Tag Archives: housing market

“The Slowing Is Widespread” – US Home Price Growth Slowest In 11 Months

The US housing market just took another hit as Case-Shiller reported that home prices (in July) rose at the slowest pace since August last year, missing expectations notably.

20-city property values index increased 5.9% y/y (est. 6.2%), least since Aug. 2017, after rising revised 6.4%.

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This was the biggest miss since May 2016

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July marked the fourth consecutive month that annual price gains in the 20-city index decelerated. That’s in sync with other reports indicating housing is stalling as buyers shy away from higher prices amid mortgage rates near the highest since 2011, in addition to a lack of choice among affordable properties. At the same time, steady hiring and elevated confidence are supporting demand.

“Rising homes prices are beginning to catch up with housing,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

“The slowing is widespread: 15 of 20 cities saw smaller monthly increases in July 2018 than in July 2017. “

But despite slowing home price appreciation, all cities saw prices rise faster than income growth.

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Sales of existing single family homes have dropped each month for the last six months and are now at the level of July 2016. Housing starts rose in August due to strong gains in multifamily construction. The index of housing affordability has worsened substantially since the start of the year. 

This really should not be a huge surprise given the collapse in US housing macro data and home builder stocks…

https://confoundedinterestnet.files.wordpress.com/2018/09/homebldgsp.png?w=622&h=448US home building companies relative to the S&P 500 index has been falling since 2017.

https://confoundedinterestnet.files.wordpress.com/2018/09/timber.png?w=622&h=448Lumber futures, a harbinger for housing, are down solidly on the year amid weaker demand.

Probably time for some more rate-hikes…

Source: ZeroHedge

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International Buyers Are Dropping Out Of US Housing

  • The dollar volume of U.S. home sales to international buyers between April 2017 to March 2018 dropped 21 percent compared with the previous 12-month period, according to the National Association of Realtors.
  • Buyers from China, Canada, India, Mexico and the United Kingdom accounted for nearly half of the dollar volume of sales to international buyers.
  • Sales to Canadian buyers fell by 45 percent.

After strong interest for several years, international buyers appear to be souring on the U.S. housing market.

The dollar volume of U.S. home sales to international buyers between April 2017 and March 2018 dropped 21 percent compared with the year-ago period, according to the National Association of Realtors.

Of the $121 billion in sales to international buyers, those currently living in the U.S purchased $67.9 billion in properties, while nonresident foreigners purchased $53 billion, both marking a drop from the previous year. Foreign buyers accounted for 8 percent of the $1.6 trillion in existing home sales, a drop from 10 percent the previous year.

While high home prices and inventory shortages are clearly playing some role in the drop. Competition from domestic buyers, whose demand is increasing sharply, may also be a deterrent. And the current political climate in the U.S. also should not be overlooked.

“The decline is partly coming off high levels of the prior year, but also surely from the strong rhetoric coming out of Washington against foreigners,” said Lawrence Yun, chief economist for the Realtors. “There has been a large drop-off in foreign students attending U.S. universities already. Chinese [buyers], in particular, purchase homes for their kids while attending college.”

China still leads the pack for international buyers, as it has for six straight years, accounting for 15 percent of international sales. Chinese buyers also purchased the most expensive homes, with a median price of $439,100.

Canada came in second, with a 10 percent share of international sales, but the Canadians’ dollar volume dropped by 45 percent compared to the previous year. Not only are Canadians buying fewer U.S. properties, they are buying cheaper U.S. properties. The median price for Canadian buyers was $292,000.

“The market here is softer, and I imagine that’s why there are perhaps less Canadian buyers,” said Elli Davis, a real estate agent based in Toronto. “That does surprise me, though, as I still know lots of people buying mostly in Florida!”

Buyers from China, Canada, India, Mexico and the United Kingdom accounted for nearly half of the dollar volume of sales to international buyers. Canadian buyers had been the market leaders by far during the U.S. recession. They dropped back significantly as U.S. home prices recovered, Chinese buying increased and U.S. investor purchases climbed.

