patrick.net

smaulgld says

Call it Crazy says

Absolutely true.... The inventory is there, but the buyers aren't buying at the current prices...

and there it is just like in the original post. Really there is no need for commentary as the above graphs speak for themselves.

But for the real estate bulls some times explanation is required.

Somehow, I don't see much of the YoY data in the media (or the bulls' posts). I think it's also instructive to see longer historical trend. That site goes to 1999. The spike in home sales in 2010 and 2013 is still only a reversion to the pre-boom (early 2000s numbers)...which is hardly a recovery or a boom.

Are screen shots (or save as) the only way to post those stlfed graphs? I don't know how to post anything other than a website pic into patnet posts.

JH says

Are screen shots (or save as) the only way to post those stlfed graphs?

you can adjust the dates on the st Louis fed charts

smaulgld says

you can adjust the dates on the st Louis fed charts

Ya I did that, but I don't know how to post them.

JH says

Ya I did that, but I don't know how to post them.

you have to take a screen shot of the chart you create and save it to your hard drive, then upload it here using the "include image" feature

Ah, ok...I see the boxes above the textbox now...thanks!

Call it Crazy says

then factor in the growth in the population over those years, the data looks even worse...

Yeah, great point re: both of the graphs. The bulls use population growth to justify higher prices yet neglect these 'minor' details.

JH says

Ah, ok...I see the boxes above the textbox now...thanks!

this chart show that home sales are really low when you compare them to historical numbers

I call it the law of small numbers http://smaulgld.com/housing-recovery-law-small-numbers/

But check out how low new home sales are over time

Call it Crazy says

So, we have an population increase of 36 million in that time frame but existing home sales are down in that same time period....

What's that say for historical trends???

it clearly means that we don't have a housing shortage!
If we did home builders would be building like mad-they are not

smaulgld says

this chart show that home sales are really low when you compare them to historical numbers

But, but...

1. interest rates are so low compared to the 80s!
2. we are running out of usable land for building!

Call it Crazy says

So, we have an population increase of 36 million in that time frame but existing home sales are down in that same time period....

Population +10%
Sales -10%
There is 20% off historical trends...

Thank god the fed came in a saved us all. That's another 20% easily.

The low new SFH sales simply means that builders aren't making a profit at today's prices. Is part of that a shift toward building more rental units? If so, that could lead to lower rental prices, or less rent increases. More people are renting rather than buying these days, so that might be what is going on.

If builders have just not been building at all, that is bad news for renters. It means that people are going to have to continue doubling up or eventually pay more for rent as well as purchase. A drop in new house sales seems par for the course in a recession. Also, it may compensate for the overbuilding from 2000-2006 but in general, low building activity is bad for housing bears and renters.

Finally, new house sales are not proportional to population. There is some amount of new house sales to replace old housing, but a lot of it is simply to provide new housing for an expanding population. As such, new housing should be proportional to the population growth rate, which is the first derivative of population. It should not be proportional to population itself.

Call it Crazy says

Go do some research... NEW house sales make up like 10% of total sales, so they don't factor in much. The charts above were EXISTING house sales, the other 90%...

I think the reference was to smaulgld's chart, which did say new. YesYNot says

builders aren't making a profit at today's prices

Well, today's prices are the same (or higher) than the last build up to a maximum, so builders could make a profit. But, I see 2 key differences between today and 2004/5, however. First, banks are no longer giving out loans like lollipops. Second, (related?) there is not enough demand for new homes. Restricted supply could easily be loosened by building. However, builders know that banks will not lend easily, and bankers know that builders will not build if nobody can borrow. Who wins? Banks. They have gotten their way for 5 years, 5 months, and counting.

Call it Crazy says

JH says

I think the reference was to smaulgld's chart, which did say new.

Oh yeah... What's Smaulgld doing screwing up our charts of EXISTING home sales with a NEW home sales?? That Doofus!!

We'll have to spank him.... Oh wait... It's his thread...

Nevermind....

