Pending Purchases of U.S. Existing Homes Unexpectedly Decline

Bloomberg – Princess Laya – Contracts to buy previously owned U.S. homes unexpectedly declined in January as higher mortgage rates, elevated prices and a limited number of listings pushed the index to a one-year low, according to figures released Monday from the National Association of Realtors in Washington.

Pending home sales gauge dropped 2.8 percent (forecast was for 0.6 percent advance), the most since May, to a one-year low of 106.4.

Contract signings rose 0.8 percent in December, revised down from a previously reported 1.6 percent gain
Index increased 2.7 percent from January 2016 on an unadjusted basis

Pending sales decreased in the Midwest and West

Pending home sales, which reflect contract signings, declined in January as affordability became an issue for potential buyers. A pickup in mortgage rates since the November election, higher home prices and fewer properties to choose from are limiting progress in residential real estate. At the same time, steadily increasing wages and a growing economy remain sources of support.

Here is a chart for Pending Home Sales (MoM) courtesy of Zero Hedge (the battery in my Bloomberg Anywhere card died).



And Pending Home Sales have declined with declining mortgage purchase applications (again, courtesy of Zero Hedge).


This is not a good sign. Very frustrating, much like trying to eat “Raw Oyster Stew.”


Are Restaurants Signalling Recession? Same Store Sales At Same Level As Just Before The Great Recession

According to the National Restaurant Association’s Restaurant Performance Index, same stores sales are about at the same level as just before The Great Recession.


While the CRB foodstuffs spot price index is about where it was just before The Great Recession, foodstuff spot prices have fallen quite a bit since 2011, causing households to choose cooking at home rather than dining out.


Is this a signal of a coming recession? Or that fact that households are trying to eat healthier? I am betting on the former.

Given the problems with traditional anchor chains in malls (like Macy’s, Sears, JC Penney’s, etc.), shopping mall and CMBS investors had better hope that mall restaurant chains don’t show the same pattern of declining same store sales.


18 European Nations Have Negative 2 Year Sovereign Yields (Germany’s Continue To Decline)

While the USA has seen their Treasury yields generally rising since the election of President Trump, Europe and particularly Germany have not been experiencing the same “love.”

In fact, Germany has the second lowest Bund yields in Europe after Switzerland (who maintain their own currency).


German 2 year Bund yields have been dropping like a stone since 2014.


And have been dropping even more quickly since January 2017 after a brief respite.


At the 10 year tenor, Germany has the lowest government bond yield after Switzerland. And the lowest of any nation with a positive bond yield.


The German Bund yield curve is greater than 200 basis points lower than the US Treasury curve after the 2 year tenor.


This comes as Germany’s deputy finance ministers claims that there will be debt relief for Greece.

The continuing Greek debt crisis and Germany’s insistance on not lowering Greece’s staggering debt load are not helping Greece’s financial institutions like the National Bank of Greece.


Here is an unfortunate photo of German Chancellor Angela Merkel.



Bubble? New Home Sales Disappoint (555k vs 571k Expected) — Back To 1990 Levels

New home sales for January 2017 were released and they were not up to expectations. 571k was the expectation, but only 555k were delivered. But there was a 3.74% MoM gain since December 2016.


New home sales continue to disappoint after the massive mortgage credit bubble of the last decade and are only at 1990 levels.


But the median price for new home sales continues to escalate and is well above the peak of the housing bubble.


Are we in a house price bubble?


Let me answer that this way. “Does your dog bite?” I am sure that Fed Chair Janet Yellen would answer “That is not my dog.”















Landlords Are Taking Over the U.S. Housing Market (Remnant of Credit Bubble Persists)

Bloomberg — As rising home prices, slow new home construction, and demographic shifts push homeownership rates to 50-year lows, the U.S. is increasingly a country of renters—and landlords.

Last year, 37 percent of homes sold were acquired by buyers who didn’t live in them, according to tax-assessment data compiled in a new report published by Attom Data Solutions and Inc.

That number may include second homes, or properties acquired by investors who seek to fix up old homes and resell them at a profit. But it’s also a strong indication that landlords are playing a larger role in the U.S. housing market.

Actually, the US homeownership rate in Q4 2016 to Q4 1985 levels, making it the lowest in just over 30 years (although it was lower in Q2 2015 and Q2 2016). And as foreclosure inventory lessens, the homeownership rate will rise.


Aside from not being the lowest in 50 years, but the share of US home sales for which the owner doesn’t live in the home is growing quite rapidly.


But the homeownership rate is around the 1985-1995 STABLE rate before the Clinton Administration launch the National Homeownership Strategy: Partners in the American Scream.

Take the inland empire of California, Las Vegas and Phoenix. For the most part, investor-owned homes are in greater percentages in those post credit apocalyptic counties. The coast, for the most part, has a lower percentage.


Continued efforts to transform America into higher homeownership rates have ended in disaster.


Duty To Serve [Man] (It’s A Cookbook!): FHFA’s New Duty To Serve Manufactured Housing, Rural Housing and Affordable Housing “Preservation”

The regulator for Fannie Mae and Freddie Mac issued last year a cookbook for the always expanding role of Federal government support for housing. Here is FHFA’s site for Duty to Serve (Man).

Here is FHFA’s Jim Grays discussing the Duty to Serve which requires Fannie Mae and Freddie Mac to support 1) Manufactured housing, 2) Affordable housing preservation, and 3) Rural housing.

Bear in mind that FHFA is ordering Fannie Mae and Freddie Mac to subsidize (at taxpayer’s expense) and drive out competition from the non-taxpayer subsidized competition.

So yes, FHFA’s Duty to Serve is really a Duty to Serve Man. And it is a cookbook … for greater Federal government expansion into the housing finance.

More risk with no capital. Brilliant combination. Yes, a cookbook for financial distress.

Here is a photo of FHFA’s Jim Gray speaking to US Congress on the benefits driving out private market competition and expanding Federal government intervention.



Existing Home Sales Hot-Hot-Hot (Jump 3.3% MoM In January, While Median Price Rises 7.1% YoY)

Existing home sales for January remain hot-hot-hot.

According to the National Association of Realtors, total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, expanded 3.3 percent to a seasonally adjusted annual rate of 5.69 million in January from an upwardly revised 5.51 million in December 2016. January’s sales pace is 3.8 percent higher than a year ago (5.48 million) and surpasses November 2016 (5.60 million) as the strongest since February 2007 (5.79 million).

On a more negative note, existing home sales are finally back to 2001 levels near the beginning of the horid housing bubble of the 2000s.


Also back to 2001 levels is median price of exisiting homes sales at 7.1% YoY.


Mortgage purchases applications are only back to 1997 levels.


Let us hope we never repeat the house price and mortgage credit bubble that started in 1995.


Here is the original version of Hot-Hot-Hot by Buster Poindexter.