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New Home Sales Surge By 18.6% In May, Now Only 63% Below Pre-Crisis Highs

Tyler Durden's picture




 

While we will have much more to say about the price dynamics in the West in a follow up post, where the Western housing market appears to be appreciated right now is in the just released New Home Sales report, which showed that in May new home sales soared by a whopping 18.6%, orders of magnitude above the 1.4% increase expected, and resulting in some 504K new houses sold, far above the 439K expected, and certainly above the downward revised April print of 425K. What caused this surge? Simple: the West, which saw a 34% surge in new home sales, from 97K to 130K, the highest one month jump since February 2013.

So a full blown recovery? Well, not quite. Here is the chart showing long-term demand for new homes since the last housing bubble: the May print of 504K was just 64% below the pre-crisis high of 1,389K.

In other words, there is demand for houses... Just existing houses, i.e., those where millionaire can park their laundered cash. New homes, those which typically are the target of first time home buyers, are not doing quite as hot.

 

Finally, one reason why new home sales may have soared in May: the average new home prices just dropped to $319,200: the lowest since August 2013.

 

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Tue, 06/24/2014 - 10:29 | 4889175 Mitch Comestein
Mitch Comestein's picture

You guys are negative about the sun shining! 

Tue, 06/24/2014 - 10:35 | 4889204 greatbeard
greatbeard's picture

>> You guys are negative

Tru Datt!!!

I can't really criticize, 'cuz I've lived my life with the same negative slant on everything but the persistent RE bashing is pretty obvious. 

 

Tue, 06/24/2014 - 10:50 | 4889253 NoDebt
NoDebt's picture

I think what's being bashed about RE is an almost child-like belief that the housing market will quickly resume it's old highs in both units and pricing.  That's not going to happen.  Not for most Americans, although the Elysium-class housing market has already attained the old higs in many respects.  More to the point- would you even WANT it to happen?  Comparing yourself to the old (bubble) highs and pegging them "normal" is risky business.

Tue, 06/24/2014 - 10:51 | 4889266 greatbeard
greatbeard's picture

>> would you even WANT it to happen?

Absolutely not.  I benefited greatly from the last, and so far this, run up.  But for the common man/woman, inflated RE prices only benefit the tax man and the insurance man.  Even if you buy in at the lows, inflated prices only hurt homeowners.

Tue, 06/24/2014 - 11:08 | 4889346 NoDebt
NoDebt's picture

Well then, good news.  Prices of "regular guy" houses continue to fall.  Under $100K they're down something like 12% YOY.  Even up to the $750K mark, they're down to a greater or lesser extent YOY.

The "averages" are getting knocked around like a screen door in a hurricane.  The high end of the market, small though it may be, is going gangbusters (price and volume), and it's skewing the downward trajectory (price and volume) of everything below it in the average.

Throw the usual vagaries of different regional markets (San Fran vs. Philly, for isntance) performing much different from the nationwide average and you get.... a big freaking mess where "nationwide averages" mean almost nothing.

Tue, 06/24/2014 - 11:16 | 4889386 greatbeard
greatbeard's picture

>> different regional markets

That's what I'm running into here.  I'm obviously in a niche market that isn't reflected in the averages.  Due to extreme price appreciation I've dropped out of the market.  But, I still get regular updates on the new listing.  The pricing is astounding to say the least.  Last updated listing I got, sold Dec 2013 for $46K, just listed $125K.  That isn't at all unusual for the low end I usually shop and is the reason I dropped out of the market.  Anything on the low end has doubled (or more) in the last year.

Tue, 06/24/2014 - 11:52 | 4889543 headhunt
headhunt's picture

For me the % rise in RE property tax and values has killed any rental property deals.

Leaves you with little too no profit and not worth the long term risk.

Tue, 06/24/2014 - 12:28 | 4889686 greatbeard
greatbeard's picture

>> rise in RE property tax

That's what has stopped my plans to move dead in it's tracks.  Even though I can sell the current one at at tidy profit (and that is using at term lightly), and afford to by an similarly inflated property where I want, the taxes would quadruple, and that's just unacceptable.  To go from $800 a year to $3,000+ a year, similar house, similary services provided, is simply unacceptable to me.

