The lead chart is from the NAR.
- In March, single-family sales were down 8.1% and condominiums sales were down 11.7% compared to last month.
- Compared to a year ago. single-family home sales were up 1.3% while condominium sales were down 3.6%
- Single-family homes had an increase in price up 8.1% at $282,500 and condominiums rose 7.9% at $263,400 from March 2020.
Econoday economists expected existing home sales to decline 7.5%.
Things were a bit worse than expected in March. April and May rate to be disasters.
Understanding the Economic Impact
From a household formation aspect (starting a family), new home sales arguably matter more. But in terms of sheer numbers, resales dwarf new home sales.
For example, February new home sales were 765,000 SAAR vs 5.76 million SAAR existing home sales.
What Happens on Existing Home Sale?
- New Carpet
- New Kitchen
- New Appliances
- New Bathrooms
- New Furniture
- Painting
- Landscaping
Not all of those things happen on a home resale. But some of them happen on nearly every resale.
Few if any of those things happen on new home sales because things are generally all inclusive.
Home Sale Crash Coming
A home sale crash is coming, both new and existing.
Given that new home sales are recorded at offer acceptance and existing home sales recorded at closing, the existing home sale crash may lag a bit, spread over more months.
Mish
People need to understand what economic depressions really are. They are a reality check. They are a point in time when everyone sees simultaneously that the Emperor has no clothes.
Value is a strange thing as it is variable. There is an intrinsic value which is basically the real value, based on its need, and their is a perceived value which is skewed by factors other than an items actual need and purpose.
Inflation is caused by buying on credit. The effect of inflation is to raise values of items purchased using leverage (debt) faster than wages.
In depressions, things which have had their valued increased simply by the speculation that they will be worth more in the future, are revalued and brought back to their intrinsic value.
The more valuations have become inflated, the more they must fall.
So in light of so much uncertainty with Covid-19 related missed payments, forebearances and subsequent drop in home sales, whether new or existing, do you view higher priced areas like Austin, SF, LA, Denver, Memphis, Seattle as more insulated from housing correction?
Also loan servicers with reduced income due to forebearances and missed payments but still have to pay investors on mortgage backed securities, will the banks have a less liquid market to sell the notes? Basically will there be enough MBS buyers where the banks feel confident enough to issue new mortgages?
What are the chances of a Mortgage interest amnesty or about a mortgage jubilee?
We have a purchase agreement right now for our house and one we’re moving up to. The buyer of our house offered based on a video walkthrough and wasn’t inside the house until they had an inspection done. So it’s possible.
Sure, volume will take a huge hit. The real question is price. With the government offering forbearance for up to a year on 70% of existing mortgages, foreclosures are not going to be rampant over the next year.
A housing PRICE bust in the mid to low end may take years to develop. A bust at the higher end will come first since jumbo mortgages aren’t federally backed and will not receive forbearance.
I am already seeing 5-100k knocked off a fair number of houses in Colorado. The real issue to watch is the jumbo mortgages are drying up. This will push the houses just over conforming down which will start the compression across the curve. You get a lot of house when you go 100k above the conforming loan limit. People are paying 500k for 2500sqft cracker boxes. 600k gets you 4500sqft older better built home.
If I were a bank, I would focus on PPP loans. Zero risk. Maybe a mortgage I could definitely sell to the GSEs. I would be hesitant to make any other loan. Any home sale requiring a non conforming loan is in jeopardy. Unless maybe the buyers are putting 50% down.
Banks, finance companies, you name it. I’ve gotten dozens of random solicitations from people I never heard of, trying to get me to do a PPP through them.
Woe to Municipal budgets as property owners rightfully seek reassessments.
One of the local counties in my area just announced they are raising values. Trying to lock in higher rates before the storm.
Woe to property owners as real estate taxes skyrocket.
I dont see it from my vantage point. I mean I paid of my California house in 7 years. . . so I wont be selling.
I know a lot of people who are going to be looking for deals if they come. Including myself. I dont know the people who will have to sell. They arent my friends.
Humble brag much?
I imagine the 35 to 45 year old crowd is the most ridiculously extended and will be stung the hardest. Statistically speaking, I’d bet you are over 50 and your social group is in the same ballpark. Times changed a lot right after the people who are in the 50’s and 60’s today got onto the helicopter and pulled the ladder up behind them (or at least the government and FED did all the pulling). Either way, congrats on being responsible and smart.
Mish didn’t even mention the finance end. People with near excellent credit scores are having a hard time qualifying. How about a refi on falling real estate prices, “Sorry, your house is worth 70% the loan amount you requested”. Remember, the last wave of home buyers had a 3% average down payment. HELOC for a redo? Granite counter tops….forget about it.
