MARCH 15, 2023 – This month treated me better. As I wrote last month, the data suggested annual inflation at 5.6%-5.7%, but I thought 6.0% was more likely. It came in at 6.0%.
The 3-month annualized inflation rate is 4.3%. The 6-month annualized inflation rate is 3.2%. Both figures are still much lower than the annualized rate (6.0%) and thus indicate the annual CPI should continue to decline.
Based on the data, my prediction for next month’s figure is 5.6%-5.7%. However, my gut tells me it may be much lower in the 5.1%-5.3% range.
As for the July 12th forecast, the data now suggests a ceiling around 3%. However, the odds for a figure around 2% are starting to decline.
Shalom,
The Mann
P.S. I did want to mention that the market has told the Fed another 25bp rate increase is acceptable. After this week’s bank debacle, there is a decent chance the Fed will forego an increase this month. A tough call for Mr. Powell. 25bp is minor anyway. It is more about the action than the amount at this time. We shall see.
Tag Archives: The Mann
PRUDENTLY CONSERVATIVE VALUE IS THE NEXT MORTGAGE LENDING VALUE
MARCH 14, 2023 – The European Union appears to be headed towards adopting the ‘Prudently Conservative Valuation Criteria’ (PCVC) in accordance with Basel III. The concept is similar to Germany’s Mortgage Lending Value (MLV). However, the EU didn’t want to simply adopt a German concept.
For those interested in the concept, please read the article on Pages 6-10 of the latest issue of the European Valuer.
https://tegova.org/static/ea861b1ab7eae74037bb22655c7bc2fb/European%20Valuer%20(29)%20March%202023%20(desktop%20version).pdf
As expected, they make it clear that market price (what American appraisers estimate) and market value (I only know of one American appraiser that has estimated such in an assignment) are often different. What is new to me is they say value and market value are different. I will need to read up on that myself.
In one of my other posts I recommend that the FDIC deposit insurance be terminated as a way to make financial institutions safer. Another way would be to mandate the use of Mortgage Lending Value (MLV) instead of Market Value.
I hope you find the article interesting.
Shalom,
The Mann
QUICK HOUSING UPDATE
UPDATE FEBRUARY 6, 2023 – Most importantly, Happy 50th Birthday to my Step-Daughter. You know you are old when your kid turns 50! Ouch.
I saw a statistic today that about 9% of households move each year. This is down from 20% per year in the 1960s. So, we have over a 50% decline in moving and over a 75% decline in population growth from the 1980s. Wouldn’t those stats tell us that the supply of houses for sale should be much lower today than in the past? I would guess that over 95% of existing and new home sales are people relocating. A small percentage might be second homes, kids leaving home and buying their first home (doubtful as most 18-year-olds don’t have the money to do such), etc.
I continue to be the lone voice that says we have an oversupply of housing. Not an undersupply. And definitely not an undersupply of 5-7 million homes as I have heard thrown around.
UPDATE – FEBRUARY 2, 2023 – The housing indicator that peaked in late 2021 and declined 38% while forecasting well ahead of time the market top has reversed directions. This indicator bottomed in October 2022 along with the stock market. It has now gone up 36% from its low. It remains 17% below its peak in late 2021. This is expected as it is unlikely the housing market will go to new highs anytime soon. However, the important factor is this indicator is forecasting a fairly strong rebound in the housing market this year. I haven’t seen anyone predict such to occur. As a side note, lumber futures are up 50% from their lows last year.
JANUARY 21, 2023 – The 30-year mortgage rate hit 6.15% this week. After some ups and downs over the past few months (as I had forecast to occur), the downturn has started again. We aren’t far from my original prediction of sub-6% rates.
Some other stats….Home sales are the lowest since 2010. I guess a low supply is fine when people aren’t buying homes:) Sales have declined for 11 straight months – the longest streak since 1999. Excluding the pandemic, home permits are the lowest since 2016.
That’s all for now.
Shalom,
The Mann
THE HOUSING MARKET – STEPS 5, 6 AND 7
JANUARY 2, 2023 – Happy New Year! I hope the year is good for all.
