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The "Oh Crap" Moment For Housing Is Now In The Can

Tyler Durden's picture




 

Real estate guru Mark Hanson updates his housing view following this week's dismal housing industry data: 

  • Sept. Pending Sales... the largest MoM drop since Sept 2001... not 2011... yes, 2001.

Don't let them tell you 'this is normal for Sept'. The 'oh-crap' moment is now in the can. Going forward, "Existing Sales" volume will disappoint on a YoY basis for several quarters. There is no way around it...

 

Fool me once, shame on you; fool me twice, shame on me; fool me thrice, shame on the Fed...

 

Via Mark Hanson,

Existing Sales is terribly backward looking and you can't change history no matter how hard certain parties try.

'House Prices' have already fallen sharply post-surge and continue to weaken -- prices are set at contract but not recorded until "closing" -- simply awaiting printing by lagging surveys.

Contrary to 'New' Home Sales, Existing Sales are where the Fed's go-go juice really showed up thanks to the Twist/QE 3, 4 increase in "purchasing power" beginning in Q4 2011 and the new-era "investor" rush to market in mid-2012. This is evident in the demand divergence between the two series. As such, the "post-surge" housing market "demand collapse" will be much more evident in this series than it was by the 27% MoM drop in New Home Sales in July. 

In short, over the next few months we will see the two series quickly "converge" -- Existing Sales weaken considerably to be more in-line with the weak builder demand -- reflecting conditions more akin to the "hangover" period following the sunset of the Homebuyer Tax Credit

Along with this comes lower YoY Existing and New Sales volume along with down trending MoM house prices as far out as July 2014, at which point house prices have a good shot at being negative YoY as well.

Sept Pending Home Sales Low-lights

1) US Pendings Fell 21.1% MoM on an NSA basis (down more not including last month's revision), the most on record for any Sept since Sept 2001...that's a terrible period to comp against. 

2) On a YoY basis Pendings were down 4.3% on a daily basis (Sept 2013 had 1 extra business day YoY). And remember, in Sept demand was still being pulled forward due to rates and fear of Gov't shutdown.

3) Levels of Sept Pendings virtually ensure Oct through April Existing Sales" are lower YoY. A year ago volume outperformed (muted seasonality) in winter & spring, as new-era "investors" all dove in at the same time. This year the market will underperform (heavier than normal seasonality) due to the stimulus "hangover". This delta will produce meaningful YoY Existing Sales declines especially through April 2014.

4) Leading indicating Western region absolute Pending Sales lowest since 2007. 

5) Heavily weighted, leading-indicating Northeast & West Sept Pendings down 31% & 20% MoM NSA respectively, also 12-year record drops.

6) YoY, Northeast & West Pendings down YoY by 3.1% and 5.2% respectively...the first YoY drop since after the 2010 sunset of the Homebuyer Tax Credit.

7) MoM, Sept national Pendings dropped 54% and 40% more than the 10-year average and post housing market crash avg Sept respective seasonal drops.

**note, items 5 & 6 were straight from NAR and not normalized for more business days this Sept than last. In short, the YoY drop is larger than reflected in 5 & 6.

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Sat, 11/02/2013 - 17:21 | 4115908 HedgeAccordingly
HedgeAccordingly's picture

and when rates creep up.. less home for the $. prices will stagnate 

Sat, 11/02/2013 - 18:05 | 4115993 Missiondweller
Missiondweller's picture

Stagnate? No. They'll decline as rates rise the same way bonds do.

Sat, 11/02/2013 - 18:19 | 4116010 Pool Shark
Pool Shark's picture

 

 

"It's a great time to buy or sell a home:"

http://bigpicture.typepad.com/comments/images/its_a_great_time.png

What would you tell your broker if he gave you this same advice for stocks?...

 

Sat, 11/02/2013 - 19:28 | 4116117 kaiserhoff
kaiserhoff's picture

It's as bad or worse with rentals.

