Economists expected the National Association of Homebuilders (NAHB) index to remain steady in September. Instead the index took a 10 percent dive, from 50 to 45.
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
Buyer traffic is in a deep recession. It will remain so as long as interest rates stay high.
Conditions rebounded from even deeper levels earlier this year when mortgage rates briefly fell. Also, homebuilders resorted to mortgage rate buydowns, were able to pass on falling lumber prices, and they built smaller homes.
Further options to entice buyers have run out of steam.
NAHB Wells Fargo Housing Market Index Present Minus Expected Conditions
Why would anyone think conditions will improve? Is the Fed going to cut rates?
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 (as of June, above chart).
As of August, the median price is $436,700, down 12.1 percent. from the all time high. But what are you getting for your money now?
For discussion, please see How Much More Will Homebuilders Have to Reduce Prices to Increase Sales?
A quick check on Mortgage News Daily show the average 30-year rate is 7.31 percent. So, expect sales to remain in a slump, with existing home sales faring worse.
I think real estate is at the early stages on a long term slump. You have a lot of people retiring and selling their homes. A lot more than new home purchasers. Many of them used real estate as their retirement savings, so they’ll sell off some properties to cover retirement costs and/or sell their primary residence and move into one of their rental properties. Most of my neighbors have already bought their retirement home. Many of which are outside the US because costs are lower.
Home prices still not falling in Huntsville, this city is fire! 7% annualized growth in this city, every corner has new construction in residential and commercial.
link to al.com
counter intuitively SLG is holding up quite nice. since we bought a few months ago.
Builders are building like MAD , in Kelowna and surrounding areas with a population of Aprox 220,000+or – . Under construction all at different stages there are 2,266 apartment units, 3,192 homes, 1,632 condos = 7,090 in 2023 while moving in from Retires, refugees, construction and seasonal workers there are aprox 3,800. There are cranes, excavated holes wherever there used to be a piece of dirt. BCs new housing starts are down 23% and sales No true no’s
RBC is forecasting a peak-to-trough decline of 15% in home prices across the country, with about half of this decline still to come.
Ontario, British Columbia, and Alberta will experience a peak-to-trough dip of 19%, 16%, and 6% for booming Alberta ,Oil capital.
Experience would call this the BOOM before the BUST. link to youtu.be
Here in south Florida thing still holding up price wise.
I just did a quick look at recently sold stuff in the area and most that sold got the asking price / wasn’t on the market long.
That said, the overall number of listings is definitely higher (not like double, but say 20% more homes for sale) than it was say in 2022 and 2021. So either more people are now listing (can’t afford their place) or it’s taking longer to sell existing places.
A glance at those recently sold says to me that if the house has what buyers want (desirable location on water or fully updated or hurricane windows etc) then it sells fast. If it doesn’t, then it tends to sit a bit longer.
Isn’t Florida sinking? I guess if your time horizon is 50 years or less it doesn’t matter.
FL is the septic tank of east coast. they will build out junk housing for many decades to come. flat and swampy forever and ever. there is a reason it was place for AWOL military men and scaliwags ran there. all the sleaziest scumbags i know that were running from things up here on wall street and the street head down there. however, that said, it is a nice spot to go lounge on beach. just don’t buy the swamp land.
Half right.
The north half of the state (above Orlando) is not swamp land, it’s mostly forests and the very north part even gets snow on occasion.
The reason AWOL people and scalawags come here is because it’s a homestead state. Once you put your ill gotten gains into a house, it can’t be confiscated via a lawsuit. That’s why OJ came here, to avoid losing his home in the civil case.
You are correct!
Here are the states with 100% homestead exemption where you can go bankrupt without being forced to sell your house, regardless of the amount of home equity:
1) Florida
2) Texas
3) Arkansas
4) Kansas
5) Iowa
6) South Dakota
7) Oklahoma
8) District of Columbia
Whose timeline is more than 50 years? Even my teenage kids will be VERY old in 50 years time.
Anyway, it’s not sinking and sea levels are rising so slowly that it will take hundreds of years to matter at current rates (which haven’t changed either despite what fear mongers claim).
Seems like there is a big price difference between new builds and existing homes. Not sure existing homes will be hit as hard. The wife put me on a purchase prohibition for 2023 … timing could be good.
“Buyer traffic is in a deep recession. It will remain so as long as interest rates stay high.”
