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What Bubble: Average New Home Sale Price Rises To All Time High
All one can say following the latest New Home Sales data release is that "baffle with BS" mode is fully engaged. First, following the release of the "revised" seasonally adjusted New Home Sales data, we learned that homebuilders somehow sold an extra 88 thousand annualized homes in the months of September, October and November: the same months when the sellside and economist crew was screaming home sales would plunge due to the government shutdown... just so there is a buffer when sales dropped and/or disappointed (because apparently nobody buys houses when the government isn't around). Instead what happened was a massive 18% jump in New Home Sales in the month of October, when the US government was shut down for over half the month, and the final print was 474K sales, the highest since July 2007. So much for that particular red herring.
But where things get outright bizarre, is when one looks at the series showing the average sales price for New Homes. Keep in mind that an hour ago we showed that mortgage applications have tumbled to a fresh 13 year low, while refi apps slid to the lowest in 5 years. So what happened to the average new home sales price in the month of November? Well, it just hit a new all time high! Why, because why it can.
And... #Ref!
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Mission accomplished.
[Insert obligatory picture of Bush here]
Meantime 10 year is creeping up towards 3%
Makes sense though - the middle-class cant afford to buy houses anymore and arent (thus the drop in mortgage applications) but the rich can still buy (thus the increase in avg price).
The middle class is being destroyed and thats what the data is showing...
This is more the 1 Percent buying their NYC mansion apartments..while the rest of us cant afford one....skewing the number....you are not building tract homes in Vegas anymore....or in Brighton Colorado either...but a new highrise in Manhatten is a good bet
Never before has there been such a concerted, determined effort to reflate a bubble than the Fed's and US Government's effort to reflate Housing Bubble 2.0. As a bonus, they've also reflated the stock market bubble, and blown countless new bubbles in other speculative assets.
Congrats in accomplishing your goal!
The 0.00001% savings yield is pushing people to do some strange [aka, crazy] stuff.
I keep hearing a ticking sound somewhere behind US....
Anecdotally, there are many people who can't afford to sell their homes, 10% cost to sell on a 400k home is too much money. I think real-estate is going to go through some changes.
IPA is right. Most buyers are so excited/b lind they forget the average American moves every 4-5 years for jobs, family, etc and they have to fork out 10% in sales costs [at least]. Since most buyers put 3.5% down [or less] they are in a hole from the start.
that's bullshit,...... in 22 years of following California real-estate (the house i bought in 1991 was upside down for 9 years and the house the X bought was only "up" for 2) i've only seen 4-5 years of NOT being upside down.....AND my parents have been in the same house for 40 years.
i suggest you turn OFF the TV.
McMansions being replaced by McCastles... kind of like the new White Castle for the New Feudal Masters.
i must agree with you, there is no fucking way i can afford a $500K starter home in a decent area in "el norte"
Interesting link and info. Thanks.
Now... just don't tune in to the BS...
I guess they must be anticipating the failure of NBC, CBS, CNN, and ABC. Considering how well those arms of the CIA have been doing their job at the propaganda game, there has been no need for a redundant effort from the State dept.
more foreclosure fodder for the banks. after the next bubble burst or collapse they can go in and grab it back, sell at auction to the shell investment companies they own then turn around and rent it back to people for more than the mortgage used to be. why wait around 30 years for peanuts in amoritization when you can simply steal it?
And they won't wait 3-5 years for the foreclosure process next time either. They learned from their robo-signing mistake and have fixed it for next time. This time the conversion to rentals will be Fast & Furious to "save" the people from being "thrown into the streets". They'll take the property and force you into a rental slum for your "protection". Those that can't afford their slum will be relocated to a FEMA camp. The new Potter Land. Just watch.
How nobody links this with the rising oil production in the US is beyond me. US is going to peak again real soon and that will be the end of the petrodollar. :)
please explain
To anyone who still is mad/sane enough to listen to a bearish statement: Watch out below! ;-)
New homes are the new gold...
But seriously I guess most of the buyers are cash buyers or with serious down payment....thanks to the market run and qe
At least these people feel that they can enjoy their fiat in more real form
Money are illusion after all:)
This is the new world we are livin' in. People convinced rising home prices still good for economy. People unaware that when HF's & PE own so much RE, it's an artificial subsidy to the price. Not only does it lock a new form of price volatility into the asset class, it also prices out the next generation. Sad in itself, but keep in mind this is a bigger issue than face value: No tax deductions, no ability to build long term wealth thru a forced savings + perhaps even more important, but way harder to measure, no feeling of community + responsibility that goes along with home ownership. More offshoots of a Federal Reserve gone wild.
God bless Obama. Under his leadership US has turned the ship around. You Amercans are so lucky to have such a great commader in chief. now the whole world can breathe the sigh of relief... the desaster has been averted. God Bless America. God Bless Bernanke.
