For a change, the Census Department revised new home sales up for last month. Sales in August are down 8.7 percent from those July revisions.
Census Department Numbers
- New Home Sales Sales: Sales of new single‐family houses in August 2023 were at a seasonally adjusted annual rate of 675,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 8.7 percent (±15.6 percent) below the revised July rate of 739,000, but is 5.8 percent (±21.1 percent) above the August 2022 estimate of 638,000.
- Sales Price: The median sales price of new houses sold in August 2023 was $430,300. The average sales price was $514,000.
- For Sale Inventory and Months’ Supply: The seasonally‐adjusted estimate of new houses for sale at the end of August was 436,000. This represents a supply of 7.8 months at the current sales rate.
Confidence Levels
Note the uninspiring confidence levels (±15.6 percent from last month) and even less confidence from a year ago (±21.1 percent).
The confidence levels do not even factor in cancellations. This make sinking markets look too optimistic and rising markets out of recessions too pessimistic. The whole process is suspect.
New Home Sales Since 1963
New Homes For Sale By Stage of Construction
Homes For Sale Discussion
The Census Bureau reports 436,000 homes are “For Sale”. From that, the bureau measures “months’ supply”.
But of those 437,000 homes for sale, only 76,000 have been completed.
Builder to prospect: “See this vacant lot? We call this a home for sale.”
There is a record level of 106,000 empty lots the Census Department classifies as “Homes For Sale”. Meanwhile, the backlog of homes under construction is sinking while the number of spec homes completed but not sold rises to 76,000.
Month’s Supply
Based on a fictitious number of homes for sale, we can calculate fictitious supply in months at the current rate of fictional sales, plus or minus 16 percent or so, and practically guaranteed to be heavily revised next month.
Existing-Home Sales Decline 17 of Last 19 Months – Yes, This is a Crash
Existing-home sales slipped again in August as rising mortgage rates make housing prices the least affordable ever. Despite denials in many corners, a crash is underway.
For discussion please see Existing-Home Sales Decline 17 of Last 19 Months – Yes, This is a Crash
It’s a transaction crash though, not a price crash. It’s hit homebuilders too as transactions are at a 1963 level. People cannot afford homes with the current average mortgage rate at 7.50 percent.
Meanwhile, President Biden says inflation is coming down and the economy is great.
I think about 1/3rd of homes are rented. I suspect the real number is higher as things like Airbnb probably aren’t counted since there are no leases. And a lot are 2nd homes. Once the ROR for renting approaches t bill yields, many of the big investors will start dumping real estate and buying risk free bonds. I suspect the ROR would have to drop to maybe around 7% to start enticing risk free bonds at 5.25%.
good analysis mish. your best stuff is r/e as i’ve said. i’ll repeat the fed is just reloading bazooka so when JPM and GS and C…….need free money to wipe out the regional banks……..they have it. been this way for a century. i’d have guessed more would have caught on. oh well. tomorrow morning i’ll be passing by the NYFED and tip my hat to those great grifters. fuck them.
I love the word and concept of a Grifter. I was one myself at one time, telling the Airline Staff, “my wife and I are celebrating an anniversary” and getting free upgrades and Champaign on board. I felt fine with it.
Do I still do it? Yes, now I am the “Senator and Mrs._____.”
“The median sales price of new houses sold in August 2023 was $430,300. The average sales price was $514,000…People cannot afford homes with the current average mortgage rate at 7.50 percent.”
Yes but lowering Treasury yields to bring down mortgage rates won’t make homes affordable either as another marauding army of investors will swoop into the market to keep prices elevated. Most of the wealth created (correction: transferred) since the last huge spike in money supply has ended up in the hands of the investor class. This surge of “cash on the sidelines” will provide bidding pressure on asset prices if monetary conditions are loosened.
The less affluent are being squeezed by higher interest rates and inflation and are providing less demand and so the government is going to keep spending to pick up this slack.
The unsound monetary policy of the past has led to a very unbalanced and out-of-whack economy resulting in extreme inequality, inflation, higher interest rates and surging debt. Given the political dysfunction, it’s going to be difficult to bring the financial system back into balance. But at least the tighter monetary policy is a step in the right direction.
