US New Home Sales Stage Black Swan-Style Surge
Markets were treated to another black swan-type event Tuesday, courtesy of a wholly anomalous beat on US new home sales (of all things).
The 685,000 annual pace for August topped every estimate from six-dozen economists. Consensus was 500,000, making the actual print a seven standard deviation event.
The highest estimate was 620,000, which seemed laughably far-fetched. I suppose we can declare that forecaster vindicated. The jump from July's pace was an astounding 28.8% (figure below).
Sale
Baby boomer parents are making the down payments. The wealth transfer effect is supporting housing.
That’s an interesting thesis. It’d suggest a lot of lucky Millennials with parents willing to hand over $100k, though.
We’ve seen a lot of that in our customer base. It’s even led to some grumbling from our service team. But they are top 3% types, so it is a long reach to extrapolate that to the broader population.
It’s an interesting dynamic that frustrates me to no end. I would suggest there are a lot of lucky Gen X’ers out there as I know several 45-55 year old’s receiving property/houses. Conversely, this Gen X’er is supporting boomer parents. I feel like a unicorn in a veritable sea of flowing pots of gold only others have access to.
Perhaps they are doing the wealth transfer a bit early – boomers I think instead of passing all their wealth through probate and wills are probably doing smarter things like living trusts and possibly even maxing out the gifting to family for tax purposes on the boomer side, as well as helping buy a new home (which everyone “knows” is a “good” “investment”) for their kids while being able to see the happiness and enjoyment on the kid’s faces.
It does feel like the last gasp of the people getting to hold the bag though. I agree with you that housing is too overpriced for most Americans to afford – and renting is decidedly not going to be cheaper than buying, at least while the market rate for rents can get away with it. Everyone is tightening the screws on everyone down their pyramid, landlords to renters, employers to employees. Who wants to work for these wages when they rise less than inflation anyway, and the jobs aren’t getting any better, if anything I think they’re worse, which is why there’s so many job openings per unemployed person but the unemployed still don’t care?
It seems like every market is dislocated in a weird way, and starting to correct, but each shift makes everyone else move a bit.
I wonder what % new home sales are to cash buyers, private equity who see property as a better way to preserve wealth with a real asset and a rental income stream…. when inflation is rising and stocks and bonds are losing value.
I recall cash buyers have recently accounted for been between 15-18% of the total.
Perhaps that % is starting to trend up?
the new TINA?
So if these “Lucky Millennials” can’t make their payments, because the economy and home prices crash, their parents are potentially out six figures? Yikes!
How does one discern a true cash buyer from one who puts in a contract as a cash buyer to win the del but then takes out a mortgage? To me most cash buyers are boomers paying cash when downsizing because they have the nest egg to do so.
I don’t know how the new homebuilding market works, but is it at all possible that builders are taking excess inventory ‘off the books’ with some accounting shenanigans, so not really sold, just moved from one balance sheet to another? Or is this data solely from tax rolls or otherwise vetted as real sales?