Sure, Obama the messiah (sarc). Bow down to the anointed one.
Only the rich have money and they are the only ones building homes so of course the price of new homes is going to go up. Duh.
tarsubil-agree completely
its not just building new, its resales in the sweet spot.not too hi not too low in prices
there are too many metrics issued too often that we cannot rely on.
Why buy used when you can buy new for the same price or less?
<This distortion can only exist in a severely manipulated economy.>
The 'new houses' are built so fast and many with crappy material they start to fall apart at the 5 year mark my general contractor neighbor tells me.
Be careful!
I hate Blackrock now. Amazing that marketers do not know where to draw the line and end up hurting their brand more than helping.
Blackrock will be Lehman in the next 10 years, maybe even sooner.
I see their ads more and more, hell they just even sponsored a god damned college college basketball game.
Usually a sign they are getting big enough to fail magnificently.
I wish mine was where the guy I bought from bought at.... in the DC area too....quick I better check Zillow and sell! Still off at least 20% from brand new price.
It actually makes sense:
Non-transitory populus mostly unwilling to move.
Baby-boomer lock down.
Nesting.
Mortgage scandal settlements leading to end of foreclouse debacle.
Bank owned inventory hoarding.
Ghost building by the majors.
They've ripped this page from the DeBeers playbook.
Get your inventory on the cheap, lock it down and hoard it, market it as a "necessity" and sell it at a premium.
"sell it at a premium"
To who? Each other? The tooth fairy?
They don't intend to sell it, only "keep it in the family". The middle class home is becoming the middle class cell for the serfs. Those that the new Feudal Kings need will get the best properties... just like the Lords of old. The pecking order goes down from there. Those that can't even qualify as a serf will be relocated to the FEMA camps known as Potter Land.
located right next to Potter's field.
Blood diamonds - first DeBeers tried to buy them up to keep off of market, then they found it was more profitable to ban them.
Blackrock and the like need moar illegal immigrants to become legal, then obtain affirmatice action mortgages for them, then Blackrock's "investment" becomes quite profitable.
The median sales price of a home here in the Palm Springs area has jumped 80% in a year despite sales down over 20%. The builders that have tiptoed back in the market know the investors have taken up all the low priced inventory (under $300K) and aren't selling anything much under $400K.
Print it....and they will come
Let's all pile into the R/E market. US 10Y [ 2.970 ] 2.929 2.972 2.922 0.041 1.40% 15:55:19 <sarc>
Greenspan said, its not a bubble... and if it is a bubble, it is contained, and islolated.
Here's a real bargain for you to invest in: http://www.redfin.com/CA/San-Diego/4873-Del-Monte-Ave-92107/home/5332060.
To summarize: Crappy neighborhood, high crime, 1400 sq. ft. on a teensy little lot offered at only $1,195,000.
Borrow now, invest now, get rich soon.
Nasdaq is heading for 5k. 21.6% more to go before the all time high is eclipsed.
Agree 100%
It's a slam dunk at some point this year
American Feudalism.
Sounds like a good AMC script. After a few years it will be "American Feudalism Meets The Walking Dead".
In my neck of the woods, homebuilders have managed to convince the cities to increase the density of the projects (i.e. make the homes smaller and lot size smaller.) The home builder wins, because they can continue selling these new cracker jack box homes cheaper than existing homes, the city wins because they can increase their tax rolls, but the consumer loses because are once again paying more for less.
This is basically the same concept as reducing the size of the potato chip bag, while charging the same amount of money...or more.
Here in the NY tri-state area they are back to tearing down houses left and right and replacing them with McMasions
They can't build them fast enough...buy for $500K, tear-down, build new 4,000 sq footer, sell for $1.2 million
Wash, rinse, repeat
Buyers: pretty much any one in the medical industry, finance douches, and scum-bag state employed unions fukers (read: overpaid cops & administrators)
What county do you live i'm in Monmouth .....
I live in Spring Lake and teardowns used to fetch 750K and a nice new home would go on mkt for about 1.5M, I was shocked to see a 900K teardown go on the mkt for 2.2M, doesn't mean the builder will actually get 2.2M but thats a hefty jump over the 1.5M price level for new homes in the same block.900K is still off 2005/6 peak when every home, including lots of teardowns, sold over $1M but there definitely seems to be a squeeze on for buildable lots.
Busybody neighbors used to bitch about beautiful old homes being torn down in 2005/6 era, nobody is bitchin now
The mayor here who, of course, had big money support during his campaign is a developer and the stupid sheep voted for him. Sheesh...
"Some rich men came and raped the land,
Nobody caught 'em
Put up a bunch of ugly boxes, and Jesus,
people bought 'em"
If TWTR and FB can rise 50% a month, why cannot home prices? Suspend all disbelief and watch the Fed conjure up prosperity. Don't blame them if they do it exclusively for their bankster buddies. Some prosperity may trickle down if you if you wish hard enough and click your ruby slippers.
