Permits for new single family homes are declining and are flat since January of 2013. Sales of new single family homes have not moved anywhere in the last two years. Meanwhile, the Wall Street scheme to save themselves has driven prices up by 20%. If permits and sales are falling, why are homebuilders so fucking confident?
We’re lost in a blizzard of lies, as this empire of debt crumbles around us.
Housing Starts, Permits Tumble Driven By Collapse In Multi-Family Units
Submitted by Tyler Durden on 09/18/2014 08:50 -0400
One look at the August housing starts and permits data, and one will wonder just how is it possible that yesterday NAHB homebuilder confidence rose to a 9 year high, when according to the US Department of Commerce both Housing Start and Permits tumbled in the past month, with the housing “leading indicator” that is Permits sliding 5.6% from 1040K to 998K, and declining sequentially in every region of the US, with double digit drops in the Northeast and the Midwest, while Housing Starts tumbled by 14.4% from 1117K, to only 956K, wildly missing Wall Street expectations of “only” a 5.2% drop to 1037K.
But while single-family units remained roughly flat in their depressed state, which hasn’t moved much if at all since the start of 2013 (as can be seen on the chart below), it was multi-family units that were the most volatile on the margin once again, dropping from 396K to 343K, or 13.4% for permits, and a whopping 31.5% for starts.
How these moves look visually:
While one can doubt the veracity of such volatile data, one thing is clear: Wall Street is having trouble with clearing multi-family housing, which also means that builders are confused whether to start new multi-family units or just dump the whole theme, now that the PE firms are leaving the own-to-rent business entirely.
The builders’ optimism index may come down to how it’s calculated. If a guy who builds 3 houses per year get the same vote/input as the president of Lennar, the results could be skewed. Single family home builders tend to be a wildly optimistic bunch. It’s obviously a cyclical industry, yet they continually take their most recent profits and plow them back into their own developments, never setting anything aside. Most of them are all-in all the time, like someone whose life savings is tied up in one company’s stock. Anyone who does that is unduly optimistic.
Optimism is all they have left.
Lol. Great comment above. Better than what I was going to write! Up there with Billy’s classic McCain comment. Well, at least to me.
Keynsian idiots are afraid of deflation. They think falling pricesare bad. No customers like rising prices
The only way to sell homes in an economy with declining wages & high unemployment (real unemployment is around 27%) is with falling prices. Otherwise, U get inventory pileup then a total collapse.
The Fed fascists are fighting the natural laws of capitalism.
THE key to the universe …. (for sales people)
[img
[/img]
Sell the dream, the vision, the hope. Sell the sizzle, not the steak.
Their are less home builders remain in comparison to the peak. Many of them have switched to remodels. Remodeling is hot right now and all the little guys I know are buried.
A lot of the construction workers took jobs in a different field and haven’t returned. Thus there are less people available to build the homes in demand. Thus many companies are a lot smaller with less crews available then in the hay day. This lack of supply of actual builder crews in the pool makes you feel confident when now your smaller operation is booked out. Even if your doing a lot less volume than previous years. The hope is there it might be coming back.
Is US Housing 12% Overpriced? House Prices Rising Faster Than Real Median Household Income (What If Interest Rates Rise??)
By Anthony Sanders
Former Goldman Sachs Head of Housing Research says that “House prices are 12% overvalued today. They have already started to decline. Today’s misvaluation matches the excess of 2006-07, just before the Great Recession.
House prices are 12% overvalued today. They have already started to decline. Today’s misvaluation matches the excess of 2006-07, just before the Great Recession. Since World War II home prices have been tightly correlated to income and mortgage rates (R2 = 96%). Investors/cash purchasers, which make up 50% of home sales, have driven real estate volatility to unrivaled levels in trackable history. As public policy makers debate seminal decisions on “forward guidance” and unconventional monetary stimulus we note that each 1% increase in rates drops home valuations by another 4%; at a 2% fed funds rate, where fed officials and investors expect to be by the end of 2016, the overvaluation equals 20%. Respectfully, the United States can not afford another housing driven recession. The facts and correlations – the tenets of probabilities – suggest it is more likely than not that home prices fall 15% in the next three years.
We do know that house prices are rising rapidly (though slowing) and that increase is not associated with a rise in real median household income (which is stagnant).
What is bubbling house prices is lower interest rates that benefit investors more so than the traditional middle class homebuyer. But The Federal Reserve is forecasting a rise in The Fed Funds Rate!
Sept. 17 (Bloomberg) — Federal Reserve officials raised their median estimate for the federal funds rate at the end of 2015 to 1.375 percent, compared with 1.125 percent in June.
The rate will be at 3.75 percent at the end of 2017, the Fed said today for the first time as it included that year in its Summary of Economic Projections. That is the same as Fed officials’ longer-run estimate. The median estimate in June for the long-run fed funds rate was also 3.75 percent.
So, what if The Fed Funds Rate rises to 3.75% at the end of 2017? If wages remain stagnant, there could be “Trouble In River City.” Or Potomac City (aka, Washington DC).
We MAY have Trouble In River City if real wages don’t start rising in a serious fashion.
Got Rent? Homebuilder Confidence Rises To 9 Year High Despite Stagnant Wages And Declining Labor Force Participation
By Anthony Sanders
Homebuilders are the most confident than they have been in 9 years, likely because of the prospects for growth in rental demand (spurred by stagnant incomes and declining labor force participation).
Sept. 17 (Bloomberg) — Confidence among U.S. homebuilders rose in September to a nine-year high, showing the industry is gaining ground and will be a source of momentum for the economy.
The National Association of Home Builders/Wells Fargo sentiment measure climbed to 59, exceeding the highest estimate in a Bloomberg survey of economists, from 55 in August, the Washington-based group reported today. Readings above 50 mean more respondents said conditions were good.
Improvement in the job market and low interest rates spurred buying interest this month, as the group’s index of foot traffic through model homes jumped to the highest level since October 2005. Faster wage gains would provide extra momentum for residential real estate, which has seen lackluster demand from first-time buyers.
Improvement in the job market? Are they kidding us? How about declining labor force participation and stagnant wage and income growth? Not to mention flat-lined mortgage purchase applications.
I would say that the enthusiasm is more about providing RENTAL housing than single-family detached housing.
Got rent?
We have a friend that has been a custom home builder for years. During the building boom times he was building custom Mcmansion’s like crazy. He did incredibly well during that time and was smart about it by not getting greedy and over extending his credit and ability to do the work to his quality standards. What he noticed during that time is that when people wanted more space, a view or some other feature that their existing house did not have, they just up and moved into something newer and better or had their home custom built. With equity increasing rapidly during that time they could get more home without any real net increase to their monthly payments as they moved from house to house.
He says the difference is now those same types of people are opting to remodeling their existing house to include whatever their new needs and desires are. He has not done a new custom home in over three years, all his work is remodels and he is just as busy as he was during the boom times.
Interesting how things change.