Here’s How Bad US New Home Sales Are

The Census Bureau’s monthly update on new US home sales for May had lots of interesting data buried between the lines. I’ll touch on a few things here, with more to come in a subsequent post.

First, while prices rose only 1% year over year, they are now up nearly 31% since the 2011 lows and by nearly 22% since the 2007 peak. And this isn’t a bubble?

US New Home Sale Prices Bubble Up- Click to enlarge

Click here to view chart if reading in email.

Then there’s the business from economists and the media blaring about the “recovery” in the housing industry. Indeed sales are up a massive 122% since the May 2010 bottom! But the reports lack perspective. The bubble peak was in 2005, already 11 years ago, and sales are down 57.5% since then, and even down 35% since 2007, when the collapse was already under way for 18 months.

The May 2007 benchmark is important because that’s when employers finally stopped hiring full time employees. So don’t get too excited about the ultra low, all time, million-year record first-time jobless claims that the media is all hot and sweaty about. Employers are always the last to get the news. That’s because they take their cues from the stock market. Unfortunately for employers, investors are always the second to last to get the news. The thing about the markets knowing more than everybody else–discounting the future–it’s hogwash. The market doesn’t “know” anything. The market doesn’t have a mind. It can’t possibly discount the future accurately. It’s a liquidity meter. That’s all. And employers know even less about the economy than the market does.

So here we are with stock prices surging, until tonight when BREXIT surprised everybody, the markets, the betting lines, the surveys, hell even its supporters. And even more clueless employers are still adding jobs. Maybe the Brexit will be the catalyst that finally gets them to find their mentality, wake, up, wake up to reality.

New Homes Sales Not Keeping Pace With New Jobs - Click to enlarge

Click here to view chart if reading in email.

But what’s this? New home sales aren’t keeping up. Supposedly jobs growth translates into home purchases. But even though lots of full time jobs have been added since the 2007 jobs peak, they don’t pay enough to allow workers to buy new homes. How do you call your neighbor’s kid who just got his Phd? Just text Uber and he’ll be right over. Or when you see him at the restaurant, yell “Waiter!” These are the jobs this screwed up, QE’d, ZIRPIAN economy is mostly producing.

A good way to visualize just how historically bad the housing industry is doing is to normalize for population growth, dividing sales by population.Per Capita Home Sales No Better Than 1982- Click to enlarge

Click here to view chart if reading in email.

Sales per million people have risen by 87% since the 2010 bottom. Is that a lot? Not when you consider that the current sales rate is only 39% of the 2005 level, and that it is no better than at the 1982 bottom when mortgage rates were at 16%. Think about that. Mortgage rates are at their lowest level since the beginning of the Hebrew calendar 5,776 years ago, and current new home sales are no better than they were at the bottom of the Volcker credit crunch in 1982. Hey, I was working on The Street back then. I remember well what it was like. That was not a good time to be in the housing business.  And today is just as bad.

I hate to think what might happen when rates start to rise. Apparently the Fed feels the same way. People who think the Fed will ever be able to normalize its balance sheet are deluded. The Fed, and the rest of the world’s big central banks, have backed themselves into a corner with monetary policy that has only gotten more and more insane.  As more and more investors and traders come to that realization, the housing market and the stock market face yet another collapse, this time with no discernible way out via magic monetary tricks. The next time, nature must run its course.

The post Here’s How Bad US New Home Sales Are was originally published at The Wall Street Examiner. Follow the money!

This is a syndicated repost courtesy of Wall Street Examiner Exclusives – The Wall Street Examiner. To view original, click here.

 

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Stucky

That helps explain why we haven’t sold this place yet. I think I’m gonna have to bite the bullet and buy that St Joseph statue. Yeah … a piece of Chinese made porcelain … that will do the trick.

susanna

Stucky,
Dedicated family man and keeper of the parental
units…your home is priced right for your area, but
in these times, you may have to lower it anyway to
ensure a sale. Negative = your area is also known as
a tax nightmare.
Consider the consequences of a sale…what happens to the
parental units? Do they sell too and move to a retirement
setting/relocate near you? Are they willing? Maybe you
(in actuality) wish you could stay, rather than further
complicating your life with the double move you would have
to endure. We had that issue. Our house and my mother’s
and guess who did most of the packing? Me. To be fair, my
Mr. did a ton of work also. More than his share really.
Then, an apartment for the Mr. Movers did my Mom’s house,
We had our up north place purchased (cash) 7 mos. earlier…
so I had a head start, btw, our movers, to the apt. and 3.5
hours away was over 3K. See, check out all the work and $.
The buyers of both of the city houses wanted concessions
and improvements. My Mom’s house was 5-600K B4 the
crash, and she netted 350K. We sold our house for 15K under
purchase price/was paid off. So, maybe you stay for now,
and get a second one/farm house in the meantime.
Good luck,
suzanna
PS, the Mr. retires in December. We will become poor.
Now the Mr. is talking a cruiser lifestyle (winters) and
is taking sailing lessons/classes. We checked out the
boats in FL. Much nicer than you might think. Me? I
do not want to leave my beloved farm house, and I want
more animals.