“Inventory shortages continue to drive up prices and sustained job creation and historically low interest rates mean that foreign buyers are now competing with domestic residents for the same, limited supply of homes,” Yun said.

High prices could certainly be a deterrent for buyers in Southern California. Chinese buyers have been very strong in the single-family market there, as they plan for their children to attend area universities. Irvine, especially, saw huge demand from Chinese buyers, particularly in newly built communities, with larger, multi-generational homes that they favor.

For international investors who are looking for condominiums in large cities as an investment, the supply theory doesn’t really hold.

“I don’t think it’s the supply issue because these buyers are buying in the higher end and there is more supply there, particularly in the gateway cities like Miami and New York,” said Sam Khater, chief economist at Freddie Mac. “It could be just that their appetite for U.S. real estate is waning.”

Source: by Diana Olick | CNBC

Rents Surge Most in 16 Months Pressuring Home Buyer Wannabees

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Rents in all unit sizes picked up steam in April. Among the largest cities, Las Vegas, Denver, and Detroit led the pack.

The Rent Cafe’s Monthly Rent Report for the 250 largest US cities shows a 3.2% Y-o-Y surge.

The national average rent in April clocked in at $1,377. This marks the highest annual growth rate since the end of 2016.

By Size

  • Large cities: Las Vegas sees the fastest increasing rents Y-o-Y (6.0%), followed by Denver (5.8%) and Detroit (5.4%). Apartment prices in Brooklyn and Manhattan continue to slide, while rents in Washington, D.C., Portland, and Austin have been steady, growing by less than 1.5%.
  • Mid-size cities: Rents in Sacramento cooled down to 6%, but still lead. At the other end of the spectrum are New Orleans (-2.2%), Tulsa (0.5%), and Wichita (1.0%), where rents are growing the slowest.
  • Small cities see the top 20 most significant rent increases in April. Rents in the Midland-Odessa area skyrocketed for another month, 35.6% and 32.6% respectively. At the bottom of the list sit Norman (-2.5%), Lubbock (-2.5%), and Alexandria (-1.1%).
  • No significant fluctuation in prices was noticed in Chicago, Philadelphia, and San Francisco, where apartment rents grew slower than 2% over the year.

Significant Changes

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Wages Aren’t Keeping Up

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The above chart was released today by the BLS. For details, please see Jobs Report: Payroll Miss +164K, Nonfarm Wage Growth Anemic +0.1%.

BLS in Agreement

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The BLS also has rent of primary residence up 3.6% (from March).

Median New Home Sales Price

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Median Real Wages

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Home Buyer Wannabee Dilemma

Home buyer wannabees struggle with rents but cannot afford houses.

The most recent data for median wages is from May of 2016. May of 2017 will be out soon and I will update the chart.

New buyers struggle with rent but home buying is not an option.

Real median wages are down seven of the last 11 years while home prices (not even reflected in the CPI), have soared.

How the Fed’s Inflation Policies Crucify Workers in Pictures

Deflationary Bust Coming

The current setup leads to another deflationary collapse as we saw in 2008-2009, not an inflation boom.

If I were trying to create a deflationary bust, I would do exact exactly what the world’s central bankers have been doing the last six years,” said Stanley Druckenmiller, 2018 recipient of the Alexander Hamilton award.

That is precisely what I have been saying for a long time.

For an explanation of the coming deflationary collapse, please see Can We Please Try Capitalism? Just Once?

“The Home Price Surge Continues” – Case-Shiller Jumps Most In 4 Years, All Cities Up

US housing data has been disappointing so far in 2018 as affordability plummets on the heels of rising rates, but that didn’t stop Case-Shiller Home Prices from surging at a faster-than-expected 6.4% YoY in January.

Home sales, permits, and starts have been underwhelming so far this year…

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But according to Case-Shiller, home prices are accelerating at their fastest rate since July 2014 (up 6.4% YoY vs 6.15% YoY exp)…

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All 20 cities in the index showed year-over-year gains, led by a 12.9 percent increase in Seattle and an 11.1 percent gain in Las Vegas.

