Rosenberg Explains Why Not One New Home Priced Over $750,000 Sold In July

Tyler Durden's picture

The most damning words on the recent horrendous housing data come from David Rosenberg: and since he has long been spot on in his macro observations, the 15% or so in additional price losses anticipated, will make this depression a truly memorable one (we will investigate not only the surging supply side of the housing equation, but the plunging demand side in a later post), and will leave the Fed with absolutely no choice than the nuclear option: "If the truth be told, if we are talking about reversing all the bubble appreciation that began a decade ago, then we are talking about another 15% downside from here. The excess inventory data alone tell us that this has a realistic chance of occurring...The high-end market, in particular, is under tremendous pressure. In fact, it is becoming non-existent. Guess how many homes prices above $750k managed to sell in July. Answer — zero, nada, rien; and for the second month in a row."

From today's Breakfast With Rosie

Once again, the consensus was fooled. It was looking for 330k on new home sales for July and instead they sank to a record low of 276k units at an annual rate. And, just to add insult to injury, June was revised down, to 315k from 330k. Just as resales undercut the 2009 depressed low by 15%, new home sales have done so by 19%. Imagine that even with mortgage rates down 100 basis points in the past year to historic lows, not to mention at least eight different government programs to spur homeownership, home sales have undercut the recession lows by double-digits.

This is what we have been saying for some time, in the aftermath of a credit bubble burst and a massive asset deflation, trauma has set in. The rupture to confidence and spending from our central bankers’ and policymakers’ willingness to allow the prior credit cycle to go parabolic has come at a heavy price in terms of future economic performance. Attitudes towards discretionary spending, credit and housing have been altered, likely for a generation.

The scars have apparently not healed from the horrific experience with defaults, delinquencies and deleveraging of the past two years — talk about a horror flick in 3D. The number of unsold homes on the market exceeds four million and that does include the shadow bank inventory, which jumped 12% alone in August, according to the venerable housing analyst Ivy Zelman.

Nearly 1 in 4 of the population with a mortgage are “upside down” and as a result are now prisoners in their own home. We have over five million homeowners now either in the foreclosure process or seriously delinquent. The government’s HAMP program was supposed to bail out between 3 and 4 million distressed homeowners and instead we have only had a success rate of fewer than half a million.

Now back to the new home sales data. Every region in the U.S. was down, and down sharply. The homebuilders did not cut their inventory levels and as a result, the backlog of new homes surged to 9.1 months’ supply from 8.0 months in June, which means more discounting and margin squeeze is coming in the homebuilder space. As it stands, median new home prices were sliced 6% in July and this followed on the heels of a 4.7% drop in June. And, at $235,300, average new home prices are down to levels last seen in March 2003, down nearly 30% from the 2007 peak. If the truth be told, if we are talking about reversing all the bubble appreciation that began a decade ago, then we are talking about another 15% downside from here. The excess inventory data alone tell us that this has a realistic chance of occurring.

The high-end market, in particular, is under tremendous pressure. In fact, it is becoming non-existent. Guess how many homes prices above $750k managed to sell in July. Answer — zero, nada, rien; and for the second month in a row. Only 1,000 units priced above 500,000 moved last month. That’s it! Over 80% of the homes that the builders managed to sell were priced for under $300,000. Just another sign of how this remains a full-fledged buyers’ market — at least for the ones that can either afford to put down a downpayment or are creditworthy enough to secure a mortgage loan (keeping in mind that 25% of the household sector does have a sub-600 FICO score).

Remember that this is a July data point and we know that the NAHB housing market index, which has an historic 83% correlation with new home sales, dipped for the third month in a row in August, to 13 from 14 in July. So it’s not even safe to say that we have hit rock bottom. Moreover, when you look at the trendline in total home sales, it is plain to see what has happened from the impact of the now-expired housing tax credits — the subsidy did little more than distort the pattern of housing demand and actually pulled forward well in excess of a million units of consumption, at the expense of future growth. What does this mean? That demand will remain anemic and likely hit even new lower lows in coming months and quarters as we enter into the “payback time” phase.
This is going to sound like a broken record but it took a decade of parabolic credit growth to get the U.S. economy into this deleveraging mess and there is clearly no painless “quick fix” towards bringing household debt into historical realignment with the level of assets and income to support the prevailing level of liabilities. We are talking about $6 trillion of excess debt that has to be extinguished, either by paying it down or by walking away from it (or having it socialized).

