Housing Market Headed For "Broadest Slowdown In Years"

For those who have been focusing on corporate earnings, the stock market and the global economy, a more ominous - if under-reported - flashpoint has emerged in recent days after some scary housing market numbers were published over the past week, or as Robert Shiller told Bloomberg, "This could be the very beginning of a turning point." 

The housing market is showing signs of a downward slide after existing-home sales were down in June, sales hit their slowest pace in eight months, and mortgage rates are on the rise, causing usually restive buyers to stay patiently on the the sidelines. 

In reporting on the worrisome data released this week, Bloomberg notes that "the U.S. housing market — particularly in cutthroat areas like Seattle, Silicon Valley and Austin, Texas — appears to be headed for the broadest slowdown in years," due to a trend of buyers "getting squeezed by rising mortgage rates and by prices climbing about twice as fast as incomes, and there’s only so far they can stretch."

Meanwhile, according to the latest Attom data, U.S. median home price appreciation decelerated in Q2 of 2018 to its slowest pace in two years. Here are some key indicators that we are indeed witnessing the start of a slowdown, published this week:

  • Existing-home sales dropped in June for a third straight month. Purchases of new homes are at their slowest pace in eight months.
  • Inventory, which plunged for years, has begun to grow again as buyers move to the sidelines, sapping the fuel for surging home values.
  • Prices for existing homes climbed 6.4 percent in May, the smallest year-over-year gain since early 2017, and have gained the least over three months since 2012, according to the Federal Housing Finance Agency.
  • Shares of PulteGroup Inc. fell as much as 4.9 percent Thursday morning after the national homebuilder reported that orders had declined 1 percent from a year earlier, blaming rising mortgage rates.

It looks like home prices are plateauing as supply lines increase, according to Bloomberg:

  • Some of the most expensive markets, where sales are falling under the weight of prices, are now seeing substantial increases in supply, according to Redfin Corp.
  • In San Jose, California, inventory was up 12 percent in June from a year earlier. It rose 24 percent in Seattle and 32 percent in Portland, Oregon. Those big jumps are from low numbers, so the housing crunch is still a serious problem.
  • "Inventory has increased quite a bit," a Seattle agent tells Bloomberg. "We’re seeing less competition."
  • In its preliminary July survey, 65 percent of Americans said it’s a good time to buy a home, the lowest since 2008, when the economy was still in recession.

And as the following chart of FHFA home prices, the recent home price plateau is starting to turn lower:

This as international buyers are dropping out of the US housing market in growing numbers, according to new reports, underscoring the general buyer fatigue on the rise. 

"The affordability crisis may have reached a breaking point in Portland, San Jose, and Seattle,” said Settle-based real estate brokerage company Redfin's CEO.

At the same time, the average homeownership tenure increases to new all-time high of 8.09 years: homeowners who sold in Q2 2018 had owned their homes for an average of 8.09 years, up from an average homeownership tenure of 7.91 years in Q1 2018 and up from an average homeownership tenure of 7.83 years in Q2 2017, according to Attom.

"Buyers want to shop and take some time, as opposed to having to rush and throw offers in," a real estate agent with Windermere Realty Trust in Portland told Bloomberg of trying to manage sellers' expectations. "It’s the market correcting itself. At some point, you hit a peak of momentum, and then things level off."

And as supply grows, and buyers find more options to choose from, buyers are taking their time to pull the trigger:

While we have previously compiled these numbers in separate posts, here is a summary take on the current state of the US housing market:

  • The homeownership rate in the second quarter was 64.3 percent, up from 63.7 percent a year earlier, according to U.S. Census Bureau data released Thursday.
  • S&P CoreLogic Case-Shiller data hint at the softening. The 20-city index of property values rose 6.6 percent in the 12 months ending in April. After seasonal adjustments, the gauge posted its smallest monthly increase in 10 months, with New York, San Francisco and Washington reporting declines.
  • Homeownership still remains out of reach for many Americans, especially for first-time and younger buyers. For existing homes, the median price climbed in June to a record $276,900, while properties typically stayed on the market for 26 days, unchanged from the prior three months, according to the National Association of Realtors.