After seasonal adjustment, Seattle, San Francisco and Atlanta had the biggest month-over-month gains.

Washington has the smallest month-over-month advance at 0.2 percent.

“The home price surge continues,” David Blitzer, chairman of the S&P index committee, said in a statement.

“Two factors supporting price increases are the low inventory of homes for sale and the low vacancy rate among owner-occupied housing.”

The 20-City Home price index is less than 1% away from the record highs of 2006…

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But the National home price index is over 6% above 2006 highs…

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Source: ZeroHedge

New Home Sales Crashed In December As Prices Reached Record Highs


Following yesterday’s
disastrous drop in existing home sales (due to record low supply), new home sales plunged 9.3% MoM after November saw its biggest surge since Jan 1992, revised dramatically lower.

The November 17.5% spike was revised dramatically down to 15.0% spike – the highest since 1993 but December’s 9.3% plunge was already worse than the expected 7.9% giveback…

Biggest MoM drop since Aug 2016.

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In fact the downward revisions are huge…  October from 624K to 599K; November from 733K to 689K

As good as it gets?

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While the blame is immediately laid on weather, the regional drops show that is simply not correct:

Purchases fell in all four U.S. regions, led by a 10 percent drop in the Midwest and a 9.8 percent slide in the South.

Median Home Prices reached a new record high…at $335,400

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As Bloomberg notes, new-home sales, tabulated when contracts get signed, account for about 10 percent of the market. They’re considered a timelier barometer than purchases of previously owned homes, which are calculated when contracts close and are reported by the National Association of Realtors.

But the ongoing lack of supply remains the most notable aspect in the US housing ‘recovery’.

Alhambra’s Jeffrey Snider notes critically that it’s what’s going on underneath the headline that really matters (as always). The reluctance of Americans to sell their houses has become such a contradiction to the attempt to paint the housing market, and therefore the overall economic condition, as healthy, even robust. Prices are rising, in some places quickly. Yet, inventory of available-for-sale homes continues to decline, sharply once again in December.

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It’s a glaring dichotomy that ever the NAR’s Chief Economist, Larry Yun, has been forced to grudgingly address.

Existing sales concluded the year on a softer note, but they were guided higher these last 12 months by a multi-year streak of exceptional job growth, which ignited buyer demand. At the same time, market conditions were far from perfect. New listings struggled to keep up with what was sold very quickly, and buying became less affordable in a large swath of the country. These two factors ultimately muted what should have been a stronger sales pace.

It’s the “exceptional job growth” premise that leads toward only confusion. It’s one of those terms, like “globally synchronized growth” or “economic boom”, that refers quite differently to only the mainstream depiction of the economy, the one that has been consistently overoptimistic about things for a decade. The actual data suggests an entirely separate set of circumstances, which is where all this misunderstanding comes in.

In truth, falling inventory is quite easily explained, and in a way that is perfectly consistent with labor market and national (labor) income statistics as they are. The BLS outside of the unemployment rate, which, for the nth time doesn’t include Americans who would work if there was work, actually has been describing a consistently and persistently slowing labor market. The timing of where that started matches with where resale inventory began to contract.

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There is actually a big difference between an average payroll gain of 150k and 250k; the latter is barely minimal, while the former is what panicked the Fed into launching QE3 in 2012. Last year was by every reasonable measure not even close to a good one for American workers.

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The primary effect of sluggish, constrained payroll expansion, along with parallel effects in other labor factors, is weakened aggregate income. Even people who are working start to become uncertain or even fearful when the jobs market as a whole slows down – and not just slows, but continues to decelerate year after year (after year). This trend will be starting its fourth year. At that length, workers and prospective workers become quite certain about their general uncertainty.

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If your ground-level view of the jobs environment and therefore economy is far more unsteady and dour than exceptional, you are not going to be as sure about selling your existing home to move up, taking on a larger monthly payment in the process. The more people like you who pass on the opportunity to cash in on higher prices, the more that says this is a widespread view quite different from the narrative established in consumer sentiment surveys and what news outlets write about in their headlines.

The economy is what actually happens, not what people think other people think Economists say is happening. Talk isn’t cheap, it’s way overvalued.