Was made clear that new home sales were the ones that were really down. Existing home sale are not that robust but new home sales are in the gutter.

We got more inventory and fewer sales.

We also have lower interest rates, yet home sales are down double digits year over year.

I've always wondered about the issue with inventory and why it is so 'tight'.

Considering we are on the heels of a housing bubble, where properties were being built left, right and center, one would assume that we would be dealing with surplus inventories for years. But yet, we somehow have a situation where not only do we have low inventories for homes for sale, we also seem to simultaneously have a shortage of rentals. That disconnect should not exist.

My suspicion is that the inventory 'shortage' is basically artificial. A combination of institutional investor buying, the shadow inventory and individuals with underwater homes who are not listing so as not to incur a loss. We also have a potential wave of retiring baby boomers in the pipeline who will begin to offload properties as they retire. Some of that may be a wash (downsizing). But in other cases, some boomers choose to rent in retirement or buy small condos as opposed to large homes.

Call it Crazy says

smaulgld says

We got more inventory and fewer sales.

We also have lower interest rates, yet home sales are down double digits year over year.

It's tough to buy/sell a house when these are trends that are going on in the real world:

*

the argument will come back that cash buyers and foreigners will keep the market propped up!

Diomedes777 says

My suspicion is that the inventory 'shortage' is basically artificial. A combination of institutional investor buying, the shadow inventory and individuals with underwater homes who are not listing so as not to incur a loss.

It is, just like the stock market. There is no great demand for stocks either.

S &P Companies are the Largest Purchasers of S&P Shares

Artificially low interest rates encourage companies to use their cash to buy back their own shares to drive up their share prices, rather than to invest in their businesses.

This explains why the economy is showing limited growth but the stock market is hitting record highs.

According to CapitalIQ data, the single biggest buyer of stocks in the first quarter was not a mammoth hedge or pension fund, but the companies of the S&P 500 itself, which cumulatively repurchased a $160 billion of their own stock.

https://smaulgld.com/qe-encourages-stock-buy-backs-discourages-hiring/

Call it Crazy says

Diomedes777 says

I've always wondered about the issue with inventory and why it is so 'tight'.

It's not tight... It's up around the 6 month point... Plenty of houses..

The low inventory is in Affordable houses... People can't afford housing at current prices, so they're searching for what fits their budget, and not being very successful.

I guess that also depends on region. The SF Bay Area inventory is still pretty tight. At least, I thought it was. Don't live there anymore so perhaps my info is inaccurate.
Plenty of inventory in my area. But as you stated, I am not seeing houses move. Most are having to continuously lower prices and are still getting no bites. Some of this is people 'high balling' prices to try and recoup their losses from the crash. But no takers. Most insane example I saw was someone who listed their home for what they paid for it in 2005, at the peak. It has been on the market for 6 months and has gone through about ten price changes. Now about 25% the original ask. And STILL no bites.

Call it Crazy says

Diomedes777 says

I've always wondered about the issue with inventory and why it is so 'tight'.

It's not tight... It's up around the 6 month point... Plenty of houses..

The low inventory is in Affordable houses... People can't afford housing at current prices, so they're searching for what fits their budget, and not being very successful.

That is exactly what I am experiencing

In the market my family and I are looking at, EVERY home that has sold in the last few months has sold for 15-25K below list. Most with prior price reductions.

This seller was priced way to high (45 days no offers) we inquired to seller agent about offer 50k below list, cash. She said go. They countered with 20K off list, we came back firm. (have limited amount $ to work with). 80 days later with no other offers other than ours, seller has dropped priced 25K. We came back with an offer with 10k less the original offer, seller insulted, no counter offer. lol, ok

It drives me absolutely batshit crazy that the are two people between myself and the seller. I really just want to talk to the guy, lets sit down and have a beer and talk. Regardless, I apologised.

My agent says prices are going up yet everything is selling 3-4% below list.
I am the only person in the party of four interested in getting a fair price.

Buy now or be priced out forever i guess... sigh

siklidkid says

In the market my family and I are looking at, EVERY home that has sold in the last few months has sold for 15-25K below list. Most with prior price reductions.

and more inventory would drop those prices lower!

