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7 Astounding Charts Show How Badly The Fed Failed The Housing Market
Submitted by Lee Adler via The Wall Street Examiner,
For generations, single family housing development was a driver of US economic growth. Today, there is no single family housing industry to speak of. These 7 charts derived from this week’s release of new house sales data from the Census Bureau illustrates just how bad things are.
New house sales fell versus September 2015 and remain barely above the housing depression lows, a mere fraction of 2005 bubble levels. .
This recovery has not even reached the levels reached at the bottom of the 1992 or 1974 recessions. It has gotten back to the 1982 recession low, but there are 45 million more households today than in 1982. This chart shows September sales in thousands for each year since 1972.
The number of full time jobs has returned to 2007 levels. Normally new house sales and jobs growth correlates somewhat. But while the number of jobs continued to grow since 2013, new home sales haven’t kept pace. That’s because most of the jobs being created are too low paying and too insecure to support the purchase of a home. Because of ZIRP, corporate executives find it more profitable to fund stock buybacks or buy competing companies and fire workers, than to invest in their workforces.
Homebuilders tell survey takers that business is great, but the facts say otherwise. The gap between what builders say and the actual level of sales is a measure of the uselessness of the survey. The NAHB survey is ruined by recency bias and survivorship bias. There are fewer builders dividing a smaller pie today than the housing bubble days. To the surviving builders, who mostly now build only high priced luxury housing, business looks good.
The Present Conditions Index represents one of the 3 questions which this survey asks of builders. This one asks them to rate sales as “good,” “fair” or “poor.” The index is almost back to the levels reached at the peak of the housing bubble.
While sales are terrible, price inflation rages. Economists don’t call it inflation becauses houses don’t count in inflation measures used by economists and the Fed, like the CPI and PCE Inflation measure favored by the Fed. Houses are considered assets, and economists and policy makers narrow the definition of “inflation” to exclude asset prices, particularly house prices. So the 13.5% year to year increase in new house prices is “appreciation,” not inflation.
While this measure is volatile, the trend is absolutely clear. It makes new housing less and less affordable for more and more American households. This is another artifact of ZIRP.
What growth there was in new home sales since the bottom in 2010 was only a result of the demographic trend of growing numbers of baby boomers entering the second home and retirement home markets. They moved South. Even that recovery has stalled this year. There has been no recovery whatsoever in the Northeast or the Midwest. September sales in the Northeast hit a new all time low. The West has continued to show some increase but its sales in September were only 36% of the level reached in 2005.
Considering that demographics drove most of the recovery in new house sales, we can deduce that ZIRP didn’t contribute to the recovery. Aging boomers are often cash buyers who would liquidate their existing home to make this move.
This chart shows September sales by region in thousands since 2002, just before the housing bubble took off.
At the US median household income of approximately $52,000 per year, households at or below the median can, with a small down payment, typically afford to purchase a home priced not more than $200,000 based on standard qualifying ratios. Sales in that price range just set a new September record low. Builders simply find it far more profitable to sell fewer houses at higher prices than to appeal to a mass market.
With near zero money costs, builders can afford to take longer to build larger houses with more expensive and profitable features. It enables them to build fewer, more profitable houses, and wait for the fewer upper income buyers to appear who can purchase them. Builders don’t need to build more houses faster to make money. They have no incentive to build mass market housing. In fact, their incentive has been to do the opposite. ZIRP has worked to the detriment the US median income family.
This chart shows total September sales in thousands for houses priced at $200,000 and less.
So the US housing market has had a 4 year dead cat bounce that hasn’t helped most Americans, hasn’t meaningfully contributed to US economic recovery, and now appears to be stalling. To the degree that this industry rebounded, it was driven by a demographic trend, not monetary policy. QE and ZIRP created perverse incentives to business to gamble and speculate, not to make real investments in growing their business in the US and providing good paying jobs that would enable American households to buy homes.
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This does not matter. Blankfine and Dimon are Billionaires, .... Mission accomplished!!
nobody can afford to buy a fucking house
So, demand has cratered, but prices are still high...
Yaay! Price Discovery! Yaay!
