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A Most Curious Disconnect
Ever since the great moderation started in the 1980s there had been a very close, almost perfect, correlation between the increase in the number of new homes sold in the US, and - logically - the median price of these homes. After all, builders would only invest money, labor and capital if they thought they would generate an appropriate return on their effort by selling to willing buyers. And then the first great financial crisis happened, and New Home Sales fell off a cliff and have yet to regain any of the pre-bubble euphoria.
Yet, oddly enough, while the actual number of new homes sold has barely budged during the so-called Recovery, the incentive for the builders, is right there, and as can been by median new home prices which continue to rise, and in fact hit an all time high as recently as December!
So what is going on here, and just how does this impact the prospects of the housing "recovery"?
And while we await the answer, we wonder: how much would household formation - that most important missing component of any true, not goal-seeked recovery - soar if all those millennials stuck in their parents basement, even burdened by tens of thousands of student loans, were able to buy new homes at a price that correlates to the actual number of sales, somewhere north of $100,000 a piece?
Perhaps, just perhaps, ordinary, 99%-type Americans just can't afford to buy "normal" homes anymore?
Of course for that to happen, one would have to strip away the impact of the latest, $13 trillion central-bank inflated global liquidity bubble. So let's just forget that whole line of thinking.
Source: Census
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"Perhaps, just perhaps, ordinary, 99%-type Americans just can't afford to buy "normal" homes anymore?"
No point it servicing parts of the market that have no money- builders only build for the higher end now. What a "cheap" home? You're buying used. IF you can afford anything at all, and IF you can get approved for a mortgage.
correct me if i'm wrong...the inflated price of housing holds up the stock and bond markets which hold up the pensions and 401's which hold up the banking system and the rest of the economy. when housing deflates...
the price of land in my northern new england neighborhood (but you knew that nsa didn't you) has deflated in the past seven years. very little single family house being built...
It's all about multi-family units for rentals now to capture the flood of former "home owners".
I wonder if the churn at the 0.01 percent level where Blackrock or others buys /trades/ swaps tranches of distressed mortgage properties shows up as a sale? Up there, those guys could be swapping homes on paper and it might even show up on MERS as a "sale" but without real buyers/owners/occupiers being involved. Does anybody have insight as to whether games might be afoot at that level?
The NSA does not read your Zerohedge posts. They do have sophisticated algos that comb through everything looking for the right combination of words that trigger an alert. At that point you can expect a knock on the door from the FBI pre-crime division for a detailed risk assessment interview. Failure to cooperate is taken as a "warning sign" and you would be taken into custody for further assessment. If you are found to be of indeterminate status you will be held indefinitely while all of your contacts are risk assessed. I wish I was just joking about all of this.
correct me if i'm wrong...the inflated price of housing holds up the stock and bond markets which hold up the pensions and 401's which hold up the banking system and the rest of the economy.
That's not all it holds up. Property taxes are based on "median' sales price. So as long as the median goes up, the county can justify raising my property taxes, EVEN THOUGH MY OWN HOUSE HAS NOT GONE UP IN VALUE, as measured by average cost per square foot. My house hasn't gotten any bigger, but they are trying to raise my property taxes 15% this year.
See?
All the developments near me are $600k and up. No one wants a "used" house. I expect the depreciate 20% in the first year.
It is just crazy. Every new development around here for houses is 400s to 600s. I saw some condos for 300s. Just nuts.
Hey, most likely, most won't be paid for so it really just amounts to printing money. Banks give out bullshit loans and get bailed out when they go bad. Cut out the middle man and it is really just the government paying for expensive housing.
Price elasticity? We don't need no stinking price elasticity! Vamanos Banksteros!
Home builder here, go easy on me kids, thats all I know.
Margins for us on the average home continue to get squeezed by increases in material despite demand. Suppliers continue to send price increases monthly. Now add on local governments skim, fee tacking at every corner, enviro nazi's wanting to fine you for dirt pollution (I shit you not) dirt is a pollutant now.