Why?
Because only people with lots of freshly printed curerency are paying up for real estate.
I bet the latest LTV is at a record as well
I really hope the DOW and S&P rises to infinity (and makes some of my trader buddies money in the process).
That way when it falls, the audible of the LOL out of my mouth will also rise to the level of infinity.
Have been a contractor for thirty years. I believe increase in price is due to inflation. Most materials used in a new home continually increase which obviously gets passed down to sell price. For instance Andersen windows just increased all products 4-6% for year 2014 . Our profit margins are not increasing same rate as new home prices are. The disparity between a new home and used home has never been greater somethings gotta give. Wish I could afford a 17 day Hawaian vacation.
Not all of it or even a large percentage of it where I live. I think that here it's due to pent-up demand from those who foolishly believe the crisis is over and institutional buyers buying up rental properties.
Just how many rich Chinese, all cash, earn a free green card buyers are out there?
Lots and lots evidently.
The Japanese thought the same way in the 80's. That didn't work out too good for them.
i was following a "homepath" property that couldn't sell for $150,000 back in July. Bank foreclosed, sat on it for a few months and listed it for $210,000. some idiot bought it after their real estate agent convinced them it was a lifetime opportunity. i am still speechless that the fools never did any research on the property and relied on the "honesty" of the agent.
10 year at 2.98 and rising
http://www.marketwatch.com/investing/bond/10_year/charts
3.00 is still the "line of death", right?
Manipulated inventory (at great expense
to everyone else: real neg returns/savings,
paying for loss sharing when really those
who put 5%/10% down should have non-recourse
and the lenders should have skin in the game)
and an index that purportedly weighs more
post crash round turn purchase and sale.
http://pages.citebite.com/d1i8e3n1t3rpv
http://pages.citebite.com/o2c0d2e1j0mlb
Some who SOLD the bubble chased
Icelandic Krone till they realized
the carry trade was really siphoning
from Japan's recovery to kite a
scheme of marketing in mislabeled
tranches securities based on
unqualified borrowers.
Others chased gold realizing that
the Fed's policy of purchasing the
banks' mortgage bubble would have
to transfer the inflation somewhere
(the Fed wasn't paying market prices,
after all. The market had nothing to
do with it.)
I personally know of a widow who
couldn't see her way to receiving
<1% returns on her safe money from
the house she sold upon her husband's
death for very many years, and so let
herself get talked into elements of
the casino economy.
She progressively lost parts of those
proceeds and now has frozen them
finally in a safe money account,
accepting that <1% and simply waiting
out the charade.
Those who SOLD could've cleared the
market long ago.
This
http://www.businessinsider.com.au//national-foreclosures-decline-in-janu...
is reasonable and desirable where
foreclosures are wanton in legal
process, but banks otherwise should
have skin in the game and the borrowers
should not be tied to their debt
forever.
(Actually, Jurow's talked about a
"mortgage release program" that would
open the floodgates of foreclosures,
but that could only proceed to the
extent the Fed shields the banks
from losses, and, maintaining the
illusion of recovery appears being
a genuine objective.)
http://www.multiurl.com/la/Yearend_2013_Real_Estate_Artificial_Bubble_Bu...
http://www.multiurl.com/ga/8_6_13_Evidence_Of_Illusion_4_Propping_Last_B...
http://www.multiurl.com/la/Key_Elements_Of_Real_Estate_Market_Illusion
http://www.multiurl.com/la/Self_Defeating_And_Profitable_Adversity_Creat...
When rates blipped up in May:
http://www.zerohedge.com/news/2013-05-29/cash-and-tarry-mortgage-applica...
http://www.zerohedge.com/news/2013-12-07/luxury-home-foreclosures-soar-%...
http://pages.citebite.com/a2v3i7h8x1epk
http://www.cnbc.com/id/101215003
http://www.zerohedge.com/news/2013-11-26/realtytrac-institutional-invest...
http://video.cnbc.com/gallery/?play=1&video=3000220508
@:32, "We Hit A Wall, We Hit
A Wall Last Month And Sales
Stopped In This Country And I'd
Like To Know Whether You're
(Robert Shiller) Seeing Anything
Ahead Of These Numbers Which
Indicate The Incredible Decline
In Transactions That Has
Occurred During The Month
Of October."
Jim Cramer, CNBC, 11/26/2013
http://www.caltech.edu/content/what-causes-some-participate-bubble-markets
http://www.doctorhousingbubble.com/california-housing-affordability-one-...
http://video.cnbc.com/gallery/?play=1&video=3000221314
Paying the banks to hold inventory
http://www.cnbc.com/id/101217831
Diana Olick, CNBC,
11/22/2013
11 Million (Cites Zillow)
Underwater Must Sell-Underwater
Amount "Gap Insurance" Now
Available, But Critics Say Don't Be
Afraid And Instead Put The Money
Regularly Into Self-Insuring
(Paying Down Principal.)