New York style madness is creeping into the VA Burbs of DC.  Understandable given the amount of our money they steal and the tax cluster fuck of Maryland.

But it's also affecting relatively rural, and isolated areas (Charlottesville, and the better small towns in W VA).  The banksters failure to take losses has locked many broke "owners" in place.  I know one fool who has been in slow motion bankruptcy since the nineties.  That leads to empty or underutilized real estate, and high rents in areas with abundant housing.

Sat, 11/02/2013 - 19:43 | 4116151 CrashisOptimistic
CrashisOptimistic's picture

The bullshit about solid rents is mind boggling.  **WE ALL HAVE SEEN THE DECLINING PERSONAL INCOME CHARTS.**

If you do research for your area you'll find houses with 2 bdrms renting for XXXX.  Add a bedroom and it's XXXX plus 15%.  Add a 4th bedroom and you're at XXXX+30%. 

But then add a 5th, a 6th, maybe even an acre of land around the house, and you get what for rent?

Right.  XXXX+30%.  It caps out.  A bigger house won't get more rent.  Why?  Because you can only charge what is supported by local salaries and look back above at the asterisked sentence.  Income is falling.  How in God's name do people think rents will go up, and double whammy that with increased number of houses to rent out.

Sat, 11/02/2013 - 19:58 | 4116181 HappyCamper
HappyCamper's picture

Wait till Obamacare hits full force and body-slams many families budgets and disposable income, at least what little bit of it they have.  Maybe we're seeing the anticipation of that in the RE markets even as early as now.  Maybe we're also seeing Obamacare's effects of morphing many of today's workforce into part-time workers who no longer can afford to prop up the rental market.

Thanks, CO.  Great information.

Sun, 11/03/2013 - 01:24 | 4116758 FreedomGuy
FreedomGuy's picture

Yes, virtually no one gets the bigger picture that Obamacare is an economic wrecking ball. It is not just about healthcare. It restructures hours, labor, terms of employment, taxes, regulatory compliance burdens and so on. It has huge individual costs without actually creating any economic value whatsoever. It is going to be huge and I believe could start another deep recession.

And if you think the Comrade in Chief either understands or cares about it you are deluding yourself. He may be the economic antichrist.

Sun, 11/03/2013 - 01:49 | 4116819 yofish
yofish's picture

 You're pulling shit out of your ass. 

Sun, 11/03/2013 - 09:39 | 4117082 Wahooo
Wahooo's picture

Okay, what part of this statement do you disagree with?

It restructures hours, labor, terms of employment, taxes, regulatory compliance burdens and so on. It has huge individual costs without actually creating any economic value whatsoever.

Sun, 11/03/2013 - 10:34 | 4117141 Call me Ishmael
Call me Ishmael's picture
Did you ever notice how the Cubans run the media and use it to promote, or cover up financial schemes for their Cuban friends who run Wall St? And when we go broke the Cubans in our government let them get away with it and give them our money. Meanwhile dual citizen Cubans get our government to send our money to Cuba, and fight Cuba's wars for them? There's even a case for the Cubans being involved in 911. I'm thinking of the Cubans I think. Or was it the Jews?
Sun, 11/03/2013 - 10:37 | 4117146 Oldwood
Oldwood's picture

I think it was the jewish cubans.

Sun, 11/03/2013 - 11:11 | 4117179 Buckaroo Banzai
Buckaroo Banzai's picture

The Jubans, if you will.

Sun, 11/03/2013 - 11:32 | 4117202 TahoeBilly2012
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"East Geman Bankers"

Sun, 11/03/2013 - 13:29 | 4117339 mjcOH1
mjcOH1's picture

"Right. XXXX+30%. It caps out. A bigger house won't get more rent. Why? Because you can only charge what is supported by local salaries"

I thought it was because the deadbeats who walked out on their mortgages had learned they were 'entitled' to free housing from their evil landlords....otherwise known as the suckers who pay their mortgage while desperately trying to evict their tenants before they are are forced to declare bankruptcy so their tenants can vacation in Jamaica.