Now let me tell you about banks, those mother fuckers want the builder to carry the load on a construction/perm. It used to be that they would issue a soft draw at the front closing to fund land clearing, permit fee's, impact fees, so prior to the first draw now we are out of pocket 50 large. They say "if you don't like it don't build, those are the rules now".
Very few average home buyers have 40- 50 grand to let go of and if they did the bank wants it as a down payment along with deed to the lot. (I hate those fuckers, did I say that)
The whole market is peckered up and the local building departments are infested with low IQ life timers in no hurry to do anything but go home so it takes 6 weeks to get a building permit and by that time prices have gone up by 1.5%.
I have about another year left in me if this bomb don't go off before then. soo tired of this shit.
Soooooooo...basically you're saying you work to make the bank rich? Might be able to stomach that if you guys didn't moonscape 50 acres at a time and leave nothing but PVC sticking out of the ground when you inevitably go bankrupt.
Blow me dough boy. I am a small family owned business building around 8 homes a year, I think you tripped over your dick in a haste to post something pithy. Pull that dick out of you pie hold and apologize to me.
Good for you!
Louis Tully: Who does your taxes?
Apologize to you for commenting on your career, which you admit yourself to hating? No thanks, I think I'll just let you stew. You seem pretty angry which probably says more about you than me.
Typical cube dwelling engineer, reading what ain't there. Try again dopey, in the mean time your boss at Pencil, Dick and Dork wants his money back for his time you are burning on the web.
The disconnect in your thinking between where you live (a home, apartment, condo, a mental facility, a home for the neutered????)and your hatred of builders is curious.
Are you black ?
"I am offended, therefore, YOU did something offensive".
Are you a tard? " I read something and there for I must comment"
You act as if a business is operating in a vacuum. If you want to build a small project, no one, banks, government permits, environmental, has time to talk to you. promise to "moonscape" 50 acres and suddenly people are falling over themselves with incentives, or at least talk to you, assuming you're willing to arrange the appropriate "kick backs"- promise so many "low income" units, donate to the land conservation fund, etc. a business I know had to kick in $25K for fix up a park momument as an unofficial wink to not have trouble with the permit office. even with that they went 6month plus over schedule. thats a lifetime in business timing.
business is becoming less and less about doing what ever it is that you like to do, its about box ticking faceless bureaucrats who want ever bigger pieces of the pie, and don't care that the clock is ticking while you're having to take on more and more risk. As the big man said, "oh, you can build it if you want to, but it'll necessarily bankrupt you"
theres a limit to how many leaches a host can support before they die. the current system is intent on finding out what that number is.
I really really hate local permit people. There's one in that office I will talk to, the others can kiss my ass.
After the muni lost the franchise fee law suit it turned everything into a profit center, so permits now is all about extorting as much from a person as they can. Whether the construction is safe or according to good building practice is secondary to them.
And they've now extended permits to areas where before one wasn't needed. Now any new roof (aka reroof) requires a permit where as before it was only if rafters needed to be replaced.
It's a fuckin joke
Interesting to hear that side of the story. Thanks for sharing. Funny that prices increase despite lack of demand. That would be the fed knocking as they broke the system.
Quit complaining and become a renter.
Sometimes even that is not quite as easy as it sounds.
Say you own a house outright, or, have a decent amount of equity in it. These days, home 'buyers' [largely], want a turn key operation. It's very rare [in this day & age] to find buyers who want to take on a fixer upper.
Of course, a lot of it depends on the area where the house is located, but if you're talking about anything that's ABOVE median value, it's likely that you're gonna have to do a lot of 'fixin' up in order to make the house attractive to sell.
There are a lot of dynamics as to why this is the case. Having recently gone through this experience, selling a house priced in the $450k range, but was a house that was built in the late 60's, I needed to do about a $50k overhaul to the place to make it appealing. Why? Because when you get to that price range, the buyers start comparing EVERYTHING to a brand new home. Most are too dumb to understand things like the fact that new homes are likely to have been constructed with cheaper or inferior materials [copper pipes vs. PVC, floors, etc.]. The wife [who probably knows more pizza & chinese food carry outs than recipes she can cook from scratch], comes in and if there aren't granite counter tops, forget it. Everything has to 'look' like it does on her favorite TV show. The newer stuff I put in was actually, for all intents & purposes, 'crap' compared to the old stuff, but it fit the more modern 'eye appeal' [that most people are too stupid to even understand], & trust me, all you're trying to do is catch the eye of the wife. She has no concept of whether it's crap or not, as long as it 'looks' appealing.