As we start 2023, the housing market is solidly in Step 4. That is when all of the cars on the rollercoaster are speeding downward together. Prices are declining and accelerating the pace of their decline.
Step 5 will be when the decline starts to slow down. e.g. annual price declines might go -8.0%, -10.0%, -11.0%, -11.5%. I expect some-to-many markets will start to see this in the 2nd Quarter.
Step 6 is when the lead cars on the rollercoaster reach bottom and start to turn up. Just the opposite of last Spring when the rollercoaster reached the top and the lead cars started downward. At this point, you have some markets still accelerating in their annual price decline and others level at their price decline level, and some where the price decline starts to head back upward towards 0%. I can see this happening in the 3rd Quarter with a slight chance it might even start towards the end of the 2nd Quarter. Readings go -9.0, -10.0, -10.0, -9.0.
The question right now is can Step 7 occur by yearend. I think there is a chance it can. In this Step the rollercoaster will be heading back upward towards say Ground Level (i.e. 0% price change in past year). There will still be many markets with negative price changes. Others will be back to near level and some will actually have positive price change readings. I would say right now no one is expecting any markets to have price appreciation this year. I think there is a chance for such to occur in the 4th Quarter in a few markets. About the same odds as last Spring when I thought full blown price declines could occur by Yearend 2022.
As always, we shall see how things play out. I will try to remember to update my forecast mid-year.
Always glad to hear your thoughts.
Shalom,
The Mann
STEP 3 IN THE HOUSING MARKET HAS OCCURRED
OCTOBER 3, 2022 – My June 14th post about Step 2 occurring said it would be easy to look back in 3 months and see that the housing market had peaked. Sure enough, 3 months later everyone can now see a top is in place and a correction has been well underway.
Step 3 is an acceleration in the slowdown of price appreciation. A summary of indicators follows.
The American Enterprise Institute’s (AEI) Home Price Appreciation (HPA) Index peaked at 17.0% in March and declined to 11.3% in August. AEI projects it will decline to 4%-6% by December.
The S&P Corelogic Case-Shiller House Price Index fell 0.4% on a month-over-month basis in July for the first time in 10 years. On a year-over-year basis, the increase in home prices decelerated by the most in the index’s history, said Craig J. Lazzara, managing director at S&P DJI.
Lastly, the FHFA House Price Index dropped 0.6% in July vs. June.
These are early signs that Step 4 will be upon us sooner than later. That is when the annual change goes from appreciation to depreciation. With mortgage rates soaring towards 7% the decline in home prices is more certain than ever.
What will baffle people is the continued low supply of available housing combined with prices declining. As I have long said, you don’t have to buy, but often you do have to sell. With a lack of buyers, sellers will continue to lower prices. In September, the number of households likely to buy a house in the next 6 months fell to its lowest level since 2010.
Shalom,
The Mann
40-60 AND BUBBLES
JULY 18, 2022 – As a kid, the first thing I could read was the stock market page in the newspaper. Probably since I was 5 years old I have been analyzing markets.
Early on I recognized a 16-year pattern in the stock market. I lived thru the 1966-1982 sideways (down when adjusted for inflation) market. I noticed that the market went up significantly after WWII into 1966. And looking back, we can see that from 1982 to about 1998 (actually 1999/2000) the market soared again. It hasn’t been quite as clear since then.
However, in looking at bubbles I think a pattern exists. I recall an appraiser friend telling me that you make your ‘big bucks’ in your 40’s. I assume that continues thru your 50’s. That seems very logical. People from 40 years to 60 years old invest in stocks, buy real estate, buy boats and cars, on and on. This is when they have the most amount of money to invest.
So, let’s look back at the generation before the Baby Boomers. This generation was born from 1931 to 1947. Adding 60 years to the first people and 40 years to the last people, yields 1987 to 1991. Exactly when the S&L Crisis peaked and burst.
My fellow Baby Boomers were born from 1948 to 1964. Adding 60 and 40 years, yields 2004-2008. Again, right on target with the great housing bubble.
