The National Association of Homebuilders (NAHB) Housing Market Index (HMI) resumed its slide in August. Traffic remains in the gutter.
The NAHB/Wells Fargo Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market.
The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.
NAHB Wells Fargo Housing Market Index Since 1985
Traffic remains depressed. Traffic is at levels generally associated with recessions.
Conditions rebounded from even deeper levels earlier this year when mortgage rates briefly fell. Also, homebuilders were able to pass on falling lumber prices and they built smaller homes.
30-year fixed mortgage rates are 7.26 percent according to Mortgage News Daily.
How Much More Will Homebuilders Have to Reduce Prices to Increase Sales?
New Home Sales vs Median Sales Price Detail
Buyers hit a brick wall on price with a peak of $496,800 in October of 2022. Median price has fallen 16.4 percent since then.
For discussion, please see How Much More Will Homebuilders Have to Reduce Prices to Increase Sales?
Seems some posts you can vote like and others you cannot.
Is everyone seeing this or it is my browser?
I think it depends on how many levels deep the replies are.
I’ve been looking at investment property. What I’m seeing are homes that were gobbled up during the pandemic at outrageous prices and they are having a hard time dumping them.
One I looked at they bought for 34oK. They kept dropping it. It got to 280K so I thought I would take a look. Nope. It’s worth less than 250K. Looks nice but severely outdated inside. They are going to get their ass handed to them on a bunch of these old homes.
We just need a bill passed and more bailouts. Problem solved.
The chart in this article looks like the Boise, Idaho housing market.
My house value:
$500,000 in May 2022 (Now that’s a joke!)
$415,000 in August 2023 (Still not worth this much)
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$72,000 is the median family income in Boise. You multiply by the historical average (5x) of median income to median house price and my house true value is: $360,000
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You factor in a 7.25% mortgage rate and the house’s true value is: ~$325,000
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That is 35% decrease from peak to trough. Question is, will Boise Idaho get to the trough.
Boise was the poster child for the housing bubble. Tons of Californians moving in. Knoxville also got bombarded with CA/NY transplants and saw their home prices double in 3 years. How many of these transplants will wind up staying long term?
“How many of these transplants will wind up staying long term?”
Typically takes 2 years to initially settle into a new location. Next milestone to make is 5-7 years.
These people moved because they could not afford expensive housing in CA/NY — so unless prices drop in CA/NY or they come into an inheritance, they cannot go back.
The escalating kookery in Idaho will run a lot of them off.
always thought 3x was more normal, but i haven’t used notes or a mortgage, to buy r/e in decades. sold all mine last summer. the cycles are so damn long. time to keep doing nothing. it’s the best thing to do when in doubt. nothing. i’ll wait another 3 to 10 years for bottom again. rich rainwater said, wait until bottom, wait another year. then buy. works. thanks for the r/e stuff mish. this was great. much appreciated.
Glad you recognize reality. Too many are way too optimistic about their local real estate market. They think where they live is special so the rules work differently.
What part of the “economy” could withstand a (badly needed) housing crash?
Look at the mess ya made, Fed.
Lots more real estate news coming out of from China. Different situation than US but can see some parallels. Too much easy money everywhere over last 15 years.
Either house builders are making large profits on these high prices — or houses are really worth this much and there is no bubble on house prices.
Warren Buffet was buying equity in major house builder companies during Q1 so expect he believes the former. Also read second-hand yesterday that profit margins for new builds remain very healthy.
The NAHB chart since 1985 shows a nominal Hurst Cycle of 18 years starting in 1992 and ending in the 2009-10 time frame. The present 18 year cycle would then be expected to bottom in the 2026-28 time frame. That’s 3-5 years away. Given how steep the chart has fallen from this cycle’s top, I don’t see a panic crash the next 12 months. Instead I envision the chart making a sideways move an then down for a low that happens sooner, and a couple bounces into the cycle low that happens later. Either way, I do not see any investible upside potential from here.
The fake economy continues to eat the real economy.
The U.S. has been stuck at 30-year for far too long! How long until a 35-year or 40-year mortgage becomes the new standard?
U.S. housing is a lot like U.S. college education – overpriced and financed by “cheap” money facilitated by government entities, but unaffordable to many.
Regardless of what new houses are doing, the housing market in most areas of the country is still strong. Low inventory, but demand far exceeds it, even at 7.5% mortgage rates.
The only places where the housing market is cool are those that have a bad local economy. For example, Corning NY where it’s common to see houses that have been on the market longer than 90 days.
Houses in my area of Mass. are gone by the first week if they even last that long. Record high prices just set this month. And Mass. is losing population (!) Things are even wackier in places that are gaining population like Tennessee.
Real estate is a local market. Doubt those conditions will last for long.
“Real estate is a local market. Doubt those conditions will last for long.”
Agree with your first sentence, however not sure the second. Do you think Corning NY houses will light on fire, or the Tennessee fire to be doused?
You have a wave of retirees over the next few decades, who are more likely to sell than buy. Coupled with younger people who can’t afford a new home and are delaying marriage and having fewer kids, which means they’re more likely to rent than own and will likely buy a smaller home when they do buy one. These are all long term headwinds that I don’t see abating.
Right now you have a situation where people with mortgages don’t want to sell because a new mortgage will have a much higher rate. Reducing supply. But over time, this will abate.
I think housing is going downhill from here over the next few decades.