Data reports are so wild with huge revisions that it is hard to believe any of them.
Last month I reported New Home Sales Sink 4.7 Percent on Top of Huge Negative Revisions
This month we see a big upward revision to May from 634,000 to 698,000 coupled with an 11.3 percent dive from the revision.
New Residential Construction
Today, the Census Department released a third consecutive heavily revised New Residential Construction report.
- New Home Sales: Sales of new single-family houses in May 2024 were at a seasonally adjusted annual rate of 619,000.
- This is 11.3 percent (±15.5 percent) below the revised April rate of 698,000 and is 16.5 percent (±16.2 percent) below the May 2023 estimate of 741,000.
- Sales Price: The median sales price of new houses sold in May 2024 was $417,400. The average sales price was $520,000.
- For Sale Inventory and Months’ Supply: The seasonally-adjusted estimate of new houses for sale at the end of May was 481,000. This represents a supply of 9.3 months at the current sales rate.
Note the margins of error in this report, 15 percent and higher.
Third Big Revision
Here’s my headline from April 23, 2024: New Home Sales Rise 8.8 Percent After 3.8 Percent Negative Revision
The Census Bureau revised February seasonally adjusted annualized sales from 662,000 to 637,000 and reports March at 693,000. Expect more revisions.
“Expect more revisions.” Indeed.
New Home Sales Since 1963
New home sales are well below the February 1964 report (yellow highlights).
Who can afford them? Prices are at record levels and mortgage rates are holding just over 7.00 percent according to Mortgage News Daily.
New Homes For Sale By Stage of Construction
Allegedly, there are 481,00 homes for sale but 104,000 of them have not been started.
278,000 homes under construction and 104,000 are complete.
There are 377,000 homes started or completed, 378,000 last month. That is the most since May of 2008. Good luck with that at these mortgage rates, currently 7.03 percent.
New Homes for Sale Supply
From a fictitious number of new homes for sale of which 104,000 have not even been started, and a questionable and likely to be revised number of sales, the Census Bureau calculates a fictitious supply of 9.3 months.
Existing-Home Sales
For discussion, please see Existing Home Sales Drop Slightly But Median Price Hits New Record
Existing-home sales declined 0.7 percent in May. It was the 22nd decline in 28 months. But the median price hit a new record.
The Case-Shiller Home Price Index Hits Another New Record
Housing affordability continues to soar out of reach of most buyers. Not only are prices at a new record level, mortgage rates remain slightly above 7.0 percent.
For discussion, please see The Case-Shiller Home Price Index Hits Another New Record
Prices are going up because only higher priced properties are being purchased. There is no low end market anymore.
The world is simply running in reverse. Banks don’t lend deposits. Deposits are a dollar-for-dollar expansion when banks lend/invest.
That affects housing. More purchases are made with new dollars rather than existing savings, as in the U.S. Golden Age in Economics.
Deposits effect bank reserves which inhibits the amount available to lend.
“Note the margins of error in this report, 15 percent and higher.”
Just to quantify, is that margin big enough to drive semi truck through? Or are we talking aircraft carrier?
MISH, are there stats about the AGES of home owners en masse?
IS most of the RE wealth concentrated in GEN-X and BOOMERS?
Yes, and older generations have always had more time to build equity, so there’s really nothing unusual there. But ownership rates among younger groups are lower than historically normal, due to the extreme affordability issues posed by the bubble market prices of the past several years.
The biggest question and MARKET FORCE that I envision is this:
Also, I read Brent Johnson’s piece about Chinese RE.
Chinese richies own property all over the world and liquidity requirements might force sales in Canada, USA, Australia and the EURO ZONE, where we saw a sea of Chinese money flow into Portugal.
US – Trends in Death Rates from Neurological Diseases, Ages 15-44
Our results show that the excess UC (Underlying Cause) death rates from neurological diseases for individuals aged 15 to 44 age were 4.4% (Z-Score 4.9) in 2020, then rose to 10.0% (Z-Score 11.1) in 2021, 11.2% (Z-Score 12.4) in 2022 and 8.1% (Z-Score 9.0) in 2023. In 2020 we already observe a significant deviation from the 2010-2019 trend in UC death rates, and the excess UC death rates in 2021, 2022 and 2023 can be considered extreme occurrences due to their very high statistical significance.