Either way, this debt is somebody else’s asset (a bank? an insurance company? a pension fund?) so dealing with it is going to extract a pound of flesh from somebody. Or maybe, we’ll just kick the can down the road and leave it for some future taxpayer to worry about (nice endowment for our kids, don’t you think?). Sounds harsh, but there is no free lunch, that’s the lesson of this debt deleveraging cycle. The more the government tries to paper over the problems or attempts to seek its own equilibrium value of residential real estate, the longer it is going to take to find the bottom and move on from there. It’s time to move beyond the housing market and start dealing with the real crisis the country faces, which is job creation — or the lack thereof. Surely there is something more creative we can do than pay people to be out of work for 99 weeks in what has become a de facto welfare policy.
In terms of nuts and bolts, we are now tracking 1.3% GDP growth for Q2 (we shall find out more tomorrow) and thus far the momentum is so weak that we are tracking -1.9% SAAR for current quarter GDP — and the consensus is still, quite remarkably, at +2.5%!

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Instant Karma's picture

Really? Not a single new home priced over 750K sold? That's weird.

Popo's picture

I call bullshit on that stat. 300k homes sold and not one over 750k? I'm having a very hard time thinking that's true. The average price of a Manhattan apartment is over 750k. This smells like nonsense.

nedwardkelly's picture

The average manhattan apartment isn't a "New Home" it's an "existing" one.

I thought BS when I first read the title too, but it's talking about new homes, not existing.

SheepDog-One's picture

'Avg apartment in NY' isnt a new home. I totaly believe no new home over $750K sold! Im in the construction trade, NOTHING is being built anywhere!

bonddude's picture

That is false. I'm no RE bull but that is false.

I know for a fact. Oh he said new? whatever.

Marvin_M's picture

Mr. Popo; the stats are annualized, but it is still shocking that none over $750K sold.  When we packed it in and moved out of CA mid 2004, the tipping point was a new development 1 mile from my home with 3K homes ALL priced over $750K!  Needless to say that "planned community" never quite went wheels up.  Only a few scattered McMansions, a storage facility and a lot of dirt.

Canoe Driver's picture

btw ZH'ers, "less than 500" is effectively zero.  for statistical (macroeconomic) purposes at least.

George Orwell's picture

I searched on around my neighborhood.  Quite a few homes were sold above $700K in July.  But these are existing homes not new homes.  Rosie is talking about NEW HOMES.

Housing has not slowed down that much in the silicon valley.  The lack of NEW HOME sales above $700K is because there are very few new homes in this area. 






nedwardkelly's picture

Your first link:

12/22/1988 Sold $495,000 -- $212 Public Record


Second was built in 1959, same as 3rd

pooplagrande's picture

That is a pretty resilient place (venture, big tech, stanford, etc.), but if there is another leg down, and it looks like that is a good possibility, these houses will fall...and maybe dramatically. If you really look at them (the 1.3M house for example) would be hard to defend that price. Without a strong regional economy, San Jose is kind of burnt.

quintago's picture

First of all, his statistic is for new homes only. He should make this more clear.

Secondly, Rosie either doesn't know how to read data, or he's just a glorified viagra salesmen trying to find a limp economy anywhere he sees it.

The data doesn't mean 0 new homes over $750K sold over the past two months, it means less than 1,000 of them sold over the past 2-months. If 499 homes sell, it doesn't show up on the data.

Run and tell that homeboy!


Citizen of an IKEA World's picture

First of all, his statistic is for new homes only. He should make this more clear.

How is the title not perfectly clear on that point?

giddy's picture

...apparently you are not alone... lots of folks on this blog are clueless when it comes to reading/analyzing/understanding housing data...  

Rusty Shorts's picture

 - so, for every new house sold, two are foreclosed on? Anyone have the stats?

Joeman34's picture

I know for a fact this stat is false.  My girlfriend is an interior architect and closed on more than one +$750m property in July [I know if 2 for sure]. 