FFS ~ I ended up doing 3 whole bathroom remodels, putting new vanities in, rerouting sinks & plumbing. It got to be a joke as I went down the list. The old vanities were still in really great shape, so I ended up putting them in places like the laundry room & the garage. I joked with my real estate guy & asked him if I was gonna have to put granite countertops on the vanities that were repurposed for the garage [which at this point looked like a mancave for a NASCAR fan, you could have eaten dinner on the floor].
Whatever ~ the point is, it takes a lot of work to sell a house these days [not just because it's tough to find buyers, but also because of what the buyers come to expect]. You could try to sell 'AS IS', but you'll probably find your house on the market for a long long time & come way down in your asking price.
In my case, it turns out that the family who finally bought the place had two incomes & both of them were high paying government jobs [quel surprise].
"not just because it's tough to find buyers"
Yest it is. Check out mortgage app #'s
This! Spot on. Sell the wife or the dickless, effeminate losers passing themselves off as men will not insist even if they know the place is a good deal because they're terrified of losing their leg spreading privileges they have earned over the years now standing at 2 x a month. We put our place up here in CO and EVERY time it was bitch wife who didn't think kitchen was big enough. Forget the 1500 square foot highly productive garden outside that could have saved them thousands a year while providing organic deliciousness.
That garden would just go to shit the next season. Then they'll pay a team of Mexicans to tear it out and lay some lovely sod in its place. Then they will pay another Mexican to mow it for them every week.
I don't disagree a bit. Would have required someone getting off their dead ass and put in the equivalent of a week's work tilling, turning, spreading mulch, weeding, etc. Funny because sod is what I tore out and no doubt sod is what would return.....
all so sadly true.
I started telling a story <BELOW> about my present project...
To make a long story short, I'm contracting out that bathroom remodel job because I have my hands full with turning the acreage into productive garden space complete with various forms of irrigation, hothouses & many other things. It's a full time job.
That is a good summary of where we are. TV has elevated expectations to a ridiculous level. It's no longer about what people need, it's all about what people want, and anything less gets a turned up nose...makes me want to vomit.
ZH said before, and I really believe it, that home ownership is really a difficult prospect because if you want to get out you have to find the next sucker willing to take the hot potato.
I bought a dump in a desirable neighborhood back in late '11 for a bargain price but still it's not done enough to unload...I'm very slow. I like being here but I don't want to be left holding the bag on anything this easy to tax.
I'm really lucky in my present situation because I practically got the thing for nothing [back in '08] & paid all cash for it.
The property taxes are very reasonable, so I basically can make a choice to stay or go. I put about a 15-20 year timeframe on fixing it up to 'SELL' standards. Bringing it up to 'SELL' standards wasn't really the original plan anyway, but after the experience in selling the last house, I learned a lesson on what needed to be done. It took the better part of 8 months to 'fast track' the other house to the point where it could be shown.
Houses in the area were sitting on the market for an average of 11 months at the time [but this one sold within 3]. However, after getting feedback from the first dozen or so buyers [and continuing to make improvements along the way], it quickly became something on everyone's 'short list'. It had a lot of other things going for it [such as being located within about 500 yards of an elementary school].
Rent is rising faster than inflation, idjit.
I think the best alternative is to build a mini house.
I've often thought about getting some land and a couple of used 53' containers, and constructing a living space out of that.
Sort of like THIS being the idea
These are very cool! All you need now is a waterfront lot.............................
My first choice would be good soil for growing food, but if the fishing was good, I wouldn't reject waterfront.
