Existing-Home Sales Drop 2.3 Percent in April As Inventory For Sale Remain Missing

Yet another month of missing for-sale existing home inventory and rising median prices for existing home sales.

WASHINGTON (May 24, 2017) — Stubbornly low supply levels held down existing-home sales in April and also pushed the median number of days a home was on the market to a new low of 29 days, 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, dipped 2.3 percent to a seasonally adjusted annual rate of 5.57 million in April from a downwardly revised 5.70 million in March. Despite last month’s decline, sales are still 1.6 percent above a year ago and at the fourth highest pace over the past year.

For-sale inventory of existing homes remains in the doldrums as the median price of existing homes continues to rise rapidly.

We see the same limited inventory effect in existing home sales MONTHS SUPPLY.  As the months supply collapses, median prices for existing home sales increases rapidly.

I wonder if The Fed was wise to keep The Fed Funds Target Rate at near zero and engage in a third round of quantitative easing (QE3)? Particularly when housing inventory was declining (meaning that low-rate funding was chasing scarce housing)?

As Verbal Kint said in The Usual Suspects, “And like that, (the for-sale inventory) was gone.”

New Home Sales In April Tank -11.4% MoM As Median Price Declines -3% (The West Coast Suffers -26.32% Decline)

Another disappointing new home sales report.

New home sales tanked -11.4% MoM in April.

New home sales remain considerably below any level around the housing bubble. Despite the YUGE intervention by The Federal Reserve.

But while the level of new home sales is considerably below pre-2008 levels, the MEDIAN PRICE of hew home sales is considerably higher than at the peak of the housing bubble.

New home sales fell the most in The West (-26%) and The Midwest (aka, Kasich Kountry) at -13%. Bear in mind that new home sales in California are mega expensive and unless they start buildig more in Riverside and the Inland Empire, new home sales are likely to be weak.

Is this a bubble?

 

5.5 Million Homes Still in Negative Equity Territory (But 13.7 Million Homes are “Equity Rich” (Limited For-sale Inventory And Fed Policy Error)

According to data vendor Attom, there remains 5.5 million homes that are seriously underwater (slightly less than 10%). On the other hand, there 13.7 million homes that are “equity rich” (around 24% of homes).

Equity rich is defined as the combined loan amount secured by the property is 50 percent or less than the estimated market value of the property. Seriously underwater is defined as the combined loan amount secured by the property was at least 25 percent higher than the property’s estimated market value.

One culprit is limited for-sale inventory. This chart is from Zillow:

The other culprit is The Federal Reserve, who have kept rate depressed for around 10 years.

Yes, limited for-sale housing inventory and Fed-depresssed interest rates for 10 years is helping some but not others.

Now, take a wild quess which states are “equity rich?” If you guessed California and New York, you were correct!!

 

Yes, housing is getting progressively more unaffordable to many households as limited for-sale inventory and insanely low monetary policy have effectively jailed (locked-out) many households from owning a home in California and New York.

“Please Chairman Yellen! Stop driving up home prices with your super-low interest rates when for-sale inventory is so low.”

Have Mortgage Applications Peaked For 2017? Purchase Applications Fall 2.75% WoW (Up 9% YoY), Refi Apps Fall 5.7%

 

Mortgage applications decreased 4.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 12, 2017.

The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 9 percent higher than the same week one year ago.

Typically, applications for a purchase mortgage peak in May (sometimes in April, sometimes in June). So, last week’s mortgage purchase applications print may have been the high water mark for 2017.

The Refinance Index decreased 6 percent from the previous week.  But notice that while mortgage refinancing applications plummeted aroud MayJune rapid the rise in the Freddie Mac 30 year mortgage survey rate (thanks to Fed Chair Bernanke saying that The Fed might end their asset purchase programs), the recent rise in the 30 year mortgage rate has produced decline in refi application.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.23 percent, with points increasing to 0.37 from 0.31 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Mortgage originations have not recovered to previous levels due to the amazing disappearance of subprime (sub 620 credit score) lending,

So, we at (or near) the peak for 2017 in terms of mortgage purchase applications. Historically, it will be all down hill until January 2018. But a 9% increase in mortgage purchases applications YoY is pretty impressive!

 

Q1 2017 US Homeownership Rate Declines To 63.6% (Back To Clinton, Pre-bubble Levels)

According to the US Census Bureau, the US homeownership rate is back to pre-bubble levels.

“The Great Leap Forward (in homeownership)” from various Presidential administrations (most notably Clinton’s with HUD’s “National Homeownership Strategy: Partners in the American Dream”) nhsdream2 helped increased homeownership to unsustainable levels following 1995). Homeownership rates ALMOST reached 70% but then the wheels came off home prices, foreclosures surged and homeownership fell back to pre-NHS levels.

Despite all the monetary stimulus thrown to the banks, homeownership rates continued to fall.

Of course, the amazing disappearance of low credit score mortgage borrowers didn’t help. But there has been a recent uptick in low credit score originations.

Now that mortgage foreclosures are down near pre-bubble lows, we are at stable homeownership levels. That “Great Leap Forward” towards 70% homeownership rates resulted in “The Great Fall Backwards.”

The Taylor Rule (according the the SF Fed’s Rudebusch specification) should be 5.83%. It is currently 1.00%.

Yellen must think that the Taylor Rule is a ham product rather than a guide to monetary policy.

“I could have sworn that incredibly low interest rates would work.”

 

 

Simply Unaffordable! Case-Shiller Home Price Index Grows At 5.8% YoY In February (>2x Earnings Growth)

It is April 25, 2017 and S&P/CoreLogic just released the home price indices for February.

The good news (for homeowners)? Home price growth keeps on rising, now at 5.8% YoY.

The bad news (for renters)? Earnings growth YoY for Production and Non-supervisory workers is growing at 2.34% YoY. That is less than half of home price growth.

Yes, there is a lack of available inventory and median sales price for existing homes is growing at a steady rate around 6.8% YoY.

And home listinga hit a new record low.

But WHERE at home prices growig the fastest? Seattle at 12.2% YoY followed by Portland at 9.7% YoY. The slowest? New York City and Washington DC at 3.2% and 4.1%, respectively. Followed by Cleveland at 4.5% YoY.

With home prices rising at over 2x earnings, housing in the US is becoming simply unaffordable.