For months we have been saying that there is no housing recovery, and what little buying interest there was was driven purely by abnormally warm weather and still record low interest rates. Well, the seasonal aberrations are now over, and normalcy can return, but not before much demand was pulled forward (Cash for Caravans? Money for McMansions? Shekels for Shacks? Dough for Dumps?) to December-February courtesy of "April in January [8]" and mortgage rates soaring to well over 4%, leading to a major tumble in MBA new home and refi mortgage applications (as noted here "So Long Housing - Mortgage Applications Collapse, And Sentiment Update [9]"). So we won't repeat ourselves, intead we will give the podium to CNBC's Diana Olick who now finds empirical evidence of what we have been saying all along. From Olick: [10] "Housing was charging back. Spring sprung early. Sentiment among home builders doubled in six months. Any talk that the fundamentals might not be supporting the sentiment was met with harsh criticism. And then suddenly it wasn’t. A slew of new housing data last week disappointed the analysts and the stock market, and all of a sudden you started to hear concern that maybe housing wasn’t exactly in a robust recovery. From home builder sentiment to housing starts, to home builder earnings right through to sales of newly built homes, there was not one hopeful headline in any of it (except perhaps if you invest in rentals, as multi-family housing starts made more gains, but that is a contrary indicator to housing recovery)." And from the ground:"And then an email from a Realtor in New Jersey: “Just reviewed March buyer clicks, Google’s analytics on all the sites we monitor – March is turning out to be the weakest month since last October re: Buyer interest."
Speaking of rentals, recall: "The "New Normal" American Dream Of Renting Is About To Become Very Expensive [11]" and so it is - rentals being one of the very few things in the CPI that actually are surging in price, expect Fed's inflationary beancounting to show price pressure, but luckily it will be more than offset as homes for sales quadruple dip and the housing sector relapses all over again.
More from CNBC [10]on what has been paifully obvious to all those who live in the real economy instead of making their deliberations based on Suez Canal canoe indices, or Architecture billings or what not:
Now we start another week with another disappointment. Pending home sales, a measure of signed contracts for existing homes, not closings, fell half a percentage point month-to-month.
That may not seem like a big deal, but the analysts were looking for a small gain. No doubt the Realtors will point to the solid 9% gain from a year ago, but so much of that gain is based on a change in the foreclosure pipeline.
Last year the foreclosure process stalled. The “robo-signing” mess brought everything to a standstill, and that left investors with little to buy on the distressed side. Foreclosures began ramping up again in the late fall, and that led to a surge in investor buying. Was that the “recovery” we were seeing?
Investors are still rushing into the market, with distressed sales making up a near-record 48.7 percent of sales in February on a three month moving average, according to a new report today from Campbell/Inside Mortgage Finance.
Investors are now a full quarter of the market, and they are increasing their activity in short sales (when a lender allows the home to be sold for less than the value of the mortgage).
Don’t get me wrong, investors buying up the distress is necessary to cleanse the market, but it is not real recovery. Mortgage originations are at a 12-year low, despite record low rates. Normal, “organic” home buyers, move-up owner occupants, are not flooding back into this market. Rents are still rising.
Mortgage analyst Mark Hanson runs some disturbing numbers to back up his contention that Q2 will disappoint: “Investor sales volume up 37 percent YY for a whopper 69 percent of all YY existing home sales gains. First-timers are starting to look weak in Feb. The gains in first-timer and repeat sales can easily be explained by historic rates and weather and can easily reverse in a single month.”
Judging by the market reaction today, we expect everything to be limit up tomorrow as Case-Shiller posts the 7th consecutive drop in home prices. Or is it 8th? Frankly, it doesn't matter. All that does matter is how much more currency debasement will the USD sustain before it loses its reserve status.