Here's a bunch of new housing information for you today. First up, supply of new single-family homes is down but demand is up:
This should mean a bump in selling prices, but not really:
The mean (average) price of a new home is down -1.8% from last month while the median price ticked up 3.3%. Still, mean prices have been pulling away from median recently, which generally means there's more activity in the high-priced area, and sure enough that's the case:
Since the start of the pandemic, there's been strong growth in expensive houses while cheaper homes have cratered. In May, houses in the $300s, $400s, and $500s each accounted for about a quarter of all sales. Houses below $200,000 accounted for 1%.
You've used the incorrect chart for the second chart, or at least you're using incomplete information to form your argument that prices are "not really" up. You need to be using monthly payment - that is the second primary deciding factor for whether a home will be within a purchaser's budget or not. Mortgage rates are up slightly from January to April 2023, although not as high as October 2022. There is a lag time of at least a month or three in how these changes affect the market, which would explain why prices don't come down in the chart until after October.
https://fred.stlouisfed.org/series/MORTGAGE30US
Furthermore, you're incorrect/incomplete with what the third chart is saying as well:
"Still, mean prices have been pulling away from median recently, which generally means there's more activity in the high-priced area, and sure enough that's the case."
Yes, if there is "more activity" (I assume you meant on a relative basis) at the upper end, it skews the mean above and away from the median. However, what you also see in that chart is that homes have skyrocketed in price, with ZERO new homes being sold for $150,000 or less starting in Q2 2021, and essentially zero new homes being sold for $150,001-200,000 since Q2 2022.
This pokes a big hole in the argument that there hasn't been a bump in home prices. What you see there with the median bumping up in the latest bit of data is just the beginning. The data will be noisy, but given that new homes sold at affordable-ish price points are functionally extinct and have been for almost 2 years, in a few more years when those homes begin to be re-sold in any numbers you'll see mean and median prices continue to jump upwards.
The best time to address this with interventions that created below-market-rate housing (i.e., public funded housing construction that doesn't have a profit maximization motive) was decades ago. The second best time is now.
But I still think we're collectively fucked.
It is further the case that the presentation is mixing Real and Nominal level analysis as Drum does not understand the application of deflators, which of course over a restricted time period results in a view that if one is not differentiating Real Price from
It simply does not make sense analytically to deflate a short-time series as one would not expect Real Prices for something like housing stock to be changing.
And housing price over this period is really best understood with the nominal price movement.
Really Drum should stop doing naive, ad-hoc econometric analysis.
I've been commenting on so many of his housing posts that using real prices for housing prices over timeframes shorter than, at a minimum, a year or better yet 3 years, is not intelligent analysis. Wages are slow to catch up to inflation, if they even do. Somebody who made $50K last year probably still makes $50K this year, even if inflation was 6%. Housing price analysis must be done with nominal prices only over short time frames.
The third chart is a actually an unstated but good example of how that can be useful.
Exactly.
Unfortunately Drum has gotten stuck in a naïve over-reading of the import of using real numbers (which certainly for long time series are quite fundamentl) and willy-nilly over/mis-applying in a mono-obsessive fashion....
The very mono-obsessiveness that was useful to him for his quite interesting lead analysis is leading far far astray into crank territory on inflation.
I can make 2 hundred bucks an hour working on my home computer. I never thought it was possible, but my closest friend made 7teen thousand Bucks in just five weeks working on this historic project. convinced me to take part. For more information,
Click on the link below... https://GetDreamJobs1.blogspot.com
Looking at the first chart, how is it possible for the number of homes sold to exceed the number of homes for sale for 3 1/4 years running?
Old demented minds want to know.
Now I see I mis-read it. Geez, I am demented!
Air Quality Index presently at 211 for yours truly.
How about 300, who's with me? Come on, conservatives, we can do it!!
I was code maroon for 2 days back in early June 🙁 It's god awful. We might get the bad air tomorrow or Thursday. We're merely code orange tomorrow in the Mid-Atlantic.
Is it? If you’d put one of your (in)famous trend lines in the sold line, these Mk I eyeballs would show a decline over the last two years.
I'm pretty sure he was referring to the most recent movements.
The Fed must have caused a lot of the decline in lower-priced house sales - the rise in mortgage rates meant that lower-income people were priced out. However the decline started before the raise in rates, while people were allegedly fleeing out of cities. Maybe all the lower-priced houses were getting snapped up and/or their prices were rising fast. It might be hard to track the price of a given type of house through all the things that have been going on.
I do not think this is the case. Note that this is for new homes only - not existing housing stock that is being re-sold.
I think it's more likely the case that lower-priced houses don't exist anymore. They've been eliminated by severely constricted supply. Because demand is so far in excess of supply, the entities building new homes do not need to even bother building cheaper ones. They can build to their construction capacity with more expensive homes only.
Here is a somewhat different view, based on mortgage applications:
https://www.mortgagenewsdaily.com/data/mortgage-applications
Applications for purchase (at least the index) are down to half the rate at the peak at the start of 2021 with no real sign of rebound. Kevin's graph for houses sold is so squashed down vertically that it is essentially unreadable. Lower number of mortgage applications would seem to mean less price pressure, no? Although this is very complicated because of all the things going on.
What it means is that there is less velocity in the housing market - fewer transactions. But because demand has been so far in excess of supply, there are still plenty of buyers for the new construction coming onto the market.
Also, given that those new homes are at far higher price points, they are by default being sold to people with higher incomes already. The mortgage rate increases impact people looking to enter the housing market at lower price points more than at higher price points, and it shifts people who would have bought a $600K house down into only being able to buy a $500K house (for example). But there is still so much demand for the higher priced stuff that there is still no slack in the market - and there won't be. We're underbuilt compared to pre-Great Recession trend by millions of homes.
I can smell smoke in my living room. Am I having a stroke?
That's just air, it's supposed to smell like that. It's nature. What you love, remember? It's the stink of life! You don't like it, find another planet, pansy!
No one gave a fuck when it hit me a month ago. Suck it up buttercup.
I gave a fuck. I gave a fuck a lot!
I gave a fuck. Even commiserated on Elon Musk's awful platform. But I'm a Californian; what you're experiencing is what we call "summer." And what WE got was orange-skinned loudmouth talking about how we should be sweeping the forest floor. At least you're being spared that experience.