Tue, 06/24/2014 - 11:07 | 4889341 Redneck Hippy
Redneck Hippy's picture

The previous high was a BUBBLE of ginormous dimensions.  We don't wanna go back to that.  The fact that we're not there is a GOOD thing.

Tue, 06/24/2014 - 11:40 | 4889497 disabledvet
disabledvet's picture

I'm not sure we can. "Bubbles like that aren't just made."

There is no shortage of land in the USA to be developed...let alone farmed.

Tue, 06/24/2014 - 11:00 | 4889308 max2205
max2205's picture

You know you have to buy the tail until it doesnt work.....

Tue, 06/24/2014 - 11:06 | 4889331 CrashisOptimistic
CrashisOptimistic's picture

Here is some persistent RE bashing:

http://research.stlouisfed.org/fredgraph.png?g=7iv

 

1960s levels with 50 million more people.

Tue, 06/24/2014 - 11:16 | 4889381 CrashisOptimistic
CrashisOptimistic's picture

Hard to see how this report makes sense with oil well over $100 during the time period and mortgage applications continuing decline.

Some redefinition in the measurement looks likely.

Tue, 06/24/2014 - 10:48 | 4889244 headhunt
headhunt's picture

Keynesian Vampires hate that shit

Tue, 06/24/2014 - 11:01 | 4889313 MFL8240
MFL8240's picture

No one is working tell me how you can be optimistic about another bubble built of fake interest rates?

Tue, 06/24/2014 - 11:03 | 4889320 NotApplicable
NotApplicable's picture

How many empty houses does it take to make a healthy economy again?

It would be better off if they were doing the ole hole digging and filling routine, as at least it doesn't waste as much capital.

Tue, 06/24/2014 - 11:08 | 4889345 CrashisOptimistic
CrashisOptimistic's picture

I know what I see.

I have empty houses on my block.  Oddly, not bank owned.

Tue, 06/24/2014 - 12:02 | 4889585 starman
starman's picture

Hey Mitch so who's buying if mortgage originations are tanked?

Tue, 06/24/2014 - 10:29 | 4889176 Hohum
Hohum's picture

West surging makes sense--what with all those confident consumers ;)

Tue, 06/24/2014 - 10:53 | 4889271 NihilistZero
NihilistZero's picture

Well with flippers buying up "Pre Construction" homes like it's 2005 I'm suprised it's not up more.

It's an Illusion.  That's how my property manager friend described the "Housing Recovery".  He recently shuttered his management business of over 20 years.  Margins crushed and property owners demanding to much from management.  Litigation due to crappy tenants and other headaches caused him to seek greener pastures.  But big capital's SFH rental model is rock solid I'm sure...

There is no more rent seeking availiable at current asset valuations.  Neither through new mortgages or rental households.  So the only way the parasite class can make money is to let valuations fall and begin another cycle.  The late arrivers and NAR types will deny this until it punches them in the face.

Tue, 06/24/2014 - 10:33 | 4889180 madcows
madcows's picture

so, at $319,000 that is about 6.5 times the average household income.  is that affordable?

Uh, hardly.  The average household income is 50k.  The recommended ratio of household to annual income is 2.5.  So, until the average house costs 125k, or the average income is about 125k, I'd say we are still in bubble territory.

Tue, 06/24/2014 - 10:34 | 4889201 lordylord
lordylord's picture

"so, at $319,000 that is about 6.5 times the average household income.  is that affordable?"

I laugh at home prices in urban areas.  I always think, "Half a million for a piece of shit box with no land and no privacy...no thank you."

Tue, 06/24/2014 - 10:37 | 4889210 tarsubil
tarsubil's picture

I like mini houses. Why doesn't anyone simply ask, "Why are the houses so fucking big?" They don't need to be. They really don't. Trust me on this one. The market is ridiculously distorted.

