Housing Inventory

Pending Home Sales Disappoint, Realtors Fear Unhealthy Price Appreciation

Following New Home Sales rebound to their highest since 2008, amid record high prices, Pending Home Sales disappointed with a mere 0.2% MoM rise (versus +1.2% expectations) showing very little bounce off May's tumble. Northeast sales saved the day with a 3.2% surge but The South and West both continued to slide. As NAR's Larry Yun noted however: "home prices are showing little evidence of slowing to a healthier pace that more closely mirrors wage and income growth."

Existing Home Prices Hit Record High As Sales Growth Slowest In 4 Months

Despite a better than expected 1.1% MoM rise in June (thanks to notable downward revisions), existing home sales growth is the slowest since February. Of course, NAR's Larry Yun gloated of "sustained job growth" driving an "impressive streak of sales gains," although he cautions " it's unclear if this current sales pace can further accelerate." Median home prices soared to new record highs driven by soaring demand for condo/co-ops (+3.2% vs just 0.8% for single-family homes).

Existing Home Sales Highest Since Feb 2007 As Prices Hit Record High

On the heels of FHFA reporting a disappointing 0.2% home price appreciation in April (the weakest since Jan 2015), May existing home sales rose, as expected by 1.8% MoM to 5.53mm SAAR - the highest since February 2007. All regions saw median home prices rise MoM (but Northeast -0.1% YoY) but The Midwest stood out with a 6.5% drop in sales. Median home prices jumped to a record $239,700 (up 4.7% YoY) but first time homeowners are disappearing, as NAR's Larry Yun notes a lack of inventory is "pushing prices out of reach for plenty of prospective first-time buyers."

NAR Warns Of Overheating Home Prices As Existing Home Sales See Biggest Annual Jump Since 2013

Despite the biggest annual jump in existing home sales since July 2013, even the NAR's perpetually cheerful Larry Yun is starting to get worried about the bubbly nature of the existing housing market:  "The spring buying season is right around the corner and current supply levels aren't even close to what's needed to accommodate the subsequent growth in housing demand," says Yun. "Home prices ascending near or above double-digit appreciation aren't healthy – especially considering the fact that household income and wages are barely rising." 

Pending Home Sales Jump Most Since September 2012 To Highest Since 2006, Driven By The Northeast

Following the March pending home sales report which saw growth moderate after February's 3.6% surge to 1.1%, the flurry of contract signings, not actual purchases, in April rebounded by 3.4% - the biggest jump since September 2012 - far above the 0.9% consensus estimate and 14% higher than a year ago, pushing the pending home sales index to 112.4, the highest level since 2006. The driver: pending sales in the Northeast, which soared 10.1% from the month before, and 9.4% from a year ago.

40% Of Existing Home Sales At Or Above Asking Price, Highest On NAR Record

The most stunning data point from today's report: "Housing inventory declined from last year and supply in many markets is very tight, which in turn is leading to bidding wars, faster price growth and properties selling at a quicker pace," says Yun. "To put it in perspective, roughly 40 percent of properties sold last month went at or above asking price, the highest since NAR began tracking this monthly data in December 2012."

Leaked Recording Reveals True State Of Chinese Housing Market

A leaked recording by the vice-chairman of Vanke Group (China’s biggest property developer), confirms, as The Telegraph's Amrbose Evans-Protchard reports, what the bears have been saying for months, 'it is a dangerous bubble, and already deflating'. Mao Daqing's words, translated, are ominous: "In 1990, Tokyo’s total land value accounts for 63.3% of US GDP, while Hong Kong reached 66.3% in 1997. Now, the total land value in Beijing is 61.6% of US GDP, a dangerous level... China has reached its capacity limit for new construction of residential projects... and I don’t see any possibility for a rise in home prices." The simple chart below highlights all one needs to know - inventory is exploding - and as Mao concludes: "housing production per 1000 people reached 35; even when the housing market is hot, no country has a figure of greater than 14 - this should cause alarm."

