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Tumble in new home sales hits builders

  • July new home sales fell 13.4% to an adjusted annual rate of 394K, far below expectations of 487K. The 394K pace is still 6.8% above the pace of one year ago. Given the current pace of sales, inventory rose to 5.2 months worth of homes from 3.9 in June.
  • The U.S. Home Construction ETF (ITB -3%). Weighted more heavily on building suppliers than the builders themselves, the S&P Homebuilders ETF (XHB -1.9%).
  • Lennar (LEN -3.8%), Toll Brothers (TOL -4.1%), Ryland (RYL -5.1%), KB Home (KBH -4.4%), D.R. Horton (DHI -3.7%), Hovnanian (HOV -3.3%).
  • Treasury prices cut sizable losses and turn green, TLT +0.3%.
  • Treasury ETFs: TLH, TLT, IEF, DTYL, DLBL, ILTB, TENZ, ITE, TLO, EDV, VGIT, VGLT, TMF, TYD, LBND, UBT, UST, TMV, TYO, DSTJ, DSXJ, SBND, PST, TBT, DTYS, DLBS, TBF, TTT, TYNS, TYBS, TBX.
Comments (29)
  • june1234
    , contributor
    Comments (2330) | Send Message
     
    Thats the kind of report you get when you don't use Bloomberg housing recovery headlines. Somebody needs to get fired.(sarcasm)
    23 Aug 2013, 10:41 AM Reply Like
  • Brad Kenagy
    , contributor
    Comments (1387) | Send Message
     
    Looks like buyers headed for the hills, bad data. I think with this data, if FED tapers in September it will be tapering treasury purchases, because they will still want to keep purchasing MBS to try and keep housing rates low.
    23 Aug 2013, 11:43 AM Reply Like
  • mickmars
    , contributor
    Comments (1323) | Send Message
     
    Just crushing. No Taper now, for sure....

     

    Why do you think treasury prices just rose on the news? No taper....
    23 Aug 2013, 12:01 PM Reply Like
  • WallStreetDebunker
    , contributor
    Comments (2100) | Send Message
     
    Where are the commenters who predicted that a big jump in mortgage rates would not impact home sales? They're probably busy scouring the internet for articles that support their fantasy of a "Great Rotation" from bonds to stocks.
    23 Aug 2013, 12:18 PM Reply Like
  • mickmars
    , contributor
    Comments (1323) | Send Message
     
    For a population whose real wages are steadily declining, the only thing that can support housing is a ridiculously low (not "historically low") 30 year mortgage rate.
    23 Aug 2013, 12:29 PM Reply Like
  • Tack
    , contributor
    Comments (12436) | Send Message
     
    Yeah, nobody selling any of those bonds: http://reut.rs/1d9So7d
    23 Aug 2013, 03:10 PM Reply Like
  • WallStreetDebunker
    , contributor
    Comments (2100) | Send Message
     
    The money from retail bond fund liquidations overwhelmingly went to cash, not stocks.

     

    "In the eight weeks ended July 22, $110.9 billion went into savings deposits, while $32.5 billion entered into retail money market funds. The combined inflow of $143.4 billion is almost triple the $54.1 billion that flowed into equity mutual funds and ETFs in June and July."

     

    Besides, someone bought each bond that was sold. Ditto for stocks. It's how the market works.
    23 Aug 2013, 03:39 PM Reply Like
  • Tack
    , contributor
    Comments (12436) | Send Message
     
    WSD:

     

    Yep, just as I would have anticipated. First, they panic out to cash; then, they have to find somewhere else to put it. Very positive backdrop for equities, having all that liquidity sitting there.

     

    23 Aug 2013, 03:43 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    I see. So interest rates caused existing home sales to rise, but new to fall?

     

    Did it ever occur to you that may be it is an outlier?
    23 Aug 2013, 04:07 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    Real wages are stagnant, not declining.
    23 Aug 2013, 04:07 PM Reply Like
  • WallStreetDebunker
    , contributor
    Comments (2100) | Send Message
     
    Tack:

     

    There's little, if any, change in risk perception among the public towards equities. To my surprise, the public is quite positive about real estate again. Then again, the gold bugs are making a come back all over the world again too.

