Factoring in revisions, pending home sales remain at a record low level according to the National Association of Realtors (NAR). 
Pending Home Sales Definition
- Pending home sales represent signed contracts that have not closed. They are a leading indicator of existing home sales reports.
- Existing home sales are recorded at closing whereas new home sales are reported at signing.
The NAR reports Pending Home Sales Recorded No Change in November.
Key Points
- Pending home sales in November remained the same as one month ago.
- Month over month, contract signings grew in the Northeast, Midwest and West but they contracted in the South.
- Pending home sales dropped in all four U.S. regions compared to one year ago.
Trading Economics Month-Over-Month
Golden Handcuffs
New Record Low or Tied Low?
Leading Index
Expectations vs Reality
The Bloomberg Econoday consensus estimate was for pending sales to rise 0.8 percent.
Instead pending sales were flat. The NAR revised October up from 71.4 to 71.6. This month was unchanged.
New Home Sales Down 12.2 Percent in November
Home builders finally ran out of incentives or consumers finally got fed up with what they are getting for their money. Here’s the result in pictures.
For discussion, please see Huge Thud in New Home Sales, Down 12.2 Percent in November
Existing Home Sales
In November, Existing Home Sales Rose 0.8 Percent, Only the Third Increase in 22 Months
The National Association of Realtors chief economist, Lawrence Yun, eyes a “marked turn“.
I highly doubt a major turn even if there is no recession. Mortgage rates and home prices are both still too high.
Wake me up when the home value to income ratio is back down around ~3.0 link to twitter.com My salary has barely increased ~2% YOY, insurance and all other ‘benefits’ have increased, inflation is still high (gas, groceries, consumables of all sorts) and nearly everybody I know is living m2m on credit cards….yeah, they have a big houses and nice cars (both with large monthly payments) and zero slack – zero ability to take a hit or stand on principal and refuse an experimental gene therapy when threatened. This whole obsession with ‘housing as investment’ is total sh1te, along with banks having changed into speculative (gambling) institutions (how else are they going to ‘guarantee’ an annualized 9% rate of return to keep their pension promises?) My dad taught me a house is a physical dwelling while a ‘home’ is something created… You live in a house but you create a home – focus is on living and experiencing life together. American’s obsession with ‘home values’ corresponds to the magnitude of spiritual and familial deficit in their lives…
Right now, people are enjoying Christmas with their families and will start looking for a home in 2024. The big problem is listings are very low, so we will see slow sales with a jump in prices.
Probably can’t fix the housing market without a general upheaval of the greater economy,
And will probably always wonder if this grand distortion was intentional.
It is so stubborn stupid and persistent that it had to have been intentional. WHY would any developed Country want to have policies that prevent marriages (due to the high costs associated with having kids and building homes).
This also forces people into HIGHER-COST Rental situations which means 20-somethings getting ROOMIES to afford housing OR they intentionally have two kids and then suck off the teat of Big Government in the form of food stamps (EBT CARDS), free medical care and housing credits (Section 8).
How we know all of this for sure: we visit Northern Cal to see our folks and a neighbor kids got his Girlfriend Pregnant (twins delivered last year) and he works UNDER the table and she stays home and collects CAL bene’s, all on CAL and he smokes dope continually (using a Vape tool).
His pile of crap Mitsubishi car broke down in our parent’s Driveway and I watched him try to fix the problem over the past two days and he smoked dope the entire time, taking hits off of his vape pipe and then forgot a gasket and then had to tow it away last night at dusk.
I saw first hand a completely lost TEEN PARENT, smoking dope, living off of the Government and RENTING and they are PURPOSELY not marrying due to the freebie bene’s MOM gets from Cal. FREE EVERYTHING. It is a shame.
At this kid’s age, I was going to College and made a fortune in the Silicon Valley and we did not have kids on purpose and retired before 40 purposefully. We live vicariously through our friend’s kids, and we are an Uncle and Aunt and those kids will inherit what we leave behind.
The Dow reached a new all time high, but the 2Y, the 5Y and the 10Y keep falling
SPX [1M] looks great, finally “matured”, after NDX and the Dow, but the [1D] looks tired. It closed today below Dec 26 high.
SPX [1W] reached Jan 3 2022 fractal zone, after closing Jan 10/18 2022 gap.
New homes sold (brown)/ new homes for sale (yellow) = 41/451, 9% turnover, about 2006 ratio,. Not good enough !
The highest ratio was in 2012. New homes for sale have been depleted since 2006 from 600K to 150K, to about 1/3 of today’s inventory. Home builders did whatever they could to liquidate inventory.
It took six years to reach the bottom. In 2012 starvation and dehydration elevated sales. Sales flipped from down to a low slog up. In 2023 new home sold (brown) are testing 2000/2005 lower deck.
Business suck. It might be a systemic change.
