or metric on how they came up with this outrageous claim.
The best (though basic) way to gauge market prices to affordability, is
to utilize the comparative of national median prices to national median incomes. Currently the national median income in the U.S. is approximately $51,000 +/-. While the national median home price is approximately $148,000 +/-.
Based on the approximate measure of an Income to Debt ratio, housing should be no more than 30% of DTI. So in reality, market prices are just
about where they should be, give or take a 1% to 2% range of prices.
The notion that prices are below so-called fair value are absurd.
Another key point to remember, is that prices and values that were
achieved during the credit bubble (housing bubble) were false.
Predicated upon a synthetically created credit bubble, as over-inflated home prices were based on the foolish premise of continually rising prices
through speculation– pure and simple. Not on the historic rise of cpi
(real- not Fed manipulated) and wage increases, which is the only true
valid measure of sustainable appreciation.
An additional metric is to use the house prices to rent ratio. The most
recent data for national median rent is about $850 per month. Currently,
the ratio is approximately 15.4. Which is right on the line with regards to buying or renting. It depends on many factors; salary, debt, down payment, loan amount, etc.
Just because prices are in the 150’s, doesn’t mean it is a good time to buy.
A ‘good time’ to buy is when a potential home owner can AFFORD the asset. Meaning, having the ability to carry the mortgage payment on a fixed rate loan, at no more than 30% of the buyers gross income.
There are also other methods of calculating prices to affordability and values
that are a bit more complex and over the grasp of many real estate agents.
Suffice to say, that the average agent has little to any concept of valuation methods and therefore, has no business pricing real estate. And suffice to
say that Trulia and the worthless NAR are some of the most ill-trained, unsophisticated agencies in the real estate market.
These are nothing more than Sales & Marketing and lobbying entities, who
are in the business of ‘selling’ to agents and the public. Nothing they publish
or claim with regard to prices, volume and trending data is reliable and/or credible. This fact has been proven over many years of false and misleading data from these said agencies.
The second misleading, deceptive and outright ignorant commentary from Kolko is that he states unemployment is lowering and consequently improving. This statement on its own, reveals how ignorant and uneducated Kolko is. U3 unemployment has RISEN to over 12%, while the U6 rate is in the range of 25% to 28%– Depression-Era levels. When you LACK the basic skills to comprehend labor force participation and utilization you expose yourself as plainly stupid in every sense of the word.
The BLS is engaged in a full out propaganda campaign. Using the antiquated and flawed methodology of X-12 ARIMA, where the unemployment rate drops on not only the addition of employment, BUT also on the increase in Labor Force drop-outs. So, as MILLIONS are no longer counted but STILL unemployed, the rate drops! It’s like magic! For those wide-eyed dopes who only see shiny objects, call me, and I’ll school you on the basics of arithmetic.
It’s as if the majority of the under-educated agents and brokers haven’t learned anything over the past 5 or so years. The cheerleading and arm-waving from the government, the useless real estate industry and the msm have fallen flat of their faces. The made up headlines of a “housing recovery”
go back to January 2010, propaganda put out by the NAR and published by the Washington com-Post.
Shills like Mortgage News Daily in July of 2011, then the ever neo-con supporting Bloomberg in October of 2011. Then we have the Economist.com in November of 2011 CLAIMING that a housing recovery was beginning.
Called Rising from the Ruins. Do you see a pattern? Well maybe you don’t. After all, most agents took a 75 hour class that a monkey could sit through and are ‘in’ the real estate business…running around, claiming they understand economics, statistics and real estate when in reality they are as clueless as a newborn. Here’s a tip; (no charge by the way) real estate, is NOT about staging, flashy virtual tours or ‘post cards’ mailed to faceless ‘residents’. But unfortunately, this is the credo and climate for most of the industry.
Trulia, Kolko and ‘R.A.’ are just more of the useless drones in the contingent
of Hopium sniffing sales whores and clowns, who will go to any lengths to lie and deceive the consuming public as well as most of the morons within the real estate industry itself. Falsities will ALWAYS, bring a Falling Away…Remember that.