Another month, another confirmation that the so-called housing recovery is sputtering on its last breath and is being held up entirely by the higher end segment, which however is also coming to an end now that wealthy Chinese have started liquidating their ultra luxury housing. In February, according to the NAR, some 4.6 million annualized existing homes were record, in line with expectations, and a 0.4% decline from the 4.62 million print in January. This was the 19th monthly drop in a row, and the lowest since July 2012, and a 7.1% drop year over year. But the worst news is that housing is increasingly unaffordable to the poorer Americans, with houses costing in the $0-$100 bucket down 18% from a year ago. Since nobody is applying for a mortgage any more this is hardly surprising. Finally, in addition to the usual weather excuse for weak housing sales, a new scapegoat has appeared: soaring student loans: "20 percent of buyers under the age of 33, the prime group of first-time buyers, delayed their purchase because of outstanding debt. 56 percent of younger buyers who took longer to save for a downpayment identified student debt as the biggest obstacle." Oops.
The median home price remained largely flat in February at $189,000, and has continued on a shallow downward slope which peaked in mid-2013. Not helping things is that distressed homes – foreclosures and short sales – accounted for 16 percent of February sales, compared with 15 percent in January and 25 percent in February 2013.
Broken down by region, the bulk of activity was once again in the South, where 43% of all transaction took place, followed by the West, Midwest, and the Northeast in last place.
Looking at the supply side, we see that hardly unexpectedly, the months supply of condo soared to the highest in over a year, even as both signle-family and total housing supply rose as well.
But the scariest of all, was that as noted above, while the overall number of sales is still buoyed by the upper end, namely houses costing $500k and more, the lower end is being devastated, with sales of houses costing $0-100 and $100-$250K down 18% and 7.2% respectively, from a year ago. This also is hardly unexpected as all-cash sales rose again, and were 35% of all transactions in February, up from 33% in January. And for a sales distribution perspective, 89.6% of all sales were in the $0-$500k range, with only 10% of all sales accounted for the segment where prices are still rising.
What did the NAR's Larry Yun have to say about this latest disappointing number? Why it's the weather again, of course.
Lawrence Yun, NAR chief economist, said conditions in February were largely unchanged from January. “We had ongoing unusual weather disruptions across much of the country last month, with the continuing frictions of constrained inventory, restrictive mortgage lending standards and housing affordability less favorable than a year ago,” he said. “Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year.”
Yet there was a new wrinkle in the explanation for weak sales, one which appeared for the first time: Student Loans!
NAR President Steve Brown, co-owner of Irongate, Inc., Realtors® in Dayton, Ohio, said student debt appears to be a factor in the weak level of first-time buyers. “The biggest problems for first-time buyers are tight credit and limited inventory in the lower price ranges,” he said. “However, 20 percent of buyers under the age of 33, the prime group of first-time buyers, delayed their purchase because of outstanding debt. In our recent consumer survey, 56 percent of younger buyers who took longer to save for a downpayment identified student debt as the biggest obstacle.”
Brown notes the survey results are for recent homebuyers. “It’s clear there are other people who would like to buy a home that are not in the market because of debt issues, so we can expect a lingering impact of delayed home buying,” Brown added.
Expect the student loan issue, which is now well over $1 trillion notional across the US, to keep the US housing market subdued well after all the weather scapegoating is long forgotte.