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Ben Stein's Diary
Bullish on Housing
All the signs point to its pending recovery.
Predictions are hard to get right, especially about the future. So goes the old saying. But I am going to stick my grizzled old neck out and make a prediction: the housing market is about to start a recovery.
It may be agonizingly slow or it may be fast. It may involve back eddies, and rip currents, but it will happen.
How do I know? Well, I don’t. It’s a guess. But here are some of the good signs.
First, the number of foreclosures is dropping. That means a smaller inventory of distressed homes, which in turn means less supply relative to demand.
Second, the economy is reviving. The employment numbers are getting better fast. The stock market is frighteningly buoyant. There are some signs of faltering in manufacturing, but that index fluctuates wildly.
All of this means more optimism about the future and where there is optimism, housing rallies. Home builders are meaningfully more optimistic.
More important, we have to remember that houses or condos or other real estate are an asset. Their prices have — in most parts of the nation — fallen drastically. That means the most likely long-term next move is up — not down. Assets that have fallen a lot tend to recover. So it has been with housing and will be again. Reversion to the mean is a law of finance. Not a hint: a law. Sometimes violated, but a law.
Most important of all, the great majority of us finance our real estate purchases. For a long time, lenders would simply not lend. There is data on this but I also saw it myself when I was trying to refinance. Rates were low, but lenders simply would not lend.
Now, it’s different. Lenders are lending again, and even aggressively going out and looking for customers. This means that a rebounding worker and consumer is meeting up with more flexible, available lenders.
This, if continued, will lead to a housing recovery. Again, there are risks everywhere — war in the Middle East, higher oil and gasoline prices, a recession touched off by a possibly stunning rise in energy prices. But there are always risks. The central tendencies now are economic recovery, much lower home prices, and easier credit.
These should do it to get housing back on its feet. But again, I could well be wrong.
About the Author
Ben Stein is a writer, actor, economist, and lawyer living in Beverly Hills and Malibu. He writes “Ben Stein’s Diary” for every issue of The American Spectator.
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Jack in Wi.| 3.6.12 @ 6:21AM
I was in your neighborhood last week Ben, and drove right through Malibu. The people I talked to all over coastal California were not very optimisitc. They told me jobs were hard to come by and the economy had been in the toilet for a long time. There is still a huge amount of property all over the country, residential, and commercial still way under water. I have a son in his mid twenties who is lucky to have a job after he graduated from college. Most of his friends from one of the best prep schools in this state are in dead end jobs at low wages. I don't see a lot of improvement even if Bernake is flooding the country with paper just before the election. Gas prices going through the roof are not going to help.
Al Adab| 3.6.12 @ 2:30PM
Jack:
The servers were acting crazy again this morning and my comment template came up with your e-dress. I'm starting to think the Obama campaign has hacked the system.
BSG| 3.7.12 @ 8:49AM
California is not the place to determine whether Ben's prediction is right. It is in the toilet economically, socially, morally, etc. In other states that have been better managed things do seem to be turning around, slowly.
Richard Baker| 3.6.12 @ 6:26AM
Ben:
How long is "pending"?
Bill Hussein O'Stalin| 3.6.12 @ 6:46AM
Good. I want to move out of Maryland, a liberal bastion if there ever were one. Let's hope it will occur late this spring.
SUBVET| 3.6.12 @ 6:53PM
Don't move to Ben's neighborhood the weather may be great but the LIB temperture is high......and Jack for once I agree with your discription of CA I know I live it everyday.
hardcard| 3.6.12 @ 7:42AM
Dear Benny,
It's time for a nap.
Econ 101| 3.6.12 @ 5:29PM
The economy is so bad it has made everyone see red. Everyone bought Visine to combat their red eyes. Everyone having purchased Visine for their red eyes shelves are overstocked with Visine nobody needs because everybody has some. Ben takes a gander at the recent sales figures of Visine and declares "sales of Visine are up so the economy is going to grow exponentially by riding Visine sales straight up the charts".
Meanwhile studies show every home has now been foreclosed on. Foreclosures are expected to plummet. Let the good times roll.
numbatdog| 3.6.12 @ 8:16AM
Really, Ben ? Really?
Please don't live in la la land. We all want the US economy to recover but this is not it. At best it is bouncing along the bottom, including housing. Foreclosures are dropping because the banks know there is no point in evicting people and trying to resell into this market so they simply leave them in their house rent free.
Want a real recovery? Get the left and their job killing policies the hell out.
Al Adab| 3.6.12 @ 2:33PM
The administration wants this economy to be the norm. High prices, low commodities and high unemployment play right into their hands. We are to be like Europe, remember.
As to housing starts the market will recover as prices and taxes fall. Maybe we can get away from the 250 dollar a SqFt range and back to some semblance of rational prices.