Generation X ranges from 1965 to 1980. Adding 60 and 40 years, yields 2020-2025. And here we sit in the middle of ‘The Everything Bubble.’ With the top already in place, I assume this means we bottom by 2025.
In the last crisis there was a funny bumper sticker going around – ‘Lord, give me just one more bubble!’ Sure enough, we got another one. So, for those that missed out on this one and are wondering when the next one will occur…..Generation Y (aka Millennials) ranges from 1981 to 1997. Adding 60 and 40 years, yields 2037 to 2041. A ways off for sure. And honestly, I don’t have a clue what will be in a bubble at that time. What is left? Maybe since cryptos came about after the last bubble, the next bubble will be something that has yet to be invented.
If you and I are around and remember this post, let’s have a chat in 2037:) Of course, let’s chat before that so we are invested early on in the bubble item(s).
Shalom,
The Mann
STEP 2 IN THE HOUSING REVERSAL HAS OCCURRED
JUNE 14, 2022 – It is rare that you see and know a peak is occurring as you speak. Three months or a year down the road it is easy to look back and see when a top occurred. But, while it is going on….that is difficult. Being in the forest makes it tough to see the trees.
There are 4 steps for the housing market (any market for that matter) to go from growth to decline.
Step 1 – Acceleration in appreciation begins to slow down. This occurred 6+ months ago.
Step 2 – This is occurring now. Annual home appreciation in June will be lower than it was in May. We will look back at May-June 2022 and see the rollover in annual appreciation. Essentially, acceleration has turned negative. Better to call it deceleration.
Step 3 – This is the opposite of Step 1. The steep upward slope of accelerating price appreciation now becomes a steep downward slope of slowing price appreciation. This will occur the remainder of 2022 and into 2023.
Step 4 – The final step occurs when the accelerating slow down (think of slamming on the breaks) takes the market from price appreciation into price decline. This seems a far way off. But, I think we might be in for a surprise and see declining home prices quicker than we expect. We shall see.
As an aside, Bitcoin (slightly below $20k) and Ethereum (around $1k) are nearing major lows. The next move should take both to record highs (4x-5x moves from these levels).
Shalom,
The Mann
FANNIE MAE STUDY CONCLUDES NO RACIAL BIAS IN APPRAISALS
MARCH 12, 2002 – Now, two studies of millions of appraisals by the American Enterprise Institute (AEI) and Fannie Mae have concluded that there is no racial bias in real estate appraisals.
For those involved in the industry, this comes as no surprise. It is essentially impossible for real estate appraisers to be biased. Probably 95% of the time the appraiser knows nothing about the physical characteristics of the borrower. Nearly 100% of the time the appraisal reviewers know nothing about the borrower. And ALL appraisals must be approved by a reviewer.
Also, the market sets prices and all appraisers do is analyze recent comparable sales and arrive at a value for the subject. Which, in purchase situations, is equal to or higher than the sales price 95%+ of the time.
Racist organizations like the Brookings Institution and others that are falsely complaining about appraisal bias need to ‘follow the science’ as they like to say. Scientific studies 100% conclusively say there is no appraisal bias.
Maxine Waters and President Biden owe the appraisal industry an apology. And so does the Appraisal Institute for not supporting its own members.
The real estate appraisal industry is the gold standard for an unbiased profession. We have been the independent referee for 80+ years.
Lastly, we all know about the Fair Housing Act, redlining, discrimination being illegal, et al. To say we need to be educated about such is ridiculous. If you have lived in America since the 1970’s, you know all about fair housing laws and what is and is not discrimination.
The true racists are those that accuse everyone else of being racist. These people need to be exposed and told where to stick their unfounded claims. They should be sued for slander and defamation, also.
Hey, Appraisal institute, get a backbone and stand up for your members! There is no legislation that can change 4,000+ years of economic theory. The appraisal industry does not need to make any changes. It is already fully diverse and inclusive of people of all socio-economic classes (I grew up in mobile homes and am Jewish….I have the low-priced housing and minority characteristics covered!). Remember, skin-color and the only two genders have nothing to do with diversity and inclusivity.
