Housing Repenetrates Alleged Bottom As NAHB Index Misses By Most In 22 Months

Tyler Durden's picture

It seems all that confident over-extrapolating of warm-weather-based foot-traffic into closed sales and a recovery in housing was, as we vociferously warned, simply wrong. There's no schadenfreude here as this was too obvious for anyone except the blinkered hopium peddlers as even the NAHB is forced to admit things aren't so rosy in home-sales-land "interest expressed by buyers in the past few months has yet to translate into expected sales activity". The NAHB Index fell for the first time in 7 months, dropped the most in 10 months and missed those glorious expectations by the most in 22 months - quite an impressive set of statistics.


Chart: Bloomberg

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Cdad's picture

Huh?  You mean folks aren't stepping up to buy houses, not signing up for mortgages with criminal syndicate banks?  Who would have thunk it?

Again and again and again...until such time as these zombie banks are broken up, their ranks thinned, their corrupt leadership ditched...the Greater American Depression will roll on and on.  It's pretty simple.

GetZeeGold's picture



Wow.....and right after they've created or saved like 40 million jobs.


hedgeless_horseman's picture



If one really believes that the Fed must continue to print, then borrowing money with a fixed-interest mortgage to buy a home, preferably with much land, water, and a gas well, can be a smart move. 

It would be best to have an income that can increase quickly (nominally) with inflation, and is not fixed, like a pension.  However, remember if the mortgage is fixed, then the monthly payment will decrease in real terms, while rents rise to keep up with inflation, so it can make sense for pensioners to have a mortgage.

Hourly wages tend to increase far faster than contract-linkled income like that of a physician or union worker.

With inflation, being short cash (long debt) and long tangible goods, like land, is where I would want to be.  During deflation, not so much. 

So the question is, do you think the central bankers will allow deflation, or must we print, print, print our way to prosperity?

MachoMan's picture

What is the mechanism that gives average workers an increase in their wages that will allow them to pay off the newly acquired fixed rate debt?

hedgeless_horseman's picture



Average workers should be able to easily pay the mortgage under current income.  This isn't the lottery.  It is just a way for pensioners and others to lock-in low "rents" if they believe inflation is going to be a problem in the future.

MachoMan's picture

In other words, borrow if you can pay it off anyway?  Why would inflation cause rents to increase?  If people have less disposable income (due to higher fuel, food, etc. costs), then how are increases in rent going to be passed on?  Where is the endless supply of credit worthy tenants at presently prevailing rents?  If we can acknowledge that the price of housing will decrease with higher inflation, why will rents not follow suit?

hedgeless_horseman's picture



I would never borrow money I did not think I could pay back.

Inflation causes the nominal value of almost everything useful to increase.  Whether or not a house is useful depends on the specific instance and circumstances.

Nominal housing values can decrease during inflation, but only if the utility decreases faster than the value of the currency it is priced in.

You know this stuff, Macho.  Read Orlov if you want to better guess how none of us might have to pay rent or our mortgage in the future.

jcaz's picture

Big assumption- you're leaving out supply and demand, and the fact that REAL supply is unknown.

My block is full of unoccupied "$500K+" houses that are neither for sale or listed on any real estate ledger-  mostly, they're just dumb 2nd and 3rd home "investments" that will come to market once liquidity is an issue for the owners-  will be an interesting price discovery.

At that point, the utility of those homes increases, while their prices decrease.

hedgeless_horseman's picture



At that point, the utility of those homes increases, while their prices decrease.

If these are the typical unoccupied $500,000 balloon-construction McMansion on an 1/8th an acre and you live in a state where moisture occasionally falls from the sky, then one could argue the utility of those "homes" is not likely to increase.  The land, maybe, but not those empty houses.


What I am addressing is a question that does come up for many senior citizens in America these days.  Many do not own a home free and clear, and they are living on a relatively fixed income.

Should they sell the home and become a renter or remain a borrower?  Basically, under high inflation a borrower with a fixed payment amount (rate) is better off, while under deflation a renter (with a short lease) is better. 

It occurs to me that on ZH we often rail about central bankers printing to infinity, but in the same breath disparage mortgage holders.  Is this not a bit of a contradiction?


MachoMan's picture

First, a house's utility is the same regardless of its price...

Second, debtors are exactly what gives rise to the power of central bankers...  so no, it is not a contradiction...  there may be certain circumstances that require prudent people to take on debt and pay the fiddler so to speak, but I think these are the exception and not the rule.

patb's picture

Can the Fed prevent deflation?


If the M1/M3 multiplier is busted,  then the Fed would have to print tens of trillions of dollars.






if you can't follow the above link,  google m1 multiplier chart


but the fed is no longer able to leverage money up, instead, it's below 1.  The lever is working against them.



john39's picture

MSM is doing its best to lure suckers, er, buyers in...  heard a piece on the radio this morning about how big speculators are swooping in to buy up the "bargains" to create home rental portfolios...   smells more than a bit suspicious to me.

jcaz's picture

Agreed- same old story-  gotta pump that market.....

azzhatter's picture

it's probably 50 or 60 million by today minus those 12 secret service guys

ihedgemyhedges's picture

Am I the only one who gets TD's tagline???????