Richard H. Davis| 3.6.12 @ 4:58PM
Yeah, that makes sense - do everything you can to lose the election.
SUBVET| 3.6.12 @ 6:55PM
Ya .......rational prices when Agenda 21 hits.
Derek Leaberry| 3.6.12 @ 9:04AM
Mr. Stein lives in a very insular little world divorced from reality. Houses on the Maryland Eastern Shore, once a favored haunt of Mr. Stein, are about one-third off peak sales of the mid-2000s if they are able to be sold at all. I've seen some homes for sale for over a year.
Glenn T| 3.6.12 @ 11:40AM
Ben: You have been living in la la land too long !!! The economy is NOT getting better, it is getting worse. Unemployment is not getting better, do not believe the dummied up phony Obozo number that ignore people who have 'given up', the real U6 unemployment rate is 16-18% !!! (it was about 6% under Bush). In some states like Nevada real unemployment is over 20%. Housing is not getting better, foreclosures may be held steady but that is also a manipulated number as massive foreclosures are being held off by banks seeking to avoid bad publicity. While housing sales have slightly risen, studies show average sales price has fallen badly. Sub-prime credit to unqualified persons, which caused many foreclosures, is now again on the rise due to federal mandates. Gasoline prices are approaching $5 per gallon (was $2 when Obummer got elected), thus further cutting into family discretionary spending further stifling consumer economy. You are right the economy is growing in some areas though, reports are that since the California central valley agricultural economy has been shut down due to lack of water from the Feds to support the insignificant delta smelt, the valley is now the nation’s leading methamphetamine manufacturing area. Good job liberals !!! (Otherwise I enjoy your columns)
Bob From District 9| 3.17.12 @ 2:03AM
Gasoline is $4/gal, which is just below where it was in July 2008, *BEFORE* Obama won the election.
The price of gas shot up after the republicans took the house in Nov 2010. The oil companies know who their friends are.
Joe W.| 3.6.12 @ 12:01PM
Ben -
I'd like to somewhat reiterate what you're seeing here in the comments section. I have no problem seeing that you have a wealth of knowledge greater than my own when it comes to economics, but I think you're a little off-base here.
Foreclosures are slowing because it's bad economic sense for the banks to flood the market with foreclosed homes. They'll do it gradually instead. On the flip side, there is a long line of foreclosures waiting that will trickle out over a longer period of time. I do agree that the housing market shouldn't get worse, I just think we're going to see it sit at the bottom for a while. Adding to that judgement is the fact that people are still a little hesitant to jump into homes, even with things looking like they've bottomed out. If they haven't been burned by this past downturn, they don't want to be added to the list. If they have been burned, they don't want it to happen twice. They'll wait it out a while longer.
Additionally, the unemployment numbers are still not looking good. When you factor how many are not participating in the workforce anymore, it's pretty terrible. Folks don't need to see the unemployment number at all, they just look around and can see that things are still tough. That also adds to their hesitancy to make any major purchases.
Folks are tending to getting their finances stable right now, and trying to build up as much of a protective barrier between them and another downturn as possible. This is a good thing, but it means some prolonged pain for the economy as a whole for a bit (although I don't think it will get worse...unless of course inflation or stagflation rears its ugly head which is entirely possible).
Just my two cents. But kudos for the optimism, we need it (and believe it or not, I count myself as among the optimists even if it doesn't seem like it: we'll get there eventually).
youfamissim | 3.6.12 @ 1:44PM
Ben, you are out of your mind. You may not know all the special circumstances, so I'll inform you now. Housing and construction are about to fall further - the new Energy Code and Green Construction code will send a dagger into an industry that is ailing.
The public version of the Green code is all there is for now - but it was approved in November 2011. One chilling aspect of the Green code is the property will NEVER be owned outright. The property will be obliged to resubmit for Commissioning every few years - if the property is non-conforming re: uses too much energy, or creates too much waste, it must be retrofitted to comply. This can include replacing the entire HVAC system. Commissioning is another inspection process that verifies the energy use projected at application is met - and that all other Green requirements function properly. The Use and Occupancy Cert will be held in perpetual abeyance. The additional costs to build Green and conform to Energy standards will lower profits. Oh by the way - each tenant must be instructed in the proper use of the space - and if they fail to obey the instructions -- the owner foots the bill. These two alone will negatively impact construction risks. I can give it to you in the simplest terms - there are requirements for footmats. I kid not. Footmat requirements for design, materials, placement, scrapper dimensions, etc... FOOTMATS!!!! These new codes have nothing in common with traditional standards - those being structural integrity, operability, durability, life safety issues, and to negate property complaints between neighbors. No more! Part of the purpose of these new codes is to stop development. The combined impact will drive investors from construction into safer and surer rates of return. Older properties will not escape - any alteration or addition can use NO MORE energy that original property before the addition/alteration. Is it clarifying? This is my vocation - code administration. Near DC, where we are supposedly immune to downturns due to an ever expanding government - starts are off 60%. Trust me, you aint seen nuttin yet.
