• 3 minutes UAE says four vessels subjected to 'sabotage' near Fujairah port
  • 6 minutes Why is Strait of Hormuz the World's Most Important Oil Artery
  • 8 minutes OPEC is no longer an Apex Predator
  • 12 minutes Mueller Report Brings Into Focus Obama's Attempted Coup Against Trump
  • 2 hours Australian Voters Reject 'Climate Change' Politicians
  • 9 hours Australia Election Summary: "This was the Climate Change Cult Election, and the Climate Change Cult Lost"
  • 29 mins Global Warming Making The Rich Richer
  • 1 hour Shale to be profitable in 2019!!!
  • 12 hours Canada's Uncivil Oil War : 78% of Voters Cite *Energy* as the Top Issue
  • 32 mins California Threatens Ban on ICE Cars
  • 17 hours IMO2020 To scrub or not to scrub
  • 17 hours China Downplays Chances For Trade Talks While U.S. Plays ‘Little Tricks’
  • 3 hours Shell ‘to have commercial wind farms’ by early 2020s
  • 52 mins Oil Price Editorial: Beware Of Saudi Oil Tanker Sabotage Stories
  • 17 hours Wonders of Shale- Gas,bringing investments and jobs to the US
  • 9 hours Misunderstanding between USA and Iran the cause of current stand off, I call BS
  • 9 hours DUG Rockies: Plenty Of Promise, Despite The Politics
  • 13 hours Some Good News on Climate Change Maybe
Alt Text

Global Economy Throwing Up Red Flags For Oil

Investors are feeling increasingly gloomy…

Mad Hedge Fund Trader

Mad Hedge Fund Trader

John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets.…

More Info

Trending Discussions

The Hard Truth About Residential Real Estate

Anyone who believes that housing is on the rebound, and that now is the time to buy, should take a very hard look at the numbers I dredged up for my spring lecture and luncheon tour.

There are 140 million personal residences in the US. Today, there are 26 million homes either directly or indirectly for sale.

According to a survey by Zillow.com, a real estate appraisal website, 20 million homeowners plan to sell on any improvement in prices.

Add to that 4 million existing homes now on the market, 1 million new homes flogged by companies like Lennar (LEN) and Pulte Homes (PHM), and 1 million bank owned properties.

Another 8 million mortgage owners are late on their payments and are on the verge of foreclosure, bringing the total overhang to 34 million homes.

Now, let's look at the buy side.

There are 35 million who are underwater on their mortgages and aren't buying homes anytime soon, nor are the 35 million unemployed and underemployed. That knocks out 50% of the potential buyers.

Here is where it gets really interesting. There are 80 million baby boomers retiring at the rate of 10,000 a day. Assuming that they downsize over time from an average 2,500 sq ft. home to a 1,000 sq. ft. condo, and eventually to a 100 sq. ft. assisted living facility, the total shrinkage in demand is 4.3 billion sq.ft. per year, or 1.7 million average sized homes.

That amounts to a shrinkage of aggregate demand for a city the size of San Francisco, every year. You can argue that the following Gen-Xer's are going to take up the slack, but there are only 65 million of them with a much lower standard of living than their parents.

Throw in the disappearance of state and federal first time buyer tax credit. You can count on a jump in long term capital gains taxes and state and local property taxes, further diminishing property's appeal.

If you are looking for a final stick to break the camel's back, how about eliminating, or substantially reducing the home mortgage interest deduction?

Add it all up, and there is a massive structural imbalance in residential real estate that will take at least a decade more to unwind. We could be looking at a replay of the same 26 year period from 1929 to 1955 when prices remained flat, and we are only 3 years into it!

A second down leg in the real estate market seems a no brainer to me, as is the secondary banking crisis that follows. Perhaps that's why hedge funds have been big sellers of the homebuilder's ETF (XHB).

What's a poor homeowner to do? Don't ask me. I sold everything in 2005 when my research threw up these numbers, and have been happily renting ever since. And, if the toilet blocks up, I just call the landlord.

By. Mad Hedge Fund Trader




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News