Morning Report: Home prices continue to rise

Posted on November 28, 2023 by Brent Nyitray

Vital Statistics:

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

House prices rose 0.6% in September, according to the FHFA House Price Index. On an annualized basis, they grew 5.5%. “U.S. house price growth continued to accelerate in the third quarter, appreciating more than in each of the previous four quarters,” said Dr. Anju Vajja, Principal Associate Director in FHFA’s Division of Research and Statistics. “House prices rose in the third quarter in all census divisions and are higher than one year ago, driven primarily by a low supply of homes for sale.”

Applying the 5.5% (actually 5.45%) increase gives us an expected conforming loan limit for 2024 of $765,800. FHFA should make the official announcement in the next week or so.

Home prices rose 2.5 MOM, according to the Case-Shiller Home Price Index, setting a new record. “On a year-to-date basis, the National Composite has risen 6.1%, which is well above the median full calendar year increase in more than 35 years of data. Although this year’s increase in mortgage rates has surely suppressed the quantity of homes sold, the relative shortage of inventory for sale has been a solid support for prices. Unless higher rates or exogenous events lead to general economic weakness, the breadth and strength of this month’s report are consistent with an optimistic view of future results.”

The rally in the bond market has caused the yield curve to steepen its inversion. The 10 year minus the 3 month is -110 basis points, which is less inverted than last spring, but it is a signal that the soft landing / no landing narrative of early fall is fading.

We are starting to see some more casualties in the real estate space. Unicorn real estate company Veev, a maker of modular homes, is reportedly closing up shop. The company had raised $600 million in total, but was unable to raise any more and cannot service the current debt nor can it move the merchandise.

Consumer confidence improved in November, according to the Conference Board. “Assessments of the present situation ticked down in November, driven by less optimistic views on current job availability, which outweighed slightly improved views on the state of business conditions. More consumers said that business conditions were ‘good’ compared to last month, but more also said they were ‘bad.’ Regarding the employment situation, more consumers said that jobs were ‘plentiful’ compared to October, but the number saying jobs were ‘hard to get’ also increased. By contrast, when asked to assess their current family financial conditions (a measure not included in calculating the Present Situation Index), the share reporting ‘good’ rose, and those citing ‘bad’ fell, suggesting consumer finances remain healthy heading into the holiday season.”

Inflationary expectations ticked down from 5.9% to 5.7%, which is a lot higher than U-Mich and breakeven inflation rates in the TIPS market.

There has been a lot of chatter about what to make of the big decline in median new home prices. The median new home price fell 18% compared to a year ago. Does this mean that homebuilders are cutting prices to move the merchandise? And if so, does this portend a big decline in home prices overall?

First of all, median home prices are not necessarily comparable on a year-over-year basis. If a builder sells a bunch of McMansions in one year, and then sells a bunch of starter homes in the next year, the median price is going to fall, but that is due to a change in the product mix, not necessarily market weakness.

There were 439,000 new homes for sale at the end of October, which represents 7.8 months worth of inventory. Historically, 7.8 months represents an oversupplied market, but the overall supply / demand balance in the US is skewed towards undersupply, not oversupply.

The wild card is prices are falling in the previously hot West Coast and Sun Belt markets, and there probably is some localized price cutting happening. Think places like Phoenix, Las Vegas, Austin. That said, if builders were aggressively cutting prices, it would show up in lower gross margins, and that isn’t happening.

So do I think the decline in median new home prices signals overall home price weakness going forward? No.

Filed under: Economy |

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39 Responses

  2. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on November 28, 2023 at 8:02 pm said:

    Feels like the site commenting system has returned to normal.

    Like

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    • ScottC's avatar
      ScottC, on November 29, 2023 at 1:20 pm said:

      Just got this from WordPress:

      Hey there,
      Thank you for sharing this specific example. After receiving lots of feedback regarding this change, our developer team has reverted the change. They will be addressing some of the feedback received and improving the experience.
      Thank you for providing this helpful feedback regarding the new comments.

