Goldman turns negative on housing prices

Simple house price model. Variables seem well chosen.
But surprised No proxy for income or employment....
It would be interesting if someone created or posted an index for a model like this historically and go forward
along with its cpt parts..
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We identify six house price determinants (Exhibit 5):

1. Persistence. Lagged house price appreciation is statistically significant with a sizable coefficient, confirming the existence of short-term momentum in house prices. All else equal, a 1% price decrease over four quarters is typically followed by another ½% fall one year later.

2. Price/rent valuation. We find a strongly negative effect from “overvaluation” on future house prices. All else equal, a 1 percentage point increase in the price/rent ratio lowers house prices by 0.2% after four quarters and by a full percentage point eight quarters later.

3. Excess supply. A one-percentage point increase in the homeowner vacancy rate lowers house prices by 1.8% four quarters later (and 5.4% after eight quarters), while a one-point increase in the months’ supply of homes for sale lowers house prices by 1.4% four quarters later. A higher volume of existing home sales raises prices, as excess supply is reduced.

4. Mortgage delinquencies. Rising delinquencies have a negative effect, lowering house prices by 3.2% after four quarters and 5% after eight quarters for a one percentage point increase in the delinquency rate.

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/summers/GS%20housing%203.jpg

Why stop at 4? (you identified 6?)
5. Continued joblessness
6. Increasing real estate taxes / fees / income taxes
7. Ongoing resistance to lend (increasing down payments, greater scrutiny)
8. Decreasing government services - police, mass transit, etc. - making many neighborhoods less attractive

Any others I'm missing?

And Manhattan is still way above its historical average.

BUY NOW OR BE PRICED OUT FOREVER!

i always wonder if doom sayers are predominately renters do owners also foretell the fall of physical assets know as real estate

a number of the bears own property, either here or elsewhere.

i always wonder if doom sayers are predominately renters do owners also foretell the fall of physical assets know as real estate

YES. FOR THE MOST PART.

i always wonder if doom sayers are predominately renters do owners also foretell the fall of physical assets know as real estate
PREDOMINANTLY RENTERS

You need to type LOUDER. and could you please repeat yourself, we were too thick to understand you the first two times. moron

stacygreenberg, of the bears on this board, virtually all are owners or were owners until the last few years. Their bearishness means that they believe it's not yet time to buy, but not that it's never time to buy.

Goldman is looking at single digit house price declines in NY. They make a reasonable argument. Will be interesting to see how accurate the projection is over the next four quarters.

Isn't this a company where most investors would have lost money in 2009 by following its investment advice? Given this track record, you might as well flip a coin....

It's caveat emptor with Goldman. These pieces are designed as trading ideas and to generate commission for Goldman. That said, ideas should be evaluated on their own merits.

It never ceases to amaze me how quick the bulls on this board are to assume that the bears on this board are resentful renters. I bought a downtown apartment at the bottom of the market in 1994. I sold the property in 2008 (between Bear Stearns and Lehman Brothers). My decision to sell was based on a rational calculation that if I cashed out (I sold for 6x my purchase price) and waited 3-5 years, I'd be able to buy a much larger property uptown, which is where I want to be. I continue to rent because all the evidence suggests that buying now would be an utterly imprudent allocation of assets. I want to maximize my wealth, not waste it. I remember acquaintances who bought real estate at the height of the 80s who found themselves imprisoned in properties they couldn't sell once the market had declined because they couldn't swallow the poison pill of 20-30% losses in the early 90s. Many if not most folks who are buying at current prices are doing so on the basis of an unfounded, irrational and market/media-induced anxiety about being priced out for ever. History teaches that they will come to regret their impatience.

Good luck with your plan, cherrywood. It just might work, as your historical timing has been impeccable. Not everyone is as empowered to treat their personal residence as a trading investment. Certainly, there were many that bought homes solely for "investment" near the peak, and they've not been as fortunate as you.

What kinda wood doesn't float?

A: 'home wood'

Greenburg. What kinda fairy doesn't believe NYC re will ve at $500psf, a NYC re 'home'owning faiiry. Flmao.

w67 how are things with your LL? I hope you're enjoying the relationship while he's f*ckng you, but don't get too comfortable. It's always good to switch pimps, err LLs when they stop appreciating you.

Wow such haterade on the day of our lord. What's fuking funny is my 'LL' is actually depedendent on my wife and my cash flow to float his kick it till next year retirement plan. I renewed another yr, no increase. He offered me his wife for the nite.

She's too fat and ugly.

W67, In this, the weakest of rental markets in a generation, and you're not paying less? An homeowner refinances to a lower interest rate and they pay less. A homeowner pays off their mortgage by retirement, and they pay a lot less. With your luck you'll get that $500 psf home in 2015, when you have 20 years to retirement. Better pay cash then, because that 30 year mortgage at 12% won't be so appealing.

Fuck. How did you time warp me back to 2006?, pmg! Holy cow dung!!!!

Flmao. 12% forces the the seller's hand NOT the other way around. Omfg. You r stupid with a k.

W (see what I'm saying)