WALL STREET HOUSING RECOVERY FOR THE .1%

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Posted on 23rd June 2014 by Administrator in Economy |Politics |Social Issues

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Here’s your housing recovery.

It’s good to be the kings!!!!

America – run by the few for the benefit of the few.

Guess Who Is Propping Up The US Housing Market

Tyler Durden's picture

A month ago we showed a chart that, in our humble opinion, summarized all that is wrong with the US housing market. The chart in question showed the April breakdown of existing home sales on a Y/Y basis by pricing bucket.

 

Needless to say, what the chart showed was the symptomatic, and schizophrenic, breakdown of US housing into two camps: the housing market for the 1%, those costing $750K and above, where the bulk of transactions are mostly between non-first time buyers, and typically take place as all cash transactions, and the market for “everyone else” which continues to deteriorate.

Moments ago the NAR released its May data, which on first blush was widely lauded as bullish: the topline print came at a 4.9% increase, rising from 4.65MM to 4.89MM, above the 4.74MM expected. Great news… if only on the surface. So what happens when one drills down into the detail? As usual, we focused on the last slide of the NAR breakdown, located at the very end of the supplementary pdf for good reason, because what it shows is hardly as bullish.

So how does this “housing recovery” in which the NAR has proclaimed the “sales decline is over” look on a granular basis.

The answer is below, and it is even worse than the April data. It also explains why first time buyers have dropped to even further cycle lows of just 27%, down from 29% both a month and year ago.

This is bad because while in April there was a modest increase sales in house buckets from $250 all the way up to $1MM +, in May the only bucket that had an increase in sales from a year ago was that exclusively reserve for the ultra-richest, i.e., those who benefit the most from the Fed’s non-trickle downing wealth effect policies. In fact, on a price bucket basis, the May data was unformly worse than April!

The logical follow up question: what is the total percentage of sales by given price bucket? The answer, once again, below.

Housing recovery? Maybe for the richest, and even they are far less exuberant about purchasing $1MM+ mansions. For everyone else, enjoy “plunging” hedonically-adjusted LCD TV prices. Everything else is, well, noise.

1 Comments
  1. llpoh says:

    I do not know a lot about real estate. My experience is this: high end houses make more more than low end houses.

    I have had both – I have made a lot of money with high end houses, and done poorly on low end.

    One reason for this is that with high end houses, land values are a greater percentage of the price of the house/land package than with low end houses.

    Houses themselves are a depreciating asset. And land in cheap, crappy areas does not appreciate well. Good land in desirable areas appreciates better.

    In my current home, I have done well. But not as a result of the home, but because the land value has more than doubled. The first home I had, land was worth around 20% of the total cost. I did poorly on that deal – the land appreciated slower/less than the house depreciated.

    On this home the land was worth around 45% of the total value of the property when I built. Currently the land is worth around 70% of the total value of the property. If the land goes up much more, then the very real prospect exists that someone would buy the property, tear down the house, and rebuild, as the house would be relatively too cheap for the land it is on.

    The very best of things appreciate more than poor and average things do.

    23rd June 2014 at 7:59 pm

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