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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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First hous I bought in 1985 I got a 30 year loan for 7% I think. It wasn't great but it was pretty average. So I wonder what happens if 30 yrs go to 7%?? Soon they'll have 100 year loans for 1%. I'm worried that the banksters won't get their bonuses this Christmas.
The plan is probably to legalize all the 10 million illegal and then give them the houses for FREEE. That will support the RE taxes and Walmart, and increase the income tax base. The new illegal normal...then they wil print to the moon.
Don't you worry your pretty little head about that. Yellen has your back.
(ouch)
Yellen will print 200 billion a month in January, just for fun. By April IT will be printing 500 billion a month and gold will be at $35 an ounce and silver will be $1.19 an ounce.
Yellen may print but gold can't go much lower.
The physical must flow or the whole game ends.
If the price drops the East will lap up the last few ounces that fools are parting with.
(GLD is down to 866 tons from 1352 in January.)
Then...new game.
Ah the Amerikan Dream.
Shambles and fucked bitchezzz
To make matters worse, the drop in pending sales is on top of what was already some of the lowest new resident building completions on record. Here's some perspective on housing in America:
From 1968 through 2007 the low bar mark for new residential completions was the year 1982 when we saw only 1,005,500 new residential of any kind completed. Of course, home mortgage rates were at 15% that year so its kind of understandable. We first dropped below 1,000,000 in new residential builds in 2009 when we saw only 794,400 in new residentials completed, followed by 651,700 in 2010, 584,900 in 2011, and 649,200 in 2012. With the decades low mortgage rates of today, if housing isnt' in a depression I don't know what is.
Now adjust for population increase and you'll see how delicious those raw numbers are.
Given the extraordinary increases in price in some US locations owing to a surge of cash buyers, it shouldn't be terribly surprising such a micro-boom would play out when rental returns no longer justify real estate as an investment play.
Whether this Fall slump presages an overall decline in real estate prices and volume is difficult to predict, but what is obvious is that a lot of properties formerly weighing on the market are now taken off by people using cash.
Enthusiasm for real estate advertising has always measurably fallen during the period commencing between Halloween and Thanksgiving over the past 5 years, as we've seen it in our little business. This slump is right on time with that seasonal rhythm. Whether the amplitude of decline is truly scary remains to be seen.
Yet, we just received a letter from the local realtors, asking us if we are interested in selling our home -- mighty strange for this little town in SW Minn.
It's strange, because I live in an apartment and have gotten the same stupid letters. WTF???
Bullish for the S&P chasers, since MOAR is garanteed, until, the "Oh holy Crap" moment comes and the fiat currency goes up in smoke. Tinder is heating up, just need a spark to ignite now. What a show it'll be. Good luck to all. x
I read this and then I go over to Calculated Risk where it's all peaches and sunshine and I have no idea what the hell is going on.
If I'm not mistaken, I believe Bill over at CR came out of the home building business. Developers are perputually optimistic...it's a rose colored glass thing, especially those from Orange County.
I've noticed a good plurality of real estate blogs come out of the LA area. Wackos for sure. Lots of commenters on sites from Yahoo to Craigslist will start posts with "Well my house in Orange County....yada yada" but they seem to be ignoring the insanity around them. Rose-Colored Hollywood glasses indeed.
Optimism, regardless of reality, is all we have left.
When this fucker goes down we will be witness to the most epic fireworks mankind has ever seen. Maybe, just maybe, this period will mark the apex of human hubris. Then again I'm being too optimistic.
It's obvious what needs to be done:
AHA! -- The Affordable Home Act
If renters don't buy, they will be fined...
TalkToLind's tech shop stands ready to build the website on the cheap, for only $998 million! We know BSML and ass.nyet.
Only if TalkToLind can top the campaign contributions of the no-bid winner to the Obamacare website sweepstakes.
If you like your rental unit, you can continue to rent it.
This is still nothing like the oil field bust of the 80s, but there are a lot of for sale signs in this part of Wyoming. I had understood that we had one of the strongest economies after the Dakotas, D.C., and NYC. More Mom and Pops are closing than opening, except for Mexican shops are on the increase. Lucky for them that they are exempted from Obamacare. Thank goodness we have vast deposits of high quality coal that we can rely on to preserve many energy sector jobs. Oh...wait a minute
MR. MORTGAGE I MISS YOU !!!!!!!!!!!!!
One fine day we will be right and rich, thanks to this very thing we complain about now.
I for one am thankful that these fools play the same game over and over, it sorts the sheep out and allows me to do some shearing myself.
Double tap. I'm on the family horse farm y'all. This Country is fucked.
Pray I sell my house. 4th "buyer" inspected today. PRAY. Next time I buy it will be cash.
YES. but you do know deep down, not even that keeps the fraudsters and takers off your back
That's what the Winchester is for....