“Remember, the last wave of home buyers had a 3% average down payment.”
Yes, and that was very stupid on the part of the lender.
With Gov backed loan, not really that stupid at all.
Up.
It’s pure genius when you can benefit handsomely on the way up and simply pass the losses onto the taxpayer on the way down 🙂
in fact after paying off nearly 3/4 mil in loans in past 10 years I still had HELOC
when I went to refi in 2015 they wanted me to bring in $50,000 to get 20% equity
I passed and had to get stuck with 5%+ loan
Just refi’d in Jan – simple – showed assets, some self employed income and done
of course my 800+ fico score helped – now 2% lower
but my refinance? Un affected? I guess it affects appraisals, we are beyond that. I think I am good. 5% to 3%, seems worth it. We are both still working.
There isn’t much mobility at the moment, so a crash in sales volume was baked in. Other than a temporary hit to various businesses, it’s not clear to me that this will have a long term effect. Eventually people who wanted to move will move.
It will absolutely have an impact on markets that are dependent on oil. How much further that extends is the question now.
They need to have money to be able to move which right now fewer people have the money.
And every month of forebeafance is lower seller equity.
*forebearance
So winning. Think about it guys. Home price crashing, oil price crashing, leaves more money for stocks. Dow 5 million!!!
You’re gonna need a bigger abacus.
Completely geography dependent.
Only in the sense that some places will “only” be heavily bruised while others places will see their market slashed in half.
Nah, Western New York doesn’t even have a swollen lip, in fact, still getting bids over ask, and not at deflated asking prices. Geography centric argument as prices rise and as prices fall.
It is still too early in this situation. Real estate is very sticky in going down price wise.
I did a recent re-fi and the appraiser visited with a face mask and gloves.
I did my refi in Jan 2020 – no appraisal needed – just website and low cost fee
knocked nearly 2% off existing loan – poor wells fargo can’t stick it to me anymore
Home sales crash
It has to happen. In many states, realtors are not supposed to show homes. It’s hard to sell something that can’t be shown. Some are doing ‘virtual’ walk-thru’s, but that’s not a substitute for see and believing…..
Do realtors qualify for employment relief?
In some states, yes.
Can I get the FED to buy my Florida home?
Inquiring minds want to know.
The FED is just like Mikey (from the old cereal commercial). Mikey will eat anything….
FED will be the mortgage holder of last resort. Guaran-effin-teed.
“By year end, maybe no meaningful change to median home price for the country as a whole,” said National Association of Realtors Chief Economist Dr. Lawrence Yun when asked about 2020 year-end median home prices.” Lawrence Yun is the economist for the National Association of Realtors, so he should be EXPERT about this. See, nothing to worry about!
You know that Yun in his previous job was a stand-up comedian.
and prior to that his job was as a circus clown.
…so buy now, or be priced out FOREVER!
Never been a better time to buy or sell
…and generate a commission
“Lawrence Yun is the economist for the National Association of Realtors, so he should be EXPERT about this.”
The NAR always sees the real estate industry as better than it is. If Yun says prices will be the same, it means they will likely drop 20% or more.
True, I’m surprised Yun is still the NAR’s chief economist, he’s been around forever, even working for them in 2008.
I’m think this is a good time to build a house, I have a teardown in DC I’m probably going to redo then flip, if prices for home builders come down a bit.
Ahh…..I remember a previous shill named David Lereah stating how housing would not fail.
This is going to literally kill the real estate market where I live. North Idaho seems to be the place every freaking Californian has to move to, and if they can’t sell their suburban ranchers down there, they ain’t gonna be moving up here. Maybe this is the upside!
Hate to be be the bearer of bad news but even if the formerly $800K dilapidated ranch homes have to go for a measly $575K, they(we) can probably still continue their(our) exodus. I do apologize for my fellow Californians, we are indeed the worst and I am the first to state that there is absolutely no silver lining to having us around 🙁 But hey you could see some kind of drop off as negative equity positions keep some portion of Californians trapped in the “Golden” State!
Hey I thought that only potato fields existed up there.
Happy to help a fellow Conservative relocate to North Idaho! kay.rice.homes@gmail.com
Prices will wait, probably even inflate more as sales fall to near zero.
Then, we all hope, it will all get dumped on the market each to the highest bidder when the biggest oinks finally fail.
And that’s how the recovery will begin.
“Inflate” is an illusion. Those looking for starter homes have just been knocked out of the market so the average price will not include those data points.
actually need a decent job to get one of those ‘starter’ homes
improving mine instead – no need to go anywhere