That said, there are still reasons to be optimistic that we are not at the start of a new housing crisis: per Bloomberg:

“While there appears to be a slowdown in the growth rate of home sales and prices, it has not slowed rising homeownership,” Freddie Mac Chief Economist Sam Khater said in a statement — though he added that the rate is a full percentage point below the 50-year average, reflecting “the long-lasting scars from the Great Recession and the lopsided nature of this recovery.”

Market watchers note that the housing sector has strong support from a healthy labor market and steady economic growth, which indicates a stabilizing trend for home prices rather than anything close to the experience of the crisis, when property values plunged. And shares of D.R. Horton Inc., which builds a lot of starter homes, rose as high as 8.7 percent Thursday morning after the company reported a 12 percent jump in orders.

Still, a red flag is that the experts are starting to spin the narrative, usually a key indicator that a major turning point is dead ahead: "The rate of home sales, new and existing, has probably peaked," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. "But it’s not going to roll over. It will gently decline." It was not clear why Shepherdson was confident of this.

Others were less sanguine: "Home prices are plateauing," said Ed Stansfield, chief property economist at Capital Economics. "People are saying: Let’s just bide our time, there’s no great rush. If we wait six or nine months we’re not going to lose out on getting a foot on the ladder... we’re now looking at a period in which prices move more or less sideways, or increase no more quickly than growth in incomes, over the next few years."

Which is a problem, because according to the latest Case Shiller data, home prices in all metro areas are increasing at a higher rate than incomes, and in 15 out of 20, the rate of price is more than double that of income growth.

And let's not forget the uber bubble that is San Francisco, where in just the past six months, median home prices increased by a record $200,000 to an all time high $1.62 million.

Finally, there is the threat that the Fed will hike right into a recession, making mortgages unaffordable: "no one knows how far and how fast borrowing costs may rise as the Federal Reserve raises interest rates", Stansfield said.

This was confirmed by the latest UMichigan consumer sentiment survey, which revealed that Americans believe current conditions to buy a homes are the worst they have been since 2011 due to high interest rates.

This also means that for most areas, we will not see a price surge just ahead of the next recession. Lenders and borrowers alike are less likely to let credit spiral out of control than in 2005 and 2006. And with financing tighter and wage gains in check, “there’s not much scope for prices to continue to increase sustainably” at recent rates.

The rate-driven cooling, in turn, could curb housing starts, “because builders tend to only build what they think they can confidently sell,” Stansfield said, which he noted is a potential silver lining, as the slowdown in inventory creation "will decrease the risk of a bust." Alternatively, it will also result in a broad slowdown in the economy as homebuilders hire less (or begin to fire) construction workers, while spending less on growth.

So where does that leave us? We'll let readers decide on their own where in Phase 2 of the housing market (shown below) the US is currently, with the reminder that nobody rings a bell at the top.

Comments

Free This 847328_3527 Sat, 07/28/2018 - 14:45 Permalink

We are all gonna take a hit, and need to realize this, Trump is fighting for US, even the world, it is too bad some folks cannot see this. But the freebeees have GOT to stop.

Gov't is the PROBLEM, not the SOLUTION!

Give me some of that good stuff, baby!

Cut off all forms of welfare, queens and .corp, and provide for those that are truly are in need. Disabled (truly) and retarded, downs, etc.

I propose we start a movement called "civilanism" or "civilism", where we have NO RULERS, NO KINGS, NO PRESIDENTS, NO EMIRES, NO MULLAHS, no holier than thou bullshit artists - throw the yoke of .gov off WORLDWIDE!

Arm EVERYONE, and we will have polite societies! Ban currency and go to bartertown if necessary. I don't have all the answers, but it is a fucking START!

This BULLSHIT we have endured is enough already! If a person fucks up, they lose their life! Pure rule of law!!!

I know this sounds contradictory, but we have a problem, I am offering a solution!

This is NOT to be construed as socialism, it is rule by the people!

I dunno, give your feedback, maybe it's bullshit too!?

Been thinking about this since that article here where that town banned .gov totally. Sure we run the risk of mob rule, there has to be a fix for this, even somewhere in between!

EDIT - Yeah, i thought so, gave it some more thought and I have just described libertarianism in a way. I tried lol... but we all do need to start thinking outside the box we are in, that is for sure!

We are the bourgeois and we are coming to town, beep beep!