The results show a clear break from the prior historical trend in death rates from neurological diseases, pointing to a new phenomenon in action, worsening in 2022 and persisting through 2023.
https://phinancetechnologies.com/HumanityProjects/US%20CDC%20Cause%20of%20death%20Project%20-%20Neurological%20Deaths%2015-44.htm
Multiple factors at play here besides covid vaccines. Stress is toxic for the brain.
Odd that all of this started after the roll out of the covid death shots
Coincidence… I guess
12GA plan B retirement, leave no open questions remaining.
International money is still driving housing along with the tech boom. Hearing anecdotal evidence of employees at Nvidia and other tech companies needing to sell their stock to pay the tax bill. Productivity is grinding to a crawl bc of the sheer amount of wealth creation.
“ Productivity is grinding to a crawl bc of the sheer amount of wealth creation.”
That makes no sense.
It’s like saying; “No one goes there anymore because it’s too busy.”
Productivity is what improves the standard of living.
I’m talking about employee productivity.
When smart folks quit stressful work because they can afford to retire, aggregate productivity goes down. Especially when they are replaced by people with less experience and diminished motivation.
Yes. Monthly numbers are all over the place. That’s why I appreciate Mish’s analysis of them and put my focus on long term trends instead.
Now, where are all the usual suspects who keep expecting house prices to crash by 90%?
We may be becoming a nation of squatters.
The super money pigs intend to control every stick of real estate in the country with their limitless fresh ‘printed’ trillions. They don’t care if you can’t afford a home.
When he FED drops the FED funds rate in September and again in December, 0.25 and 0.5 percent respectfully, indeed home prices willl climb.
For awhile.
Does not mean housing demand will increase.
I see a 0% FED Funds rate and a
12% Ten year treasury yield to materialize .
$6 Trillion Annual Federal deficits will do that.
Yup.
If wishes were horses home buyers would ride.
Free money for everyone, and twice on Sundays.
People are waiting on rates to drop. Trillions were printed. I think homes are $100k higher 3 years from now.
The $64,000 question — where’s the market competition up and down the supply chain? Are excessive government fees and regulations suppressing supply and competition? I’m pretty sure I could build my own house on my own lot if it were merely legal for me to do my own construction without government interference. In the early 1900s, self built homes were fairly common, and even encouraged by the government, if you can imagine that!
This is why the wealthy are fleeing the US.
Most of the places people want to live are built out. You end up having to buy land an hour away and commute. Nobody wants to do that. You can still build cheaply in the Dakotas.
Saying goes” You can’t fix stupid”
There is somewhat more to it then that.
If you recognize “stupid” then make good effort not to get hurt by it.
We are entering the results parts of stupid, good and hard.
People can not afford homes. OK we have been here quite a few times before.
There is going to be some inventory liquidation. If it can not get financed and sold it is going to get unloaded. Well that also means production of new inventory is going to stop. Builders loans to finance construction will not be available.
If a person has been waiting for such a time and sitting on cash then they have a fairly good chance of finding someone hungry to do work. Win Win for you and your contractor. You get a good buy over course of coming year and contractor gets a chance to make bills and not lose everything they worked for over past several years.
You will also likely get a decently built house with some care put into it. Where else does your contractor have to turn too. You the customer are it.
Longer term are prices going higher? Probably, as there are no policies being attempted to bring down costs of construction.
After this shakeout which is starting, once again there are going to be fewer knowledgeable Trades people to do future work when market turns. Working people can only get burnt so many times before they start looking for a different occupation.
Something that actually has a future, which is certainly not building Houses.
\No guarantees as the idiotcrats are still in control and they very well may turn a downturn into a full blown depression.
Since we are below 1964 numbers things are not very Rosy in Home building land.
Mish – I would love a post on the number of people that have been forced to stop renting and move back home with parents/family because they no longer can afford the rent. I’m not sure if the numbers are out there but this would be interesting. When I lived in IL the rents were so high that people were renting rooms for $1,000+ per month. The rent only included the room. (no private bath, etc.)
