Existing Home Sales Crush Recovery Narrative, Plunge Most Since Nov 2015

Tyler Durden's picture

Following yesterday's 7 standard deviation beat in New Home Sales, Existing Home Sales for July missed expectations by 2 standard deviations dropping 1.64% YoY - the first annual decline since Nov 2015. The blame for this collapse - according to NAR's Larry Yun - is "frustratingly low inventory levels."

 

 

New Home Sales...

Existing Home Sales...

Which one of these "sales" series looks more like Mortgage apps?

 

Lawrence Yun, NAR chief economist, says existing sales fell off track in July after steadily climbing the last four months.

Slowed by frustratingly low inventory levels in many parts of the country, existing-home sales lost momentum in July and decreased year-over-year for the first time since November 2015, according to the NAR. Only the West region saw a monthly increase in closings in July. 

 

Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,” he said. “Realtors® are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows.”

 

 “Furthermore, with new condo construction barely budging and currently making up only a small sliver of multi-family construction, sales suffered last month as condo buyers faced even stiffer supply constraints than those looking to purchase a single-family home.”

We warned that a slowdown loomed last week...noting three prominent "red flags" that the US housing market was starting to roll over.

Among these were a report by real-estate advisory RealtyTrac, which cited by Bloomberg, said that "almost nine years after the housing-market bust helped trigger the most recent recession, RealtyTrac senior vice president Daren Blomquist sees the industry waving a red flag." He was referring to house flipping by third party investors at auction which was back with a vengeance, and what's worse, the share of foreclosures snapped up by inexperienced mom-and-pop buyers at auction had hit a record 31% in June. As he said, "this a redux of the same fervent speculation that pushed the housing bubble."

 

The second warning came as a result of the latest sharp decline in spending on furniture and home goods stores, which according to Bank of America credit and debit card spending data, showed that the yoy drop had reached the lowest since the recession period. As BofA said then, "this shows that consumers have delayed spending on housing-related items, which could be a sign of weakness for the housing market."

 

The third red flag was revealed in the then-latest Credit Suisse survey of real estate agents: "Our Buyer Traffic Index took a sizeable step back in June, slipping to 41 from 52 in May, indicating traffic levels decidedly below agents’ expectations.... Prospective buyers also continue to be deterred by a persistent shortage of affordable inventory across markets, with agents frequently highlighting buyer pushback to rising home prices. On the other hand, agents repeatedly mentioned that low mortgage rates were crucial to supporting demand."

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StackShinyStuff's picture

Say it with me boys and girls:

IT'S DIFFERENT THIS TIME

Hitlery_4_Dictator's picture

Soon the crying and knashing of teeth of all Real Estate agents will start.  Get a real job losers.

Consuelo's picture

 

+1000

 

'Folks, don't even attempt to buy or sell a house on your own, without enlisting the services of a 'trained professional' - a Real Estate agent'...  

TrajanOptimus's picture

1 out of 10 agents are worth their salt and when you do find a good one, you understand THEN why you are glad to have found a good one. My agent has made me a lot more money than I could have made on my own. She has earned every comission.

If you have ever had a bad experience with a real estate agent the only person you can blame is YOU, YOU picked the agent and didnt do your homework to find a good one.

nibiru's picture

Maybe it is the same, but remember TINA!

 

There is no alternative... so we all should just give up because in the long-run everyone is dead. 

Citizen_x's picture

Maybe...maybe
that one will leave a mark

brada1013567's picture

The Fed needs an excuse not to hike rates.

 

Really hard to type that while laughing histerically

E.F. Mutton's picture

Almost as funny - Yahoo Finance blames it on a housing shortage

Hohum's picture

Of course, everyone was buying a NEW house!

Yukon Cornholius's picture

How long before you call a hedge fund manager rather than a realtor to book a home viewing?

adr's picture

Also since most new homes will last about ten years before turning into mush, THEY'LL ALL BUY NEW HOMES AGAIN!!!! WHOOOOO!

Infield_Fly's picture

And if you believe these stats...

 

This housing issue is far worse....much like employment numbers.

 

ACES FULL's picture

Its hard to know what to believe anymore. Just go by what you see in your area,I guess. Looked at some houses on the SE coast about 2 years ago,they were in the 800k range,today almost identical homes are 1M or a little more Using as close of comparisons as I could,I figured on average close to 250k increase in 2 years. There are a lot of extra costs associated with owning a home on the coast and it looks like the top of a trend imo. I expect the cycle to reverse (or worse) soon.

NumNutt's picture

I hate to say it but I think there is some truth to what is in this article. I am currently looking to purchase a house for my son. Nothing fancy just a basic starter home in the 150 range. I am having a hard time finding a decent one. What I see happening is this price range of homes are being snatched up to be used as rental properties.  Higher end homes, 250 and up are everywhere, first time home buyers are being squeezed out of the market.

Yukon Cornholius's picture

When I see people looking to buy houses for $150k I wonder what year they're in. Then I remember I'm in Vancouver and it all makes sense again. Even with the burst bubble I'll never see prices like that.

The Real Tony's picture

If the Chinese all stop buying I can guarantee you'll see at least a 65 percent drop in prices. From what I read on Zolo.ca prices for single detaches homes have already fallen 20 percent since the start of March this year. The tax on the Chinese will crush the housing market in Vancouver.

 

Yukon Cornholius's picture

Not down to $150k.

Besides...Russian money will be coming in next.

Houses Depreciate's picture

It's all borrowed money irrespective of origin.

hound dog vigilante's picture

 

Wealthy Russians don't leave Russia for homes in cold/wet Canada... Russians will follow the sunshine. Sorry.

