In case the world needed any additional proof that the latest housing bubble (not our words, Fitch's) was on its last legs, it came earlier today from Credit Suisse' Dan Oppenheim who in his monthly survey of real estate agents observed that October was "another weak month" for traffic, with "pricing power fading as sluggish demand persists." This naturally focuses on the increasingly smaller component of buyers who buy for the sake of owning and living in a home instead of flipping it to another greater fool (preferably from China or Russia, just looking to park their stolen cash abroad). Quantifying the ongoing deflation of the bubble, Oppenheim notes that the "weakness was again broad-based, and particularly acute in Seattle, Orlando, Baltimore and Sacramento.... Our buyer traffic index fell to 28 in October from 36 in September, indicating weaker levels below agents’ expectations (any reading below 50). This is the lowest level since September 2011."
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Other notable findings:
- The Price appreciation is continuing to moderate: while many markets saw home prices rising if at a far slower pace, 7 of the 40 markets saw sequential declines (vs. no markets seeing declines in each of the past 8 months). Agents also noted increased use of incentives. Tight inventory levels remain supportive, but are being outweighed by lower demand.
- Longer time needed to sell: it took longer to sell a home in October as our time to sell index dropped to 42 from 57 (below a neutral 50). This is typically a negative indicator for near-term home price trends.
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Which is bad news for the Fed: recall that as the TBAC has been preaching for over half a year, unless the Fed manages to reflate the housing bubble to escape velocity speeds where the securitization product can become the equivalent of "high quality collateral", Mr. Chairwoman will be unable to step away from injecting the credit money flow, while in the process extracting so much more collateral that the market ultimately runs out of things the Fed can legally (or illegally) monetize.
Full note:
Another Weak Month for Traffic, Though Some Saw More Signs of Life in Late Oct.
• Pricing power fading as sluggish demand persists: Add the government shutdown to the list of recent buyer concerns. Even as mortgage rates pulled back (which had ostensibly been the main driver of weaker trends this summer), buyers headed to the sidelines in October, especially in markets dependent on the federal government or contractors as the government shutdown ensued. The end result was that after several months of weakening demand, price appreciation appears to be moderating in most markets. One potential bright spot is that we saw some comments from agents toward the end of the month highlighting a pick-up in activity after the shutdown and debt ceiling debate were resolved, though it wasn’t enough to move the needle on our index so we will watch closely in November.
• Buyer traffic falls again as government shutdown leads to further hesitation: Our buyer traffic index fell to 28 in October from 36 in September, indicating weaker levels below agents’ expectations (any reading below 50). This is the lowest level since September 2011. Agents had previously highlighted growing hesitancy from buyers given the sharp move higher in home prices and mortgage rates, but even as rates came in, buyer confidence took a hit from the government shutdown and debt ceiling debate, even in markets which on the surface wouldn’t appear overly reliant on the federal government. Weakness was again broad-based, and particularly acute in Seattle, Orlando, Baltimore and Sacramento. Dallas remained at healthy levels, while Denver, Houston and Vegas all improved sequentially.
• Price appreciation continuing to moderate: Our home price index fell to 57 in October from 72 in September, still pointing to higher home prices, but much less broad-based. In addition, 7 of the 40 markets we survey saw sequential declines (vs. no markets seeing declines in each of the past 8 months). Agents also noted increased use of incentives.
Tight inventory levels remain supportive, but are being outweighed by lower demand.
• Longer time needed to sell : Our home listings index pointed to stable inventory levels, but it took longer to sell a home in October as our time to sell index dropped to 42 from 57 (below a neutral 50). This is typically a negative indicator for near-term home price trends.
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Oh well: the latest mass delusion of instawealth was fun while it lasted.