ASIG
ASIG

Stucky
I don’t think the photos of your house on the internet are very good, whoever took them is not a quality real-estate photographer. The quality of the photos are critical in attracting potential buyers. Buyers scanning the listings will only spend a few seconds on the photos of each listing looking for something that interests then. You need good quality photos to interest them in those few seconds.
The photos of you house are just not good. I spent a few minutes and was able to improve them somewhat so you can see that what you have can be improved upon.
I tried to post some edited photos of your house and it didn’t work.
How can I get an e-mail to you?

Stucky

ASIG

Was out most of the day yesterday …. just getting to yesterday’s stuff today.

You are probably looking at the For Sale By Owner website. I’ve given up on that site completely. We are now with a Realtor, and he brought in his own professional photographer to post on MLS. IF you are talking about pics on MLS … well, there isn’t shit I can do about it, really. But, I honestly appreciate your concerns, and offer of assistance. Admin has my email, so he can forward stuff to me that way.

=========================

suzanna

My parents live in their own home, about 6.1 miles from here. Anything we do here has no effect on them. We’ll be moving (renting) in the same town we’re selling our house.

Yes, taxes are a bad but …. people moving here expect that, so it’s not a show-stopper. In other words, it’s “baked in the cake”. Actually, we’re lower than the neighboring town. We live in Scotch Plains. The next town over, by a few blocks, is Westfield. Yesterday, we had a showing to an older couple from Westfield who wanted to downsize — they had an almost identical ranch home, but their taxes were $8k higher … almost $20,000 … for a fucken ranch. It’s crazy.

Anonymous
Anonymous

How much -in %- of the money driving prices upwards is from investors and not owners, particularly foreign investors using balance of payment deficit money to buy up American property since there isn’t really much else in real things they can buy with it to make it worth accepting in the first place?

Chicago999444
Chicago999444

I would say that investors are the main drivers, and the hunger for rental properties is driving prices. Most new housing starts are for multifamily properties, while lower and mid-priced houses and individual condos languish as first-time and moderate income buyers have a much more difficult time qualifying to buy.

There is now a huge wage of condo de-conversions underway across the country, especially in the major cities, and I am caught in the middle of it. You can tell that the commercial real estate market is in the grips of hysteria when investors pay substantial per-unit premiums for older buildings that were converted to condo to begin with because they did not pencil out as rentals. What is happening now, is that old buildings like mine, that have huge rooms and are in prime rental neighborhoods, are being sought by investors who will, upon purchase, convert a huge 5-room, 2 bed unit like mine to a 3 bed, and the 4 room 1 bedroom units to 2 bed units, to be able to collect much higher rents. It amazes me that renters and purchasers alike are so easily gulled that a 4 room 1000 sq ft unit that is advertised as a one-bed unit with a dining room, sells for $20,000 less than the unit under it, with the exact same configuration, that is advertised as a 2 bed.

The de-conversion wave started with large downtown high rises, but now, smaller buildings with 10-50 units are being eagerly purchased at substantial premiums per unit over what the units would command if sold as individual condos. This amazes me, because, for decades, it was the reverse, but it is the result of the glut of condo conversions during the Great Rampage years, that left Chicago vastly oversupplied with condos, and many distressed condo buildings with multiple foreclosures and massive financial issues. The result is a rapidly shrinking supply of condos. Rents have been inflating wildly in recent years, but I suspect that in a few more years, we will see a vast glut of rentals, and many of these recent de-conversions will end up in default… and being converted back to condos.

In the meantime, condo owners caught up in this are often being forced to sell against their will, at prices that may leave them with huge deficiencies because they bought at elevated prices in the bubble years. I’m in at a very low cost basis, and would like to stay, but my building is full of investors who bought units in foreclosure, for very low prices as well, who will make a gigantic profit. I will, too, but I will have to either shovel it back into another place at an inflated price, or sit this current spate of hysteria out while paying nosebleed rents. I love my place, which has been a great rent-hedge and is a wonderful place to live, and I love my low cost basis, but my mistake was buying into a building where investor owners vastly outnumber owner occupants. So the de-conversion proposal could easily win the mandatory 75% ownership approval necessary, and I will just have to scramble for another place to live. Sure, I’ll “make money”- double my money, in fact. But that is no comfort when every other comparable unit has inflated in price in step with mine, and I will have to deal with the expense & sheer hell of moving. Which is why I bought to begin with.

Moral of the story: Avoid buying in any building that is more than 10% investor owned, and work to get rental restrictions put into place in your association. If your association is 100% owner-occupied, do your level damndest to keep it that way.

KaD
KaD

I believe it. I have the misfortune of working for a faltering real estate agent right now. The cheapest houses are HOT HOT HOT, even if they are utter wrecks. The more expensive they are the less people are interested anything over $300K is not moving.

Wip
Wip

Housing starts in my area are down. They’ve gotta be. I drive around for Work a lot and I just don’t see any building going on.

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