9 Signs the Housing Market is Turning Around ---REALLY?

Wall Street Journal BUSINESS

Updated May 10, 2012, 11:00 p.m. ET

J.P. Morgan's $2 Billion Blunder

Bank Admits Losses on Massive Trading Bet Gone Wrong; Dimon's Mea Culpa

JP Morgan Chase is the largest bank in the United States. They lost 2+ billion but still earned a profit in the billions for the quarter. However, Dimon is supposed to be the Wiz Kid of Wall Street. So should we listen to “experts” or do our own research?

The following was prepared by Associate Editor Jeff Zagoudis of the Housing Zone summarized JP Morgan CEO Jamie Dimon's optimistic outlook on the housing market in Dimon's recent annual letter to investors.
I have added my comments.

The existing supply of single-family homes and condos has decreased from 4.4 million units in May 2007 to 2.7 million today, one sign offered by JP Morgan CEO Jamie Dimon that the housing market has reached a turning point.

I do admit, there seems to be a new energy in the real estate market. It could just be the spring time and buyers are coming out and the supply is down. You need to check your local market but in Charlotte, there seems to be a change. I will research and let you know.

In his annual letter to investors, JP Morgan CEO Jamie Dimon offered an optimistic outlook on the housing market for 2012. Despite the continuing trend of low home prices and an excess of homes in delinquency or foreclosure that are still NOT on the market, Dimon offers these nine indicators, as reported by Business Insider, that things are starting to turn around:

1. The U.S. population has grown by 3 million people per year since the housing crisis kicked off four years ago. He projects additional growth of 30 million people over the next decade.

He doesn’t mention the lack of housing formations.

2. At that growth rate, there would typically be a need for 1.2 million additional housing units. Over the last four years, that demand has been cut by about half; as job conditions improve, the other half of that demand is expected to return.

The housing starts have been cut by almost 75% per year over the last four years. The lack of supply and increased housing formations will create a seller’s market and increased prices ---- when? Now you would expect something to happen after the election.

3. There has been slow employment growth over the last two years, with 3.45 million jobs added in that span.

He certainly doesn’t explain the reality. Not slow growth --- No growth, This number looks huge!! However, new jobs added on an average monthly basis for the past 2-years is 143,750 jobs or about 2,800 new jobs per state!!


The participation rate in the labor force in April 2011 was 63.9%


The participation rate in the labor force in April 2012 was 63.4%


More people filed for unemployment on a monthly basis than new jobs were added.


And the unemployment rate has been going down.

4. A surplus of housing — thanks to the creation of 845,000 new housing units annually over the last four years versus the destruction of just 250,000 a year in that same period (via demolition, disaster and dilapidation) — will be scooped up as these new households are created.

Say What??? What does this mean?

5. Since May 2007, the existing supply of single-family homes and condos for sale has been cut almost in half, from 4.4 million units at that time to 2.7 million today.

The supply is now the issue. See my previous posts about the over production of new housing starts during the “bubble” and the lack of housing since then. This will hit home buyers like a ton of bricks.

6. The inventory of homes with loans in delinquency or foreclosure has also decreased over the last few years. At the peak of the trend in 2009, 5.1 million homes were in this category; at present, the number sits at 3.9 million. Dimon predicts that number will continue to drop as more investors continue to buy distressed units and rent them out.

Rentals are at a premium in most markets due to foreclosures, deed-in-lieu, and short sales. These avenues for homeowners destroys their credit from 2-7 years. They CAN’T get a mortgage and enter the housing market until their credit is restored. Just about the time when the regular housing demand comes back rents will have increased significantly.


Do you really think a homeowner that becomes a renter will want to stay a renter? I don’t think so!


I have read that there remains a shadow inventory – foreclosures held by banks and not released for sale.


Bottom Line:


Lack of supply


High Demand


Result --- higher prices and shortage of materials!!!

7. In half of the housing markets across the U.S., it is currently cheaper for potential homeowners to buy than to rent — a condition not seen in more than 15 years — thanks to ever-growing rental rates.

So why is there a problem with buyers with interest rates at historic lows???


FEAR!

8. The household debt service ratio — which compares mortgage plus consumer debt payments to disposable personal income — is at its lowest level since the mid-1990s.

This is good!

9. Recent senior loan officer surveys by the Federal Reserve show that, while there are not yet clear signs of credit loosening for new mortgages, at least the rush to tighten mortgage lending standards has abated. Over the last two years, $2 trillion of mortgages have been refinanced, substantially aiding homeowner burdens. Dimon expects another $2 trillion to refinance over the next two years, with approximately 10% coming from recently announced government programs, and, at that point, we estimate that only 15%-20% of Americans will be paying interest rates over 6%.

WOW ---- and none of these mortgages are assumable!

WAKE UP AMERICA!