Wednesday, March 28, 2012

Dimon: Housing Market Will Soon Head Higher

The U.S. housing market is very close to a bottom and there are already signs its improvement is giving a boost to the overall economy, JPMorgan Chase CEO Jamie Dimon told CNBC Wednesday. This is what I wrote yesterday in the EPJ DailyAlert:
The Case-Shiller housing numbers are out and they show U.S. single-family home prices were unchanged in January. I don't consider this a important data point, since the housing market is totally screwed up because of government intervention. If it wasn't for the intervention, the housing sector would have been cleared of overhead supply years ago. That said, once the overhang supply is cleared, housing prices like everything else are going to soar in price. If you are considering buying a house, now is the time, especially with interest rates are so low. Buy now and lock in a long-term fixed rate and you will be very thankful in three years. House prices will be way up by then as will be interest rates.
This is what Dimon said today:
I believe we’re very close to the inflection point. People look at prices that are still coming down but all the other signs are flashing green....the shadow inventory everyone talks about is lower today than it was 12 months ago. It will be a lot lower 12 months from now.  Homes for sale are about half what they were four years ago. You could come up with a pretty bullish case. If the economy grows, housing gets better, quicker.
As I wrote below, as CEO of JPMorgan Chase, Dimon gets to see a very solid cross section of data on the economy.  He was one of the very few that early on understood the economy was turning to the upside.

I believe he is correct about the housing market. As I wrote in the Alert:
If you are considering buying a house, now is the time, especially with interest rates are so low. Buy now and lock in a long-term fixed rate and you will be very thankful in three years. House price will be way up by then as will be interest rates.


  1. RW,

    Won't prices come down if rates rise?

  2. Still a lot of homes on the market and in the foreclosure process. With rates heading higher I do not see homes appreciating much and relative to gold, losing a lot of value.

  3. Robert,

    What do you consider as "way up" in regards to interest rates?


  4. How do you pay a 30 year loaded with high fees mortgage with wages that haven't budged for 20 years and all necessities going up every 3 months or so? It takes to miss 2-3 payments only and you are in default.No one will listen to you, even more so if you have paid more than 10 years into it, the nasty little Jamie Dimons will take your house in a flash and sell it to the next sucker screaming the very same sales pitch about the interest rates and the low shadow inventory.

  5. Nobody knows where the bottom is for housing, it's pure conjecture. Your buddy Jamie said it was at the bottom in 2010, so what, now we are REALLY at the bottom? The data can be spun in any direction. For example, the fact that fewer homes are on the market does not suggest recovery. On the contrary, one of the major reasons is that sellers simply cannot sell for what they owe on the property and so, they come off the market unsold. Additionally, the shadow inventory is several million homes more than is being reported. Get real. And I was just introduced to your site and excited about it...

    What is going to spur this massive increase is property values to which you are referring, another artificial bubble?

  6. I get the rationale behind housing prices possibly increasing, due to more money being in circulation and needing to find a home so to speak, but I don't know on this one Robert. There is a lot of houses in the shadow inventory and an immense amount of properties that have yet to be foreclosed on or are just at the beginning of the process. With unemployment set to spike up again and the lack of people that can qualify for home loan / come up with the down payment, I think we're looking at years before the market recovers noticeably.

  7. Let me explain why you are clueless on housing and the economy.

    #1 The peak of the housing bubble occurred at the same time as the peak earning years of Baby boomer spending in 2005-6.
    #2 The peak earning years of the Baby Boomers hit when they were 55-56 years of age.
    #3 The peak spending years for consumers is between 35-54 years of age, when these middle aged consumers make up 49% of sales.
    #4 In 1980 people between 35-54 made up 22% of the population. Remember the word malaise?
    #6 In 1990 people between 35-54 made up 26% of the population. Remember Gulf War 1?
    #6 In 2000 people between 35-54 made up 31% of the population. Remember the Dow Mar. 9, 00?
    #7 In 2010 people between 35-54 made up 28% of the population. Remember the Tea Party rants?
    #8 In 2020 people between 35-54 will make up 24 % of the population. Boomers spend less, and drive less every day until they disappear from the scene.
    #9 This downward trend in spending will not start to reverse until 2022.
    #10 The foundation for spending by the Millennials will be much more fragile than that of their parents.
    #11 Millennials have a much lower median net worth than their parents did in 1984.
    #12 Millennials who enter the housing market will find that the number of Baby Boomers selling will far outnumber the millennials who are buying, putting downward pressure on prices.
    #13 Robert Shiller understands that that we are in the middle oaf a sea change in millennials thinking on homes vs. renting in the city. He stated that the suburbs may never recover because of this change in attitude.
    #14 Since 1960 the percentage of babies born outside of marriage has increased 4100% among all races.
    #15 Among women under 30 the percentage of children born outside of marriage has shot up to 55% of all live births.
    #16 When you look at marital status and income, single mothers make the least among all groups.
    #17 The birth rate in the U.S. has been collapsing among all races for years now, but since the start of this depression in December 2007 the birth rate has fallen another 11%.
    #18 The 2010 U.S. census showed that only 22% of households, fit the old notion of a married couple with children.
    #19 The fastest growing group among U.S. households was single parent according to the 2010 census.
    #20 Household formation is critical for "Single Family Home" sales but this rate has been stuck at zero for several years now, and by some measures is negative.
    #21 Multi-generational households have climbed from a low in 1981, back to a level not seen since 1958.
    #22 Around 30% of 18 to 34 Year olds are living with their parents according to Pew Research, and this trend is growing fastest in California.
    #23 People in the U.S. are getting married much later than their parents or grand parents. Which leads to household formation being pushed back.
    #24 College graduates according to Pew Research are the only group that still comes close to having a majority that believe marriage is not obsolete.
    #25 When millennials decide to buy a home in 10 years it will be women who decide when and where. Men have been been slipping farther and farther behind women in college graduation rates, and advanced degrees for 25-30 years. Men, the trend is not your friend!

    I am afraid you did not see the housing bubble coming, and have no idea where we are headed. You have much to learn.


  8. Switchblade - Even the freaking Federal Reserve has admitted that Mr. Wenzel saw, and called, the housing bubble as it was developing, frothing, and right before it burst

    I would also encourage you to learn about price inflation, nominal interest rates, and the difference between nominal interests and what real interest rates would be absent Fed monkeying

  9. Who else didn't see the housing bubble coming, Ron Paul and Peter Schiff?!

  10. Well, I do know the People over at the housing bubble blog saw the bubble way in advance, approximately 2003. Few listened then.

    One of the main characters over there did a write up with a formula as to why now might be a good time to buy, even If prices were lower later on. It made a lot of sense, wish I kept of copy to show others here.

    However; with the feds easy money pumping out, those lower house prices will likely never materialize, so it seems that yes indeed, now is a good time to buy. The only catch is, can you keep your job or income stream?