New Home Sales Dive As Prices Go Parabolic

New Home Sales Dive As Prices Go Parabolic

It finally happened. The US housing market finally cracked. New home sales plunged an astounding 16.6% in April, government data out Tuesday showed. There's no use calling it a "miss," The 591,000 annual rate (figure below) simply wasn't comparable to estimates. The lowest forecast from five-dozen economists was 700,000. The data included revisions back to 2017. Last month's pace was just barely higher than that witnessed in April of 2020, the pandemic nadir. With the revisions, it marked
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9 thoughts on “New Home Sales Dive As Prices Go Parabolic

  1. Yay! It’s about time.

    Doesn’t shine a very positive light on the value of economists. They really should stick to economic analysis rather than prediction.

  2. I’ve lived in my small subdivision for 13 years and the developer has finally started to build as many homes as he can this year. Right as new home sales begin to decline he will be trying to unload seven new half-million dollar medium quality houses twelve feet apart. I hope he has a patient lender.

  3. There are smiles all ’round at the Fed . . . demand is contracting, asset prices sinking . . . UST yields are going down, which might not be the plan but could ease worries about QT.

    Maybe not the time just yet, but I think investors should have contingency plans in case demand destruction and inflation easing comes sooner than consensus seems to expect. Right now consensus has a recession starting in 2023 and Fed starting to reverse its rate hikes rates sometime in 2023. I think that we need to be prepared for that timeline should be pulled in. I am not any kind of market prognosticator, but have circled (in pencil!) late summer/early fall on my calendar.

  4. Between the run up in prices over the last year and a half, and now the run up in rates in the last few months, there’s been a ton of would-be buyers who have simply been priced out of buying a home. You’d think that as prices come back down to earth, those would-be buyers would provide some kind of floor to the housing market, yes?

  5. H-Man, another manifestation of rising rates exposing the weak links in the chain of our economic pillar. No further solace in looking at your Zillow value on-line.

  6. Would-be home buyers, who now cannot afford to buy, must continue to rent. This keeps rental demand robust. Investors with a low cost of capital (there must be some) can continue to invest in real estate, continuing the conversion of former owner-occupied homes to rental units. This keeps the supply of homes available to purchase low, putting a floor on any price declines. With other assets subject to decreased real rates of return (due to inflation), or outright price declines (equities), real estate could continue to look attractive as an income stream and as an inflation hedge. No, I’m not a realtor.

    1. I don’t see a clear mechanism for Fed to suppress overall demand for housing, since it seems pretty inelastic. Seems like raising mortgage rates will shift demand from buying to renting. Institutional investors have lower cost of capital. QT of MBS may advantage institutional cost vs mortgage cost. I-buyers and build-to-rent streamline the acquisition of rental houses for the SFR investors. The SFR and multifamily REITs are reporting very good rent growth, occupancy, and NOI growth. Purchase cap rates are thin, but a couple years of +12% rent growth helps that.

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