Morning Report: Existing Home Sales fall 9/21/15

Stocks are up this morning on no real news. Bonds and MBS are down small.

Existing Home Sales fell 4.8% month-over-month in August. On a year-over-year basis they were up about 4.7%. The median home price rose to $228,700, which puts the median house price to median income ratio over 4x, which is pretty high. The first time homebuyer accounted for 32% of sales, which is an uptick from 28% last month. Inventory continues to be a problem, although it did increase to 2.29 million homes, which represents a 5.2 month supply. A balanced market is about 6 – 6.5 months’ supply. Days on market increased to 47 days from 34 two months ago.

Homebuilder Lennar reported earnings that topped estimates this morning. Deliveries were up 16%, while orders were up 20%. Average selling prices were 350k, up 8.9%. Incentives were down to 5.6% from 5.8%. Stuart Miller, CEO characterized the market this way: “During the third quarter, the housing market continued to improve in its slow and steady manner, as demonstrated in the past few years. The new home and rental markets continued to have significant pent-up demand, which positions us well for years to come. This demand is driven primarily by a large production deficit built up over the last several years, an increasing millennial population, reasonable affordability levels and high-rental occupancy rates.”

A new Harvard study points out how the rent vs buy decision is becoming even more skewed towards buying as rental inflation continues to increase. The number of US households that spend at least half their income on rent could increase 25% to almost 15 million over the next decade. Note that the homebuilders are pretty much all venturing into multi-family housing as well as single family, which should alleviate this problem at least to some extent. We have had a production deficit for single and multi-fam construction for several years, prices keep rising, and yet housing starts remain at about 75% of normal levels (ignoring the boom and bust years).

At least one housing statistic is showing signs of returning to normalcy – mortgage debt outstanding is rising again. This was the first gain since 2008. Such an extended contraction in mortgage debt is pretty much unprecedented, at least as far back as the data goes (late 1940s). Of course anyone in the mortgage business could tell you it has been nuclear winter since the crisis began.

Various Fed-heads are still making the case for a December rate hike. Note that the Fed Funds futures contracts are pricing in something like a 50-50 chance for a hike in December. It is kind of hard to reconcile the Fed forecasting sub 5% unemployment and rates pegged to the zero bound.

22 Responses

  1. Jacobin accidentally gives away the game on the left’s obsession with inequality:

    “Chávez also made progress on the issue you care the most about: inequality. By 2012 Venezuela was the most equitable country in Latin America”


  2. equally shared misery > unequally shared prosperity…


  3. “Why Gender Equality is Good for Everybody”

    My experience is purely anecdotal, and I expect it’s generally true in the workplace (in my experience) but the stuff about gender equality in relationships seems just wrong to me, for a number of reasons (and I say this living in a gender-equal relationship, generally). For so many reasons I’m not going to detail them here, but I do know I’m not the only one. People in gender equal relationships have more sex? I call bullshit. Or they studies folks in the first year of their relationships exclusively . . .

    But this goes back, I think, to a recent link McWing posted (related to AGW) about how social experiments tend to lack reproducibility (i.e., they are not “hard” science and results are survey responses in which those wanting to find a certain result tend to, and those trying to reproduce them out of an interest in their accuracy cannot). Also, it touches on causation vs. correlation. Even if men in gender equal relationships are healthier and have more sex and better everything, would it not be just as likely that men who are more mentally balanced and have lots of awesome sex would be more likely to do housework and share child-rearing responsibilities? Why is the assumption that gender equality causes all these good things for men as opposed to men, awash in these good things, are also those more likely to pick up after themselves and cook dinner half-the-time and make sure the kids get to school?

    Starts off with the whole thing about how privilege is invisible to people who enjoy privilege (white privilege, gender privilege), which I think is true but should not be used to enhance one’s victim status. But that’s another topic.


    • I applaud your take on the ridiculous assumption of causality of good sex by gender equality. In fact, it would be as logical to say good sex leads to gender equality.

      Then again there is the definition of gender equality that can be bent to fit the narrative and the definition of more good sex that can be bent to fit the narrative.

      I would be willing to bet that healthy people who like sex and like each other have more sex than sick or demented people who hate sex and other people. Yes, it is better to be healthy and happy than sick and sad.

      And that is about it.


