The US Housing Market Begins to Feel the Pain



Posted by Ed 3 mths ago
Fact is, home prices cannot outrun wages forever.

The market, if it’s allowed to, can fix the affordability problem that exists in many cities in the US by finding price levels were first-time buyers can afford to buy a home with the income they’re making. At its glacial pace, this is starting to happen in some markets, with sales volume dropping, and inventories rising, and sellers having to step down the aspirational ladder to make deals.

In some of these markets, price levels have a long way to go before they make sense, where a household with a median income on the local scale can afford a median home. And there are now enough local housing markets that have turned south to where the impact is starting to creep into national averages.

Sales of “existing homes” – single-family houses, townhouses, condos, and co-ops – across the US in January dropped 8.5% from a year earlier, to a seasonally adjusted annual rate (SAAR) of 4.94 million homes, according to the National Association of Realtors, after having dropped 10.1% year-over-year in December and 8.9% in November.

All three were the biggest year-over-year drops since May 2011, during the final throes of Housing Bust 1 (data via YCharts):


Ed 3 mths ago

Ed 3 mths ago
“Home and automobile sales could be in for a big correction, due to “pent-down” demand. Homes and autos aren’t selling that well lately. Total vehicle sales in the US dropped to 16.70 million units in January from 17.55 million in December of 2018. While that number is still above the long-term average (1993-2019 period), it’s well-below the all-time high of 21.77 million reached in October of 2001.

“Meanwhile, sales of previously owned homes in the US dropped 6.4% to a seasonally adjusted annual rate of 4.99 million in December of 2018.”

Ed 3 mths ago
Sharply Lower Prices Help Sell New Houses, But it’s Not Enough

Inventory continues to surge. Potential buyers move on.

Here is the good news: Lower prices stir sales. Clearly, homebuilders are motivated to move their inventory, and they’re making deals at lower prices. The median price of new single-family houses whose sales closed in December fell 7.2% from a year earlier, to $318,000, according to the Commerce Department this morning.

December’s 7.2% drop and November’s blistering 11.6% drop were the sharpest year-over-year declines since Housing Bust 1:

The steep year-over-year price increases in prior years formed a multi-year boom in prices that has now outrun what the market can bear. The median price of new houses ballooned by about 55% from the range in 2011 and 2012 to the peak in November and December 2017 ($343,300), which exceeded by 31% the crazy bubble peak in March 2007, before it all came apart:

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