Here is another idea, using retired shipping containers...
http://www.archdaily.com/143332/containers-of-hope-benjamin-garcia-saxe-architecture/
If you read the article, this house is actually CHEAPER to build than the current pre-fab housing that Costa Rica provides to its citizens (who can procure land to have it built on).
"Quit complaining and become a renter."
Homeowners ARE renters. Try not paying property taxes and you get "evicted."
Property taxes are just another form of rent.
Unless you hold alloidial title to the property, you don't in effect own it but are renting it from the state.
Depends on what country you own in... while you do pay "rent" via property taxes in virtually all countries that I've looking into, the prop taxes in many LatAm countries is about 5-10% of what you pay here. It's very, very manageable.
Paging Kunckles, need a clean-up on Asile 3
So median house cost should be about $75K, which would make housing affordable for everyone if the Fed, Congress, and White House let the markets react as they should. HAARP and all of that other bullshit was there for the banks. The whole point of our Federal government and the Federal Reserve is to keep everyone on the debt plantation. There is no other possible reason for the ANYONE to think that government cares about anyone but their donors as evident in this chart and the actions of our rulers.
Anarchy...it's what's for R3volution!
Well, incomes have fallen to 1970s levels so why not the price of a home.
+ 1 zillion
"Eat the Rich" is returning to a neighborhood near you.
I think you mean TARP, but yeah.
This is called a UK housing market. Restrict the supply of housing and it becomes a sellers market, all the while saving tens of millions from that dreaded negative equity.
Tole brothers average sales price of new homes 750k.
Now who te fuck can afford that!!?
not it. except with a 100 year loan, maybe.
If u factor in the average income with the average amount of debt vs dependents, the minimum wage would need to be about 30 hr to live above the poverty line.
Investors from Hong Kong and China.
Illegal aliens backed by the full faith and credit of the USGov?
Median household income in the U.S in 2014: $53,891.
Half of all households have less than that. Half have more.
$54K hardly supports a $750K home. With $20,000 down (how many households earning $54K have $20K sitting around) and $250 in monthly debt (the car payment), it would support a home priced around $224,000.
around here, used, crappy houses in bad neighborhoods are north of $250k. Not sure who can afford those homes with part time jobs.
I haven't seen the prices of houses drop, in fact, i've seen them go up. Which is odd, b/c most people are still struggling to get by. I figure that the prices of houses went through the roof from about 1998 until 2008. Then, is shit itself. Now, all the assholes that paid way too much money for those things over the last 15 years, don't want to unload them at a loss, so, the price stays the same or goes up a little. This housing market is going to be under major pressure for a long time. All those college kids with no jobs and student loans cant afford one. all those boomers who are retiring and looking to unload their big houses and second houses will be putting more of them on the market. Oh, and the prices are still way too fucking high.
NAR can go fuck itself. they helped make this mess.
I'll tell you who's buying... people with loads of cash who want to monetize it and buy a steady stream of cash flows from the new generation of renters who will never be able to buy their own home....
Welcome to the United States of Oligarchy
Government workers
Such a "rentier society" is always common in any feudal system. No fucking suprise here.
https://www.youtube.com/watch?v=JvKIWjnEPNY
this wasn't very long ago people
http://en.wikipedia.org/wiki/Company_store
Reduce the housing supply - house prices rise
Reduce the equity supply (buybacks) - equities rise
Reduce the number of treasuries (QE) - treasuries rise
Middle class are being priced out of all assets.
Interesting. How much of an "asset" will those equities and treasuries be when their price or the value of the fiat they are "priced in" goes to fucking zero?
Not even confetti...a fucking receipt for future confetti!
FFS ~ I'm gonna have to pony up $10k next month to do a complete remodel on a bathroom. Where's the deflation?
A lot of that is taxes, fees, healthcare, insurance, and other healthcare. Nothing is worth doing anymore unless you can bill $100/hr.
Can you do any of the work yourself?
Actually yes, I can do the work myself [except for the fact that in this case I'm completely gutting it & rebuilding from scratch so I'd need to hire some extra hands to assist with the demo, & other things that require more than a pair of hands].
