What Is The Future of New Housing and More Generally US Real Estate?
>New Housing is being Created at an Unprecedented 2.5x's the pace of the Growth of the 15 to 64yr/old Population
>Total Annual Population Growth Has Slowed 25% from Peak Growth, 2 Decades Ago
>However, Annual Population Growth Among 15 to 64yr/olds Has Slowed Over 80% From Peak Growth & Will Continue Decelerating Through 2030
>15 to 64yr/olds Do Nearly all the Net Home Buying, 65+yr/olds Net Home Selling
>15 to 64yr/olds Have a 70% Labor Force Participation Rate vs. 27% for 65-74yr/olds, just 8% for 75+yr/olds
>15 to 64yr/olds Earn and Spend Double that of 65-74yr/olds & triple that of 75+yr/olds
>65+yr/olds Have Highest Homeownership Rate at 78% vs. Just 36% for Group with Lowest Rate, 15 to 34yr/olds
>15-64yr/olds are Credit Willing Relative to Credit Averse 65+yr/olds
I read an article a few days ago that got me thinking. The articles author claimed, "At 5% mortgage rates and with today's level of affordability, history shows that there is nothing in the way from having a homebuilding boom over the next ten years to satisfy this demographic demand." I found the claim contrary to everything I think I know, so I thought I'd lay out the counter argument.
The chart here shows annual growth of the 15+yr/old US population (blue columns) vs. the annual growth of the 15 to 64yr/old population (red balls). The 15+yr/old annual population growth has fallen 25% (decline of a half million annually) since the 1998 peak but more significantly, the 15 to 64yr/old annual population growth has fallen over 80% (decline of 1.8 million/yr) due to a combination of lower immigration rates and lower birth rates.
These population growth trends will only continue to slow through 2030, according to UN and Census estimates (not really estimates, since this population is already born and simply advancing into adulthood). The future estimates for 15 to 64yr/old population growth (presented above) include estimated immigration well above present rates. Most, if not all (net) of the assumed 15 to 64yr/old minimal population growth is premised on ongoing immigration that continues slowing. Thus the forward looking 15 to 64yr/old growth estimates are likely to be lower and perhaps even turning to outright annual declines.
The chart here shows average income, spending, and LFP (labor force participation) rates by age segment. No shocker, those actively working make and spend more than those with low rates of employment. Those who have worked longer earn more than those new to the labor force. Elderly expenditures come into very close alignment with their (generally) fixed incomes.
Noteworthy is that 75+yr/olds have only an 8% LFP rate but will make up over half of the total 65+yr/old population growth through 2030. The next largest growth segment is among 70 to 74yr/olds with a 19% LFP rate, and the smallest increase is among the 65 to 69yr/olds with a 32% LFP. As an aside, 65+ year olds have the highest homeownership rates at 78% vs. 36% for those aged 15 to 34. So while the more affluent portion (5% to 20%?) of 65+yr/olds may be interested in a second home in the dessert, the mountains, or beach...the majority already own and are eventually looking to downsize. Simply stated, nearly all the coming growth is among those that work the least, earn the least, spend the least, already own homes, and are more likely to downsize than buy a second home.
Putting it all together, annual 15+yr/old total population growth (blue columns), 15 to 64yr/old population growth (red line), housing starts (yellow line), and federal funds rate (black line). Given it is the 15 to 64yr/old population that does the net home buying, (and growth among them continues decelerating...coupled with rising rates and elevated valuations versus most population growth among 75+yr/olds who are more likely to sell via downsizing and/or willing properties to their heirs) I contend the US is creating too many homes presently, not too few. Of course, this doesn't even factor in things like the lack of income growth among the vast majority those working, high student debt loads, slowing household formation, continued delayed family formation and the lowest birth rates in US history which were just recorded in the first quarter of 2018 according to CDC, etc. etc.
Contrary to the author of the article that inspired me, I contend that housing is in for another very rough decade (at the very least)...likely worse than the period during the GFC. The math is pretty straightforward on this one.
The big banks learned their lesson in 2008, as the American middle class is being hollowed out, they are no more likely to be creditworthy than third world citizens. In less developed countries people often find they must pay 12% or more interest due to the low likelihood of repayment.
So these days who is taking all the risks in U.S. housing, who is holding those mortgages? Increasingly it is "non-banks" firms like Quicken loans and local Savings and Loans.
As a result, nearly 50% of all mortgage lending is now from unregulated non-bank sources. J.P. Morgan is proudly showing how many mortgages have been moved away from the big banks (them), to "non-Bank" -- let's see, would that be smaller mortgage lenders (like savings and loans) and the Fed by any chance?
Well let's see how America's biggest Savings and Loan is doing, New York Community Bancorp: Oh not so good, the stock price is hardly a surprise, with New York Community Bancorp holding $40 million in taxi medallion loans, made worthless by UBER. But more importantly, a 48% increase in repossessions, and over $37 billion worth of questionable mortgages.
