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Why New Home Sales Remain At Recession Levels, In One Chart
While the number of new home sales reported earlier beat consensus expectations, coming in at 546K above the estimated 523K, driven mostly by another curious surge in Northeast sales (up 88% from April) where something is clearly afoot following the recent historic outlier in housing permits as shown a week ago...
... the reality is that, as a long-term of New Home Sales shows, this series is still at recession levels, and even at the better than expected print of 546K, this the same as a level last seen in 1992.
What is the reason for the non-existent rebound? Simple: the following chart comparing total new home sales and the median new home sales price explains it.
Because while the US housing market suffered a depression-level collapse after the housing bubble burst in 2006, median new home prices had a modest dip and proceeded to levitate to new record highs without interruption until the last few months of 2014, when they hit an all time high of just over $300,000. Since then they have fallen to $282,800 but clearly they have a long way to go to match the implied supply/demand dynamics seen the last time housing sales were at this level. In fact, one can say that new home prices are about 3 times higher than where they should be to promote a housing recovery for "the rest of us" and not just Chinese "investors" and foreign oligarchs (who are buying existing homes anyway instead of new homes).
This also means that despite the "best efforts" of the Fed and the government to blow yet another housing bubble, this has proven far more difficult than reflating the stock bubble. And as a result of the failure of fiscal and monetary policy to trickle down to the common man, there is far less demand for new housing at these prices and hence, far less supply.
Until and unless prices tumble far more to where new homes are affordable for most, the unprecedented failure of new home sales to pick up in line with the general "recovery" will continue. It will also mean that most Americans will be destined for a life of renting instead of owning, something we already know courtesy of the latest homeownership rate plunging to multi-decade lows...
... which means that rental prices across the US will continue rising to new record highs with every passing quarter.
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Wait I thought housing was..um...what?
home ownership for 0 down and no job. American Dream
Yeah, buy 2 while your at it and rent one out!
Put the whole picture together...
US is adding 10 55+yr/olds for every one new 0-54yr/old now annually
http://econimica.blogspot.com/2015/06/0ne-simple-chart-explains-great.html
Mortgage rates have been mandated down over 80%+ since their peak in '81 allowing ever lower mortgage funding costs.
Almost all popuation growth is taking place in S and W, primarily in urbans areas as young migrate from depressionary rural to urban, MW and NE generally seeing flatlining or declining populations and horrific demographics
http://econimica.blogspot.com/2015/06/us-population-and-housinga-tale-of-two.html
This massive demographic wave of old are moving into retirement, many cash flow poor but asset rich while bonds have become uninvestible due to Fed determined low yields...so everyone looking for cash flow has become a landlord @ ZIRP to find that 5%-8% annual cash flow to support them in a COLA-less retirement...the last bastions of population growth are in the S and W cities driving stupendous bubble'rama prices and rents that can't be sustained...what could go wrong?
I'm having a Tyler moment....
New Home Sales Surges To Highest Since Feb 2008 As Northeast Spikes 87%
Why New Home Sales Remain At Recession Levels, In One Charto.O
One chart? I count eight charts.
Math is HARD...
Actually, anyway you look at it, the housing market can't lose...check the genius article on MW
http://www.marketwatch.com/story/the-housing-market-any-way-you-look-at-it-cant-lose-2015-06-19
So, stop all this worrying, everythings going to be awesome.
No one can buy these new McMansions when real person incomes are not going up. When personal incomes have only gone up 6.9% since 2008 nationwide, this phony rebound in housing prices makes even less sense than the last bubble. I fail to see why everyone does not understand that simple math.
Indeed.
Nobody is 'buying' these McMansions; they're all 'renting' them.
If you have a mortgage that equals or exceeds your home's current market value, you own smoke...
How true.
Not a lot of people out in the world realize that if you owe what your house is worth, you are really about 10% underwater if you were to sell it. 6% to the Realtor, plus another 3%-4% in closing costs and inspection, and so on.
You won't walk away with a good sum until you are about 75% LTV at the time you sell.
"New home sales." Hm. What is the "New home supply"? I see prices rising perhaps faster than sales. Would that not indicate slightly short supply of "new homes"?
Why a shortage? After 2008 home construction workers abandoned the industry for other work, and they remain there. Construction costs are higher, based on short supply of labor. New homes are short supply based on higher cost of construction, etc. However, getting permitted does raise the value of an empty lot, owing to the cost and risk surrounding the process.
Although, there is still that problem of shrinking nominal wages against aggressive real inflation.
incomes....rising? not happening. interesting twist at one of my jobs probably due to walmart raising their wages. New hires will get $9 minimum. Older worker bees are grandfathered and will be paid less. Don't like it? then quit. your worker efforts aren't appreciated and don't mean shit
I agree with you. The 6.9% I mentioned was since 2008 nationwide across all employees nationwide. That translates to an average of about 0.98% increase per year, which when you factor in inflation is a wage decrease. Many colleagues I know have lost 10-15% of their wages since 2008, but are just happy that they are still employed.