Shalom,
The Mann
STUDY CONCLUDES THAT APPRAISERS ARE NOT BIASED
JANUARY 8, 2021 – The American Enterprise Institute has published a study about the possibility that appraisers have intentional or even unintentional racial bias. Their conclusion is:
We conclude allegation that knowing the race of the applicant results in racial bias by appraisers on refinance loans is uncommon and not systemic. This same analysis supports the conclusion that unintentional bias based on race is also uncommon and not systemic.
You can find the article and link to the report at:
It would be nice if the racially biased Brookings Institute would issue an apology to the appraisal industry. But, racists have an agenda and do not apologize. Thankfully, there is access to actual data and entities like the AEI can analyze and report the facts.
Basically, it is simply impossible for the appraisal industry to be racial or gender biased. Probably 99%+ of the time appraisers know nothing about the physical characteristics about the borrower in residential transactions. Also, every appraisal report is reviewed and I would say near 100% of the time the reviewers know nothing about the borrower at all.
AVMs are often used in the residential arena and they know nothing about the borrower nor the subject’s neighborhood, et al. To them, data is data. Finding the best comparables is based on analyzing numbers. That simple. And for the most part, it is the same for human appraisers.
There is one group of people in real estate that can have significant bias. I won’t name them. You can probably figure it out. There might actually be a few groups involved in this arena that can have bias. That is not to say it is widespread and rampant.
For those who want to keep the ‘conversation’ going, provide the AEI report. You will see how fast the other side wants to stop the conversation and change the subject:)
Great work AEI. I hope they will now do a study about the 20 million whites that live in poverty and see what it is about their neighborhoods that is common and how action can be taken to improve their standard of living….and housing. At the same time, I am sure those solutions can help everyone that lives in poverty. Remember, poverty is colorblind.
The Mann
ENDING MARCH AND INTO APRIL WE GO
UPDATE APRIL 3 (EVENING) – Thankfully, a calmer week in the books. Nothing has changed regarding my market forecasts.
I did want to congratulate Morgan Stanley on correctly forecasting the 700,000 job losses that was reported this morning. That was an extremely difficult forecast to make and to nail it is impressive.
Oil was up 40% in two days. We will let it play out a bit more to see if a final low is in place or not.
It is becoming apparent that there will be some major changes in our world going forward. Hopefully, AirBNB and Uber are dead. Dining in at restaurants might be forever changed, too. How do we know that someone in the kitchen area doesn’t have the virus? Plus, the virus can stay around 2-3 weeks after a place has been thoroughly disinfected (per the Diamond Princess experience).
Grocery delivery will finally succeed. 25+ years in to its existence, telecommuting will finally go mainstream. Executive offices (now called shared worked areas, .e.g. WeWorks) should go back away. They are simply VIs as I have termed them – Virus Incubators.
Other VIs are apartment complexes (especially mid- to -high rise buildings) and large cities like New York and San Francisco. The denser the population the higher the rates of crime, disease, and numerous other issues. If people truly want healthy lifestyles, move to the suburbs or rural areas.
The changes will be interesting to observe. Everyone continue to be safe. Maybe next week will be more interesting regarding the markets.
Godspeed
The Mann
UPDATE APRIL 1 (EVENING) – You know you are becoming immune to the chaos when 1000 point days in the stock market are no longer shocking. Not much to add this evening. Stocks might be starting their next significant downturn, but it isn’t a certainty.
One thing to note is that all of the stimulus acts that are being passed are only trying to replenish what has been lost. There is no pent-up demand. Wealth and Output have been permanently lost. It is a misnomer to call these stimulus packages. No stimulus is going to occur. The money handout is simply trying to make as many people and companies as whole as possible.
I will say that it is about time that an infrastructure act is being considered. $2 trillion at this time. We missed the opportunity to do that in the last crisis. With an expected 45 million people being unemployed over the next month, it would be good to put people to work to build our versions of the Hoover Dam and TVA and so on.
I won’t bore you as there isn’t much to add to what I have already said. It is truly tragic that we will start seeing 3000 and 4000 Americans die each day. Amazing we will likely hit 100,000 deaths by the end of this month. And we just surpassed 4000 today.