But if we were really in trouble in the housing market you would see it in areas like the profits of home builders, and the price of their stock. It would be obvious in something like the Philadelphia Housing Index.
But the big banks have not unloaded everything, and they need to think fast as things blow-up. As the housing market slows the biggest banks are getting worried they can't dump toxic mortgages in ghettos of southern Florida fast enough. It looks like they ran out of suckers, because CNBC says Citibank, JP Morgan, Bank of America and others have started dumping toxic assets directly to people with low-credit scores. They are appealing to the same people who got burned in 2007 with their new "Fool Me Twice" zero-down sub-prime mortgage plan.
Clearly, something is systemically wrong in the housing market and it looks like the big banks have a few suckers to hold all those dangerous mortgages; the underemployed, the smaller lenders and taxpayers.
Bank of America dumping sub prime shite directly to consumers
Isaac Allen
Thank you for posting this OP Can't say I can really add anything but it's important to have people on Jow Forums who can make these types of observations
Leo Peterson
ok but what are banks holding that they're dumping? it just sounds like they're just writing loans they shouldn't be unless i'm missing something.
what are they holding?
William Morris
They are holding EVERYTHING. Stocks, bonds, real estate, student loans, and all those toxic mortgage backed securities from 08.
Gabriel Bailey
I think you will be proven wrong.
1. This time around everybody's balance sheet is way stronger. Nothing is hiding under the rug. 2. Millennials will be just fine. They will have less children, but still buy houses. Surveys indicate that home ownership is one of the highest priorities to them. They will also vote for student loan repudiation. UBI will be gasoline on a fire.
3. Housing starts have been so low, there is actually a shortage that won't be filled for at least a decade. Immigration will propel housing demand even higher. The country is also migrating away from expensive cities, which will fuel a long bull market in reasonably priced areas around the country.
4. The elderly won't pose a threat at all. There will be some down-sizing, but that won't put a dent in demand. They won't be going to nursing homes as much, as home care will be increasingly sophisticated in the future.
Lucas Collins
>They will also vote for student loan repudiation. this will be the match that sets the fire of 3rd world tier loan rates
Liam Long
What is the reason for the spike at the end of 17?
Tyler Thompson
Considering the willingness of Millennials to vote for Hillary Clinton(who made student loans debt for life), there is no reason to suggest they are going to "vote away" their student loans
Hunter Allen
Millennials hated Clinton after Bernie was through with them. The second they learned that voting away student loan debt was a potential option they leap on it like flies on shit
if it wasnt for Bernie, Hillary would have won.
Kayden Scott
Student loans only make up 1 trillion total though, with only a 10 percent delinquency rate, not to mention all defaults are covered by taxpayer money I find it hard to believe student loan defaults will cause anything to change
Logan Rodriguez
>Bank of America dumping sub prime shite directly to consumers no....that's not what that says. it says BoA is giving out sub-prime loans again.
Luke Evans
NACA is giving out the loans and BoA is helping them, when the shit hits the fan NACA will take the fall and BoA will get away scot free. All major banks are in the process of doing this because they do the same demographic analysis as I do and see the writing on the wall
Henry Wilson
ok but dump is the wrong verb for that fren
Landon Smith
>voting away student loan debt
Why do people make life decisions as if this is an option? Politicians will never screw over the banks that fund their campaigns.
Christian Reed
Wow... a well thought out thread on biz. What's going on?
Dylan Miller
I think the housing market will see a very clear and more severe divergence between prime real estate and everything else.
Mega cities and affluent nearby suburbs with excellent connectivity will stay strong as global capital fly into the safety of these investments whereas shit towns and shit suburbs get rekt into 3rd world status.
Ryan Lopez
bump
Grayson Taylor
I feel like this is what will happen, it already is to some degree since 08.
Matthew Collins
Millennialis not getting behind Hillary is a big reason why she lost. Like RKG said, they fell in love with Bernies message and Hillary’s arrogance to not assimilate some of it into her own repertoire sealed her fate in the election.
Michael Reed
sounds like something she'd do, making student loan debt debt for life, do you have a source tho?
Lincoln Walker
I think you're way overplaying Bernie's appeal in Hillary's failure. Hillary was a shit campaigner, massive hypocrite, rape apologist and complicit in the large-scale fraud that is the Clinton Foundation. Her image was filthier than pigshit, even for Washington Elite types.
Caleb Ross
Really good thread OP. The “quick rundown” article of the day or whatever on linkedin today also talked about some of this exact shit, and zoomers in the comments were basically saying “uh yeah. No one can afford this shit”
The market will die with the Boomer at the latest 65% vote for anti immigration and protectionist policies - demands plummet. 15% of the population are willing to start civil wars over political cleavages and could easily kill productivity and raise risks for - security situation deters. And still Niggers get housed in white areas by tax financed (((programs))) - security situation deters more. People think about this and either forget about property completely or wait with buying - demand falls more.
Housing market is even without jewish banking shenanigans fucked for the next at least 50 years
Angel Campbell
>Linkedin is that something like Link Pool? btw fuck off shill