Here is where all the work on the house should kick in…
Good luck with the sale… and the relocation.
But, since the last lead smelter in the US has been forced to close, you might have a hard time finding ammunition for that Winchester. Hope you have a nice stash hidden in a sunken boat somewhere! ;-)
I love the cartoon that heads up this article! ;-0
http://www.libertyfederation.com/have_we_had_an_endrun_around_the_2nd_amendment
I've been waiting to buy in cash for almost 4 years now. Not going into debt these days, especially since I'll be free from the ball & chain soon.
Hopefully I won't slaughter a banker in the meantime, but in 45 or so days I should be free to move wherever I want and finally start that business that's been itching at me.
Hint: It's housing related. Life is looking ok, patience, Tungsten, patience.
Iridium (I see you also have a metal related name), any reason why you have to sell? Renting is quite terrible.
I'm not saying that housing prices aren't crushing either especially if you're under a lot of debt, but sheer cost of housing is killing our economy.
good luck to all of us. i'm hoping to sell this top also.
Mark Hanson (whoever he is) has been consistently negative on housing recovery & quite wrong in his assesements for at least couple of years, explaining away every uptick in prices & sales as temporary & unsustainable phenomena. Eventually he will get it right but don't take his analysis as a gospel. The simple fact is housing has become overpriced & frothy in many markets just like equities, so buying today is a risky proposition.
Duplicate
Mark is the real deal. I made a fortune following his advice in '07 in front of the banker crash. As a mortgage executive he knew where all the bodies were buried and was not afraid to name names. Glad to see ZH adopting him. Kindred spirits, truth seekers.
"this week's dismal housing industry data:
Sept. Pending Sales... the largest MoM drop since Sept 2001... not 2011... yes, 2001."
does this mean the 45b of mbs the fed is 'buying' a month has gone to less than zero face value?
:)
Housing: Drive through Ohio, Indiana or Michigan.
Hell, Wisconsin, Missouri, most of the South; everywhere in the midwest where there isn't an oil boom is drowning.
Everywhere on the West coast aside from a couple pockets are looking dim, and those pockets haven't collapsed only due to foreign (Chinese) investment. Gotta park those US dollars somewhere.
Related, maybe maybe not...Meth problem growing across the country. It's no longer in isolated pockets. We're going down the way China lost it's footing during the Opium crisis. Either way, junkies aren't going to maintain neighborhoods, work isn't going to get down, but which is the cause and which is the effect?
neither is a cause or an effect of the scenario you paint, they are both merely symptoms of the economic collapse caused by the lack of jobs . Without stable well paying jobs no one can afford a mortgage and certainly the unemployed can not afford to purchase homes outright for cash.
food stamps,housing, consumer debt,unemployment, these are all indicators, ther is no recovery, the depression continues and the MSM continue to deny,lie, and try to say we are in a recovery.
whom to beleive, tv or my own lying eyes? hmmmmm?
Start by throwing away the television. Nothing but lots of advertisements, interrupted by the show now-and-then.
And the shows, holy frikken canoli. I visit friends and relatives; the thing is on continuously, whether people are in the room or not. I catch snippets, or scan up and downt the channels; what I see, hear, and intuit physically scares the schitt outa me.
The cause is the evil bankster impresarios behind Obowel Movement....The effect is Obowel Movement and the Insatiable Mooch and their evil cabal.
this is hype....the gov shutdown killed a LOT of deals. They weren't even processing credit checks or loans.
criminals.
Yes, thats weird. Its almost like you can't do anything anymore without both feet of uncle sam standing right in the middle of it.
I recently attempted to transfer some money between two accounts and it took three days. I asked why it doesn't go immediately, after all it is all cybermoney now. She said all transactions between banks have to go through the Federal Reserve banks now. I almost shit! So any money transfer between banks from Joe Schmoe to Fred Farckle has to go through the Fed. Sounds a little paranoid to me, they have to see every transaction! I'm sure the NSA puts their grubby, beady eyes on it too.
bullshit, wires go through immediatly, ach, over night. your either lying or getting fd over
Been that way for decades, nothing new there. You just never noticed it. One of the many services that the Fed performs for its grateful dead customers.
Dark star crashes, pouring it's light into ashes.
Reason tatters, the forces tear loose from the axis.
Searchlight casting for faults in the clouds of delusion.
Shall we go, you and I while we can
Through the transitive nightfall of diamonds?
Most California real estate is holding steady or continuing to rise, which shouldn't bother me cuz I should abandon state like yesterday before it crashes violently, but as long as I'm still here I might yet buy in if prices fell to reasonable. It's a mystery why prices are so strong. A lot of Chinese money I know but that much, here, now? Or do Bernankebux somehow land in California preferentially? Even the higher rates have barely moved things around here afaik, yet. Party hearty party people, for tomorrow we may diet.