Sounds like Peter North is in the house.................

Bay of Pigs's picture


You don't hear "repenetrate" very often.

ACP's picture

It only seems to be used when talking about housing or the half of Americans who pay taxes.

EscapeKey's picture

"income taxes", not "taxes".

Virtually all americans pay taxes.

ACP's picture

That's true, but government handouts more than make up...which is also why some politicians don't mind raising taxes. They just steal more money to make up for it.

killallthefiat's picture

Hooray for escapekey.  I almost barf when that stat is quoted again and again about income taxes. 

Spirit airlines had not started labeling the taxes on their airfare as "Government Cut" and "Your government tax rate for this selection is x%".  More small businesses should do that.

ihedgemyhedges's picture

And after 18 years of marriage, you can remove the "re" and your statement still applies.............

jeff montanye's picture

and it's not the bottoms that are most often "alleged".  it's usually the other side.


SilverTree's picture

Peter North did a bit of gay porn. 

ShankyS's picture

Cuming in the back door with all that liquidity. I wondered if they paid their $47 but this still leaked? I guess my Peter North "pulling liquidity" thought the other day is taking root. 

Reggie Middleton's picture

As excerpted from Did Bernanke Permanently Cripple the Butterfly That Is US Housing? The Answer Is More Obvious Than Many Want To Believe

This near cessation of foreclosure activity has materially dropped the shadow inventory numbers, but has done so in a way that is quite misleading. Those foreclosures either will happen and become REOs or distressed property sales that are currently averaging a discount of ~25% to conventional retail sales (thus further pressuring sales prices), or will result in the properties being put directly  on the market at steep discount (again, further pressuring sale prices). Basically, the foreclosure backlog is simply accumulating in the background and will print a very sharp spike upwards one way or another once the foreclosure and fraud issues of the banks are sorted out – even if they are sorted out to the detriment of the banks. Despite this reprieve in foreclosures, the ratio of shadow inventory to home sales is not decreasing. This is a double negative, for shadow inventory is decreasing (albeit for very artificial and temporary reasons). The reason for the lack of movement in this very key figure is that housing sales are actually declining both on a seasonally adjusted and non-adjusted basis – and if these figures were to be adjusted for “true” inflation, would look much worse. This leaves the ratio of delinquent and foreclosure activity to sales relatively static. One can surmise what happens when the foreclosure backlog that was caused by the bank’s myriad legal issues clear up.

The most valuable chart in the study just released to subscribers, File Icon Shadow Inventory Update -- March 2011 shows how quickly one can expect the shadow inventory to be consumed by the sale of homes. To make a long story short, we still have quite a ways to go before we reach the pre-bubble levels, and that is without taking into consideration the foreclosure moratoriums. Keep in mind that these numbers do not include the pent up shadow inventory that is being hidden by the foreclosure crisis. That additional inventory on top of a slowing housing sales metric can easily tack one to 4 years onto the inventory numbers.


As you can see, the credit (delinquency measures) metrics are actually moderating slightly over the last few quarters, but have increased over the last two. This is a negative sign considering all of the efforts that have been made by the government and the banks to reduce that figure. The foreclosure inventory, although lulled somewhat, is still slightly on the rise. This lull is synthetic and temporary, a by-product of congressional pressure and legal issues pressing the banks to undergo voluntary and involuntary moratoriums on foreclosure activity. The consequent movement to be expected as these moratoriums are lifted, the banks work out their legal issues, and the properties move one way or the other will cause a very dramatic spike in the shadow inventory numbers. This spike will occur on top of slowing housing sales, dramatically reduced housing prices metrics and potentially deteriorating credit metrics (if the most recent trend continues). If that is not enough good news for you, the Goldilocks scenario of the perfect interest rate environment for real estate needs to (and probably will in the near to medium term) come to an end. See The True Cause Of The 2008 Market Crash Looks Like It’s About To Rear Its Ugly Head Again, With A Vengeance Friday, March 11th, 2011. Our calculations available ot subscribers show a very bleak outlook for housing. It is not as if there is no precedence for such. Take a look at the Japanese situation, and this is not taking into consideration the recent issues of the earthquake, tsunami and radiation poisoning and nuclear meltdown. Few things are as detrimental to property values as radiation poisoning!

A lesson to be learned: Beware for when a true black swan event occurs...