Baby Boomers are downsizing, millenials cannot afford it, and X'ers are under water.
and all can see that $18T and snowballing of debt is going to get paid for....at some point.....and when it's rolled over at higher interest rates (well, maybe) DC is going to jack up taxes on all the "wealthy" defined as people with real estate.
Yeah, and $18T is nothing compared to what is owed to future retirees with SS and Medicare. Somewhere around $250T.
The only way out is to outright default or default by printing money, devaluing debt/obligations over time.
But that would mean jacking up taxes on Blackrock!
So much for making sure your children have a brighter future than you do.
Attitude of the 90s "FUCK THEM I WANT A GODDAMN JET SKI AND A CORVETTE WOOOOOOOOOOHAAAAAAA REFI BABY!"
2 words: family formation
Peeps buying houses to...............................Rent out for yeald
Sacre Bleu!
It;s cheaper to buy than rent once again. In some places.
Two articles earlier:
New Home Sales Surges To Highest Since Feb 2008 As Northeast Spikes 87%followed by this one:
Why New Home Sales Remain At Recession Levels, In One Chart
I don't get it. In only 8-20 more years things will be great again right?
Just listen to the NAR and MSM, it's all great now. All hail Obama our savior! /sarc.
No worries, Mon.
Long Er Wong and Yung Dong will pull us out of this recession.
Charts are too difficult for some people to understand. It is the highest since 2008 and that is a recession level.
Even with historically low interest rates for six years they can't get home ownership up.
Uncle Sam needs some Viagra! What? He's 99 and in a wheelchair on oxygen?
Say it ain't so! C'mon Gramps! Let's go run a marathon like the old days!
"Even with historically low interest rates for six years they can't get home ownership up."
Because contrary to what every idiot says, price matters more than rates.
This is so true. Would you rather be in debt for $300,000 @ 6% or $600,000 @ 4%. I know where I would want to be......
All those Wal Mart clerks and their Minimum Wage increases getting into the market. /sarc.
Hahahahaha.
In many areas of the country it costs more to build a new house that it will be worth when it is completed. The market is still too depressed to warrant the construction of new homes. You cannot get it to appraise for more than it would cost you to build it.
Household formation is cratering...
Thus housing demand is going to crater as well. the graduates aren't marrying, they aren't buying houses, they are in debt up to their eyeballs. and are living with mom and dad.
the student loan overhang is going to last a generation.
Calendar effect
May had 5 fridays/saturdays/sundays
a new home sale is counted when contract signed (not at closing). Most people visit the home model on weekend (when they're not working. duh.) and sign then.
and this week's existing home sales for may benefited by having 5 fridays. Most closings occur on fridays (all involved on sales end LOVE getting checks going into weekend) so buyers don't have to pay on mortgage anymore than they have to before moving in (on saturday)
and no doubt May sales included fencesitters locking in rates since - according to ALL the "experts" - they are moving on up H2
exactly. May sales based upon March/April locks. Refi's are already gone. August home sales (new and existing) to be reported in late September will be a huge disappointment.
My firm's customers LTV is around 82% so about 18% down payments / equity. yes, we have high LTV loans (mostly through FHA/VA) but there is a lot of real equity out there.
NoVa
$3000 mortgage / month
prorated = $100 / day
why the eff would anyone close on tuesday ... and eat 3 days ... when they won't move in till saturday??
Home volume drops but prices keep going up. Bond market liquidity drops to almost nothing but we're still near all-time-high prices. Stock trading volumes are down, down, down but just shy of all-time-high prices (or at them in the case of the NASDAQ).
These are all related. When we say the Fed "levitates" the market, this is exactly what they're talking about.
Everyone likes a bit of phony economics. Who needs demand when it can be manipulated to increase the cost of the supply. But the supply is probably fake too.
When price fails to be the allocator of resources, scaricity never fails. Note the home ownership rate.
Oh yes it is very encouraging to always see the negative aspect of every situation. War ,doom and gloom,dark skies,imminent financial collapse,end of the modern world.No wonder there are so many depressed fucking alchaholics.There is a saturation point to all this nonsense.I know iam going to be told i am in the wrong place and to f off. Relentless propaganda ,Russian or American is bad for your health.
Idiot.
Put moar lipstick on it and see what happens.... A nice red seems to work the best.
I guess you walk around with your eyes wide shut and only listen to the MSM right? It's all sunshine and lollipops..
Assuming Domnius is not just trolling to stir things up....he does point out that while MSM pulls hard on their end of the rope that everything is wonderful.....and ZHer's pull hard on our end of the rope that things are not wonderful......the actual economy is not at either extreme.
We (ZH) tend to believe that the current system is so dysfunctional that the only fix is economic revolution, which will only be triggered by catastrophic collapse. This tends to cause a bias towards seeing ...(perhaps hoping??).... for that revolution to start, and thus every piece of economic news is evaluated in that light.