In reply to by 847328_3527

Whoa Dammit JRobby Sat, 07/28/2018 - 16:04 Permalink

The problem with the housing market is that the traditional move-up buyer has been taken out by the double whammy of stagnant wages and rising home prices. If the owner of a starter home sells, that person can only afford to buy another starter home, so these owners are not going anywhere.

I wish the stats for Atlanta were split into northside and southside markets. South of 1-20 Atlanta becomes Planet Dindu, which skews the numbers for what it really costs to live in an area where you don't have to worry about getting shot or car jacked. Prices in the northern part of Atlanta have gone insane.

In reply to by JRobby

PitBullsRule Whoa Dammit Sat, 07/28/2018 - 16:10 Permalink

Planet Dindu is why you need to buy the most expensive house you can find as soon as possible. The one thing that keeps the Dindus away is the high price of houses, because they can never save enough for a down payment. They always buy a cool car whenever they get close to being able to buy a house.

Otherwise you will be living amongst the Dindus for the rest of your life.

In reply to by Whoa Dammit

MK ULTRA Alpha PitBullsRule Sun, 07/29/2018 - 03:38 Permalink

A strange thing happened on the way to the forum. Would you pose for a photo of your burned out home with smiles, like you were happy. Well I was reviewing fire photos from California.

It means, they have fire insurance, the state of California will help out and now low interest loans from Trump's emergency declaration. They'll all get new houses, much more modern with a mandated solar roof. And for most, it will be a chance to relocate away from fire prone regions.

Last year, I wrote, we are seeing antifa arson along the entire west coast. A few were caught, this time more were caught. Anyone can look at the locations of the California outbreaks, small fires which looked like California had the measles.

That's right, unusual amount of small fires set, looks like someone or most likely a group traveled the state setting fires.

I hope the Red Wood Forest aren't burned down by antifa.

At the convenience store I mentioned this to two Hispanic women who I know are anti-white, and guess what, it confirmed what I suspected, the young Mexican origin youth knew about and supported antifa. This was good intelligence anecdotal collection of what I suspected.

We're in a full blown race war instigated by the MSM and communist. It's not because of Trump, it was because they believed the whites had been over turned and would never return to power. They believed with Obama, they were now on top.

This proves multiculturalism dreamed up by the left in universities was a theory that didn't work.

It also means this, these kind of people are primary users of the television media system because it's cheap, free entertainment. They're now brainwashed with delusion, any illogical reason to destroy the whites. Trump is just a scapegoat target, it's not about him. It also means, the MSM believed Clinton could win, so a great many, in the millions believed Clinton would win, thus no need to vote. This is now a completely different dynamic.

In reply to by PitBullsRule

MK ULTRA Alpha MK ULTRA Alpha Sun, 07/29/2018 - 03:55 Permalink

Another note, a ZH article stated the Chinese were pulling back from real estate, mainly to pay off loans at home. Also, and this is my input, the capital flight crack down and the belief a war with the US will mean they lose their money is also a driver of the end of the Chinese soft power program of buying up the US.

So Chinese investment, soft power has pulled back or ceased real estate acquisition. The same trend is happening in Australia, soft power didn't work, now it'll be hard power.

We saw the new president of South Africa call for the genocide of white farmer owners, well over 5 million. Then we saw Obama make a speech, whites were the racist, spewed communist doctrine. Attacks on white farmers intensified after Obama left South Africa.

So I tried to help both sides, I saw oranges out of season at the grocery, I thought from a distance it was South African oranges. It was, and they were half the size of the South African oranges of the past.(I know that citrus production region) This means the drought is huge in South Africa. A drought-racist driven genocide, did Obama offer to resettle the white farmers in the US, like his plan to flood the US with Muslims from war zones?

In reply to by MK ULTRA Alpha

MK ULTRA Alpha MK ULTRA Alpha Sun, 07/29/2018 - 04:16 Permalink

Another note, I've got a lot of notes.

I would hope, the left in Australia can shut up and do something honorable for a change. Australia needs more people right now to counter the Chinese and the millions of ethnic peoples and foreign people of color they've loaded up on.

I'm sorry, we are the world and multiculturalism isn't going to work. It's not me or you being the racist who want to kill an entire race off, because I bit off on multiculturalism too. Well, they will not accept our values. period.

