New Home Sales Drop With Prices Loitering Near Half A Million
The pace of new home sales in the US fell to a five-month low last month as financing costs rose, data released on Tuesday showed.
The 675,000 annual rate was the slowest since March, and nearly matched the lowest estimate from five-dozen economists. The range was 670,000 to 732,000.
The MoM decline, nearly 9%, was the largest since September of 2022, when the Fed was dialing up the third of what would ultimately be four consecutive 75bps rate hikes.
Mortgage rates rose 35bps in August, lik
I prefer a delivered single origin bean, through a burr grinder, and into the $700 mechanical pour over brew myself
I have yet to be able to afford my own breakfast nook, but that’s probably a function of my choice to live in one of the highest cost of living areas in the country.
I’d be curious to the geographic concentration of new housing and how it will influence regional home prices going forward. Admittedly, when the Fed started raising rates, I thought it would wreck much needed new construction and cause further imbalances in the housing market and lead to higher prices.
I still think we’ll see further distortions in places where new housing construction is severely limited. We saw a mild correction out here in the Bay Area suburbs, but that correction has reversed itself and then some if the price estimates on real estate websites are accurate. I wouldn’t be surprised if some of the regional trends where purple areas were still gaining now flip and it’s the blue areas that tend to limit construction that see greater gains. NIMBYism is one of the great blind spots for liberals who have pulled the ladder up behind them when it comes to real estate and housing.
While the big noise in housing is rising prices and rates, the nasty side effect is that rising prices are causing strong property tax increases which are putting heavy stress on the lower half of household income earners. These folks aren’t buying or selling but they’re getting dog bit anyway.
Can you please explain that for an uninformed Canadian? Simplistically, in Canada, the municipality divides is cash needs for the year by the aggregate assessment to obtain the mill rate that property taxes are levied. For example, if the municipality’s cash needs increase by 3%, the assessed value of my house increases by 20%, but but the average increase for all properties increases by that same 20%, then my taxes will only increase by 3%, the extra amount the municipality needs. If my property has increased in value more than average then I will see an additional increase, conversely, if my property value has increased less than average my tax increase will be less than 3%, or maybe even decrease.
The issue you identify would only occur if lower priced houses are increasing more than average.
When my kids all left home after high school, the “family home” got sold and 3 small condos got purchased. All under 1200 sf and all in excellent rental locations with great views.
All 3 condos are rented when I am not occupying them, and all provide enough rental income to cover all costs of ownership. Even with personal use, based on when they were purchased- they generate a 3+% cash on cash return (after paying all costs of ownership)- so they contribute to daily living expenses. Plus, there is the tax advantage of depreciation. Real estate taxes are going up a lot, but so are rental rates and based on rental activity- I think the “K shaped economy” is still in play. Unconventional, but it works for me.
In order to live this way, I had to go extremely minimalist, but it turned out that I am happier not owning anything I don’t use. I was quite embarrassed when I realized how much I owned that I didn’t use (I kept valued possessions such as my Frieling, double-walled, stainless steel French press). I highly recommend this short read- “Goodbye, Things”- by Fumio Sasaki. It is a practical guide for anyone interested in implementing “degrowth” at a personal level and it is really just another flavor of the concept of “Swedish death cleaning”.
For anyone so inclined, these are great opportunities to assist the less fortunate, on a personal level, as well. When I cleaned out my parents’ house, I gave everything to the two end of life care takers for my mom- who expressed an unbelievable amount of gratitude. My mom would have been so happy.
+1 for the Frieling, double-walled, stainless steel French press. I’ve had one for ten years and expect it to outlast me.