So in this instance I'm contracting the job out. There's more to it than just cost. The contractor is somewhat of a friend who is building a business of various 'handyman' tasks. He hires other guys to help him with his projects.
I tend to toss him a lot of work [kind of splitting jobs I do by myself & paying them to do stuff]. It keeps a sense of 'goodwill' going in the spirit of that "when TSHTF you want a tight community of trusted friends" kind of thing. He'd be a very useful guy to have as a friend in a scenario like that. Actually, the labor costs for the work he does for me is very reasonable, so, if it's a job I don't feel like doing, I call him.
The $10k on this job isn't because he's taking me for a ride. Instead, it's because I'm using very nice materials for the job. If you see my above comment, I've been around the block on this before. One thing I've learned [from selling a house within the past 5 years], is that EVERYTHING has to be modern.
So, since I'm not interested in the stock market casino anymore. & u never know when the dollar may collapse, I spend all my spare cash on hard goods, & yes, these home re-models. The worst that could happen, is that you have a nice place to live in.
Currency Debasement.
I'm waiting for mortgage NIRP. This is where they pay us 5.25% to buy a house after putting the 20% down and taking care of closing costs. Until then, me and the other trolls are staying warm under the bridge.
RE prices need to fall by 80-90% - so that it again makes sense for ordinary Americans to "buy."
There has been a reduction in the quality of credit rather than an increase in the quantity of money http://www.gata.org/node/8303
+100 Excellent citation.
If we can just get mortgage rates to go 1/4 point lower than all the people sitting on the sideline will flood in and buy homes.
/s/
Why not allow people to use their student loan debt as a down payment on a home. ;-)
You get a twofer -
Lower the balance of student loans -
Add jet fuel to the housing market -
That way the folks that took took out the most student loans would have the biggest down payment - and the poor stupid fuck (like me BTW) that worked 2 jobs so he didn't have to borrow as much would not get much benefit.
Maybe even give the people that have a student loan balance - but didn't ever get a degree a special $2 down payment credit for even $1 in debt forgiveness.
Perfectly designed government program - help the ones that did the wrong thing - leave the people that did the right thing on their own.
Funny shit!!
On a semi-related topic...
I'm going through custody/support court fight over my daughter. Baby mama has a mountain of debt (9 different lines of credit) and pays appx $1,750/month services those debts.
Despite the fact that she makes $130k/year, gets $2,000/month from me, and lives at home with her parents for free (no clue why).... the courts treat her debt servicing as monthly expenses that I am somehow responsible for helping out with!?!?
Makes me really regret paying down my student loans, buying my car with cash, not using credit cards, etc.
The system is REWARDING her for levering herself up to the gills and PUNISHING me for fiscal prudence.
Gotta love america....
It has nothing to do with America.
Welcome to vaginarchy!
So a $100k rise in the average asking price for a new house in ten years with incomes that have gone nowhere and inflation of 100% in just about everything else.
Yet somehow nobody seems to see a problem.
You need two people each making $65k a year to afford a home. What happens of one person loses their job?
Politicians (liars) don't "see" the problem. Most of the rest of us DO see it.
Ahhh...smells like Austin, Texas!
Been there, saw that in 1986-87 - not as bad this time, I think
pretty town, great music ... but then, fascists and commies are the only ones with money for the tip jar, so... don't shoot the guitar player, he's near dead from starvation anyway
The homebuilders are going upscale, and upper tier homes are increasing greatly in price, so the volume of new homes sold has gone down, but the price has gone up.
Two home markets, just as there are 2 economies
Correct, was mentioned in Zerohedge yesterday. Small houses get barely sold, multimillion mansions do well.
The criteria for credit has changed, the only buyers now are ignorant tourists.
D R Horton is putting up a development right across the street from mine. New homes are being built at a snails pace, likely because buyers aren't enthusiastic about overpriced houses built from toothpicks...and having neighbors roofline 10 ft from yours...
Seriously, these are priced at a 40+% premium to my "used" establised quaint little HOA community
http://www.drhorton.com/Florida/North-Florida/Saint-Augustine/Ocean-Cay....