Source: ZeroHedge

Average U.S. Home Is Selling After Just 3 Weeks On Market; Fastest Pace In At Least 30 Years

Earlier today Bloomberg shared their thoughts that recent data released by the National Association of Realtors (NAR), namely the fact that homes are sitting on the market for a record low average of just 3 weeks before being scooped up, pointed to a devastating shortage of housing inventory for sale.  Here was Bloomberg’s take:

Here’s more evidence that the defining characteristic of the U.S. housing market is a shortage of inventory for sale: Homes are sitting on the market for the shortest time in 30 years, according to an annual report on homebuyers and sellers published today by the National Association of Realtors.

The typical home spent just three weeks on the market, according to the report, which focused on about 8,000 homebuyers who purchased their home in the year ending in June. That was down from four weeks in the year ending June 2016 and 11 weeks in 2012, when the U.S. housing market was still reeling from the foreclosure crisis. It was the shortest time since the NAR report began including data on how long homes spend on the market, in 1987.

Buyers are snapping up homes quickly at a time when for-sale listings are in short supply, forcing them to compete. The number of available properties declined in September, according to NAR’s monthly report on existing home sales, marking the 28th consecutive month of year-on-year decline in inventory.

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Moreover, the “inventory shortage’ thesis was further reinforced by data showing that a growing percentage of buyers are once again having to pay asking price or more to win their fair share of the American dream. 

In addition to moving fast, buyers also had to pony up to close the deal. Forty-two percent of buyers paid at least the listing price, the highest share since the NAR survey started keeping track in 2007.

“With the lower end of the market seeing the worst of the supply crunch, house hunters faced mounting odds in finding their first home,” said Lawrence Yun, NAR chief economist, in a statement. “Multiple offers were a common occurrence, investors paying in cash had the upper hand, and prices kept climbing, which yanked homeownership out of reach for countless would-be buyers.”

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That said, while Bloomberg has taken the ‘glass half full’ approach in it’s analysis, one could also easily make the argument that the housing market isn’t suffering from a lack of supply at all but rather an artificially high level of demand courtesy of a combination of perpetually low interest rates and taxpayer subsidized mortgages that require minimal down payments of just 3%.

For evidence of the slightly more pessimistic assessment of the housing market, one has to simply review the fine print included in the NAR report which reveals that the average first-time homebuyer is financing roughly 95% of their purchase price and the tightest housing markets are those that fall below FHA limits.  So, what does that tell you about how “tight” housing markets would be if they weren’t subsidized by the U.S. taxpayer?

Of course, to suggest that millennials should hold off on purchasing a home until they can actually afford a debt-to-equity ratio somewhere south of 19x is probably considered a hate crime in many social circles so we can understand why it might be avoided.

Source: ZeroHedge

 

Know the Competition: Who’s Buying Homes, Who’s Selling—and Who’s Not?

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With soaring rental prices, extremely low mortgage rates, and a stronger economy, it seems that just about everyone wants to buy a home these days. But high home prices are keeping many aspiring homeowners, as well as would-be sellers (who need a new home to move into) out of the market.

So who is buying and selling these days?

It turns out the typical buyer and seller both are getting older—and buyers need to make more money to be able to afford a home of their own, according to the 2017 Profile of Home Buyers and Sellers by the National Association of Realtors®. The report is based on a 131-question survey filled out by nearly 8,000 recent home buyers.

It turns out the typical buyer and seller both are getting older—and buyers need to make more money to be able to afford a home of their own, according to the 2017 Profile of Home Buyers and Sellers by the National Association of Realtors®. The report is based on a 131-question survey filled out by nearly 8,000 recent home buyers.

“Prices are going up,” says Chief Economist Danielle Hale of realtor.com®. “So in order to get into the housing market, buyers need to have more income to afford the same type of properties.”

Who is the typical home buyer these days?

Home buyers come in all shapes and sizes, but the typical one is about 45 years old. That’s up considerably since 1981, the inaugural year of the report, when the median age was just 31.