From an anecdotal perspective, I'm perplexed at the housing data being reported based on how busy she has been lately.  She just recently started her own company and has so much work she's actually turning down jobs.  I know the housing market is bad [maybe not so bad here in greater Chicago], but you couldn't tell by observing her business.

Astute Investor's picture

Interior architect??  Do you mean interior designer?

I too live here in Chicago.  Real estate is slow, but certainly things are selling.  It's mostly existing homes and condo/co-op resales.

Not sure about Rosie's figures, but I don't put too much stock in anecdotal evidence about high-end property sales.  There is always some hedge fund trader or HFT guy who can pony-up the dough for a high-end home regardless of market conditions.

Spalding_Smailes's picture

In Chicago, where the cry "Wait 'til next year" is a common refrain, the condominium market is getting its own version of a losers' lament: "Wait 'til 2013."

If you are a condo investor, owner, builder, Realtor or anybody else with a vested interest in rising condo prices, the market probably won't appear stable for three years. That consensus view emerged Tuesday in interviews with condo experts commenting on the latest data on housing, numbers that threw the stock market into a tizzy.

The consensus view among condo experts is that the market likely won't appear stable for another three years.
(Sun-Times File)

The report for July showed the volume of sales for all homes -- condo and single-family -- declining nationally and in the Chicago area from July 2009. In both cases, the decline was about 25 percent. The same data from Realtors groups showed that prices nationwide were essentially flat, while in the Chicago market they registered a year-over-year dip of 9.6 percent.

Drilling into the numbers shows that condos are behaving differently from the rest of housing. The Illinois Association of Realtors said that for the Chicago market, condo sales in July were down 28 percent compared with July 2009, but average prices rose about 1 percent.

Benson said prices are rising in buildings that are mostly owner-occupied and have condo associations with ample financial reserves. "The downtown Chicago market has the greatest supply of inventory and therefore is at the most risk of loss of value," she said.,CST-NWS-roeder25.article

Joeman34's picture

No - there is a difference between interior architect and interior designer.  Designer does drapes/colors/pillows.  Interior architect plans space, designs kitchen layout, electrical layout, bathroom layout...etc.  You need a degree/license to be an interior architect/space planner.  Any idiot can be an interior designer...

Spalding_Smailes's picture


My bud just recieved his degree & was at the top of his class. He interned at the merchandise mart for 3 months but was just let go because of the economy.


Is she looking for help?



Joeman34's picture

Sucks for your friend.  She's not hiring at the moment - doesn't want to expand in case the economy/market deteriorates further.  Happy to make the connection, though.  It never hurts to network...

moneymutt's picture

its hard to judge general economy by such a small business....I'm in construction and it sucks, I know many small business trade guys out of business, scratching and clawing to get work and yet, when I call contractors on the referral service, for say, a small concrete sidewalk at my house, or for hardwood floor re-sanding, several have told me they are booked solid for two months. A small general contractor remodoler/handy man guy I know that hires subs a lot says 2 out of 10 guys he hires are way busy cause they got on Angies List or some such but the rest are broke.

I found a guy on Google that just does legal egress window installs and window wells for them which he has been doing for five years, same business, and says this year his best year ever...he thinks its due to his prominent ranking for typical search terms on Google (and he does a great job for reasonable price - but he says referrals not a big part of his business).

So even a diasterous construction economy some trade guys are friends situation may be same, she just found right group and got good work of mouth with right clients, who knows.

Depressions are depressing, but that does not mean no one makes money, the whole economy is not shut down. Fewer people do well on average, fewer people get lucky on average, but there is still money to be made...

But gone are the days that if you have a decent education and show up at work/job hunt everyday you are guaranteed a decent middle class lifestyle...that is over. That is what is dragging on most people.

Joeman34's picture

And BTW... that's why I pointed out the 'anecdotal' basis.  I understand the weakness in anecdotal observations and don't need you to junk my post.  I was providing evidence to refute the point made above that no +$750m homes have sold.  Not very astute of you...