In SC, you could see the pileup of framing lumber inventory @ the mills 12 months ago. The next 'growth' market will be MUCH less expensive housing for the illegals. I've been researching $30k manufactured homes that look like a real house, but dont get property taxed like real homes. I'm gonna be quite the plantation owner, and the wetbacks will appreciate the row house quarters I will offer them on my planatation in exchange for their labor. Call it sharecropping, 2.0, and competitive with the free shit .gov entitlements.
I have a buddy that builds houses. He just did one for a friend as a favor. The lot was given to her for free by a relative. He did the septic, slab, plumbing and tile work by himself. The rest he hired out. It cost 150K without any builder fees and the above work done free plus free lot. The house is only about a 1,000sqft with attached 2 car garage. I know that there are cheaper places to build than the northeast but come on, this is frickin ridiculous.
The protelariat will rent their houses from the Dark Lords, and like it.
They aren't trying to help most Americans. Duh.
...maybe someone has mentioned this already??? The next big shore to drop is easy: Federal Rent Control. It has happened before during FDR, it'll be mandated again.
Gotta give all those dweeb Fed employess something to do! Fresh papers and websites to mangle! A new Kangaroo court system to air grievances!
Soon, we will ALL be living in tents! Loving it too!
until we have a million or more people on the streets demanding to end the FED (or just end the NY FED's 90% share of the federal reserve balance sheet), nothing will change.
the only time the fed cares about housing is when it negatively affects the billionaire's balance sheet.
Imagine that, higher house prices and lower demand are correlated! Who'd have thunk it? OOoooh, and lower wages and lower demand are correlated too! No wonder the Fed failed, not knowing these critical market mechanisms. Poor Bernanke/Yellen, if they'd only known about this beforehand they wouldn't have to do QE4-7 to fix it. /smokes emits from sarc meter.
lol. Yeah, it sure feels like the stories are dredging the bottom these days.
THE RENT IS TO DAMN HIGH!
Go long rentals.
Fertility rates of US women is below replacement rate. However, immigration rate continues to climb. The trend is your friend...
And wages are declining and lowest with immigrants. That'd sure make me hesitant, but if it didn't, it would color the choice of properties to buy a lot.
Funny how nobody talks how the zionist environmentalists have stomped out home building at a local level except for the connected whom are allowed to build high rise condos on top of earthquake faults with public funds.
http://www.latimes.com/local/lanow/la-me-ln-hollywood-fault-map-20141106...
All while pushing more stringent earthquake standards for everybody else. http://www.businessinsider.com/r-los-angeles-approves-sweeping-earthquak...
Without limited housing, the American renter public could build their way out of and "strand" the sub prime looter flipper loan fraud community and their Latino fraudster renters foreclosure army.
Alas American voters are too stupid to vote for home ownership and freedom in their own country, they vote for fraud and invasion.
I'm in a house in a high property tax town (#8 in the state). Thanks to dual income professionals requiring the best of everything and a top rated school system which seemingly is a magnet for renters with special needs children. "For Sale" signs are all over the place for those of more modest means. I'm having trouble with the basic costs of just maintaining my house. Something sems to go wrong or need replacement all the time. I'm hoping against hope that the leech field will hold up until we leave - just did the roof and chimney.
It's irritating spending all this money on upkeep for a home in a town you want to move away from but can't because so many others wish to move also but can't and every potential buyer is aware of the property tax squeeze.
p.s. Any suggestions welcome.
Very nice. And scary.
Except maybe that last chart.
Are there really houses anywhere on Earth today for under $200k? In Los Angeles that's about the price of a parking ticket. Average Joe houses around Los Angeles have to go for $500k, up from maybe $350k at the bottom of the crash.
ZIRP wasn't supposed to help Average Joe, unless Average Joe is a bankster. Well, actually it did help Average Joe because Joe got to refi his 5% mortgage down to 3%, and that's not bad.
How long will ZH play this same tired song?
Ask for a full refund on your way over to buzzfeed.
Thanks to Dodd-Frank, if you want a mortgage, you have to bend over and let them look deep into your asshole.