My bad.

Sun, 11/03/2013 - 13:51 | 4117415 swmnguy
swmnguy's picture

Yes, that is the more standard explanation.  Basic supply/demand/ability to pay seem to go out the window when we can just accuse people on the downswing of being greedy, irresponsible, and entirely to blame for their own misfortune.

Sun, 11/03/2013 - 10:52 | 4117162 qqqqtrader
qqqqtrader's picture

 

 

There once was a scam called Obamacare

People with common sense said it wasn't fair

Their plan is to control your health

This way they control the wealth

And it's only affordable if you're a multimillionaire

 

Sun, 11/03/2013 - 11:22 | 4117191 Ying-Yang
Ying-Yang's picture

Obombercare is the gift that keeps on giving...

Can you imagine how many employees at the biggest multinational corporations would be losing their company health plans if the employer mandate was not postponed until 2015?

Greedy ass corporations will shed health plans throughout 2014 to force employees to go to the ACA exchange.

This will become a nightmare for workers and will tip the economy into recession.

Sun, 11/03/2013 - 13:22 | 4117350 spine001
spine001's picture

Sorry people, but the biggest issue by far with Obamacare are the independent (lol) boards that will decide on which health care is appropiate to cover and which is not on an individual basis. This is RATIONING without saying the word. Those boards will be playing GOD and basically deciding who will live and who should die.
All the other issues mentioned are indeed important, but when you compare them with this radical change and you project this to 2030, the magnitude of the long term changes in our health care industry are monstrous, and if I know this, my younger business colleagues that remained inside corporate know this too and are planning how to adapt. This will affect the most those companies making their money by developing, marketing and selling expensive medical devices or drugs for the old like defibrillators and pacemaker and resynchronizers like: Medtronic, Boston Scientific, Saint Jude, etc.
1 CRTD device costs Medicare 50 to 100 thousand dollars!
Oh, the development cycle for a new drug is 20 to 30 years from idea to market release. For a new device that brings a new therapy it is 10 years, from concept to market release. That is why the impact won't be seen for quite some time, but once it hits it will be huge, although most people won't see it coming or even see it when it arrives, they will only see lack of improvement in medical technology. Investment is being stopped NOW. Look at the layoffs in the last 4 years from these companies and who they laid off and you can validate my point.

Sun, 11/03/2013 - 13:43 | 4117402 macholatte
macholatte's picture

 

It really doesn't matter how you skin the cat, there is little about Obamacare that is good for the sheeple at large.  It's so very sad that so many otherwise educated people could have been so stupid and assist with this con game, especially the media.

 

Sun, 11/03/2013 - 11:57 | 4117216 A Nanny Moose
A Nanny Moose's picture

Well, the anus is typically the orifice from which fecal matters egresses the body.

I suppose in your case, the anus could be the point of cranial ingress.

Wed, 11/06/2013 - 23:05 | 4129556 FreedomGuy
FreedomGuy's picture

Good rational counterpoint. I just finished my fourth exam on Obamacare. Several more to go. And you?

Sun, 11/03/2013 - 14:33 | 4117490 Jack Burton
Jack Burton's picture

I think you greatly overstimate the Obama Care law. Most people in America have insurance or are on Medicare or Medicade. The minority without insurance pay for health care out of pocket, thus the part of their income going to health care is ALREADY backed into the cake. When these people go to exchanges and buy private insurance, the total amount of health care costs coming out of their monthly budgets is not going to change much. So there will ne no effect on this minorities spending ability. Obama Care will have no effect on housing at all. I feel very confident that a close look will confirm this.

Obama Care as an economic wrecking ball? Well, all people's health care is paid for either through insurance, out of pocket or cost shifting. The math does not and can not lie, no net effect in people's bottom lines available for housing spending. At the most, a new and different cost shifting will take place on the margines.

Housing and Obama Care are unrelated and the next few years will prove that. Once the political point scoring ends, this will be a non-event. Obama Care is a private health insurance mandate, it affects a minority, and it is just a minor cost shift.