Astute Investor's picture

I didn't junk you so you can relax - take up your beef with the other 8 posters.  I assume you were as high-minded despite the snarky comment at the end of your post.  People tend to be a little myopic and see things based on their personal circumstance or those of people close to them.

I didn't say that I agreed with Rosenberg's statement or that no properties over $750k had sold.  My point was that I wouldn't make any conclusions about the broader real estate market based on business activity at a newly-formed, sole proprietorship.

We have been looking at real estate in Chicago for over 2 years in the high-end.  Most stuff still way overpriced in my opinion.  Still, there is always some kind of market for real estate, particularly at the high-end where buyers are less sensitive to mortgage rates, prices, etc.

So an "interior architect" is simply an architect that focuses on interior spaces rather than designing structures?  My sister and brother-in-law are architects and you are either a licensed architect (with or without a focus on interiors, structures, landscape, etc.) or your not.


reading's picture

As has been noted several times, Rosie is referring to NEW homes.  As in not existing homes being re-sold.

sceptic164's picture

It is hard to believe any questionable statistic posting on this site after reading the piece on Illinois' pension problems.  The author of that piece mentioned that the IL TRS investment return for 2009 was -22% while the SP500 returned 20+% for 2009.  The article used this to highlight the mismanaged of the fund and the state's finances.  The problem with the stat though is it the TRS return for the year ended Jun 2009.  It used the SP500 return through Dec 2009 however.  The TRS return for the year ended Dec 2009 was +15.4%.  Big difference.  It is amazing how numbers can be manipulated to back up one's arguments.  Is the same thing going on with the housing stat of no homes being sold over $750k for june or july to argue how weak the housing sector is?

peripatetic86's picture

I find that really hard to believe.  What country?

Plainview's picture

great stat; pretty shocking.

Tic tock's picture

Nah, prices -and wages - in the upper brackets have been at silly levels. We're here because of Greed, it's everywhere. 

hugolp's picture

No. We are here because there is oxigen in the air. Its everywhere.

Without oxigen, humans could not breath, there would be no humans and there would be no crisis.

Bearster's picture

doesn't that sound just a bit trite and stale--even to you?

Didn't we have greed in 1800?  1850?  1900?  1950?

EVERYone wants to increase his position in life.  Most people condemn this in others, while pursuing it for themselves.

The problem isn't greed.  The problem is the government has replaced money with credit,  markets with interventions, and individual decision making with central planning.  The results are always the same.  In the Soviet Union, central planning led to too many shoes of size 5 and too few of size 10.  In the USA, it led to too many houses (among other things).


hbjork1's picture


I wasn't around in 1800, 1850, or 1900 but I was around in 1950.  There was lots of greed but there was no conception of the levels and methods that we have been able to develop in our modern world.  

I have posted this before it is worth note that in 1950 a respectable farmer living in a "remote" area 4 miles out of town came to town and shot a certain individual because it was certain that he had stolen a pig.  He didn't kill him; just a wound but justice was swift and sure.  The shooter was arrested, brought to trial, convicted and given a suspended sentence. 

The shooter was eventually and for many years on the school board and a respected citizen.

However, in this country at least, the means for the levels and means for the scale of the greed that exists today (largely through the courtesy of the political establishment) had not yet been invented.  

Too many people are "overdriving their headlights". Be careful who you vote for.  

themosmitsos's picture

I read this, and I believe you're being honest....BUT THAT JUST CAN'T BE TRUE?!?!?! CAN IT?!?!!

IN THE ENTIRE United States?!?!?!

I mean that's just mindblowing! I know the caveat is *NEW* home, but STILL!!!

TheFantasticMonkey's picture

I don't by the headline. I can tell you for a fact that we had probably in the area of 30 - 40 purchased over $750,000 in our zip code alone - 92130. Sucks for me because I rent here, but there were definitely homes over $750,000 selling in 92130, 92067, 92014 & 92075.

ghostfaceinvestah's picture

Agreed, I know for a fact that statistic he quoted is not accurate.  He should be more careful before quoting things like that, because it is too easy to disprove.

thesapein's picture

You guys, it's in the article and in every other post, NEW homes, not existing home sales.