80% drop is needed for this market to even begin to recover.
Yes, they keep talking about BOOMERS not moving and yet affordability is barely mentioned in Mainstream News outlets. The Golden Handcuffs narrative is likely myth. People sell when they do not NEED their homes any longer. My father-in-law and his sick wife live in a Mansion. We are in our RV parked here and I see the misery of keeping 14 acres, a pond with pumps, etc., 4000 sq feet to maintain, and they hire people to help them that show up late or NEVER. He feels frozen decision-making wise and we cannot seem to convince him to sell. It is so frustrating.
The house is worth MILLIONS. It is on a BLUFF facing Mountain Ranges and a dream home for a family of Five with MONEY and Boats, cars, etc. BUT, he will not budge. He wants her to die first. This is SAD.
HE KNOWS he should move. The house is paid for so the Golden Handcuff concept does not apply at all to him or any of their 85 year old friends. They do not WANT to move.
All these inflationist, speculating money mongers holding on to unoccupied housing should have to pay quintuple rate property taxes on them.
Well, they are in places like Ore and Cal. Property taxes, even at 1.125% of the value, is STILL a lot but Prop 13 protects MANY of the older folks.
I don’t know what will happen, but I do know that have a ton of cash at work getting 5.5% on FDIC CDs and I’m loving it. I’m firmly in camp “higher for longer.” This is the type of economy I’ve been waiting for my entire life.
I’m Gen X and my wife is a millennial. We own 2 properties outright, 1 condo and one home sans mortgage. We have the intention of renting out our condo and eventually selling our home and moving back into our condo as we opt for a lower maintenance (and less spacious) lifestyle when our son goes off to college.
If rates dropped a lot and home prices popped, we might consider selling 1 or 2 of our properties depending on where prices are. We’ve even contemplated selling both of our properties and turning around and becoming renters simply because the cost to rent has fallen so much relative to home prices. The amount of money we could pocket by selling our properties and putting to play in risk-free treasuries would more than pay for our monthly rent in a nice single family home.
Jacob, let me give you some perspective (we were child-free, so we are MORE free to leave). At 38, I owned my Company Stock, we had three cars, two motorcycles, a huge Home (4700 sq feet) and I was commuting to my company in Fremont, Cal from the south. Sure, I had nice Cars (Infinity, Mercedes, Lexus) and cool bikes (Ducati, etc.) and REALLY great friends and I was considered the most successful of our circle of friends and certainly our families (no one else were Millionaires in their 30’s).
I SOLD MY SHARES, the house, put everything in storage and we bought a new RV and took off to Fla for that first winter. IT WAS SO FREE-ING.
I did consult back to my Buyers.
The stock gave us a nest egg and we had NO housing costs and only RENT in RV parks (cheap back then, not true now)…so, our down-sizing afforded us, with our retained earnings, a life of leisure and I consulted a bit here and there, and retired over 32 years ago.
I do not mean this to brag. It is simply fact: we made the decision of a life-time. We have been free to travel full time.
We live well when we travel. We fly Business Class, LIE FLAT seats. We eat modestly but buy the best wines. We are on organic foods, mostly when we can find it (easier in southern Europe, where the food is unreal great).
OK, I will share where we live: Portugal and Spain are unreal beautiful Countries with food that will knock your socks off (Portugal’s local Markets are ALL organic.
I heal when we stay there – – I DIGEST better and LOOK better and FEEL better compared to the crap we have to buy in the USA which is garbage food laced with chemicals and produced and packaged in Styrofoam which is amazingly weird compared to the back-country towns and villages of the Algarve.
GET OUT FROM UNDER all of that maintenance, prop taxes, insurance, up-keep and be FREE from all of that B.S. In retrospect, it was STUFF that required my attention (maint.) and UP-KEEP ($$$$$), taxes, etc. I have NOTHING now and am freely telling you to do it: be FREE!
We live in GoLDEN AGE OF Fraud and ALL “asset” prices are to the moon because the FED juiced it all and now refuses to fix it by popping it back to 2019 levels. THEY HATE US
New mantra is YES, 100% fight THE FED and you will win HUGE. They are cowards and serve the great ponzi benefitting the 3%
Sharpen up the pitchforks cause this is how bastille 2.0 will happen
Wage growth is high, service inflation is high, employment is chugging along like a honey badger. Gas is a bright spot, but it’s not enough to make up for everything else still at nosebleed levels. The market is having a consensual hallucination on rate cuts. Powell’s gonna pop the blue pill and keep it higher for longer as inflation plunges deep into working class pockets. Reluctant sellers on the sidelines will frown while comps adjust lower as churn from job change, death, illness, and regular life happens. In short, it’s gonna be a slow grind lower, for years.
I just had an agent reach out to me to “offer” that I buy a house for over asking price. I was kind with my reply because it’s not her fault that we’re 100k apart on perceived value. The selection is so crappy right now and I’m just not willing to wildly overpay for something I don’t like very much.