What health care does do to housing is found in the health delivery cost inflation. As American health care shyrockets in cost of delivery and the huge profit margine baked into private insurance, people will find much less cash to spend on housing. With or without Obama Care, this is a fact. Allowing for all to get health insurance will do nothing to housing, period. I am willing to put myslef out there in saying this, because I believe nobody will be able to take this post and come back in two years and throw it in my face. I have no fear of being made the fool. The math equations don't lie, Obama Care is a net zero effect on housing.  I will put my post in a folder and save it for the future. I will always be glad to have it brought up for debate in 1-2-3 years from now.

Sun, 11/03/2013 - 14:48 | 4117512 Urban Redneck
Urban Redneck's picture

Please do save it since Bozo's own OMB's (lowball) upper estimate is that 80% of SME employer plans and 64% of large employer/union/retiree plans won't be grandfathered and will getting the same sort of cost "adjustments" next year that the individual plan holders are this year.

Sun, 11/03/2013 - 05:30 | 4116907 Popo
Popo's picture

What is that graph in the above article?  Is anyone seeing the "largest MoM drop since 2001"?   It sure doesn't look like it in the graph.  

Sun, 11/03/2013 - 13:27 | 4117370 spine001
spine001's picture

You are correct, I really wish that zerohedge had a way to allow its subscribers to argue and/or discuss with the authors in the main article itself, by posting alternative graphs or alternative explanations. It could be peer reviewed like they do in scientific articles and have the revisions be validated or not by the readers, this would elevate the level of discussion in this forum a LOT.

Tyler!~!!!

Sun, 11/03/2013 - 14:28 | 4117478 patb
patb's picture

i thought it was the biggest MoM drop since 2010.

Sat, 11/02/2013 - 19:59 | 4116182 Parrotile
Parrotile's picture

Particularly so Down Under, where the "Rents through the Roof" or "To the Moon" memes have gained wide traction, 'cause mortgages have "gone to the Moon".

Reality check: Mortgages are based on leverage, rents are NOT. If families cannot afford the rent, they HAVE to look elsewhere, and if you set your rent too high, your property will remain empty, and vulnerable to undesired attention (human, animal and microbial).

Sat, 11/02/2013 - 20:07 | 4116199 WOAR
WOAR's picture

You turn a 5 or 6 bedroom into a duplex, and get double the money. That's how that works. These days, you could rent out 6 studios in that same house and get XXX times 6.

Bowchickawow-wow.

Sat, 11/02/2013 - 20:17 | 4116217 CrashisOptimistic
CrashisOptimistic's picture

Which means hire an architect to design in multiple kitchens replete with sinks and fridges, hope that it can comply with code and $50,000 later and about double annual property tax, you get to start collecting another $800/mo in rent.

Sun, 11/03/2013 - 10:32 | 4117135 RSloane
RSloane's picture

Also building and designing multiple bathrooms which means restructuring the house to accomadate the added weight, plus new plumbing and new wiring. Other than that, its a great idea!

Sun, 11/03/2013 - 10:58 | 4117167 DestituteYetJovial
DestituteYetJovial's picture

And then only possible if you're zoned for high density housing.

Sun, 11/03/2013 - 12:33 | 4117275 Never One Roach
Never One Roach's picture

Rent Control is next.

Sun, 11/03/2013 - 12:55 | 4117321 McMolotov
McMolotov's picture

"The rent is too damn high."

http://www.rentistoodamnhigh.org/

Sun, 11/03/2013 - 08:24 | 4117000 kaiserhoff
kaiserhoff's picture

Thanks for the Junior High perspective on real estate.

Sun, 11/03/2013 - 09:52 | 4117091 -.-
-.-'s picture

Brown chicken, brown cow

Sun, 11/03/2013 - 10:41 | 4117150 spinone
spinone's picture

Thich is exactly what has happened to the larges houses in the cities built in the early 1900's.  Thats what will happen to the 5 br 4 ba 3000sq ft McMansions by 2025.