Further reading:

    1. Reggie Middleton ON CNBC’s Fast Money Discussing Hopium in Real Estate Friday, February 25th, 2011
    2. In Case You Didn’t Get The Memo, The US Is In a Real Estate Depression That Is About To Get Much Worse Wednesday, February 23rd, 2011
  1. Further Proof Of The Worsening Of The Real Estate DepressionThursday, February 24th, 2011
    1. You’ve Been Had! You’ve Been Took! Hoodwinked! Bamboozled! Led Astray! Run Amok! This Is What They Do! Monday, February 28th, 2011
  2. FASB Appears to Have Bent Over For The Final Time & Accuracy In Financial Reporting Dies An Ignominious Death!!!Wednesday, February 9th, 2011
    1. As JP Morgan & Other Banks Legal Costs Spike, Many Should Ask If It Was Not Obvious Years Ago That This Industry May Become The “New” Tobacco CompaniesThursday, January 6th, 2011
  3. The Latest Case Shiller Index – Housing Continues Freefall In Aggressive Search For EquilibriumMonday, February 7th, 2011
    1. As Clearly Forecasted On BoomBustBlog, Housing Prices Commence Their Downward Price Movement In Search Of Equilibrium Scraping Depression Levels Tuesday, December 28th, 2010
battle axe's picture

Go long Tents....

Jason T's picture

$10 trillion in mortage debt, you got students with $1 trillion in student debt, new jobs created are paying on average 40% less than jobs lost in the recession = no housing recovery for an entire generation

midgetrannyporn's picture

Broke people stopped buying overpriced crapshacks in the middle of the desert? Shocking!

DeltaCharlie's picture

But, but, interest rates are at all time lows..... oh wait a minute, crap credit scores, no jobs, no income. NINJA loans 2.0 anyone??

EscapeKey's picture

My favourite piece of propaganda over here in the UK is that "housing affordability has greatly improved" - yeah, Sherlock, what happens when interest rates rise from these historic lows? What will happen to your finances, when the 2.99% 2-year rate you locked in can't be refinanced for anything less than 4.99% down the road?

Oh, better not discuss that in the media.

EscapeKey's picture

Fixed rate beyond 5 years is ludicriously expensive. If the rate doesn't get you, then the up-front fees will.

LawsofPhysics's picture

Spot on, wages and tax reciepts tell the true tale.  Going to be a bad time to be a landlord when local governments raise your taxes and then try and tell you what you can or can not charge for rent (price fixing).  Miss Whitney was correct, but she forgot that all economies and politics are indeed local. Many local governments will have to increase taxes to simply continue to deliver services (and I am not talking about social services, I am talking about things like sewage, road maintenance, water...)

MachoMan's picture

Sure, they'll have to increase taxes if they want to try and eat their cake and have it too.  Weed out the unnecessary beaurocrats and paper pushers, and I think the budgets will allow for some road maintenance and sewage (aside from the fact that these things are perfect for and often recovered with excise taxes).

The problem is that you can't get blood from a turnip...  and, ultimately, local governments do not get to "push things through" without answering for them...  until very recently, my city has denied dozens of proposals to increase sales or property taxes...  we're still low for the state and really, really low for the country.  Eventually they'll collect the last marginal penny and will be forced to reconsider...

We've come full circle...  where a conglomeration with a focus on local autonomy cannot form a viable nation...  and a single nation that punitively usurps local control falls prey to the rudimentary constraints of central planning.  Bouncing between the poles some more...  never finding stasis.  

prains's picture

nothing like a good REpenetrate

mayhem_korner's picture



Exuberance is a transitory, barbarous relic.

Catullus's picture

Downloading the Zillow app is not translating into actual sales?! What is this? 1999? My clicks are worth something, damnit!!

Just goes to show you: sales people are forever and always full of shit.

Dick Darlington's picture

Oh Cramer, where art thou, LOL!!!

blu's picture

Who said they could report any bad news? Terrorists hating America ...

DormRoom's picture

So  all this liquidity isn't helping the housing market, and only propping up the big banks, structural inefficiencies, and prior malinvestments.


p.s.  Demographically (25-35), all the prospective home owners are living in their parents basement, and are heavily in debt from student loans.

Dr. Engali's picture

If the idiots would stop artificially supporting the house prices and allow the market to clear some of these people might be able to afford to move out and buy a house.

MachoMan's picture

Houses would be cheaper, but I'm not sure that necessarily means they'll be affordable...  we still lack a mechanism for job/wealth creation.

StychoKiller's picture

In the early twentyth century over 40% of people owned their own business.  Onerous regulations have prevented many a person from starting their own business these days...

LongSoupLine's picture

Somewhere, right now, Bill Gross is sitting on his Stratospheric pile of MBS's...and smiling.

rosiescenario's picture

....and an accelerating wave of new foreclosures is coming to a market near you, putting more homes under water and creating more incentives for 'short sales' or walk aways.....if the housing market were an airplane, we'd call this a 'graveyard spiral'.

Peter Pan's picture

We can talk about housing and make predictions until we all go blue in the face. The reality is that any meaningful improvement in house prices, house sales, house construction etc are all primarliy dependent upon more jobs that are also well paying and not just subsistence level.


apberusdisvet's picture

Merchant builder puts, anyone?  Might be the best investment for the rest of the year, excluding PMs of course.