Paul| 3.6.12 @ 2:26PM
Man, Ben, you really went off the reservation on this one. The economy is improving and unemployment is going down? While that may be true to those who deal in facts, bringing it up now when the president is black with a D after his name is most inappropriate. Until Obama is replaced by a republican, you have to pretend that the economy is the worst in all of recorded history and is getting worse every day. You can talk about the recovering economy the instant a republican is elected, but not before. The rest of your commenters seem to understand this.
Joe W.| 3.6.12 @ 3:08PM
Oh please. I don't care what group of wh**es currently occupy the White House. The focus is on improvement and being honest about what's ahead.
The "facts" you refer to aren't facts at all. That's why you can have predictions that go either way. The data set out there can be interpreted any number of ways.
Ironic that you chastise others for doing exactly what you are doing from the opposite end of the spectrum.
Oh yeah, and way to play the race card. How special.
Paul| 3.6.12 @ 11:29PM
Fact is, objectively, the economy is improving. Unemployment is easing down, capital expenditures by small business are increasing, and a whole bunch of other indicators say the same. Now, to your point, whether or not this turns into a full recovery is debatable. However, it doesn't change the current state of things, which are that the economy is improving and has improved.
As for the race card, while we may mention it from time to time, it's you guys who are truly playing the game.
http://wearerespectablenegroes.....-mutt.html
Joe W.| 3.8.12 @ 10:25AM
Again, you like throwing around the word "fact" very loosely. "Unemployment easing down" is a highly dubious claim given that the number that has gone down needed to cut record numbers out of the workforce in order for it to happen. I don't see how that is championed. Workforce participation is at lows not seen in decades. How is that good news in your book, and signs of improving employment?
I am not going to click on some b.s. link you appear to have pulled up to get sucked into your all-of-"you guys"-are-racists fantasy. Take a deep breath. Seriously, use a bag if you have to.
To the point of whether or not a recovery is in order, that is the whole point of this article and the comments that followed. Instead, your whole point seems to be to cling to questionable numbers posed as "facts" to try and divert the attention away from the very legitimate argument that things haven't gotten appreciably better in order to then get to your ultimate goal of arguing for four more years of this Administration.
If that's your goal and you want to argue you think he deserves another four years because he faced tough circumstances, then fine (I'd argue that it's a tough job and virtually every President faces tough circumstances, but that's neither here nor there). Just don't parade out your spin on the current economic environment to achieve that.
Ben offered up his rosy picture (for other reasons altogether than promoting another four years for this Administration), and folks here rightly called him on it by pointing out that there are many more claims against that picture than there are for it.
If you don't like that, tough cookies.
http://www.zerohedge.com/news/.....2-released
Ron| 3.6.12 @ 3:04PM
Ben,
Where have YOU been? I live in Juneau, Alaska, and we have been pretty well insulated from most of the downturns in unemployment (except predictably in our outlying bush communities) there are still so many people adding accessory apartments into their homes - legally with permits or otherwise) to try and afford their mortgages. I see a lot of people parking RVs in yards and renting them out due to lack of affordable housing, and to pay there mortgages as noted above. We have little buildable land which causes the housing costs to be higher than in the Lower 48 as well. Sure houses are going to be available, and at lower costs down south, but who can afford them?
danshanteal| 3.6.12 @ 3:09PM
O contraire! Foreclosures will boom when the fed raises rates. Jobs aren't there...the jobless have disappeared. There is no entity to take the place
of Fred and Fan and they are about to bastaddize FHA.
Clemmie| 3.6.12 @ 3:37PM
Ben, you are wrong. As far as I am concerned, the economy is not improving until my husband gets a job. I see nothing but empty storefronts along the El Camino and deserted shopping centers. The unemployments figures are not for real. Most people have dropped off the stats.
Jabber3| 3.6.12 @ 4:33PM
Ben - ". . the economy is reviving. The employment numbers are getting better fast. The stock market is frighteningly buoyant."
Ben, I love ya Man, but let's be real. First, jobs follow consumption increases not the reverse and when you look at the key indicators, GDP, personal income, and revenues (sales) they are all trending downward over the last several months suppressing consumption,
second, the housing industry is shackled by a huge backlog with no historical precedence that indicates it will clear itself anytime soon (next three years), third, the DJIA fell by over two hundred points today. We all wish the economy would recover fast but "dishing" optimism isn't going to make it happen.
cicero| 3.6.12 @ 4:53PM
Don't let them pick on you, Ben. I think what you are seeing is a phenomenon that we have not seen before. The banks are forclosing on upsidedown homes, and then are bidding at the sheriff's sales the total amount of their outstanding debt. This leaves the displaced homeowner with no residual debt. It sets up an interesting situation. The homeowner (former) now is free to re-enter the home buying market and aquire a new mortgage, because there is no debt from the foreclosure. The bank can then sell the foreclosed property at its real value. I believe, but have seen no reportage on the matter, that the Feds make sure that the banks realize no loss, using the FHA guarantee to make up the difference. That is why Fannie and Freddie keep coming to the government for more money.
