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