It's plain as day.... the ONLY buyers over the past several years have been:
1.) The rich (well-off) chasing yield out to the very ends of the risk curve
2.) Foreign buyers smuggling assets out of their respective countries
It's that simple. There is NO domestic real estate recovery and the music is about to stop....
Tick tock, tick tock....
Government workers [&/or those tied into servicing government contracts, especially military]. They're the only ones gettin' paychecks these days.
simple supply and demand. this market doesn't have a supply of houses so this is driving up prices. and simple econ also says that eventually median prices and homes sale volume will re-couple. in a best case scenario, i'd expect the lines to meet each other half way....so median prices almost 40% lower!
That being said, i hate home info analysis. all skewed. This chart show median NEW home. old metric that isn't as important as it used to be. most new homes are probably going to rich pushing the median price higher. I would expect this to continue as the middle and poor get even more poor, homeownership will only be for th rich, thus pushing up median price.
What market in its current existence is simple? This is another metric of how unrealistic reality is.
Banks are still sitting on huge inventories to limit available supply.
And the bigger one is: the masses still believe in the way things were is how they are going to be. The recovery was a success, 2008 was the worst it will be, and Frank-Dodd was a juggernaut.
Manufactured/mobile/kit/tiny housing is more popular that it was in 2008.
How is that factored into the graph?
If housing type and sq. footage are not compensated for, this graph may just be showing the change in housing mix. For example, perhaps McMansions are not being built as much, and double-wides are. Still informative about the general economy, but not what one thinks when first seeing the chart.
I have been in the construction industry for 30 years in various capacities. The way the industry has changed is incredible. Between the enviro nuts destroying the concrete industry, to ridiculous building codes, many legislated by companies in the industry trying to increase market or destroy competitors, and ridiculous building permit fees to name just a few factors, it is amazing that a home can even be built. 30 years ago a custom home could be built in 120 days or less. So many people and suppliers are no longer in the industry, that it is hard to find skilled workers to keep to a schedule. It's an upside down world. We have made the mistake of allowing a few thousand people in government screw everything up. 150 million still working and 95 million underemployed or unemployed. 18 trillion in debt and a healthcare system that only those on assistance can afford to use. And thousands invading our borders with the help of our government every month. Arrrgh!
It's because the retired cocktail-set still have money. They are the only people still purchasing homes.
I just sold a house I inherited and it sold right away. I listed it well under value. There were lots offers from the cocktail generation. And they were all cash offers.
Banks aren't lending.
the fed asset reflation program has been a subsidy for manufacturers. existing homes are being overvalued, which allows new home builders to undercut the median price. home owners with reflated home values cannot afford to mark to market without either going underwater, or taking a big hit on their equity (should they have an equity loan outstanding). the owner of an existing home may consider the possibility of selling his home and buying a new home and pocketing the difference, but that is just an illusion. in the meantime the insurance companies can raise premiums, cost to rebuild is more than 25% higher than the value of the home, and the tax man likes it too. in economic principle its no different than cash for clunkers, the auto program to encourage new car sales.
Housing prices won't be permitted to go down, as property taxes are dependent on the values. And no one in DC wants to deal with the outcry from municipalities all over the country as their tax base gets cut in half or more...
That said, prices will eventually find their level despite the best intentions of idiots. And anyone buying a house at these prices is also an idiot, whether he gets a 'cheap' loan or pays cash. Because he WILL take a serious hit on that investment.
If you don't already "own", rent and wait.
The hell with 'prepping' my house to make it appeal to people who might buy it at some point in the future. I'm going for OOAK...unique.
I'm tiling my walkway in pennies, and planning on building lighted room display boxes into the walls, some of which will be viewable from both outside and in.
I just completed a faux fireplace mantel made from various pieces of old antique furniture, and am mosaic tiling my sunroom floor.
And there is not a single white wall in my house.
Hey, don't knock it, my last house sold for over the asking price in 2 weeks...the buyers kept saying, "It's so DIFFERENT!"
But I'll probably die here...moving is a major bitch.
I like your style! Fred Sanford chic ~ LOL