Who cares about the data at a time like this?!
Nobody, is the answer. Nevertheless, I felt somehow compelled to mention that US new home sales missed the mark for January, data out Thursday showed.
The 4.5% decline was the first in three months (figure below) and the annual rate, at 801,000, was short of consensus.
That blip on the proverbial radar screen (in red) is notable. Mortgage rates are rising and prices are stratospheric. I keep waiting for demand destruction to set it, but headlines suggest that’s still a long way off.
Earlier this week, Bloomberg ran an amusing story which told of newly-rich couples seeking mini-mansions near Boston only to discover it’s too late. In Wellesley, which Bloomberg described as “a leafy Massachusetts town” with a population of just 30,000, two-income buyers “hungry for kids’ rooms and ‘his’ and ‘her’ home offices” were fresh out of luck earlier this month. “In the first week of February, there were just eight homes available for sale,” the linked article said. “The cheapest one: $1.1 million.”
According to Zillow data, the number of cities where million-dollar homes are the rule, not the exception, rose 43% last year (figure below).
“There are more new $1 million cities this year than there were in the past six years combined,” the site’s Jeff Tucker wrote, in an article dated February 16. “The number of cities that crossed the $1 million threshold in 2021 is almost triple that of cities reaching those heights in 2020.”
On Tuesday, Toll Brothers said the average price of homes in its backlog was $956,000 last quarter. Thursday’s new home sales data showed average prices rose to $496,900 last month (figure below).
As you can see, the red dot is pushing the limits of the y-axis. Median prices rose to $423,300.
The supply picture has improved on the most basic metrics, but frictions persist. More than a quarter of the new homes for sale as of end January hadn’t been started yet. Backlogs rose.
Who knows when it’ll be possible to get something like a “clean” read on the market. Mortgage rates are now the highest in nearly three years, and the Fed is keen to structure QT so as to gradually shift the composition of the balance sheet away from MBS. That effort may entail outright sales, at the possible risk of destabilizing markets.
But maybe a little instability is just what the doctor ordered. In a high-profile note out last week, Zoltan Pozsar suggested the Fed might consider deliberately stoking volatility in order to rein in inflation via a controlled demolition of the wealth effect, including housing prices.
Mortgage rates “need to get higher,” Pozsar said, adding that home prices need to be flat or “outright lower.”
Maybe Vlad is doing the Fed’s job by stoking vol. Just a thought.
Something has to give. Add in the in process clapse of Chinese real estate/construction, excessive commodity bubbles, slowing demand and declining real incomes… we’ll something has to give.
The everything bubble is bursting in slow motion in front of our eyes.
Doesn’t mean we don’t have 1 final crowded squeeze up aka delirium.
The “everything bubble” — has a nice ring to it. Only to pop it is if Fed is committed to ending its easy-money regime. But…tons and tons of leverage in the system. And Republicans and Dems both in for more than a dime. My guess is that Joe Sixpack gets screwed again, through tolerance of sustained higher inflation. Buckle your seatbelts.