The NAR is in panic mode as pending home sales dip to a record low dating to 2000.
Pending home sales represent contracts signed but not yet closed. It’s an estimate of future existing homes sales reports.
Record Low
Pending home sales fell by 7.1% in August, significantly higher than expectations of 1.0%. This was the biggest monthly decline since September 2022. Now, pending home sales are down 18.8% over the last year all while existing home sales are at their lowest since 2010.
The Pending Home Sales Index is now at its lowest level on record, exactly equal to the pandemic lows. We now have new, existing and pending home sales in free fall. There simply is no supply.
NAR in Panic Mode
Mortgage News Daily reports NAR Calls for End to Rate Hikes as Pending Sales Drops Again
NAR Chief Economist Lawrence Yun: “The Federal Reserve must consider the sharply decelerating rent growth in its consideration of future monetary policy. There is no need to raise interest rates. Moreover, the government shutdown will disrupt some home sales in the short run due to the lack of flood insurance or delays in government-backed mortgage issuance.”
On Track for 8 Percent Mortgages
New Home Sales Sink 8.7 Percent
New home sales are about where they were in 1963.
For discussion, please see New Home Sales Sink 8.7 Percent in August.
Existing-Home Sales Decline 17 of Last 19 Months
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.
Yes, This is a Crash
- Existing-home sales are down 35.8 percent in 2.5 years.
- Existing home sales are back to a level seen in the mid 1970s.
- If there is a decline next month, an that is highly likely, existing-home sales will drop to a 12-year low.
Real estate tooters keep telling me there is no crash.
What the heck are the above stats? Chopped liver? An egg salad sandwich?
Prices have not crashed but transactions have. Crashes are rare, but we are in one now, from a transaction perspective.
For discussion, please see Existing-Home Sales Decline 17 of Last 19 Months – Yes, This is a Crash
Bidenomics Explained
“New data released this morning provide more evidence that Bidenomics is working.“
Yeah right. Tell me about it.
1: Hand out free money via unwarranted subsidies to ease the pain of stupid regulations 2: Stoke massive inflation in the process 3: Brag that it is working.
We now have 23 states where residents are paying at least 40% of their gross annual income on home payments. On a post-tax basis the median homebuyer is spending clost to 70% of their income on home payments. It should be 35% of net income.
I wonder if Black Rock is concerned about ‘interest rates’ when the hoover up whole subdivisions to rent out later?
Best explanation of Bidenomics ever! Keep up the good work Mish!
imagine fat amerikan born men picking lettuce in 90 degree sun. best keep them in their mcmansions with free shit army benefits of 3rd base lives…………
Not all obese males live in mcmansions. A lot of fatties are on welfare. I recommend forced Army service with an extra dose of pushups and running for welfare mamas.
Hence “Rich men from north of Richmond’
Fresh talent soon for pole dancers on amateur night.
What no one is talking about with regards to real estate is that it’s not just the 3.5% keeping people locked in their homes. It’s the fact that the work place has changed. The WSJ had a great article on the commercial real estate market in Atlanta, GA. A city with booming economy, jobs, growth and empty commercial buildings.
link to wsj.com
What gives? Many working professionals are now working from home or work remote from a tropical island or Europe/Asia/wherever. If you have locked in a 3.5% rate and bought your dream home during that period, there is no reason to move or sell possibly ever. The fact Atlanta’s economy is booming without the need for CRE is indicative that people are working from home or remotely.
In the past, what forced people to move was a new job with higher pay that may have required you to move from Chicago to New York or vice versa but now you can probably just get by working from home so why ever sell? The mobility matrix has fundamentally changed with COVID which may mean lower real estate transactions moving forward.
It’s time to throw away the 1960s economic playbooks and start facing the new realities.
I’d rather work from the friendly confines of my home around my dogs than anywhere near psycho MeToo floozies in some office.
Working remote is economically promising at a personal level until the higher price of capital forces many businesses, mostly tech, to go bankrupt. Venture capital will dry up and competition for remote work job will increase tremendously.
It’s not always a low mortgage rate on a house that prevents the selling of the home, but often the amount of principal debt, taxes, insurance on the home can supercede the mortgage rate and force a sell when the economy goes south in a high interest rate environment.
great points
It is silly to discuss Bidenomics when it is called Bernakomics. They printed so much money that the populus simply stuffed itself silly, and Bernanke is the inventor of printing presses.
It is the same story worldwide, competitive interest rate devaluation accomplished the trick. The US has driven the world to the ditch, again.
At the last republican debate they mentioned that under Trump the deficit rose 7.8 trillion USD vs Brandon’s 5 trillion. Jeez both numbers are obscene. WTF.
It took 4 years for real estate prices to hit bottom during the recession of 2008 – 2010. real estate prices hit their low point in 2012.
and highs in phoenix were circa 2005 and 2006
It took closer to six years from top Oct 2006 to bottom winter 2012.
Wrong on both counts. Home sales already fell. They’re now in the gutter. Fortunately for homeowners, there are simply no sellers out there because as soon as there are, prices will follow sales south.