A number of state political systems are infested with pro-union liberals which will tax state residents to financial death. Productive people are fleeing those states and moving to business-friendly lower tax environments.
The San Diego market has been rising for the last 12 months. It's actually at a high enough point to make it attractive to sell at this time. My plan is to leave the state. The increasing illegal population and the lack of political balance in Sacramento has scuffed the shine on this golden state. And you, who have been reading here for more than a year, are still considering staying and buying back in at the dip? Have you considered the new taxes that'll be put upon you? Do you have a plan to compete for food and water amoungst the massively unprepared hoard that resides here?
Yeah, well, call me conflicted, lazy, and old, ready to do the old Slim Pickens as Major "King" Kong bomb ride to perdition.
He may be the anti-Christ, period.
The housing market is like a baby seal that has been clubbed half to death.
Have some humanity and just finish it off quickly.
Methinks when markets are driving up expenses like housing beyond what can be accounted for by wage and commodity price rises or supply constraints - it is a sign of a bubble - irrational exuberace - no?? So what accounts for the bubble market price rises in Cali, Az, NV, Fla??
So what accounts for the bubble market price rises in Cali, Az, NV, Fla??
Cash sales to fleeing Chinese criminals and Chinese government bureaucrats buying high-dollar homes and apartment complexes.
You didn't think Americans would have that kind of money laying around, would you????.
Existing sales are doing fine, especially compared to new home sales which is that the chart above shows. Problem is, existing home sales are still dominated by investment activity. Meaning, of course, that the Fed's pipeline of liquidity by and large is still not reaching main street. If not for student loans, all that newly printed paper would be stuck in banks or trickling out into EBT sales only.
This only means moar QE, so BTFD! Bad news is good news!
Until it isn't. All bubbles are subject to gravity (a countervaling force) the difference between economics and reality, is in the real world everything dies and nothing is infinite on a finite world except gullibility.
So the fed paints the dream of an endless bailout and the sleeping zombies beleive until they awaken. You can make money dreaming but what happens when you wake up and find it was all dream bucks?
timing is everything and if you can't afford to lose don't play the game.
Housing bubble #2 is set to collapse at any moment.
The Fed has created many bubbles (in selected areas, it's very frothy). All bubbles eventually collapse.
In my local paper the Tax man is worried. He said that housing prices have declined by 2% (heh) and rates will have to be increased to make up the difference. Who'd have thunk it. The people in the county have to tighten there belts but the City and County can just keep spending like it's 1999.
Noticed this as well. Incomes are going down and the counties in various areas (pro government union) want to maintain spending levels, so they keep raising taxes.
People and businesses leave. It's the only thing that forces the bloated bureaucratic governments to cut. Look at Detroit.
It's like this in many parts of central/southern NJ but conviently Superstorm Sandy has enabled pushing off the day of reckoning. Residents got an extra year of extended UC meanwhile there is tons of shoddy work being done by out of state contractors.
Game Over! Dollar Dead! Gold $7000 (Part 1)
Game Over! Dollar Dead! Gold $7000 (Part 2)
Game Over! Dollar Dead! Gold $7000 (Part 3)
Enjoy
ack.. this is totally depressing.. time to get shitfaced.. (again)
Very cool !!! The voice of doom reading Jim Willie !!!
This is all normal and to be expected. Baby boomers are in retirement mode now. The century plus immigration era ended. Housing as a driver of the economy is not what it used to be, nor what it is expected to be when looking in the rearview mirror.
Dozens of empty houses "For Sale" where I live. This does not include the massive Shadow Inventory the banks hold back. My friend lives in Houston and has not paid his mortgage in 14 months...he's still there and no eviction notice ever received. Thi sjives with the ZH article the other day which stated banks are not eviciting in Houston, LA and perhaps many other places....people living rent free! Booyaaah for them!
The Shadow Inventory has to be Massive.
This is how u get your house for free. buy it, then stop making payments. As long as the FED is buying MBS, the banks are laughing since the FED holds the toxic side of the trade, and so there is no obligation, no pressure, no incentive for the defaulting buyer to pay, and no incentive for the banks to ensure that he pays. Its more cost efficient to ignore the default - and only until prices rise to make it worthwhile for banks to foreclose (demand), will there be any pressure to evict the defaulter.
True, but you will trash your credit score/rating. And since you were able to get a mortgage in the first place, you probably had good credit, so this plan may work but is it worth it?
I hate to interrupt the doomer porn wank fest, but the shadow inventory that needs to clear is not as bad as a lot of people make it out to be. The broad problem is that many people (including juristic people) refuse to accept the basic fact that a huge number of these properties are NEVER coming on the market. The land beneath them may come back on the market (if Uncle Sam starts handing out tax incentives for demolition), but the structures are unsalvageable, and the banks can hold the properties on their balance in effort to maintain a facade of solvency far longer than the facades will survive on an unmaintained property.