Tue, 06/24/2014 - 10:46 | 4889240 greatbeard
greatbeard's picture

>> I like mini houses.

In the city, I concur.  If I move back, and that is a distinct possibility, it will be the smaller the better.  I'm perfectly comfortable living in an RV and they are in the 250 sq ft range.  Our first place in the stix was 650 sq ft and we lived just fine in that and my sig other is/was a packrat extraordinaire.  The second bedroom was turned into just a clothes closet for her and that held about half.  Without her possession obsession we would have been swimming in accommodations at 650 sq ft.

The biggest problem I've run into looking for smaller sq ft houses in the city are they are in the older run down neighborhoods, for obvious reasons.  I can live humbly and simply and be happy, but I can't live around trash.

 

 

Tue, 06/24/2014 - 10:38 | 4889216 greatbeard
greatbeard's picture

>> with no land and no privacy..

Within commuting distance of jobs, medical, shopping, dining, entertainment, sorta trumps the other.  I've gone the cheap with land and privacy route, and love it, but I understand the other side of the equation.

 

 

Tue, 06/24/2014 - 10:30 | 4889183 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

Monthly housing data isn't if much use. Quarterly or annual is worth considering.

Tue, 06/24/2014 - 10:32 | 4889192 TabakLover
TabakLover's picture

Market melting up.  Did anyone hear Plosser say rates may have to go up sooner?  Usually a comment like that is good for -100 on the Dow.   Insanity reigns!

Tue, 06/24/2014 - 10:34 | 4889200 oklaboy
oklaboy's picture

and how many west sales are in the silicon valley? alot a stupid money there....

Tue, 06/24/2014 - 10:45 | 4889237 headhunt
headhunt's picture

Stupid depends on if you are selling or buying

Tue, 06/24/2014 - 10:47 | 4889250 greatbeard
greatbeard's picture

>> stupid money

Matter of perspective.  Stupid isn't generally rewarded with money.

Tue, 06/24/2014 - 10:36 | 4889208 Kaiser Sousa
Kaiser Sousa's picture

look,

1 out of 4 mother fuckers aint got enough savings to last them 6 fucking months...

so who the fuck got money to buy a overpriced, hyper-inflated fucking house???

man im over all this propaganda...

Hey Tylers, when u guys gonna start a radio, or TV outlet to call all this fucking bullshit out????

FUCK MAN!

Tue, 06/24/2014 - 10:43 | 4889232 headhunt
headhunt's picture

Oh you want to spit in the white houses coffee - that will put you on their hit list.

Talk Radio is kryptonite to the left, it's the sunlight on these Keynesian vampires.

Hell of a good idea.

Tue, 06/24/2014 - 10:54 | 4889281 greatbeard
greatbeard's picture

>> Talk Radio is kryptonite to the left

Maybe so, but it's been of no benefit to the right, either.

Tue, 06/24/2014 - 11:41 | 4889498 headhunt
headhunt's picture

True but talk radio is the only main stream media which shines some actual truth on the leftists.

 

Tue, 06/24/2014 - 11:55 | 4889555 deKevelioc
deKevelioc's picture

Still playing the left-right game?  God bless ya, fella.

Tue, 06/24/2014 - 16:23 | 4890602 MisterMousePotato
MisterMousePotato's picture

Am I the only one shaking my head at the irony of this statement? (Given that it is posted on a thread about looking behind the curtain of housing data?)

Try looking behind the curtain on the political parties, the difference there between not being measured by the difference between, oh, say, Mitch McConnell and Harry Reid, but by the difference in the parties' respective rank and file. To be sure, that difference has not been reflected by the leadership thus far chosen by The Stupid Party, but that IS changing (Eric Cantor, anyone?).

Tue, 06/24/2014 - 11:06 | 4889218 rwe2late
rwe2late's picture

How many of those are single family homes

duplexes, condos

mobile homes

or RVs purchased by retirees?

Need more info to evaluate "lower prices", increase in "new home" sales,  etc.

Is the changed total just a reflection of new retirees purchasing summertime RVs?

