Thursday, May 22, 2014


So today, residential realty numbers have many busy fingers writing the latest propaganda scenes for American commercial and political life.

The busy ones at Reuters seem to have spun the story more than most with their stories Existing home sales rebound, inventory increases and Housing sector turning the corner.

Numbers are meaningless without context. Even pictures that seem bleak such as downward curves can't tell anyone anything without context.

To understand what is going on, you need to see existing house sales and existing house inventory in context of the civilian population, specifically the civilian non-institutional population.

First, let's look at the Flip Ratio.

Today's number is a scant 5.29% above the long run average Grouper Ratio of 558. 

The Flip Ratio tells you how many persons for each house sale. The higher the number, the more persons for each sale. Looking at it another way, there are fewer sales per person.

The peak came January 1, 2009, when there were 1,077 persons per sale. So today's number has fallen an impressive 45.4% from the peak.

However, the low came on June 1, 2005, during the heyday of the last peak-flipping prosperity when everybody wanted a house and there were only 300 persons per sale. So, from the low, today's number looks bad, up 96.2%!

So looking at the chart, the higher up on the curve, the worse reality is. Today's Flip Ratio is par for after the realty bubble of the early 2000s.

Now, let's look at the Glut Ratio.

The Glut Ratio tells us how many persons there are in the wildest schemes who could buy a house from those wishing to offload a house to the next sucker.

Today's number is 21.8% down from the peak Glut Ratio of 138 hit back on January 2013. However, today's number is a whopping 88.2% above the Glut low hit on July 1, 2007, when there were 57 persons for every house available.

Today's number is 19.8% of above the long run average Glut Ratio of 90. It looks like there is way too much inventory still relative to civilian population.

So looking at the chart, the lower down on the curve, the better reality is. 

It's hard to say what the long run average should be for the Flip Ratio and the Glut Ratio since realty data only goes back to January 1999. Now, let's look at the True Credit™ bubble to see if we can be helped.

The first leg of the massive Greenspan bubble ran from April 1994 to January 2001. A pause came between July 2002 and January 2004. Then Greenspan and his boy wonder sidekick Ben Bernanke turned up the credit heat creating the largest credit bubble in the history of America since Nixon closed the gold window.

So if we compare the Flip Ratio and Glut Ratio to the averages for each respectively between 2002 and 2004, the Flip Ratio is 21.5% above the average for that time and the Glut Ratio is 6.3% above.

To get a better gauge for residential realty in relation to the economy, have a look at New Privately Owned Housing Units Started relative to True GDP. There is a return link at the bottom of the page to get you back to Bizarro Theater. You can access that chart anytime from the Bizarro Theater Dashboard.

Housing starts are at historic recessionary lows. Compare today's number with 1975, 1982, and 1991. 

For those nostalgic for the residential realty bubble, here is the NAR's cheerleader, and yet another Ph.D. in economics spewing irreality from the false doctrine that is economics.