Probably also says something about the quality of "modern" construction, too. Who would want the stuff we make today anyway?

nedwardkelly's picture

Try here:


Shows no homes built in 2010 sold for over $700k in the last 90 days in that zip code. I guess it could be a new home built in 2009, but I tried that as well and it said zero homes built in 2009 were sold for over 700k in the last 90 days in that zip code either.

I know zillow should be taken with a grain of salt, but generally the public record info is accurate.

If you zoom out to state level you can see some homes that will list as being constructed in 2010, but when you click in on the detail they'll have prior sale records in 2009. For ex.

packman's picture

Zillow's sales though typically come in months later.  E.g. when I bought my current house I don't think the sale showed up on zillow for almost a year.


dogbreath's picture

a friend in Santa Fe says there have been only 5 new homes started this year there.  he does the high end carpentry so I think he was only refering to the that category.  last year he said there were 35 new homes started. 


giddy's picture

...oh fuck... let's just blather-on and on about how "wrong" he is with everyone citing some property they "know" which sold recently... get-a-grip... the housing titanic is sinking fast... look at the forest... not the trees...

septicshock's picture

I was dumb enough to buy a home last December. The house was 50% off. Well, I guess I should have waited a lot longer. Does it really matter? With hyperinflation coming, I will be able to pay off the mortgage with worthless paper soon enough.

ATG's picture

What if hyperinflation doesn't come because Federal Reserve banks don't want to write off their mortgages?...

Chump's picture

Then priorities change.

Fighting zombies > Paying mortgage.

thesapein's picture

unless all that paper of yours has to go to paying energy bills and buying food, but at least your debt will shrink even if you don't pay it, under those conditions.

Helix6's picture

Re: With hyperinflation coming, I will be able to pay off the mortgage with worthless paper soon enough.

The problem is that hyperinflation doesn't necessarily result in higher salaries.  Only higher prices.

I personally don't see hyperinflation in the near-term.  True hyperinflation starts with a loss in confidence in the currency, but is sustained by a wage-price spiral.  With unemployment what it is, and with continued outsourcing of jobs, it's hard to see how the wage part of that dynamic will kick in.  More likely will be just a slow downward spiral in standard of living - first eating out and going out will go, then other trips by car that are not strictly necessary, then new purchases of nonessential items, then cell phones and college education.  This spiral can continue for a long time, as the Great Depression illustrates perfectly.

moneymutt's picture

if there is hyperinflation, it is likely to occur in the things that were deflating when HOUSING was hyperinflating previously...everyday goods, food, oil, gas especially imported products, may get quite pricey down the road, but doubt that will translate to housing and wages much...

read Mish's blog sometime, with debts being defaulted on left and right and with most of the money supply being credit/debt, the money supply, despite FED's every attempt otherwise is still contracting. If I own a mutual fund or have a pension fund that lent money to someone to buy a house or an office building and those buyers are defaulting on those loans, my "money" is gone, poof. Almost all money comes into existence when a bank lends it to some one. When they default on debt, poof its gone. When bank no longer wants to lend, businesses/consumers no longer want to borrow, or no longer are worthy of being lent to, no new money is created because no one is lending. Poof its gone. The Aussie economist Steven Keen has shown bank reserves follow bank lending, not other way around.

We are in a deflationary spiral, money supply is crashing...does not mean somethings won't get expensive, but not likely to be the house you bought, which you and most anyone else would need credit/debt to buy. If housing goes to cash only basis, you'll be underwater 10 fold.

e1618978's picture

2nd month in a row?  This is impossible, as just in Boulder County CO there were 14 million dollar sales in June, unless this info is wrong:

packman's picture

That doesn't break out new vs. used though.  All 14 of those could have been used.


juno9604's picture

FYI - The New Home Sales Report records the numbers in 1000s of Sales.  For homes over $750k, they reported (Z) which means "less then 500 units" which may be, but is probabistically not in fact Zero Homes Sold.  (Z) New Home Sales over $750k were also reported in June and March of 2010 and in August of 2009.  Aren't things bad enough without what appears to be intentionally misleading commentary? 

ghostfaceinvestah's picture

thanks, that makes more sense.  I agree, he really discredits himself when his misinterprets the data like that.