Monday, May 4, 2015

Real Estate Put Aways

I just read this on MarketWatch:
There’s a new boom in the housing market, and in many cities, this bubble is even bigger than the last, warns Wolf Richter of the Wolf Street blog. He explains that home ownership — the bedrock of the American dream — has been tumbling as houses get snapped up as investments. In fact, the proportion of owner-occupant buyers fell to a multiyear low of 63.2%, Richter said. What’s more, it’s not the “smart money” that’s feasting on real estate. The institutions are getting out of the game and leaving it to the “mom-and-pop” types. “
This reminds me of my days on the municipal bond desk at Merrill Lynch. Those were the days when even a peon like me was wearing blue shirts with white collars and multi-glitz suspenders under my Gorsart suit.

Traders traded with each other and tried to offload inventory on the buy side, which included retail. When bonds finally got "put away" to end investors we knew it was time to move on to the next hot dollar bond issue. When investors had them in their hands, even in block size, the bonds were finally distributed in small enough lots and we knew only dribs and drabs would reappear at any given time to "flood" the market. Flood really meant trickle.

In the real estate graf above it seems that all of the real estate buying has gone to traders, now known as flippers, and very little is getting put away. That means a whole lot of inventory is out there in need of getting sold.

Supply high
Demand low

Get the picture?

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