Buyers these days are also making good money, at about $88,800 a year, according to the report. It was $88,500 in the previous year.

Most buyers preferred the suburbs and more rural areas, at 85%, compared with urban areas, which is where just 13% of folks bought homes. And the vast majority, 83%, also preferred a stand-alone, single-family house, the kind that typically has a lawn out back.

The suburbs reigned supreme because that’s where many of the available homes with the desired features are, says Hale.

“Properties tend to be a bit more affordable than in urban areas,” Hale says. “You’ll get much more space in the suburbs for your money than you will in an urban area, and the schools do tend to be better as well.”

Calling all the single ladies

In another indication of just how much things can change in 36 years, about 18% of home sales were made by single women. That’s up from 17% last year and just 11% in 1981. And while it’s still well below the 65% of sales that married couples scooped up, it’s ahead of the 7% of sales that unmarried men made. An additional 8% of closings were made by unmarried couples.

There are more single women today than there have been historically, says Jessica Lautz, NAR’s managing director of survey research and communications. She points to how folks are marrying later in life, or not at all. Or, some may have been married before and become widowed or divorced.

Being able to have a 30-year fixed mortgage provides financial security, compared with facing rising rental prices, Lautz says.

In addition, single women buy homes that cost just a little bit more than single men: a median $185,000 versus $175,000 for the men. And that’s despite often making less than their male counterparts.

Fewer first-time buyers are getting in on the action

High student debt, coupled with rising home prices, kept many first-time buyers out of the market. These real estate virgins made up only about 34% of home sales, according to the report. That’s slightly down from 35% last year and the long-term average of 39%.

Those who were able to buy a home were a median age of 32.

“Right around turning 30 is still a significant milestone in many people’s lives,” says Hale. “That’s why we tend to see a lot of first-time buyers.”

These buyers typically had a household income of about $75,000, up from $72,000 last year. They were likely to buy a 1,650-square-foot abode for about $190,000 in a suburban area.

“The dreams of many aspiring first-time buyers were unfortunately dimmed over the past year by persistent inventory shortages,” NAR’s Chief Economist Lawrence Yun said in a statement. “Multiple offers were a common occurrence, investors paying in cash had the upper hand, and prices kept climbing, which yanked homeownership out of reach for countless would-be buyers.”

Big student loan bills due every month also make it harder for many of these younger folks to save up for a down payment. And it could affect their debt-to-income ratios, which lenders look at before issuing mortgages.

About 41% of first-time buyers have debt, according to NAR’s report, up from 40% last year. And they now owe about $29,000—compared with $26,000 in 2016. Ouch.

“An overwhelming majority of millennials with student debt believe it’s delaying their ability to buy a home, and typically for seven years,” Yun said in a statement. “Even in markets with a plethora of job opportunities and higher pay, steep rents and home prices make it extremely difficult to put savings aside for a down payment.”

What kinds of homes are buyers snagging?

Buyers overwhelmingly opted for existing homes (ones that had previously been lived in), at about 85%, compared with just 15% who closed on brand-new abodes, according to the report. That’s likely because there are fewer newly built homes on the market as well as the newer homes tending to cost significantly more.

They shelled out a median $235,000 on their homes, which were a median 1,870 square feet. The typical home was built in 1991 and had three bedrooms and two bathrooms.

And they’re not moving far away. Usually buyers moved only about 15 miles from their previous home.

Who’s selling their homes?

They typical home seller in 2017 was much older than the typical buyer, at about 55 years old. Their household incomes were also higher, at about $103,300 a year.

“The age of sellers and repeat buyers continues to increase,” says NAR’s Lautz. That’s because many baby boomers are purchasing retirement homes later in life.

The top reasons for selling were a residence that was too small, the desire to be close to family and friends, and the need to relocate for work.

Sellers usually stayed about 10 years in their homes before putting them on the market. Their properties stayed on the market for a median of three weeks, compared with four weeks last year.

And, in a boon for sellers, they sold their homes for a median $47,500 more than what they originally paid for them, and got about 99% of their final listing price.

By Clare Trapasso | Realtor .com