Call it Crazy says

It's not tight... It's up around the 6 month point... Plenty of houses..

The low inventory is in Affordable houses... People can't afford housing at current prices, so they're searching for what fits their budget, and not being very successful.

This is EXACTLY the problem and has been since investors started spiking prices last year. I don't know why people don't get this.

Call it Crazy says

If they owe a lot, they might just sit and wait.

Which keeps inventory off the market as they sit and hope for higher prices

https://smaulgld.com/real-estates-underwaterdown-side-sticky-catch-22/

Call it Crazy says

Have you found out what the sellers owe on their mortgage? Many sellers hold tight to their prices because they need a certain price so they can pay off the loan and cover closing costs. If they owe a lot, they might just sit and wait.

They own it, free and clear. They built it in '97.

smaulgld says

We got more inventory and fewer sales.

We also have lower interest rates, yet home sales are down double digits year over year.

Real estate is such a local phenomenon. Here in Silicon Valley, inventory is basically nil and buyers line up on the streets to get into open houses. It's rare that a house doesn't go from active to pending within two weeks.

myob says

Real estate is such a local phenomenon. Here in Silicon Valley, inventory is basically nil and buyers line up on the streets to get into open houses. It's rare that a house doesn't go from active to pending within two weeks.

Agree, but SF, NYC LA and a few other metros are the exceptions. The media talks about a broad based nation wide recovery in housing.
SF Bay area HAS recovered in price and volume, few markets, however have been so fortunate

I completely agree. Real Estate is slow in most of the country. I personally track a couple of areas in the north east and Texas, near my family, and I've seen stagnant prices, and increasing inventory. Sellers aren't willing to cut prices yet, but that'll come.

Here in the SF bay area, my small starter home has appreciated by 20% in the one year since I bought it. I get unsolicited cash offers for it in my mail box, that's how crazy it is.

myob says

Sellers aren't willing to cut prices yet, but that'll come.

IF the current sellers don't cut prices, new inventory will come on the market at lower prices

smaulgld says

myob says

Sellers aren't willing to cut prices yet, but that'll come.

IF the current sellers don't cut prices, new inventory will come on the market at lower prices

Many sellers didn't get the memo yet. The only place that I think might withstand any downturn is SFBA. All other places, sellers would soon be forced to sell at much lower price than they are willing, if they don't sell now.

myob says

Real estate is such a local phenomenon. Here in Silicon Valley, inventory is basically nil and buyers line up on the streets to get into open houses. It's rare that a house doesn't go from active to pending within two weeks.

Sale of apartments/condos and less desirable neighborhoods (no excellent public schools) are stalling.

hanera says

Sale of apartments/condos and less desirable neighborhoods (no excellent public schools) are stalling.

I find the same. That highlights its really only a seller's market for select properties.

Yup, I had that thought as well when I bought, so I bought the worst house I could afford in the best neighborhood :) I'm surrounded by Googlers, Facebookers, and WhatsAppers

Inventory for San Jose:
http://www.deptofnumbers.com/asking-prices/california/san-jose/

According to Smaulgld, how is it supposed to be, and why? You look like a "rent is too damn high" whiner to me.

"A seller's market for select properties" : isn't that true for anything? People don't generally want to buy things they aren't interested in. If you have a SFH, in a good school zone ... chu-ching $$$. That's been the story for two years!

The point of the blog post was to debunk the concept that more inventory would lead to higher prices and more sales
Nationally that hasn't happened
The SF bay area is an anomaly
Has nothing to do with whining about high rents

Well, I think it failed then ...
http://www.deptofnumbers.com/asking-prices/us/

Rew says

Well, I think it failed then ...

http://www.deptofnumbers.com/asking-prices/us/

That shows the median ASKING price not sales price

As prices rise more homes will come on the market at higher prices but they wont sell at the higher prices
http://smaulgld.com/real-estates-underwaterdown-side-sticky-catch-22/