We know no fewer than 8 couples, from Grandparents down to Gen-Ex parents (esp BOOMER parents) who have 40-year olds moving back in with them. My band mate, P, just had his kids from LA move in with them in Oregon (2 people home to a 4-people home in an instant) and the kids had not paid their PG&E bill and HAD TO MOVE because the power was cut off.
Their last week in their apt in LA: NO POWER. BROKE!
The daughter has not worked in five years. The Son-in-law is on Disability due to a knee injury (he was in Banking).
They are BOTH deadbeats. Mom and Dad are NOT rich. They are making ends meet Barely NOW, due to the new situation, and I suspect that this trend will continue.
First suggestion: Padlock the refrigerator and freezer, Dad.
Will be checking some new builds at a 55+ AZ “active” community (golf, tennis, etc.) in a couple of weeks. While these communities have different demographics (almost all buyers are cash so not sensitive to rates), what is the same is 1) Like all AZ, even 55+ homes went up 25%+ since Covid, and 2) there is a lot of inventory on the market. The builder just opened about two dozen home sites, but there are about 20 re-sales available in the same development, and prices have dropped about 3% over the last six months (so builder is offering all sorts of incentives). If I like the area I will probably look at the re-sales for desperate sellers.
The realtor I am meeting for the resale viewings is not sure why there are so many re-sales in a 55+: maybe some speculators got in and are figuring out they need to get out, for some this is their snowbird home and maybe they are unloading, or maybe some of us active 55+ are dying faster than we thought.
Some may find that they don’t care for the heat.
My aunt lived in Phoenix for many yrs, but she spent summers with her son in Chicago. Kind of reverse snowbird.
Here’s some mind blowing information. Go to the priced in gold website and go to the “US Home Prices” page. Find the chart for “Shiller’s Long Term Home Price Index”.According to the chart, home prices are a bargain today when priced in gold. It blows my mind. I feel like there’s some money making information here but I can’t quite figure it out. Maybe the lesson is to never own cash, always put it into assets.
Home prices from 1987 to 2010 where higher than they are today when priced in gold.
1934 to 1942 had similar prices as today.
Even 1890 to 1900 the prices then where slightly higher than now.
I’m sure there are lots of reasons not to read too much into it, but its still crazy to think about.
Home prices show the true rate of inflation. Foreign banks are selling USTreasury bonds. The Federal Reserve, buyer of last resort, buys the bonds. And the dollar debt comes sloshing home to feed rampant inflation.
Mish, please drop the bogus framing of this topic pushed by the Realtor monopoly and the house-builders.
Those aren’t “new homes” being sold. They are “new houses”.
No one ever buys a “home”. You make your own home by buying a house, living in it and making it your own.
The Realtors and builders use “home” because it has more emotional pull on people. We should not accept that.
“Home is where you go, they have to let you in.”
Robert Frost
I recently sold my big house which I no longer needed now that the kids have moved out. It didn’t help that my town raised my taxes 25% to $24,000/year with no improvements despite NJ’s supposed law that limits increases to 2.5% – but with enough exceptions to be meaningless. I have been watching lots of houses/townhouses/apartments for sale and rent on Zillow and Realtor. What I have been seeing for the last couple of months is many places for sale are at reduced asking prices of about 10%. Not so much for rentals – yet. Of course, that is 10% off their original asking price. None-the-less, I am wondering if housing prices have already peaked.
I wonder if Zillow can provide that data or if they are vested in pushing prices higher?
Hope we can figure out a “fix” to this challenge although it feels like the “Fix” is in…yikes. I talk with a local builders group often and the biggest concern (besides economic) is the lack of civic stability a bunch of angry disenfranchised younger renters bring to society – less family formation, more atomization, “You Will own nohing and be happy?” Suuuuuure you will….
That’s a misprint of the original quote.
It was “You will own nothing and be hungry and cold.”
Ah, duly noted 🙂
Builders are ratcheting up the price by 10% or so to subsidize the mortgage rates. Buyers might start to be worrying about overpaying.
Deeply disturbing numbers
And chart patterns.
Better buy now, home prices can only go up, it’s a FED backed perpetual motion machine and you can’t lose!