Tue, 06/24/2014 - 10:39 | 4889221 orangegeek
orangegeek's picture

Philly housing index monthly hasn't recovered either

 

http://bullandbearmash.com/chart/monthly-philly-housing-index-moves-35-s...

 

and probably never will

Tue, 06/24/2014 - 11:49 | 4889529 disabledvet
disabledvet's picture

"Teslas."

Put that drive system on an RV. "Free fuel for your home." A home on wheels no less. I did see the Model X has been delayed for six months.

Hasn't hurt the stock price.

This is why the Fed has to keep inflating.

It's a hopeless battle of course. The average income in the USA is 27,000...not fifty.

"If they get free energy for their home" ...forget who's buying these homes...who the hell is living in them?

Tue, 06/24/2014 - 18:56 | 4891155 Colonel Klink
Colonel Klink's picture

Philfidelphia, shitty of brotherly murder.

Tue, 06/24/2014 - 10:46 | 4889239 ilovemilken
ilovemilken's picture

Housing is recovering, fine.   Now for goodness sake raise fukking rates already!!!!!

Tue, 06/24/2014 - 11:03 | 4889318 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

b, b, bu, but, won't the value of my home, our homes, d, d, de, decline then?  Gulp.

Tue, 06/24/2014 - 12:03 | 4889591 the grateful un...
the grateful unemployed's picture

no wrong the price of you home has to go up, if the value of existing homes goes up new home builders can undercut that price and gain a bigger market share (there is no economic value to existing home sales, only new homes sales create economic activity, and goverment grows only when it creates economic activity) the downside of you new wealth is that its not very liquid, no one wants to buy your home at an inflated value. there are ways for you to get that value from your home, equity line of credit, reverse mortgage, the old home ATM from the housing bubble. in the meantime your expenses go up, taxes, insurance, maintenance and upkeep. soyou need to access that equity if your personal income is not growing (and most are not) so thats your predicament. eventually persons in that position choose to move into smaller, low maintenance buildings, condos (which still have HOA fees)

Tue, 06/24/2014 - 10:48 | 4889252 ilovemilken
ilovemilken's picture

You know damn well Yellen will still find economic data to support keeping rates low for the rest of her tenure. 

Tue, 06/24/2014 - 10:57 | 4889295 NoIdea
NoIdea's picture

"You guys are negative about the sun shining! "

 

You mean "clouds failing to appear"

Tue, 06/24/2014 - 11:17 | 4889310 papaswamp
papaswamp's picture

Inflation bitchez! Here come the rates...

fYI... @IanShepherdson: New home sale in June: +18.6%. Margin of error: +/-17.3%.

Tue, 06/24/2014 - 11:55 | 4889552 the grateful un...
the grateful unemployed's picture

their policy is working, ( which means cash for shacks, the bulldozing of older existing homes,  -  the home industry equivalent to cash for clunkers- is not going to happen. or in Germany they simply mandate car retirement at 7 years. in the US muni codes they call it redevelopment, tearing down of old buildings for new) so you see we have an economic policy which precludes central planning measures, (sort of) the difficulty is that all the prime land is taken and so this creates (sub)urban sprawl, more reliance on transportation. eventually people will find out they don't need the urban job, they can telecommute or do nothing much at all, let the robots make the drive. so you see the world is changing and they're doing their part to see the transition is effortless for all of us. evolution through central planning, thats the message of the progressives, and the party of obama.

Tue, 06/24/2014 - 11:59 | 4889574 starman
starman's picture

Let's examine, mortgage originations are down but sales are up.

Could it be instutional buyers? Or the rich middle class buying with cash?

Tue, 06/24/2014 - 12:13 | 4889637 the grateful un...
the grateful unemployed's picture

the hedges have stopped buying, but if you're out of the stock market and worried that your bank account might get bailed it, you would take your savings and buy property. you call it the rich middle class, but its widows and orphans looking for some return on their savings. you buy some old houses, and rent them, pay a property manager 5% and watch the rent receipts roll in (rental property is getting a premium)

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