Tag Archive for: FallingHomeSales

Home Sales Plunge, Supply Rises, Prices Drop Year-over-Year Most since 2012. Even Investors Pull Back

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All-Cash sales plunge 22% as investors don’t feel like overpaying either. The 2023 version of the spring selling season is here.

 

OK, it’s spring selling season, the famously best times of the year to sell a home, because that’s when prices rise and sales rise due to hot demand from home buyers who were hiding out in the winter. But this year?

The median price of all types of previously owned houses, condos, and co-ops whose sales closed in April fell year-over-year by 1.7% to $388,800, the third month in a row of year-over-year declines, according to the National Association of Realtors. A debacle we haven’t seen since February 2012, when the market emerged from Housing Bust 1. From the peak last June, the median price declined by 6% (historic data via YCharts):

For single-family houses, the median price fell 2.1% year-over-year, the third year-over-year decline in a row, to $393,300. For condos, the median price still ticked up 0.7% year-over-year, to $348,000.

But it’s still spring selling season when prices always rise from one month to the next. Even during Housing Bust 1, the median price often rose month to month during spring selling season, and sometimes by quite a bit. And the median price in April was up from March, but that increase was smaller than the increase in April 2022 (+4.3%). Hence the larger year-over-year decline (historic data via YCharts):

Sales of all previously owned homes fell by 3.4% in April from March, to a seasonally adjusted annual rate of sales of 4.28 million homes, solidly entrenched in the dismal levels of Housing Bust 1……

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Home Sales Plunge, Investors Pull Back Too, Prices Drop 8.4% in 4 Months

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Sellers are struggling with denial: Priced “right,” a home will sell, but “right” is where the buyers are, and they’re a lot lower.

Sales of all types of previously owned homes – houses, condos, and co-ops – fell by 5.9% in October from September, the ninth month in a row of declines, to a seasonally adjusted annual rate of sales of 4.43 million homes, just a hair above the lockdown-month of April 2020, according to the National Association of Realtors. Compared to the recent free-money peak in October 2020, sales were down 34%.

Year-over-year, sales fell by 28%, the 15th month in a row of year-over-year declines. Beyond April and May 2020, this was the lowest rate of sales since December 2011 (historic data via YCharts):

Sales of single-family houses plunged by 6.4% in October from September, and by 28% year-over-year, to a seasonally adjusted annual rate of 3.95 million houses.

Sales of condos and co-ops fell by 2.0% in October from September, and by 30% year-over-year, to 480,000 seasonally adjusted annual rate.

Investors or second-home buyers purchased 16% of the homes in October, down from the 17%-22% range in the spring and winter. In other words, their purchases plunged at an even higher rate than the purchases of regular buyers, as investors too are losing interest in buying at these prices.

This plunge in sales is a sign that potential sellers and buyers are in a standoff. Many potential sellers refuse to accept reality and lower their prices to where the sellers are; instead, they’re thinking, “and this too shall pass,” and they’re hoping or praying for a Fed pivot or for a miracle or whatever and don’t even put their home on the market, or pull it off the market after not getting any traffic at their aspirational asking price. And buyers have lost interest at the current prices.

Homes that are priced right – meaning priced down where the buyers are – are selling. But sellers don’t like to go there. And we see that in the active listings too. But there is some price-cutting going on, as more sellers figure this out.

Price reductions: In October, the number of homes listed with price reductions rose to 327,184 homes, the highest since October 2019, and just a tad below it (data via realtor.com).

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Housing Bubble Getting Ready to Pop: Traffic of Prospective Buyers of New Houses Plunges, Homebuilders Cut Prices, Sentiment Dives

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Homebuilder stocks have been wobbling lower all year, now down between 24% and 40%.

 

Homebuilders have struggled for well over a year with supply and labor shortages and ridiculously spiking costs. In addition, this year, the new holy-moly mortgage rates added to the woes, and unsold inventories surged to levels not seen since 2008, as sales fell. And homebuilder stocks have gotten hammered across the board, down year-to-date between 24% and 40%.

So, not all that surprisingly, the confidence of builders of single-family houses, as depicted by the NAHB/Wells Fargo Housing Market Index for July, released today, plunged by 12 points, the second biggest drop in the data going back 35 years, behind only the April 2020 lockdown cliff-dive, as “high inflation and increased interest rates stalled the housing market by dramatically slowing sales and buyer traffic,” the NAHB said.

It was the seventh month-to-month drop in a row. In other words, it’s been all downhill so far this year. With today’s index value of 55, it is now back where it had been in May 2015. And it’s right back where it had been in February 2006, though it was dropping a lot more slowly back then.

“Production bottlenecks, rising home-building costs, and high inflation are causing many builders to halt construction because the cost of land, construction, and financing exceeds the market value of the home,” said the NAHB.

And builders are cutting prices: 13% of the builders have reacted to those conditions by reducing home prices in the past month to boost sales “and/or limit cancellations,” the report said.

Regionally, the Housing Market Index plunged by the most in the West (-16 points) and the South (-15 points), with the West and the Midwest showing the worst HMI levels of 48 and 49 respectively.

Region HMI, July Point Change fr. prior month
Northeast 57 -5
Midwest 49 -6
South 60 -15
West 48 -16

The future looks worse, homebuilders said.

There are three components in the MHI: Current sales, sales outlook for the next six months, and traffic of prospective buyers. Only the current sales component was still at a positive level.

The index for current sales plunged 12 points in July, to a value of 64, which means that still more builders rated current sales as “good” rather than “poor” (an index value of 50 would be neutral).

The index for sales over the next six months plunged by 11 points to an index value of 50, which means that builders were evenly split between those who rated their future sales as “good” and those who rated them as “poor.”

And the index for Traffic of prospective buyers plunged by 11 points, to an index value of 37, after having already dropped below 50 in June. Traffic is an indication of interest by buyers, and buyers have lost interest. That’s a real problem going forward…..

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Suddenly Here Comes the Inventory: Homes Listed for Sale Jump amid Price Reductions and Sagging Sales

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The shadow inventory emerges with perfect timing, just as holy-moly mortgage rates and sky-high prices keep buyers away.

“Inventory” in housing means homes listed for sale. Then there’s the shadow inventory – vacant homes that owners want to sell eventually because they have already moved into a new place but want to ride up the surge in home prices all the way, and then at the tippy-top, they’ll sell it to maximize their profits.

We have seen this during the past 18 months when home prices spiked: people bought a home and moved in, and they moved out of their other home but didn’t sell it, expecting a 10% or 20% or 30% gain in price on a leveraged bet with a much bigger gain on equity. The math makes sense, though it doesn’t always work out, and now it’s starting to be time to put those vacant homes on the market, and here they come, just as home sales are dropping because layers and layers of buyers have been removed from the market by the rising mortgage rates and sky-high prices.

Active listings jumped. In May, the inventory of homes actively listed for sale jumped by 26% from April and is suddenly up by 8% from a year ago, the first year-over-year increase since June 2019, according to the National Association of Realtors today. There were about 38,000 more homes listed for sale in May than a year ago (data via realtor.com):

Active listings jumped for two reasons:

One, falling sales, as potential buyers left the market due to sky-high home prices and holy-moly mortgage rates. The NAR’s metric of “pending listings” for May, which tracks listings that are in various stages of the sales process, but before the deal closes, dropped by 12.6% year-over-year in May, after the 8.7% drop in April, the ninth month in a row of year-over-year declines:

Reported later in the month, closed sales have also dropped for the ninth month in a row, and the closed sales data for May should be another doozie.

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