This may actually be acccelerating the remediation of the market. The houses will be back on the market at acctuall value. Whether this can succeed without the job market picking up is anyone's guess. With real unemployment at about 15-29%, it is problematical.
I would welcome a real economic analysis of this whole situation, from the "Bailout of the Bankers", to the non-accounted for expenditures of $4 trillion (to say nothing of 3 years of non-budgeting by the U.S. Government) by congress. Where is the WSJ, and our schools of economics when we need them?
mountaindale| 3.6.12 @ 6:37PM
If anyone lives near my dear friend Ben, please go check to see if he's ok. I fear that he may have had a stroke or something to screw up his sense of reason. Real unemployment is in the toilet. Foreclosures are down only because there are none left. Millions of us who simply won't renege are making payments on mortgages double what our property is worth.
I love ya, Ben, but you're bad wrong on this one.
Dick Hertzer | 3.6.12 @ 8:42PM
Ben Stein is wrong once again, and here's why. He forgets one important variable. All the people who put their houses on the market to sell them the past 5 years, who not getting their price took them off the market. At the first sign of any recovery , MILLIONS of homes are going to go back on the market. Can you say supply and demand. Winning.
PolishKnight| 3.8.12 @ 1:58PM
Indeed Dick. The sellers who are sitting on their properties are either renting them out or worse, letting them sit empty and rot along with their savings accounts. The housing standoff is killing the economy. And why should buyers step in and pay bubble prices again? In the hopes of being in the middle of the pyramid to stick a buyer down the road?
In many markets, there's another set of foreclosures coming as banks have to eventually stop letting people live rent free for more than 5 years. When that happens, prices will go down again and set off another chain of foreclosures.
Alex| 3.6.12 @ 9:11PM
--the labor pool is the smallest in recent memory
--the 99'ers are running out of 99 and will soon stop being counted
--a lot of folks already are NOT counted because benefits have run out and/or they have a part-time gig, maybe two, to make ends meet
--thus, the unemployment rate is artificially low
But, the economy is improving. Right. I get it; Ben lives off his portfolio so the only bellwether is the stock market.
chuck| 3.6.12 @ 9:33PM
Ben,
I've been reading your columns for years, and generally enjoy them. This time, you're just full of shit. Sorry for the language, but ain't no sugarcoating this dog squeeze. I've been in residential construction all my life, and you're just completely wrong.
You sound like a cheerleader for Obama,
Yougenic | 3.9.12 @ 8:32AM
Amen...
gary siebel| 3.6.12 @ 10:27PM
Strangely enough, I concur with your assessment. I predicted months ago that the Vegas housing market will show real signs of life around June.
Vegas is a great bell weather for the economy in general because it depends so heavily on disposable income. All indicators show a slow but steady rise there, and since the Vegas housing market was amongst the worst, any improvement will be obvious.
All the same, high end places were overpriced and should not be expected to return to their absurd price levels any time soon -- unless owners plan to sell to Chinese or other international investors who have the cash (evidence of housing sales to internationalists is growing).
pete | 3.7.12 @ 2:22AM
Predict the recovery, then indicate that it should happen but remind everyone that you could be wrong. What kind of a prediction is that? One needs not be an economist or rocket scientist to notice that foreclosures are dropping. That is like observing that as one consumes resources there are less available. Furthermore, predictions made on statistics which are probably inaccurate and possibly deliberately misrepresented, is not wise.
An educated guess remains a guess and the incredible point is that so many economists differ hugely in their predictions. Strange but true.
POST American| 3.7.12 @ 3:18AM
------Great '90's Show' cover op!
Meanwhile, scarcely a week after
the 'timely' -er- 'termination' of
Andrew Breitbart -----NOT A PEEP
about the witheld Obama tapes.
Even Breitart's end itself ---deftly
'managed' from view.
Finally, for those who STILL have money
and are tired of the capstone sap op media
---DO make a generous pledge to the RBN
radio network. They're being harassed
incredibly and are in financial straights.
In this, the 11th hour of the CFR-RED China
handover, TREASON and TOTAL EUGENICS
OP -----you can't afford NOT to.
shox en france | 3.7.12 @ 5:09AM
Very Good!
The Bruce| 3.8.12 @ 10:52PM
Feel free to move to my neighborhood in Tucson, AZ. We just had two short sales in the last month, and my property value is still on the decline (and I live in a nice neighborhood). Come see this "recovery" in the housing market from my perspective.