Yes, you are correct.
When I think about how they handed over homes to Blackrock in 2009, effectively stealing homes from original borrowers, only to rent them back afterwards, always reminds me of the hand-rubbing/Cigar smoking by the big four RR tycoons of the late 1800’s: it is always the same story.
We all yearn to be wealthy, at our varying levels, and yet I do NOT THINK that I could have done what Fink has done.
Did you see Cash-Shiller set a new all time high? Completely wiped out last years 5% drop already. The FED has really fudged things up in the housing market.
Case Shiller is deeply flawed, as it was designed as a financial instrument to sell index futures to speculators, and does not accurately capture how much money homeowners are sinking in to get their house in market ready condition. Don’t believe me? Read the methodology yourself:
link to spglobal.com
Case Shiller attempts to reduce the impact of renovations by excluding homes the sell more than once every six months, which doesn’t work as permits for renovations in big cities and labor/material shortages means renovations take much longer than this), and “applies smaller weights to homes that appear to have changed in quality or sales that are otherwise not representative of market price trends.”
There is no way they are accurately accurately capturing the renovation work done to many houses prior to sale. As the market slows, more homeowners are spending more money trying to get their house to stand out, and many buyers are demanding houses in move in condition.
correct el mundo. i spent decades buying the most beat up 100 or 200 year old homes in hoods in 4 cities. sometimes i rented for years, sometimes flipped. all about cap rate
It may very well be deeply flawed, but it’s a consistent measurement of “something” important over time.
I’ve always wondered about home improvements. There’s no way to look at raw data and accurately take that into account.
Jaime Dimon reminded everyone again to prepare for the possibility of a fed funds rate at 7% which may push mortgage rates into the stratosphere. And of course, there are many saying it will never happen so this is what makes an exciting market with many winners and losers.
Interestingly, Ackman is shorting long bonds and Gundlach is going long on those same bonds. Only one of these guys can be right. Two men enter, one man leaves…
Seems like we’ve been waiting for 6-9 months for obvious bad news, and it seems likely that the initial release of Q3 GDP will be around 5% which will be huge.
The CME FFR watch is still at 81% pass for 11/1. A 6% FFR seems very possible by January at this point and would translate into a low 7% 30YFRM. Inquiring minds want to know what % of all homes sold have a conventional 30YFRM that’s not bought down more than 50-basis points. Something tells me this is less than 10% of all homes sold in the last 6 months.
I don’t think 7% is likely but who knows. I think we’ll start to see significant deterioration in consumer & business confidence by yearend. Early 2024 will either bring about a slow turn in unemployment or a move towards a 6.25% FFR. If we get to 7%, it will take until June, IMHO.
Week by week, this seems to be more of a train wreck waiting to happen. I personally want to see the government shutdown. The conservative holdouts’ demands for old school 12 appropriations bills & significant movement on border security are no brainers. And I think independents will reward the GOP for getting something close to what they’re asking.
The annualized interest expense for Q3 & 4 are going to be blockbuster.
if the repug hold outs are conservative, than i’m a rock star, play center field for yankees and the richest man in universe. those assholes are radical big government bootlicking fascists…….in a cult.
Triggered
Also, what’s needed is a sustained decline in the DOW below 30K by Thanksgiving.
they are pikers without discount window access. gundlach has been wrong for 2 years.
It may well be that both are right and no one knows the timeframes they are targeting.
Who, what, Where, WHY and WHEN! The when is always murky, right?
Those guys do NOT give away their best ideas publicly.
New homes for sale completed are low 76K, slightly above nadir.
Isn’t this supposed to be good news for the Fed? This is exactly the only outcome they can achieve with their monetary policy. It will probably not fix inflation, but it will surely kill the economy.
Yes, and yet the contradictions continue. Good news used to mean good news and bad WAS bad.
In order to return to “normal” (purposely in quotes, as it is murky at best), we must re-attune our minds to the fact that Bad news will drive Interest rates lower, stealing income from Savers and congratulating borrowers once again.