Hopefully, we have learned a lot from this experience. The sad thing we have learned is that some people are plain stupid and some just don’t care about others. But, that is nothing new for the human species. A lot of the virus spreading is due to plain selfishness.
The upside is we have seen how good most people are. How we help each other out. It would be great if we continued that after this pandemic is gone. But, well before Election Day I am sure we will be back to a hateful 50/50 split country again. Tragic.
I will post Friday evening. As the markets are starting to calm down (well, to me they are getting boring already), I will likely post less frequently.
I did want to thank everyone that has been sharing information with me. The more I can absorb the better.
Please stay safe!
The Mann
MARCH 30 (EVENING) – As expected, our essential shelter in place recommendation has been extended thru the whole month of April. April has been projected to be the month where we finally peak in cases and start to see the curve flatten and rollover, hopefully.
I am confident the shelter in place will be extended to at least May 15th. Maybe until Memorial Day weekend.
Trump is right when he says people in this country want to live a normal life. Colds and the flu have never gone away. We live normal lives with them coming and going thru the population and seasons. I guess that will be the way with Covid-19, also – when we have a vaccination. That is supposed to be 12+ months away.
There is a point where we just have to get back to normal and deal with the Covid-19 cases and deaths. There is no choice. But, we had to do this Social Distancing in this initial phase so as to avoid the 2,000,000+ deaths that were projected if we did nothing.
Continue to be safe. And take advantage of the world being on a long time out. I always wanted things to slow down. To stop. Time to stand still so we could relax and smell the roses. Now is that time. This likely will not happen again in our lifetime. Take advantage of this. Reduce your stress, permanently. Learn that things do not need to be rushed. Do all of those things you stacked up to do when you finally had some time to do them. You have that time now!
As for the stock market, today was up a bit. I still cannot rule out a move above last week’s high of 22,595. Whether or not that occurs, the expectation of a 25%+ decline remains. I took advantage of the rally last week to get out of some oil stocks I stupidly got in too early. We all make mistakes eh:) But, best to cut your losses than let them ride.
Oil broke below $20 today. I believe we are seeing the final down wave to what might well be the end of a 120-year combined bull and bear market. I haven’t followed up on the timing issue mentioned last week. So, just sitting on the sideline and watching the crash continue.
Gold and silver didn’t do much. Significant declines are still expected. That is a bit longer-term view so this isn’t a day-to-day forecast.
Everyone went crazy about the US Dollar being so strong. So last week, I believe, was one of the worst weeks ever for the USD. The markets love to get everybody to one side of the ship before sinking them.
So, nothing has changed re my forecasts. The markets are starting to trade in a bit of a range. This helps alleviate all of the record oversold readings for technical indicators. We can’t go straight up to infinite nor straight down to zero. More Wednesday evening when I post next.
I will drop this after one more mention of it….I don’t recall firefighters and police whining after 9/11. Those people were proud of the fact that their peers ran straight into those towers to save as many people as possible. I don’t recall them saying they were like lambs being led to the slaughter. They were true heroes. They know every day they go to work could be their last. They don’t ask for sympathy.
So, I just don’t get it, and am truly disgusted by, the doctors and nurses in New York complaining about everything…we are risking our lives, we are overworked, whine whine. They are truly ruining the appreciation they would get and deserve. Maybe they just aren’t as tough as firefighters and police officers. That isn’t in doubt really. If you didn’t think you were going to be in many situations where you could become very sick or die by helping others, you shouldn’t have become a healthcare provider. Thanks to the majority that do their job proudly and don’t whine in hopes of getting pity.
And as to us real estate appraisers arguing that what we do is essential….really? An appraiser friend in Puerto Rico said they ruled it wasn’t essential. I agree. Albeit, I was happy the appraiser came out and appraised my daughter’s farm today so hopefully her closing will still occur in 2 weeks:) But, truthfully, this isn’t an essential service. Closings can be pushed back 2-3 months like everything else.
Enjoying life on the 5/3 Farm…..til Wednesday evening….be safe and stay well.
The Mann