No, I don't hate people of color, I've taught and worked hard to help them all of my life. The communist have brainwashed them and used them as a pawn in a communist take down all over the world.

Australia had a world class agriculture industry, second to none, it was torn out by the roots when the UK entered the EU. Nearly 300 years of mercantile integration with Great Britain. I was real disappointed in this, and I would buy only Australian steaks in Tokyo at the grocery, the hyper-marts which most Japanese wouldn't buy. It was high quality and cheap for Tokyo and the best steak besides US Black Angus.

Now Australia needs people, specifically white people to counter all of the militant people of color and the Chinese. It would be a good idea to use the political cover of the genocide of white farmers to allow, again, reversing the left which is not open to allowing in South African whites, well it would be a good idea to settle white South Africans around a city in the north called Darwin and all along the remote, sparsely populated northern coast with investment in salt water conversion plants.

40 acres and a John Deere offered to South African whites would cause a Tsunami of capital flight out of South Africa to Australia solving the serious problem of the dearth of Chinese real estate investment in Australia.

In reply to by MK ULTRA Alpha

new game MK ULTRA Alpha Sun, 07/29/2018 - 06:22 Permalink

birds of a color flock together, hope that saves 1000 strokes next tyme...

talk to any honest policeman on the streets-multi-cults DON'T WORK...

hello- ever been to china town? da nort side...

or white rural, ahh, that sounds better, low crime and people that wave sincerely..

but then again i'm just a raycis fuk, because, drum roll, i don't want those fuks rippen all my shit off..

In reply to by MK ULTRA Alpha

MK ULTRA Alpha new game Sun, 07/29/2018 - 07:51 Permalink

It's birds of a feather flock together, but I can understand what you're saying. However, what we're seeing is deep seated anger toward whites in general. I wonder how the Democrat whites can handle the DNC officially calling for a race war and no one calling them on it. That's what gets me, no one is calling out Maxine Waters for instigating a race war.

MSM has proven they're trying to kill us. The homosexuals in media, Cooper, Maddow, etc and all the homosexuals in newspapers, media matters etc. It's an inbred army of homosexuals, if we're not like them then we must be destroyed.

They think in inverted logic and now days with the homosexual take over of media, it's too easy to see. I was a programmer analysis and then a technician for Microsoft when I decided to drive a cab to see what was wrong with the US, I had recently returned from working seven years in Asia. I immediately could see, the homosexuals were operating with inverted logic.

Now with the media system operating in inverted logic, many people who aren't homosexuals have been conditioned to process data with inverted logic.

In reply to by new game

Kidbuck MK ULTRA Alpha Sun, 07/29/2018 - 08:09 Permalink

It ain't the white that they hate so much as the perceived association with traditional republican values of freedom, private property, rule of law, science, history, English, mathematics, and every other element of civilization.  Just as most distaste for blacks and browns is not the skin color so much as a distaste for their perceived association and constant clamor for all things primitive and uncivilized such as 3rd world hygiene, socialism, lawlessness, and unfettered democracy (mob rule).

In reply to by MK ULTRA Alpha

Kidbuck Whoa Dammit Sun, 07/29/2018 - 07:50 Permalink

The problem with the housing market is that its really a market in vote buying and campaign financing dressed up to look like a housing market. The Fed gives free money to its buddies on Wall street, Blackstone etc., and the government through Fannie, Freddie, the VA, USDA, FHA gives away cheap money and free rents to its friends. 

In reply to by Whoa Dammit

austinmilbarge Whoa Dammit Sun, 07/29/2018 - 10:05 Permalink

Fellow Atlanta denizen here. I’ve seen some softening in prices in East Cobb, but they are still elevated (majority of price reductions on a Zillow search in my area). Same thing is happening in the Roswell/Alpharetta area. 

Gotta wonder how many banks/REITs own the stuff up here that are hanging on praying prices don’t go down too much further. 

Not sure about the prices North of I-20 but still in the perimeter. School situation in that area sucks anyway. 