I too believe our system is "broken" and over the long term unsustainable. Having said that, the economy is too entrenched and has too much momentum to just collapse and trigger some sort of economic revolution the way many would like to see. Barring some huge natural physical calamity....(or of course major war)....I suspect the current sad state of affairs can limp on for some time yet.
Or maybe its worse that even ZH'r are willing to recognize. Your point is philosophical and equally unhitched from reality as the current state of free floating currencies. Agree to disagree. It wont continue for long because whats that sound? oh yes war drums. Keynesian war drums of "economic stimulus".
It is theoretically possible to understand that neither you (nor I) will EVER, as long as we both shall live, EVER get the world we want or need. It is equally possible to continue--- in spite of this understanding----- to refuse to talk ourselves out of wanting it.
word
I agree.... I keep hoping (and working) for change.
I still don't understand how when the FED, et all, create make believe money that we just can't make believe that we have paid it back.
"After Dodd Frank takes full effect...the flood."
-Unknown US Realtor, Circa June 2015 AD
Flood of sales or foreclosures? Please elaborate.
No surprise that they lied. Would be a surprise if they told the truth!
its a pretty simple fucking equation: kids are coming out of college with 6-figure debt before they get to 1st base in the real world. jobs being created under obozo suck and are lo-payjng because of his war on success. Business owners don’t feel confident because of the fed & the pinheads in Washington NOT simplifying the tax code so how can the people who work for them? who the fuck wants to buy a house if they person who runs the company is unsure about rates spiking 1 way or another because the fed has their thumb on the scale AND/OR tax rates spike if obozo rails an executive order thru in the last 2 years. I realize all tax law is originated in the house but its not like that’s stopped him up until now.
wanna get housing going? Rand at least had the balls to stick his tax plan on the table (first repub candidate to do so); calls for 14.5% flat tax, kill all deductions except mortgage interest & charitable giving. Pay off debt thru closing all other loopholes. Its not exactly splitting the fucking atom here – its math. wont pay it off in 2 seconds but at least its a sustainable path towards solvency.
I just hope that the MSM gives Rand his due. He has a lot of good ideas that could actually turn the country around. I just have a feeling that TPTB will do everything they can to squelch him.
rand has no shot cuz the country isn’t that smart. Too concerned with “what can this person do for me” rather than “can this person put me in position so its only on me”. I don’t know where we went so fucking soft in this country, but it seems as tho to masses need someone who is going to save them, help them, blah-blah-blah. our GDP could be 8-9% if these assholes would get the fuck outta the way & stopped gumming up the system in every which way. we’ve done it before & growth would give the free shit crowd just enough to shut the fuck up and enjoy their free iphones & free tv dinners from their mothers couch.
oh, I also love hearing too how rand is “so far off” when it comes to foreign policy. considering it’s the exact opposite of obama & bush’s, id say its pretty fucking spot on.
I 100% agree.
They will never do it simply because what you are suggesting makes too much sense. They are stealing our futures by sucking the dicks of Oligarchs now.
It used to be that making sense got you somewhere, but now, as you point out, making sense sounds like crazy talk to the masses. The only president in my lifetime that came close to making sense in my opinion was Reagan.
.....and he had alzheimers.
They will never do it simply because what you are suggesting makes too much sense. They are stealing our futures by sucking the dicks of Oligarchs now.
Even Honey and Vinegar Realty is struggling right now.
The dirty little secret is that many welfare folks expect the government will pay their rent for life, ... why buy a house when the government pays rent for you, and will throw in an obaamaphone and $75/month obaamacare. Baby-mommas got their baby-daddy, and he is uncle sam, biggest hous buyer on the block, .. but they say it is rent.
U r just not looking in the right percentile of the market, to wit:
https://www.google.com/search?q=most+expensive+homes+in+the+world+2015&e...
this is where the nonexistent inflation showed up, as it has in all asset classes including pms. unfortunately, labor doesn't want to fight for better pay so they did not participate and are trapped in high price rentals because of their weak kneed, quivering tower of jello character says they prefer bondage and discipline imposed upon them.
of course, a labor dispute is domestic tttttttuuuuuuurrrrrrriiiiiisssssssmmmmm. more security is needed to thwart the threat.
Second-to-last chart looks like an ACORN
When you lard the country up with semi-literates whose span of forward-thinking extends (maybe) 72 hours, you aren't going to get elected on a platform of long-term winner ideas.
It's time to take the exceptional few and start afresh.
Well, I'm in the lumber business in MA and we are not seeing any sort of surge in homebuilding. Yes, around the cities seems to be busier, but out here in the sticks its still very unusual to see new homebuilding. All the contractors are telling me that they still cannot even remotely build a new house for anything close to what a used house costs. The last ten years have seen a huge increase in regulations, energy, environmental, permitting, engineering, etc. so that new houses are prohibitively expensive in a market that is not seeing any income growth. There's your problem.