Housing: One Chart Says it All by Mike Whitney

[Crewleader]

Weekend Edition March 21-23, 2014

Unbelievable

Housing: One Chart Says it All
by MIKE WHITNEY

Get a load of this chart from DataQuick’s National Home Sales Snapshot. It’ll tell you everything need to know about housing.



(Note: MSA=metropolitan statistical area)

As you can see, prices are flatlining or drifting lower while sales are sinking like a stone. That’s the whole ball of wax, isn’t it?

Sure, sales will increase in the spring (as they always do), but judging by the sharp dropoff in last year’s hottest markets, this could be the crappiest spring selling season since the crash.

Why?

Because prices are too high, rates are too high, “organic” demand is too weak, credit is too tight, and the pool of potential buyers has shrunk to the size of a walnut, that’s why.

The banks have reduced the percentage of distressed homes (foreclosures and short sales) on the market to roughly 11 percent from 59 percent in 2009. Fewer distressed homes mean higher prices, but higher prices mean fewer sales. It’s a trade-off. The banks get their money, but the market goes to hell. That’s how it works. According to most estimates, there are roughly 4.5 million homes in some stage of foreclosure. That means that –at the present pace–we should get through this Housing Depression a few weeks before Judgment Day. But don’t hold me to that.

Did you catch this gem on Bloomberg last week? It’s about the big private equity guys exiting the market. Take a look:

http://www.counterpunch.org/2014/03/21/housing-one-chart-says-it-all/

[BlueStreak]

1. I don't see that conclusion at all

#1, it is not necessarily a virtue for prices to go up and form another bubble. Many people have been concerned about exactly that outcome (a second bubble.) It is good to see the prices stabilizing. Also, there has been upward pressure on prices as the banks work their way out of all the defaulted inventory. While banks are trying to unload foreclosures, that holds prices down. We are nearing the end of that cycle and prices are stabilizing. That's the perfect situation.

#2, As far as sales, they aren't "dropping like a rock" They are following the normal seasonal cycle, and that is only exaggerated a little this year. Big parts of the country have had really crappy weather the past 16 weeks, and that has a big impact on things. You will see the sales resume their normal spring up-trend shortly. Spring just started 2 days ago, after all.

[Warpy]

2. Mostly it's because WAGES are too low

Nothing kills demand for everything like wages that are stagnant or continuing to fall in a time of high unemployment.

[Sherman A1]

3. Agreed

It's hard for many to buy a house if you are trying to make it on two minimum wage jobs. Just holding on is about the best you can hope for at this time.