In reply to by Whoa Dammit

Telemakhos Free This Sat, 07/28/2018 - 14:56 Permalink

While my gut wants to agree with you on cutting welfare, I don't think that's much of a factor in the suppression of single-family housing inventories. On the contrary, the problem in my neck of the woods is local—the city council refuses to grant permits to build any new single-family housing stock, because "sprawl is bad." The city planning department doesn't exist to plan for new development but rather to keep new construction from ever happening, so the market never loses pressure. Meanwhile they keep adding multi-family rental housing and are now allowing single-family property owners to build rental rooms for extra income on the side—anything to support to vested property owners and screw over the young who want to start families. If the city would back down on its building ban and let builders put up some single-family housing that wasn't $250K/trailer, people would move out of apartments and into homes and start families.  Instead, what we get are singles in apartments who feel that they'll never be able to afford homes or families, and retired hippies whose 100 square foot shack lists for half a million.

In reply to by Free This

Endgame Napoleon Telemakhos Sat, 07/28/2018 - 15:38 Permalink

There are a lot of Americans———a LOT———-who do not fall into the wanting-to-start-families category or anything to do with the sex and reproduction that every policy devised by politicians addresses. These are non-womb-productive, single citizens and single parents with kids over 18 who need small apartments in safe areas. We are the MAJORITY of potential voters.

In reply to by Telemakhos

Endgame Napoleon 847328_3527 Sat, 07/28/2018 - 15:28 Permalink

The housing market won’t crash as bad in states with a per-capita income of $20k or below that charge close to 10% sales tax on food and every other necessity, making life hell for single, non-welfare-eligible, non-womb-productive citizens and single parents with kids over 18 since rent for a crappy, one-room apartment takes the better portion of their paltry churn-job pay. 

But retired couples with double everything in terms of retirement income and the dual-earner babyvacationing  parents who halve the size of the college-educated middle class by keeping two decent-paying jobs with benefits under one roof, while $9-per-hour NannyCam-supervised babysitters, $9-per-hour daycare workers or elderly grandparents raise their kids for them, do well here.

They can afford huge houses, and in their above-firing jobs, as long as sex leads to reproduction, they can miss whole mornings, whole days and whole weeks of work beyond PTO & pregnancy leave without meeting quotas. That is what the churn-able, hardworking “non culture fits” are for until the crony parents bully them out the door, using and losing them.  

This group just needs paid family leave to complete the package of womb privileges, as do their all-mom low-wage crews who are likewise above firing. Because they “have somethin’ comin’ in” from a spousal income, child support that covers rent or layers of monthly welfare covering everything from rent to groceries, plus monthly cash assistance and up to $6,431 in refundable child-tax-credit money, they can work cheaply and must work part time to stay under the income limits for the programs. It is convenient for the bigly house crowd.

If I turn out to vote Republican again, I fully expect the Hillary Clinton-blessed agenda item of paid family leave to be the first thing on the legislative plate, like $2,000 non-refundable child tax credits for dual-earner parents were in 2016.

We have a lot of illegal immigrants who can work cheaply, undercutting underemployed citizens who do not get their groceries and rent paid by .gov for US-born instant-citizen kids. Nor do they get up to $6,431 in refundable child tax credits to beef up the paltry, paltry pay that most of the big-house buyers offer the welfare-eligible immigrants. That welfare-aided illegal alien workforce—like the welfare-buttressed “voted-best-for-moms” workforce—helps keep the labor costs down, hoisting up the housing market for the top 20%. 

 

 

In reply to by 847328_3527

spiral galaxy 847328_3527 Sat, 07/28/2018 - 16:17 Permalink

Alright ZH...........I'm going out on a limb here.  You've been fucking wrong about everything .....stocks, bonds, gold, etc., etc., etc., for about 10 years now.   So since you suck, I'm going to buy real estate, more stocks (especially FB and TWTR) and watch as they rise to records and enjoy reading, once again, why everything globally is imploding.   Seriously, ZH is THE best contrarian indicator anywhere.

In reply to by 847328_3527

Pernicious Gol… spiral galaxy Sun, 07/29/2018 - 02:27 Permalink

The 2008 onward housing crash was telegraphed several years in advance. Its inevitability was fairly obvious from 2005 on. I recall, 2005-2007, counseling young men at work not to buy a house, because a major crash was on the horizon. Of course their trailer trash wives who married up refused to wait, and those people lost the expensive houses they bought at just the wrong time.

When I now hear flipping seminars advertised on local radio, and get stacks of postcards from speculators wanting to buy my house as is, I think we're back in 2006 or 2007.

In reply to by spiral galaxy