Houses Depreciate's picture

Considering it's built new for $50/square foot, $150k is grossly overpriced.

adr's picture

Thanks to the Fed and the gift that keeps on giving to high net worth individuals, they are buying up property as fast as they can. Everything around me is bought with cash.  Anything under $250k goes within days of the listing, all for rental properties. Then since all properties are available for government housing, wonderful latinos move right in granting the owner of the property a guaranteed government income.

An absolute shit home in an area that looks like the wrong part of West Virginia sells for $260k in my neck of the woods. It is absolutely insane.

Houses Depreciate's picture

All houses are bought with cash. Borrowed cash.

NumNutt's picture

Funny you say that, because that is what I am trying to do, cash purchase that is. And you are correct, anything less then 250 is like trying to be the first to respond to a free car add on craigslist. good fucking luck.

Houses Depreciate's picture

Time is on your side. Inventory is racking up and prices are cracking. Sit tight.

The Real Tony's picture

Where I live a one car garage costs about $250,000.

Houses Depreciate's picture

And before long you won't be able to give it away. 

ACES FULL's picture

You must be the owner of "WE BUY HOUSES" as hard as you're pushing your narrative. Either that or just extremely bitter over being foreclosed on.

Houses Depreciate's picture

Housing demand is at 20 year lows and prices are falling my friend. Get over and get on with your life.

ACES FULL's picture

Like I said,if you believe housing demand is at 20 year lows then surely you are a buyer. Why else would you be pushing your narrative so hard. I own one house and it's not for sell,so there isn't really anything for "me to get over".

Houses Depreciate's picture

It's  the data my friend. Worse yet, homeownership rate is at 51 year lows and falling with record housing inventory out there. Don't fight the data.

ACES FULL's picture

I'm not fighting the data,see my post at the very top. I'm waiting for coastal homes to fall by 40%,which they will imo. Missed a great opportunity in 2011 as I had other irons in the fire and didn't wanna take on debt. I pay as I go friend and I don't over extend myself even then. With all the extra costs of owning a coastal home,I will never buy one unless its a steal.

Houses Depreciate's picture

The data is the data my friend.

ACES FULL's picture

Ok,I get it now. Robo-account. Fifteen word vocabulary.

Houses Depreciate's picture

 

Ok,I get it now. Underwater homedebtor. Empty Pockets.

ACES FULL's picture

Wrong. 700k home and 105 acres paid for free and clear. Can't even tell you off the top of my head what taxes are,thats how much concern I have about them as I have more than enough income and stash. It's been real,I will not be wasting anymore breath on you as you are not interested in a dialogue. Obvious troll.  Good day and good luck sir.

Houses Depreciate's picture

A rapidly depreciating shanty on a load of worthless dirt and not a buyer in sight at a fraction of that $700k.

Same old story. Same old worthless house and dirt.

I am Jobe's picture

Never been a better time to buy for an overpriced Box and to pursue the dream. Americans have shown how dumb they are. 

Rellorellin's picture

I have been looking to buy now and sell my overpriced home on the Northwest side of Chicago.. If I don't sell now, I will be stuck there in case housing rolls over. The prices of homes in the Chicago suburbs are also extremely overvalued. During our search for a home since June, I have noticed that homes are sitting longer and longer. Some 6+ months. There were 10 homes for sale in the immediate are in which we were searching. Now there are 20. I have been seeing on average 5 price cuts with no bites. Previous to that, I seen homes selling quickly as a month. I actually see the slowdown in action.

wisehiney's picture

Get out before the gold grills get there.

besnook's picture

yea, but you are in chicago. people are leaving chicago to move to birmingham, ala. or atlanta, georgia.

ACES FULL's picture

Please guys,you will all absolutely hate the South. Please pick another location,for your own good. A little piece of inside advice,when TSHTF,all the outsiders who migrated to the South will be the first to "get it". You have been warned. Stay away.

markitect's picture

Can confirm, Architect and developer here in Chicagoland, the red hot commuter suburbs are definitely cooling off this summer as are some of the nice outer city neighborhoods.  The downtown area is still on fire but the blue collar industrial areas seem like they've actually gotten worse since 2008 instead of better.  Its clearly an uneven recovery.

wisehiney's picture

Don't forget that new home sales are only about 10% of total home sales.

When existing home sales are down, there are a lot more transaction costs not paid, ie commissions, atty fees, state taxes, surveyors, appraisers, bank fees, etc

maldorer's picture

Need to cut rates to make housing more affordable. 

The Real Tony's picture

Lack of supply ranks as one of the worst excuses ever even worst than I was drunk. Good god what will they come up with next? I'm watching lack of housing supply up in Canada as all types of Vancouver housing are in a free-fall having fallen 20 percent since March this year. Just cover your ears when you hear these excuses.

markitect's picture

This is really extremely simple to explain.  "Inventory" is low because people know if they put their house on the market they wont get what they want for it so they wait.  Enter the NAR who spews constant bullshit about rising home values and being priced out in order to prop the commission structure.  

besnook's picture

if you look at the chart there is an inverse relationship between new and existing home sales. new home sales go up and existing home sales go down. the longer aggregate trend is the story and that says home sales are still trending up.

TheRideNeverEnds's picture

Why buy an existing home when there are new homes for sale at only two to three times the price? Do you really want to live in a home without drapes, AC etc which can be controlled from you iPhone?

Is that even really living?

Seriously though, selling existing homes is not the model. The model is build new homes as cheaply as possible that seem as nice as possible and entice unfit buyers to leverage their entire lives into it, sell derivatives against the debt, unload risk to a public pension or something, then when they get behind, foreclose on it, write it off against profits, try to have the government cover outlay plus any """expenses""". Then let it rot vacant till you can find a buyer to tear it down and start the cycle again.

If done correctly it is far more profitable than collecting your three and a quarter naked for thirty years.