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September 21, 2018

U.S. Housing Slump Continues


The National Association of Realtors (NAR) today picks right up where we left off yesterday. The Census Bureau had reported another month suggesting a rough spot in real estate.

More recent housing data isn’t encouraging, either. The lower the unemployment rate goes, the main emphasis of this “boom”, the worse the housing market becomes; not because one follows inversely the other, rather because the unemployment doesn’t reflect on-the-ground reality of the full economy…
Now in 2018, there are signs of weakening in that segment. Since January, permits have fallen substantially. Month to month, the housing construction figures tend to be very volatile. This is a seven-month string, a multi-month slump emerging that raises the significance.

The August 2018 estimate from the NAR on resales was low again, corroborating the tendency in construction. According the realtor trade group, existing home sales were stuck for the second straight month at a seasonally-adjusted annual rate of 5.34 million. More importantly, that’s the sixth consecutive year-over-year decline, and nine out of the last twelve.




That’s fewer homes sold in August 2018 than in June or July 2015, or July 2013 for that matter. And like construction, the pace is historically slow to begin with. Economists continue to blame inventory but not the reason inventory is so low to begin with (though it was up marginally for the first time in three years in August).

While inventory continues to show modest year over year gains, it is still far from a healthy level and new home construction is not keeping up to satisfy demand,” said [NAR Chief Economist Larry] Yun. “Homes continue to fly off the shelves with a majority of properties selling within a month, indicating that more inventory – especially moderately priced, entry-level homes – would propel sales

So, where are they? Few want to sell and builders won’t build. Not quite the booming economy this is made out to be. What is everyone seemingly afraid of?




Simple, as I wrote yesterday:

Just as workers have altered their home selling behavior, builders have, too, faced substantial changes to their habits. Among them, construction finance once at the top of any local bank’s list of lending projects is no longer.
And builders themselves, many who barely survived, cognizant of the surprisingly large number who didn’t, aren’t so willing to take on funding risks no matter what the unemployment rate says about prospective demand. The NAHB sported 240,000 members at the peak in 2007, a membership that had collapsed to 140,000 by 2012. Many were good businesses that just couldn’t manage the reverse of monetary leverage. They aren’t building for it until they actually see it this time.

Economists claim to see it, but no one else really does. We’ve heard about it, and hear about this boom all the time. But consumers/workers sure aren’t acting like there’s one. In 2018, at least according to what sure looks to be a minor housing slump, everyone’s instead acting like there is even less of one.

Courtesy of Jeffrey P. Snider, Alhambra Investment Partners (More from Alhambra Here
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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