NOTE:
Zillow's Estimate Is Based On
Their Selection Of Indices And
Comp's.
(But see the Jurow / Ritholtz
at the top of this comment to
see why Zillow's estimate may
be regarded by some such as
myself as being too low.)
http://www.zerohedge.com/news/2013-11-20/home-sales-plunge-fastest-rate-...
Down arrow for your TMI post.
When using cut and paste, always preview your post. If it looks like yours, paste it into something like Notepad to remove HTML or other formatting, then cut and paste it from there.
i thought i was reading haiku
Big Bubbles. Big, Big, Bubbles....
In the 1990's the FHA financing was dead. It was cheaper and easier to finance through private lenders and use private mortgage insurance than it was to use those soon to be bubblin' blowers: Fannie Mae, and Freddie Mac. Mortgage underwriting was a system that worked. People who didn't qualify didn't get to buy. People who did paid market interest rates (historically around 6-7%). The Gub'ment stepped in and over rode the solid business practices of private industry and replaced it with cheaper, easy to use newly nationalized mortgages brought to you by the Lawrence Welks of the Mortgage Industry (omage to champaigne bubbles here, clever?).
We've been blowing bubbles ever since. Fannie Mae and Freddie Mac are now holding foreclosed homes and leasing them to their section 8 clients while trying to keep the bubbles ever so inflated.
This will not end well. Pray for the Republic.
The fix: 20% down with income, assets checks and mortgage issuer holds it to maturity. Problem solved the "old fashioned" way that WORKED due to proper vetting incentives for the lender and proof of an ability to hold a job and manage finances by the borrower.
You don't really need 20% down to keep the risks reasonable. You just need sound underwriting practices and Mortgage Insurance that is issued at market prices. In the bad old days if a lender's portfolio held too many risky loans the industry would self regulate it back into compliance.
Today, Fannie and Freddie underwrite to achieve political goals. The net result is that private industry has been corupted into a shill for the Feds (kinda like health care under obama/romney cares?). The "administraton", who ever that is on any given election cycle, controls where you live, what you'll pay for it, and what you get to buy. Very East European don't you think?
Teach economics to your children!
Merry Christmas!
the point of this article is statistical bullshit - a very cheap trick. on the other hand, if this represents a trend with high positive correlation with time, the explanation is quite simple....with fewer and fewer people able to afford a home, the remaining buyers are closer and closer to the apex of the economic pyramid....
the average of 0,0,0,0,0,0,0,0,0,1000000 is 100000.
in other words, only the 1% can afford homes and they are not going to buy a cheapass 500k dump.....the lower end of the market disappears and 500k becomes the new low end. what remains is a higher average home price.....same reason sat scores plunge....so many people have been duped into the college racket that sat are diluted whereas compared to 1940 the scores have plummeted....but what does that mean? that americans are dumber and education has failed?
no - it only means you need to look at the composition of the sample population or the whole thing if you like. of course usa education is a nazi enterprise catering to imbecility, but that cannot be proven by sat scores.
Obamananke nailed it:
......"Have been a contractor for thirty years. I believe increase in price is due to inflation. Most materials used in a new home continually increase which obviously gets passed down to sell price. For instance Andersen windows just increased all products 4-6% for year 2014 . Our profit margins are not increasing same rate as new home prices are. The disparity between a new home and used home has never been greater somethings gotta give. Wish I could afford a 17 day Hawaian vacation". I had to read a lot or outlandish comments before I found Obamanke's, which to me seemed obvious. You want a new house, you have to pay the price. And the fact that so few new houses are being built, is just more testament to how our standard of living is dropping like a rock.Obamananke nailed it:
......"Have been a contractor for thirty years. I believe increase in price is due to inflation. Most materials used in a new home continually increase which obviously gets passed down to sell price. For instance Andersen windows just increased all products 4-6% for year 2014 . Our profit margins are not increasing same rate as new home prices are. The disparity between a new home and used home has never been greater somethings gotta give. Wish I could afford a 17 day Hawaian vacation". I had to read a lot or outlandish comments before I found Obamanke's, which to me seemed obvious. You want a new house, you have to pay the price. And the fact that so few new houses are being built, is just more testament to how our standard of living is dropping like a rock.my neighborhoods homes values increased 10% over the past 2 months on zillow!!!, Yet there's still 5 to 6 incompleted stoped months ageo "weeds all over the dirt monts" constructions sites, 4 unsold " for the past 6 to 8 months" public foreclosures and a hand full of homes "for sale that have not sold even after a good reductions in their prices. WTF why would zillow show an increase when nothing selling nor getting completed. this is crazzzzzzy town numbers.