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Wed Dec 23, 2015, 12:32 PM

“Sudden Withering Demand” & End of Housing Bubble 2, or just an “Anomaly?”

“Sudden Withering Demand” & End of Housing Bubble 2, or just an “Anomaly?”
by Wolf Richter • December 22, 2015

[font color="blue"]NAR blames ‘anomaly’ for plunging sales then destroys the theory[/font]

We’re always leery when something expected happens prematurely. We’ve seen home prices soar for years while real incomes for the lower 80% of households have declined. That math cannot work forever. We’ve seen sales hitting a wall here and there. And we expected that this would eventually percolate up in nationwide figures. But we didn’t expect this to happen so soon.

And in November it suddenly happened. We’re scratching our head. Could this already be the end of Housing Bubble 2?

November existing home sales – completed transactions of single-family homes, townhomes, condominiums, and co-ops – plunged 10.5% from October to a seasonally adjusted annual rate of 4.76 million units, according to the National Association of Realtors, the lowest sales rate since April 2014, and the worst plunge since July 2010 (-22.5%). And sales were down 3.8% from November last year.

It shocked and appalled forecasters. The Investing.com consensus was 5.35 million units, just above the prior reading, as consensus forecasts usually are.


Suddenly the “anomaly” theory falls flat on its face. We don’t know why existing homes sales plunged in November. We’re still scratching our head. But blaming the rule changes, when only single-family home sales plunged and nothing else, makes zero sense. So we might try one of the other reasons and perhaps even dabble with that “sudden withering demand.” ..........(more)


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Reply “Sudden Withering Demand” & End of Housing Bubble 2, or just an “Anomaly?” (Original post)
marmar Dec 2015 OP
PatrickforO Dec 2015 #1
PatrickforO Dec 2015 #2
jtuck004 Dec 2015 #3
pscot Dec 2015 #4

Response to marmar (Original post)

Wed Dec 23, 2015, 12:54 PM

1. Interesting. In addition, according to Census data,

There were 1,173,000 new housing starts, up 10.5%. As to sales of new single family homes, they were up 4.3% at 490,000. So people are still buying new homes and new home starts are up, but now all home sales are down 10.5% with an even bigger plunge from the numbers last year.

Retail sales were down $2.6 billion in the 3rd quarter. I live next to one of the premier shopping malls in my metropolitan area and it's parking lots haven't seemed as full, which seems to vindicate that advance retail and food service sales for November are up only 2/10 of one percent.

We might, as your article suggests, be entering new territory where consumers may either have the money but aren't spending it on certain things, in spite of historically low gas prices, or perhaps they are tapped out. I believe the former, because new car sales are at 15.8 million, up 5.4% from this time last year.

You know, I've gotten to the point where I don't like...well, really hate...Christmas. I mean, remember the movie Fight Club, where he talks about spending money we don't have on shit we don't need? This was the last year I'm going to allow us to spend like we have. Maybe more people feel like that. My wife and I watched the Christmas Carol movie with George C Scott (our favorite, with the Patrick Stewart one second), and it seems the poison of capitalism has led us away from any positive 'spirit' we may have during the holiday season.

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Response to marmar (Original post)

Wed Dec 23, 2015, 12:57 PM

2. Final note - and we are NOT spending a dime more than usual

just because gas prices are low. Global warming is too real. Driving more is a bad thing.

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Response to marmar (Original post)

Wed Dec 23, 2015, 01:52 PM

3. The real reason that sales collapsed was that prices are largely becoming unaffordable to most famil


We spent the last7 years making bank$ter/donors richer while watching as millions of people move from "middle class" to poverty or into the realms of the working poor. Detailed in Stress Test by President Obama's Treasury Secretary "Timothy Killer" Geithner, and ridiculed by the host and voters in the audience on the Daily Show in his interview with the little scum sucker. Makes Stalin look like a nice guy.


The 2016 election will be about money, again. And since we left the watched as an additional 4 million families were thrown into the street in foreclosure since 2009 (on top of the 3 million before that), and watched as millions moved from good paying jobs into poverty - and have been left there.

Has any Democratic adminstration left so many people in poverty, or swelled the numbers of the working poor, since the War on Poverty? I've been looking through the charts, and I can't find it. Although Obama did increase his net worth by $2 million, according to google.

It will be interesting to see if voters have forgotten Democrats who could have extended them a helping hand and pissed on them instead.

"Blame it on too much paperwork. The house humping cheerleaders are blaming the drop in sales volume on too much paperwork instead of the true underlying culprit. The real reason that sales collapsed was that prices are largely becoming unaffordable to most families. In virtually every part of California home prices are out of reach for families without them diving into massive mortgage debt for a piece of crap stucco box. Taco Tuesday baby boomers of course would like home prices to remain inflated but now they are getting a taste of economic karma when their boomerang kids move back home as adults. An indication of this insanity in California is based on the volume of investors buying homes. Last month 30 percent of home purchases went to all cash buyers. This was the highest amount going back to 2012. However, sales volume took a big dive. In other words, a large portion of those that can buy are investors. Is this trend sustainable?

Cash buyers make up a big part of sales volume

Cash sales jumped up significantly again last month thanks in large part to foreign money flowing in from China.
While cash sales jumped up, this is still a small portion of the market. Most other crap shack wannabe buyers were unable to buy based on their pathetic income growth and the ridiculous sized mortgage they would need to take to purchase one of these cardboard boxes. 2015 looks like it will end with a wet towel thrown over the market. Price gains have hit the expected wall.

First, it should be noted that cash sales were never a big part of the market. In more “typical” years before housing turned into a speculative investment vehicle, cash sales made up about 10 to 15 percent of all sales. Last month cash sales cracked the 30 percent mark of total sales for the first time since 2012:"


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Response to marmar (Original post)

Wed Dec 23, 2015, 02:23 PM

4. Most new construction around Seattle is high end housing

And that seems to be saturated. Nothing much has been built for the 80% who earn less than $50K a year. That doesn't seem like a sustainable model, but income inequality is at the root of it.

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