And that’s exactly why this weekend I was looking at properties in Austin, TX. When the herd is running scared, it’s the time to go check out the field. Saw a few properties but the numbers still don’t work just yet but the deals are looking better and better. I’ve seen 75k price drops on some units and more to come.
I’ll probably head back in early November, hopefully the fed will have hiked at least once by then. Getting giddy with excitement. Choo! Choo! New money train coming into the station.
Housing is just entering its second down leg. There is a LONG way to go until a bottom is in. Foreclosures still have not surged. When massive foreclosures are reported on the front page news, THAT’S a good time to buy. Be prepared to pay the former homeowners to move out.
If that strategy will work for you then by all means do it and wait for mass foreclosures. The markets I am looking at have already have significant correction and they are in places that are booming due to a variety of factors. This is a property that I will own for 30+ years anyway so my event horizon is far different and it’s in a market that has been resilient.
There are too many people waiting for a fed pivot to buy on the assumption they buy now and refinance later. As soon as the fed does it’s first cut, the housing bubble will re-ignite and I want to get in before that happens.
Yes there is risk but there is no train ride without some kind of risk, the risk is mitigated with a 30 year time window.
Recession job losses, divorces, medical emergencies, deaths.
Folks forced to sell now at any price.
Choo! Choo! Choo!
That is the best comment you have ever posted! Very (profit) forward thinking!
Housing has been down in certain regions of the country for close to a year at this point. I think the housing bust won’t necessarily look like what we saw during the GFC with yuuuge price declines (to borrow a phrase from our former President). I don’t think we are going to see prices slash in half across the board like we did about 14-16 years ago. To me, it’s hard to gauge just how low everything will go because of the sheer amount of inflation that has occurred over the last three years. Yes, some is supply related (lumber, chip shortage etc). However, I don’t think we’ll ever see the money supply contract to 2019 levels.
Another wild card is the fact that this time the price increases weren’t exactly gradual in housing. It basically occurred over 1.5 years rather than over a 4 year period. Minus the effects from inflation, it is possible that prices could drop as quickly as they rose. Prices are dropping every month on currently listed homes and not all of them are dropping by $5k a month. In some instances, there are 20-25k price cuts every month. You do that a few times and most of those 2020-2021 gains are largely gone.
Thats not gonna happen. This isn’t 2008. Most owners have tons of equity in their homes and can afford to reduce prices if they have to sell. But then again, nobody’s selling unless they absolutely have to.
Prices are already dropping. If you lose your job it doesn’t matter what is your rate or your equity. You need to find a buyer at 8% rate to realize that equity.
So it’s “different this time” …… Got it
Where in Austin are you looking? I lived there for a few years in the early 2000’s and still have friends there I visit.
It’s gone from a quaint college town to a sprawling city in 20 years time. But the area’s aren’t all desirable just like in any bigger city. Hopefully you aren’t looking in those areas.
Near the city center. Austin is now a large area and there are new towers going up every time I visit. The realtors kept wanting to steer us outside the city into the suburbs and we kept telling them NO. i suspect the commissions and incentives are higher there based on what I’m seeing.
Everyone that does rentals has a specific clientele they typically chase after and so do I and it doesn’t involve the suburbs where families live and long commutes.
Families = kids and dogs/pets = damage to rental unit so no thanks.
…and you’re a wannabe landlord. Hahaw! Find another berg, dude. Austin can’t give its rentals away!
Austin is still stupidly overpriced…75K reduction from a 200K price hike tied to nothing but FOMO-fueled mania and wet dreams of passive income. I wouldn’t buy anything there for at least 3-4 more years and I know that market all too well.
good attitude. r/e is a game of cap rates. even for the amateurs that only buy single homes to live in. the cap rates are nowhere near sensible comparing to the now 10 year treasury note. last panic, i got cap rates at 15% and higher. it payed off, too. just takes tons of patience. doing nothing is usually the best course for pro investors. r/e is such a long cycle. good article mish. r/e is for sure your best topic you understand and write about. thanks.
I see about as many price drops and ‘back on market’ as I see pending now. My pent up demand is generating enough interest for rent and groceries now, so I’m just gonna watch for a while.
I don’t think so. People who are locked in below 3% on 30 year fixed rate mortgages can’t afford to move and buy a different house at 7.31% due to the payment increase. These people will do anything in their power to stay in their house. This isn’t like the housing crash of 2008 with the NINJA loans. We are seeing large price corrections in some markets but I don’t expect a massive crash or foreclosure tsunami.