We have new home sales at 25 year lows. We have new home sales 65% below levels of 2006, but we have prices 12% above 2006 and up 30% since 2011. Is this the new normal? Or is this the new abbie normal? I’d love to hear a rational market based explanation for how this could happen in a non-rigged, non-manipulated free market? Igor is describing Ben Bernanke’s and Janet Yellen’s brains.
Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
I leave it to the Dude to have the final word.
The housing market is both regional and slanted toward upper end sales.
Some parts of the country are doing far better than others and the high end housing is booming in markets that are otherwise depressed.
You have to have breakdowns, overall averaged numbers don’t give a true picture.
They give a perfectly true picture. Home prices correlated with new home sales for 20 years and suddenly disconnected in 2010. Can’t you read a chart?
Admin,
Home prices i the lower end range in Detroit or home prices in the million plus range in Colorado or New York?
Where I live it is going gang busters and a house in any range is sold about as quickly as it goes on the market and there is all kinds of new residential, apartment, and commercial construction.
I hear it is the same in parts of Arizona where I have friends living as well as Texas.
A normal supply and demand situation.
The article doesn’t seem to be connected at all to these very real markets.
Anon
The chart shows the MEDIAN home price, so it eliminates the extremes. It isn’t the AVERAGE home price which would be skewed by the high end sales.
New home sales are at 25 year lows. That is a fact. Median home prices are at all time highs. That is a fact.
That is abnormal and caused by Federal Reserve monetary manipulations. It will end badly for any buyer today.
Admin, the chart shows a nationwide median, not one that takes into account regional differentials.
So back to that thing about low end housing and high end housing in other places, you factor those in and you get a false median for both places.
In case you don’t understand median, which apparently you don’t, it is the point where half of the data points are above it and half below it. There are usually very few data points at tha actual median (the same as, say, I.Q. where half the population is over a hundred and half under it with very few actually scoring 100)
Things are doing absolutely great where I am, and that is being offset by things doing badly elsewhere giving a false impression of the housing market here since, as I pointed out, it is a regional situation with some areas good and some bad.
What about figuring worldwide housing starts and prices instead of just U.S starts and prices, you think that would reflect the U.S. starts, sales and prices accurately?
Anon
It seems you are changing your story. Your first comment referred to average numbers. The chart was clearly referring to median prices. You apparently like to change tactics when you are proven wrong.
The regional differences and low end versus high end exist across time. They existed in 1991, 2001, 2011, and now. They are accounted for in the national chart. The disconnect between prices and new home sales is abnormal.
Just because your neighborhood in Colorado is doing well, does not extrapolate to most of the country. You strike me as a pompous asshole who thinks he’s winning the real estate game because of your brilliance. You think Ben and Janet creating a new bubble in real estate is actually you being a smart investor.
Let me guess. You are a high end house flipper.
Anon
What were you hearing about Texas?
I’m sure $50 oil won’t impact home sales and home prices in the good old lone star state.
Look at those booming home prices in Arizona. Anon is surely a real estate guru. I guess 20% to 30% below 2006 levels is booming in anon’s world.
http://www.trulia.com/city_guide_matrix_graph_row.php?dp=BedAvgPrice&c=&s=AZ
A couple things that may be pushing up prices:
1- desperation of small investors searching for return on their money, driving up prices
2- increased cost of materials
3- increased cost of red tape and govt charges
Llpoh
Materials and government costs are sky high. I read that builders can’t build homes for less than $200,000.
Rich foreign (mostly Chinese) buyers are driving prices higher.
Anyone who has bought a home in the last two years is going to be deeply underwater in a few years. Imbeciles never learn.
Pulte Homes Sees Profit Decline, Fewer Closings In First Quarter Of 2015
Pulte Homes posted a 27 percent first-quarter profit decline and 2 percent fewer closings in Q1 2015. Pulte’s poor results for the first quarter can be summed up in one word…affordability. While Pulte posted higher average prices, sales volume suffered as a Pulte apparently tried to hold the line on margins. Even with those limited concessions, Pulte’s gross margins declined to 22.7 percent for Q1 2015 from 23.8 percent in the previous year. Pulte posted lower unit closings in four of six market segments, including Texas. Both closings and new orders fell for Pulte in the Lone Star state. Closed sales in Texas were off 4.4 percent. New orders in Texas were down 4.7 percent. As you might expect, Pulte’s CEO, Richard Dugas Jr, attempted to downplay the soft results with some positive sales spin:
“The improving demand conditions that we noted toward the end of 2014 carried through the first quarter of 2015 and provided a strong start to the spring selling season,”
What Dugas should have said if he wanted to be more truthful is that lower year-over-year mortgage rates helped his company to push average selling prices higher even as demand for expensive new homes faded. If you look at the plummeting price of lumber, and the lack of affordability in general for new homes, real market conditions suggest a more challenging market than Mr. Dugas would like to admit. The labor force participation rate and the price of lumber are certainly hinting at a stagnating market for new home construction. Wage growth has continued to lag home price inflation, and builders are finding it more difficult to sell expensive homes to families that simply can’t afford them.
A bigger problem for Pulte, and most of the other major home builders, is that Texas just posted the first employment decline in the last 5 years, shedding over 25,000 jobs in the month of March. The employment situation in Texas doesn’t appear as though it will improve any time soon, and that could spell trouble for home builders who have an oversized presence in the state.
Here in Seattle there is a housing boom to beat all. Bidding wars, prices up beyond 2007, demand for rent controls, million dollar grey cubes going up in old neighborhoods all over town and selling like hotcakes.
Yet we were here in 2010 when the area was awash in foreclosures, vacant apartments, empty houses, for sale/for rent/for lease signs everywhere you looked. Um, that was only 5 years ago.
Now nobody can pay enough to live here.
Interesting though that retail has never made a comeback. All the places that were empty in 2010 are still empty.
It looks like economic insanity to me. Boom, bust, boom all in less than 15 years.
Anon,
You mention friends in Arizona. Metro Phoenix? I’ve been in Phoenix for 31 years. New home construction had average closings of 25-30,000 per year, save the 1989-1992 recession where the low was 9,800. The bubble years of 2004-2006 went something like 35,000 to 60,000 in 2006. The the shit hit the fan. The lows were about 7,000 closing 2009-2011. Now present day. 2014 closings, 10,200. tell me how things are booming. In fact, they will never be the same.