This is all only bad news for crappy real estate agents who are now leaving the business to go back to their previous lives and jobs, since you actually have to know how to sell in a market like this. The good, professional real estate agents are doing just fine, because there’s less competition from the amateurs and prices, along with commissions, are up 50%+ in the past three years.
Zillow should reduce the need for real estate agents. Don’t see why or how a 6% commision is justified.
How does raising interests rates help anything?
It doesn’t seem to have a function other than to exacerbate all the other problems.
It just makes every thing more expensive on top of the devaluation of the dollars. (Even the government pays more, prints more to pay interest)
Businesses etc are just going to trickle that down to the consumer.
Can someone explain this?
7% interest during 12% inflation is free money economic stimulus.
7% interest to refinance a 3.5% mortgage on over priced 50% occupancy commercial real estate in downtown San Francisco means the bank now owns a worthless asset.
Yes, I understand what you are saying.
I don’t understand why the government raising interest rates accomplishes anything. Everyone thinks this will somehow fix it.
In my opinion that would only work if your currency is tied to a balanced budget.
If you just keep printing money on top of your interest rates it just blows your system up faster.
And inflation stays where it is or gets worse as you raise interest rates. Because it increases the cost of everything in business, transports, housing etc and so on. And all that gets passed down to the end user.
Businesses figured out how to max out the consumer during covid and incorporated it into their business models as a policy. Food prices and necessaries are going to stay elevated on top of the costs to operate.
Am I wrong on any of that?
the bank will sell it to their “arms length” pals for a steal. fed will own some more regional banks. same as it ever was.
Raising interest rates makes retirement a bit more comfortable.
Those who bought a house with a 3% mortgage rate will never sell.
If the down payment was 20% and his house is down 15% he might sell, cutting
his losses after commission and other expenses.
The heirs should never sell, either. At 3% interest, keep on making the payments like Norman Bates’ mother.
New home sales are not in a free fall, they are up significantly off the lows of 2022.
Crushing drop in existing home sales, tough out there for a real estate agent.
New home sales are not in a free fall.
They have risen majestically to a 1963 level …. primarily via building smaller homes and mortgage rate buydowns.
When people discuss a real estate crash, they discuss price not volume. Prices are not crashing. People are not experiencing a crash as most are in their homes with a 3% mortgage.
I was very clear to call it a transaction crash. And it will have a huge economic impact for years.
And if they tapped the “equity” in their 3% homes they are going to be in big trouble when they experience distress (statistically about every 5 years).
And cruddier materials/poorer finish outs
You have a strange outlook, new homes sales are up 5.8% from August 2022. Not sure how that fits any definition of a “free fall”.
At yet miraculously, the median price of existing homes has climbed from $361K in Jan ’23 to $407K last month.
HOUSING SALES CRASH HYSTERIA = RISING PRICES
That makes zero sense, so yammering on about falling sales is absolutely pointless.
Again, do some extra digging and start making predictions on when falling sales means a real drop in prices over an extended period of say 3-5 years like the GR.
Otherwise, all we’re going to end up with is uber high home prices that continue into the stratosphere.
Yes, the low end of buyers DROPPED OUT of the market so the median price bumped up a little and then a little more and longer when the Fed injected liquidity in March. The same pattern played out during the first year of the meltdown of the 1987 and 2006 bubbles. Then prices (a LAGGING indicator) went into free fall for 2-4 years. But as the trajectory reversed downward in 1988 and 2007 every real estate booster in the world flooded MSM with housing bubble denialism. Yes, when the number of transactions craters and the only people buying are too rich or financially illiterate to care about price the *median* price might bump up. We are pretty quickly running out of the free money crowd and debt default rates are spiking.
Because of the spring selling season, goofball. There’s always a bump—even in ‘08 there was a bump. Todays buyers are largely the holdouts who got lucky on the way up & held but who’ve now capitulated in their staring contest with Powell and started blowing their wads. Everyone else is sick of this casino.
The only index worth tracking lags by three months so you won’t see the blazing obvious about whats right in front of you spelled out until three months from now.
Nowhere to go but the standard over-correction. Give it 4 years at least.
Home sales, new and existing, are reported on a seasonally adjusted basis goofball.
BS! Go look at the graphs. From the peak in Oct 2006, there was a NEAR continuous drop all the way through late fall 2008 when prices briefly leveled off for a few months. The recession officially ended in the summer of ’09 but prices continued to fall through 2011 with two very minor bumps of about $2-4K. This occurred well after 2008, Ed. The first REAL seasonal bump, ~$10K, wasn’t until spring of 2012 or about 5.5 years after the downturn started and accelerated.
This time around is totally different. The entire housing market is out of whack.
I live in Woodstock GA, a very hot real estate market over the last 10 years or so.
A 72-home neighborhood was started in the summer of 2022. The finally got three houses dried in by late May 2023. Then two things happened. The sales sign went from $600K to $700K and literally nothing has happened in the last four months. Nothing. The 3 houses were never finished and sold. No additional homes were constructed, but somehow the developer in the midst of rising interest rates decided to raise the starting price by 16%.
Things are so F’d up out there it makes zero sense. Just like it makes zero sense that Mish keeps yammering about a sales crash.