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  4. ScottC's avatar
    ScottC, on November 28, 2023 at 9:54 pm said:

    A perfect symbol of this clusterfuck of a presidency that has been imposed on us.

    https://www.dailywire.com/news/bidens-america-social-media-lights-up-when-national-christmas-tree-falls

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  5. jnc4p's avatar
    jnc4p, on November 29, 2023 at 3:17 pm said:

    Everyone’s name is on a list:

    “Special Counsel Jack Smith Demanded Info On Americans Who “Favorited Or Retweeted” Trump Tweets; Newly Released Docs Show”

    https://www.zerohedge.com/political/special-counsel-jack-smith-demanded-info-americans-who-favorited-or-retweeted-trump

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  9. Brent Nyitray's avatar
    Brent Nyitray, on November 30, 2023 at 12:05 pm said:

    Guy doesn’t even know what inflation is.

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  10. jnc4p's avatar
    jnc4p, on November 30, 2023 at 12:06 pm said:

    State of affairs as seen from the other side:

    “The Democratic Position on Crime Is a (Political) Crime
    There is a better way.
    Ruy Teixeira
    Nov 30, 2023”

    https://www.liberalpatriot.com/p/the-democratic-position-on-crime

    &

    “A report on a new baseline battleground web-survey.

    President Biden trails Donald Trump by 5 points in the battleground states and loses at least another point when we include the independent candidates who get 17 percent of the vote. Biden is trying to win these states where three quarters believe country is on the wrong track and 48 percent say, “I will never vote for Biden.”

    Can the President get back to win these voters and states? I believe the answer is yes, though not if you think next year’s partisan polarization, the abortion issue and the risk of a Trump presidency will bring them home. That is a dangerous strategy when the base of Blacks, Hispanics, Asians, LGBTQ+ community, Gen Z, millennials, unmarried and college women give Trump higher approval ratings than Biden.”

    https://democracycorps.com/national-surveys/the-change-campaign-that-can-contest-america/

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  12. jnc4p's avatar
    jnc4p, on November 30, 2023 at 1:43 pm said:

    You have to love the Post’s framing here:

    “U.S. stops helping Big Tech spot foreign meddling amid GOP legal threats

    The federal government is no longer warning Meta about foreign influence campaigns, a shift that comes amid a legal campaign against the Biden administration’s communication with tech platforms

    By Naomi Nix and Cat Zakrzewski
    Updated November 30, 2023 at 12:05 p.m. EST|
    Published November 30, 2023 at 8:00 a.m. EST”

    https://www.washingtonpost.com/technology/2023/11/30/biden-foreign-disinformation-social-media-election-interference/

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  13. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on November 30, 2023 at 4:22 pm said:

    This will show those ruby red New Yorkers! Everyone knows, NYC is MAGA country!

    https://x.com/rawsalerts/status/1730049602068381982?s=46&t=vSGsUlnc4rLxcUf7zfUiHg

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  14. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on November 30, 2023 at 6:58 pm said:

    Holy shit!!! If this is half as good as Mad Max: Fury Road it will be the third best Mad Max!!

    https://x.com/thr/status/1730370138627842165?s=46&t=vSGsUlnc4rLxcUf7zfUiHg

    Will it supplant Mad Max: Thunder-dome as the third best?

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    • jnc4p's avatar
      jnc4p, on December 1, 2023 at 7:16 pm said:

      So what’s your rankings?

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      • Let the mutherfuker burn!'s avatar
        Let the mutherfuker burn!, on December 1, 2023 at 7:53 pm said:

        Ok, my rankings are:

        The Road Warrior
        Mad Max: Fury Road
        Star Trek (reboot)
        Mad Max Beyond Thunderdome
        Star Trek II: The Wrath of Khan
        Mad Max

        The problem with Mad Max is that it has an interminable middle where Max and the family take a road trip. I know you need a pretense for Max to become Mad Max but it did not need to last a fucking hour! Also, my fan fiction theory is that FiFi from Mad Max is Lord Humongous from The Road Warrior.

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  15. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on November 30, 2023 at 9:13 pm said:

    Is DeSantis sick or something? What an abysmal performance from him. Newsom is continually lying, but sounds convincing and sincere, DeSantis looks like a deer in headlights.

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