  4. we already have gender equality… next…


  5. Meh, women will find something else to bitch about, it’s what they do.


  6. @brentnyitray: “we already have gender equality… next…”

    You’re male privilege is showing!


  7. Let me know if you guys are feeling “enraged” by Fed (in)action:

    “The Rage of the Bankers
    SEPT. 21, 2015
    Paul Krugman

    Last week the Federal Reserve chose not to raise interest rates. It was the right decision. In fact, I’m among the economists wondering why we’re even thinking about raising rates right now.

    But the financial industry’s response may explain what’s going on. You see, the Fed talks a lot to bankers — and bankers reacted to its decision with sheer, unadulterated rage. For those trying to understand the political economy of monetary policy, it was an “Aha!” moment. Suddenly, a lot of what has been puzzling about the discussion makes sense: just follow the money.”


    • Krugman:

      But bankers are different from you and me: they have a lot more influence.

      Heh…”different from you and me”. Krugman gets invited to a personal dinner with the President at the White House in order to discuss economic policy and has a regular column on the most sought after op-ed real estate in the country. But he’s just like you!


    • Krugman is very weird.

      He has written some good economics texts and some utterly ridiculous columns.

      When I point out the column failures to liberals they often defend his motives.

      Now I have had some of that kind of response from conservatives, about missing logic in conservative comments, as well, to be fair, but Krugman seems to evoke a truly enraptured following.


      • Mark:

        When I point out the column failures to liberals they often defend his motives.

        I have found that as a general rule motives do in fact tend to be more valuable to liberals than reason (and often more important than actual results….see minimum wage law advocacy as but one example).


  8. Yes, Bankers hate borrowing money at 0% interest, that is a known known.


  9. Like

  10. My response (though I’m sure they won’t publish it)

    If the economy is as weak as you think it is, then people who argue for a rate hike would experience a bond market rally as the economy forecasts a slowdown. This would flatten (or even invert) the yield curve, which means net interest margins would fall. So that argument doesn’t hold water.

    Inflation over the past 30 years has been a case of “too much money chasing too few assets” not “too much money chasing too few goods.” And when you consider entities like Petrobras are able to issue 100 year bonds below 7%, you can make a strong case that you are in the midst of a credit bubble.

    But, no Paul. It isn’t a case of greedy nefarious bankers twirling their mustaches in a cigar smoke – filled room trying to make sure poor people can’t get a job. They do see people taking insane risks to get yield when interest rates are held down artificially. We already know how that movie ends.


  11. I find the arguments from Bill Gross and others that it’s a subsidy to the banks to be more convincing, but that doesn’t fit Krugman’s villain narrative.


  12. I don’t know that ZIRP is a subsidy to the banks as much as it is a prod to get them to lend more…


  13. That’s a good one Scott.


  14. Bill Maher on #IStandWithAhmed

    He makes many good points, and it’s important a guy like Maher tackles it because otherwise the only narrative the vast majority of people who watch a guy like Maher would ever hear is the mainstream narrative.

    He doesn’t really touch on the fact that the CAIR lawyer has been their since the day after, feeding him talking points. Or that his dad is very active in anti-Islamaphobia movements and has twice, unsuccessful, run for the presidency of the Sudan.

    Richard Dawkin’s initially questioned the whole thing, given Ahmed’s invention was a a consumer clock disassembled and put into a pencil box that, as Maher points out, kind of looked more bomb-y than clock-y. But when attacked for his “Islamaphobia” he walked it back.

    The cynical interpretation, which I now favor, is that the school was played. There was an expectation of a negative reaction to a boy bringing a digital clock in a small black case to the school, and when they didn’t get what they wanted he had an alarm set to go off in the middle of the class, then refused to explain the device to the teacher or administrators, or talk to them about it generally, which led to the subsequent arrest and assumption of “hoax bomb”.

    However, the teacher and the school system and the police were kind of idiots for falling for it. They got honeypotted. As Adam Curry recently stated on the excellent No Agenda podcast, let a goth kid in a trench coat bring his “digital clock he invented” in a small black case to school and show it off, and chances are he wouldn’t make it past first period. He also would not have been invited to the Whitehouse, most likely.

    Still. A predictable reaction by the school. Suckers.


  15. I think the VW is fascinating.


    • McWing:

      I think the VW is fascinating.

      I am rather impressed with VW. Especially if it turns out that they actually followed the letter (albeit not the spirit) of the regulations.


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