Even before 2001, go to your favorite search engine an plug in "abandoned Bangkok" -- Tom Yum Goong disease (the real estate bust associated with the Asian Financial Crisis) struck 15 years ago, followed by the BRICS boom, followed by the bust from Goldman Sachs' Shitty Deals, followed by the current Asian boom. Like a cockroach in a post-nuclear apocalypse -- that "shadow inventory" has survived it all... So you might as well embrace your abandoned "neighbor" it's probably not moving any time soon.
you've made a lot of sweeping claims without presenting numbers?
http://lmgtfy.com/?q=rehabilitation+cost+versus+replacement+cost+of+vaca...
You call that an interruption? It's more like you swung into the doomer porn wank fest on a wrecking ball and started twerking.
damn straight
No story here.
Houses aren't being purchased because:
Past stories here at ZH have"
revealed college graduates, for years; with big loan payments and no jobs
layoffs by the tens of thousands
77% of new jobs since Obummercare the law(heheheh); part time w/no benefits
shadow stats of 22% or greater real unemployment
shadow stats of 15% inflation
less people in workforce by % since the 60's
51% of population receiving 1 gvt check in lieu of work check
wages of today are 60% of the value of wages in 90's
Who the hell can afford to buy a house?
15% inflation? More like horseshit stats. Overall Inflation isn't even half that.
Overall inflation when fuel and food are included is 10%. If you don't use food or fuel, you can eliminate them from the statistics. The rest of us aren't so lucky as we continue to eat and to buy things that are brought by trucks.
How long before Blackstone is bailed out again?
Sounds like it's time for FoodStamp to sign another bill into law that mandates a $10,000 handout, err tax credit, for home debters, err buyers.
How about a "cash for clunkers" style program where the government buys properties from slumlords for bennybux and then bulldozes them and guarantees a new mortgage loan?
THAT won't have any unintended consequences ;)
The reasoning for this dip will be the government shutdown. But since 50% of the deals are all-cash, the shutdown effect was probably smaller than if there were few all-cash deals. Prices will be manipulated higher. We're gonna need a bigger bubble folks. And you'll get one.
The attempt to create "wealth effect" consumer spending via another housing bubble is simply another desperate Federal Reserve attempt to influence the US economy to the up side. It is fucking laughable at best and criminal market manipulation at worst. The fucking Fed just can't stop their bubble blowing. It is what they do.
We know from simple math that as average people lose income and job security, their ability to bid up house prices decline. I say that the figures are in that prove US consumers are in an income stagnation or decline and their job security [out side of government jobs] is declining.
There are some fools out there who can play the bidding war housing game. These tend to be the 1%. A few upper middle class 1% wanna be's are playing too. BUT, all in all, there is NOT the income growth needed to fuel hous price inflation. Even the Fed fuckheads probably know this, but as confirmed bubble blowers, they know nothing else. It is habit that drives them, not rational economic policies.
There IS income GROWTH in CHINA. And they are BUYING. Sit back and enjoy. Pass the popcorn.
Does this guy Mark Hanson have a good track record for making these calls?
IDK. However, we do know that the ObamaTax will be taking a couple hundred dollars or more a month extra out of many people's monthly budgets.
There was an article that came out a few months ago regarding a survey that said 3/4ths of the US households live paycheck to paycheck and 46% had $800 or less in savings. Sorry don't have a link.
When those asteroids collide, it could make a lot of noise. It won't make for a lot of home sales, new or otherwise.
Woke up this morning to almost an inch of water on the floor of our bedroom in our Queens garden apt....This is the second time in 6 months. According to upstairs neighbors has been ongoing issue for years.
We're in NYC on one last contract....swore we would never come back after leaving in 2000 for the midwest....central MO to be more precise.
Renting out couple SFHs there.... 50s/60s built small ranch homes.....So I kinda get both sides of the picture. Those houses have been the best investment I ever made....built right with good materials and I maintain them as if I was living there myself. Bought them with dotcom $ and never looked back. I got lucky....don't plan on ever selling.
Now I'm in a 6 family apt bldg in a nice Queens nabe....used to be 3 floor duplex....this was worth around $500K ten years ago....likely double that now.....and the stupid Iranian fuck that owns the building can't even be bothered to deal with a water leak that could DESTROY his income property....
When we leave here in 3 years we are building on some land around Holland, MI. A small ICF ranch home with luxe finishes.....I will never buy another pre-existing property again....You just don't know what you're getting these days imho....
My point....I don't really know....Fuck stupid landlords that dont take care of their shit! I made it clear that not a penny of rent will be paid until the leaks are fixed....he is really fucking around with the wrong mofo....Grrr...LOL