Overnight Market Summary

Overnight one of the main stories is that the European Union has been downgraded to AA+ from AAA by S&P. While the market digests the impact of the downgrade, all eyes remain on the US treasury market. As Deutsche Bank notes, treasuries are increasingly being viewed as a potential sign of the success or not of the Fed taper in early 2014. From the lows in the immediate aftermath of Wednesday’s FOMC, 10yr UST yields have added more than 10bp. Yields continue to leak this morning (-2bp to 2.95%) though we’re still hovering at levels last seen in early September just before the Fed surprised markets with its non-taper. Despite this, US equities and credit were both reasonably well supported yesterday. However the combination of higher UST yields and a stronger dollar resulted in a fairly difficult day for EM. In EMFX, the Brazilian Real fell 1.1% against the USD, underperforming most other EM currencies. The move was exacerbated by the announcement from the BCB that it would wind back its intervention in the currency market, following the initial positive reaction to tapering on Wednesday. Other EM currencies also struggled including the TRY (-0.7%), MXN (-0.7%) and IDR (-0.3%). A number of EM equity markets struggled including in Poland (-0.7%) and Turkey (-3.5%).

Existing Home Sales Tumble, Post First Annual Decline In 29 Months On Day After Taper Begins

If anyone is still wondering why back in June Zero Hedge first presented what the adverse impact on housing affordability as a result of soaring rates, today's NAR release on existing home sales should set all questions to the side. Because after rising in a seemingly relentless fashion, existing home sales have (and this is before the traditional downward revision by Larry Yun's conflicted organization which will expose all of its numbers as flawed regardless) finally hit a brick wall, and not only did November existing home sales tumble from 5.12MM to 4.90MM, missing estimates of 5.02MM, they also posted the first year over year decline in 29 consecutive months of increases.

Why Obama's Home Affordable Modification Program Failed (Spoiler Alert: Thank Bank Of America et al)

Back when the Executive and Congress at least pretended not to abdicate all power to the Fed, one of the centerpiece programs designed to boost the housing market for the benefit of the poor (as opposed to letting Ben Bernanke make marginal US housing a rental industry owned by a handful of private equity firms and hedge funds), was Barack Obama's Home Affordable Modification Program or HAMP, which attempted to prevent foreclosures by lowering distressed borrowers’ mortgage payments. Under the program, homeowners would be given trial modifications to prove they can make reduced payments before the changes become permanent. The program was a disaster as of the 3 million foreclosures that were targeted for modification in 2009, only 905,663 mods have been successful nearly five years later - a tiny 13% of the 6.9 million who applied (still, numbers which Obamacare would be delighted to achieve). Part of the reason: the program's reliance on the same industry that sold shoddy mortgages during the housing bubble and improperly sped foreclosures afterward. But there was much more. For the definitive explanation of everything else that went wrong, we go to Bloomberg's Hugh Son whose masterpiece released today explains how and why once again the banks - and especially one of them - won, and everyone else lost.

Home Sales Plunge At Fastest Rate In 16 Months

It seems, despite the Fed's efforts to unscamble the treasury complex's eggs, that the rate shock of a taper/no-taper decision has become sticky in the housing market. With the fast money exiting, existing home sales missed expectations for the 4th month in a row - dropping to the lowest annualized number since June (very much against the trend in recent years). This is the biggest month-over-month drop in existing home sales since June 2012 but, of course, NAR has an excuse... "low inventory is holding back sales." So, in other words, they could sell loads more houses if only there were more available for sale (or prices were lower...)...

Goldman: "Without The Boost From Housing, Real GDP Growth Would Fall Below 1% This Year"

Wonder why the Fed and the banks are so desperate to reflate the second housing bubble, to the delight of flippers and taxpayer consequences (deja vu) be damned? Simple: as Goldman points out in a note released last night, "without the boost from housing, real GDP growth would fall below 1% this year." That's the revised GDP by the way, the one that now includes iTunes song sales and underfunded pension plans in the sumtotal. Which in reality means that ex housing, GDP would almost certainly be negative. So the bigger question is what happens to housing which has already seen a shock to the system following the surge in interest rates in the past month and which hobbled both homebuilders and mortgage applications? This is what Goldman sees there: "On house prices, we have started to see the first signs of deceleration and expect a slowdown from the 10%+ pace observed over the past year. Our bottom-up house price model projects 4-5% annual growth rate in the next two years." Alas, since prices moves from top and bottom inflection point never happen in a straight line as everyone rushes to buy, or sell as the case may be, resulting in a skewed and pronounced move, once the reality seeps in that the artificial housing 'recovery' is over, watch what happens when everyone rushes for the door. That goes for GDP as well.