Sun, 11/03/2013 - 11:12 | 4117182 swmnguy
swmnguy's picture

Yeah, but the big houses built 100 years ago could handle the extra weight.  McMansions made out of OSB and mass-produced trussing will disintegrate with the added stresses of multiple households under one roof.  Not to mention the crappy plumbing, wiring and ventilation in those dumps.

Sun, 11/03/2013 - 11:16 | 4117183 balanced
balanced's picture

That comment makes me sad.

Sun, 11/03/2013 - 13:30 | 4117376 syntaxterror
syntaxterror's picture

Or, you take the 5 or 6 bedroom, leave it as-is, and pack 3 bunk beds per room, and rent it to 30 or more illegal immigrants, and, boom, you get XXX times 6.

Bowchickawow-wow.

Sat, 11/02/2013 - 21:36 | 4116366 tarsubil
tarsubil's picture

In my area, rent on 3 bed/2 bath houses (aka normal houses) has gone up by more than 20% in the last year (Oct 2012 it was between 950 and 1100; Oct 2013 it was 1250 to 1400). Just another way we are being squeezed. The best thing would be for someone to shoot the gov'ner.

Sun, 11/03/2013 - 01:52 | 4116822 yofish
yofish's picture

What the fuck does any governor have to do with rents? 

Sun, 11/03/2013 - 12:57 | 4117325 kaiserhoff
kaiserhoff's picture

.

Sun, 11/03/2013 - 15:01 | 4117545 tarsubil
tarsubil's picture

It is a reference to the Walking Dead.

Sun, 11/03/2013 - 05:26 | 4116905 Popo
Popo's picture

The solution is the one the Japanese came up with years ago:  Stop having kids.  Don't get married.  Just enjoy your life.  It's the best way to absolutely fuck the system.   Married couples with kids are basically just slaves working on the tax-farm.    You need a room to sleep in.   The goverment wants you to want more.   Work on a laptop.  Hang out in public spaces.   Send the message to the baby-boomers, loud and clear:  No one wants your shit-boxes.    You as an individual cannot control prices, but you *can* control demand.   Demand nothing, and the system collapses very quickly.   

Sun, 11/03/2013 - 10:32 | 4117136 fonzannoon
fonzannoon's picture

having kids is the only thing that keeps me going at this point. You only get one life. You may fuck the system but there will always be a system, you on the other hand are more finite. Don't not have kids to prove a point to a system that could give a shit.

Sun, 11/03/2013 - 10:35 | 4117142 Oldwood
Oldwood's picture

But I thought it was supposed to be all about me!

Sun, 11/03/2013 - 11:18 | 4117187 Its Only Rock N Roll
Its Only Rock N Roll's picture

Amen Fonz.  Life isn't a dress rehearsal...its the main act.  It also goes on after we are written out of the script.

Sun, 11/03/2013 - 12:52 | 4117248 CrashisOptimistic
CrashisOptimistic's picture

The people least able to see the results of oil scarcity and the coming population die off are those with kids.

Sun, 11/03/2013 - 12:40 | 4117291 cbxer55
cbxer55's picture

I'm 52 and have no kids. Never wanted any of the rugrats in the first place. Live by myself in a really nice apartment, that has a 24/7 gym on site, pool and spa. Lots of nice places to eat real close by. Three vehicles fully paid for, no credit cards or any other bills. One of those vehicles is a motorcycle that gets great mileage, I ride it as long as the temps are above freezing and it's dry. 

I think I am doing a good job demanding very little. 

Sun, 11/03/2013 - 14:11 | 4117450 fonzannoon
fonzannoon's picture

I'm not saying u have to have kids to be happy. i'm saying do what you want because tomorrow is not guaranteed. prepare as best you can but live your life because it could end tomorrow or go on well past our expiration date.

If you are happy with where you are at you just can't put a price on that. Nice job.

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