Happy 2024 everyone!
Smart move. BUY LOW, sell HIGH. This has been my mantra all of my life and it takes PATIENCE. Stand your ground.
Mish, you track various numbers closely, so I have a mission for you, if you choose to accept it: In a future post, examine the lag times between Fed tightening and Fed easing and the unemployment rate. If you do that, then I will have a detailed and well researched comment pertaining to next year’s presidential election.
I am specifically interested in how this might work between now and the end of June, but it will be more credible if you can provide documented historical data. Thanks.
Everyone will want to see this. Thanks.
If he follows up on my suggestion, I promise an informative, factual, highly numerical comment that will blow at least a few minds, including his. That’s the teaser, and I hope Mish is teased.
QE with its LSAPs, took government securities off the market, reducing loan demand while increasing the available supply of loan funds. This artificial suppression of interest rates stoked asset prices, homes, and stocks, etc., – Bernanke’s so-called “wealth effect”.
So, single-family residential real-estate became less affordable. “Housing is considered unaffordable if it costs more than 30% of an individual’s income”. And unaffordable housing begets crime.
High real rates of interest are not restrictive if (1) available credit is expeditiously activated and (2) is accompanied by a tighter money policy. In fact, high real rates of interest were an economic catalyst during the U.S. Golden Age in Capitalism. A higher personal savings rate results in higher real-investment schedules.
It was November when 30YFRM were coming off 8% highs. They’ve dropped to 6.6x% in barely 2 months. Let’s see where they’re at in late February.
My bet is rates are going to drop to at least 6% without any intervention from the Fed. Then, housing sales & prices will begin to stabilize and move higher than expect (adjusted for seasonality) through late spring and summer.
Too much government spending at all levels means a buoyant labor market, which means no recession, which means no Fed pivot possibly throughout all of ’24.
Seems like the spread has already priced in the rate cuts. What is the historical spread on mtg rates vs fed? Not trying to be snarky, I really don’t know. Just hard to imagine the rate going much lower w/o a fed cut.
The only way the Fed cuts rates is for there to be noticeable softening of the labor market.
This means 1st-time unemployment claims will have to move above 250K and stay there for at least 304 months. Today was 218K, and it’s the end of the year, when companies typically start to do belt tightening. Also, continued claims will have to rise up to at least 2.3M’ish (currently at 1.9M). I don’t think we’re on the cusp of the labor market softening significantly throughout ’24. I do see some pull back in the next couple of months which is seasonal, then it will stabilize.
Again, $1.7T in federal deficit spending, nearly zero drop in existing home prices that has ensured no property tax cuts, and solid consumer sales propping up sales tax significantly reduces the chances of a recession.
Housing, in general, leads us into a recession and as rates continue to fall, housing is going to stabilize. The absolute last thing the Fed wants is to start cutting the FFR which will push down 30YFRM and then be blamed for having housing heat up too much. Despite all the sales crash hysteria, housing remains well positioned for a 2024 turnaround.
Uncle Sam is pumping too much money into the economy for there to be the kind of meaningful softening in the first half of 2024 for the Fed to lower rates.
The result of central banking engineering. Those locked in mortgages at ZIRP are sitting tight, and not going to sell when interest rates are at 5%. Keep interest rates at 5% for as long as ZIRP, and things will start to move.
A better solution is to end central banking as Javier Milei will hopefully follow through.
Central bank monetary policies have proven to be cancerous to equality, homeaffordability and free market principles.
Aside from that, absolute corruption in politics, academia, media and the unimaginable levels of greed of the corporations sums up todays reality.
This won’t get better any time soon. Not until something completely collapses.
I’m actually afraid of the next few years. I’ve had this feeling for at least 5 years that something profound is about to happen…
Whatever that may be, it certainly won’t normalize this chaos or bring back the way we used to live….that’s for sure.
What IS HAPPENING is a profound debasement of the dollar along with hyper inflation. It won’t end until minimum wage, welfare, social security, EBT cards, and AFDC pay less than rickshaw wages. You’ll pay $50 for a McD’s burger.
The US standard of living was briefly above average after WWII while USA enjoyed a monopoly on industrial manufacturing. Those days are gone. Americans earn and deserve the same tar paper shacks they enjoyed before WWII. If building codes do not accommodate tar paper shacks then people will live in tents and travel trailers.
Yes, after WWII, USA enjoyed a period of unusual prosperity because most of the rest of the world manufacturing was destroyed and China was making trinkets. Now, there is a surplus of manufacturing world wide, China has improved tremendously, American manufacturing has largely been outsourced, and American education is poor. USA can’t compete with a poorly educated workforce (there are exceptions), with a poor work ethic and the opportunities don’t exist in the USA like they once did.