     

    How long these speculative trends persist is anyone's guess, but I'm not seeing many average joes interested in stocks. Maybe you'll need a repeat of 1999 to interest them in stocks. I wouldn't count on that happening.
    23 Aug 2013, 04:11 PM Reply Like
  • Tack
    , contributor
    Comments (12436) | Send Message
     
    WSD:

     

    The idea that "average Joe's" drive markets is a nonstarter. They're really irrelevant.

     

    The bottom line remains, as it has been for many, many months that the equity market has been buttressed by the disproportionate money outside of low-trading-volume equities, which provides a huge liquidity pool of potential buyers. And, we've seen the effects of that, repeatedly, as all attempts to move the market southward are always confronted with buying after even minor dips. Downside traction has been almost impossible to generate, regardless of news from Europe, China,interest rates, QE, or any other "scare du jour."

     

    The fact that even more funds have left bonds means that it is available for other investments. it's probably one of the reasons for the recent resurgence in gold, too. I'm not expecting any rocket-launched climb in markets, but do remain comfortable that we're not going to see any meltdowns, either. as such, high-yielding value-oriented portfolios should continue to perform well.
    23 Aug 2013, 04:42 PM Reply Like
  • WallStreetDebunker
    , contributor
    Comments (2100) | Send Message
     
    Tack: The average joes I'm talking of are the 401K holders that drive the mutual fund industry--the industry that supposedly will "rotate" from bonds to stocks.

     

    No money has "left" bonds. Every bond in existence is held by someone. A possibly important question is who is trading to whom and for how much. The people who recently sold bonds have cash to invest in something else. But the people who bought them from the sellers have correspondingly less cash to invest in something else.

     

    There is no "historically large" amount of money outside the stock market. That's a myth and a sales pitch, like the myth of money "rotating" from one asset category to another. It doesn't bother me if anyone wants to believe these myths, but they shouldn't be presented as facts.
    23 Aug 2013, 05:09 PM Reply Like
  • WMARKW
    , contributor
    Comments (10219) | Send Message
     
    I'd agree with "Stagnant".

     

    Charts:

     

    http://bit.ly/16z7qvt
    23 Aug 2013, 06:39 PM Reply Like
  • CaladesiKid2
    , contributor
    Comments (271) | Send Message
     
    For the diminishing few that would qualify for home financing, why would you buy a house in this economic climate? Projected appreciation on a house is 3 - 5% annually while projected increases in property taxes will meet or exceed this growth rate. There is a sustained trend into multi-family and away from single family housing. Why buy a house when so many current homeowners are underwater on their mortgage and considering walking away? For a multitude of economic reasons, we are decades away from a recovery in housing.
    23 Aug 2013, 01:15 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    Existing home sales were sharply up. The report was released 48 hours ago. Have you forgotten already?
    23 Aug 2013, 04:09 PM Reply Like
  • mickmars
    , contributor
    Comments (1323) | Send Message
     
    That was an NAR report, right?
    23 Aug 2013, 09:49 PM Reply Like
  • financeminister
    , contributor
    Comments (572) | Send Message
     
    I think more and more youngsters are starting to think that if they can live fine in a small apartment, they can hold off and avoid all the overheads when it comes to buying a home. They can use that time to build some savings and think of buying homes when they actually need to. Atleast that's the decision our household has made.
    23 Aug 2013, 03:56 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    A finance minister would try to reconcile the fact that existing home sales were sharply up while the report shows new home sales down.

     

    Unless you believe the existing home sale market is dominated by wholesale buyers, and I don't, then it is likely the one of the reports is way off. I would wager a bet on the new home sale report since sales of new homes is a tiny of total sales. Hence the report likely to be noisier.
    23 Aug 2013, 04:11 PM Reply Like
  • phdinsuntanning
    , contributor
    Comments (1194) | Send Message
     
    Most economists now understand that in the long run, monetary policy determines only the level of prices and not the unemployment rate or other real variables. In this sense, it is monetary policy that has ultimate responsibility for the purchasing power of a nation's fiat currency. Monetary policy can sometimes temporarily stimulate real economic activity in the short run, albeit with considerable uncertainty as to the timing and magnitude. Any boost to the real economy from monetary policy will eventually fade away as prices rise and the purchasing power of money erodes in response to the policy. Nonetheless, the notion persists that activist monetary policy can help stabilize the economy against shocks, such as a sharp drop in the price of housing. Attempts to stabilize the economy will provide stimulus when none is needed, or vice versa. It also risks distorting price signals and thus resource allocations, adding to instability. Monetary policy cannot reverse the sharp decline in house prices when the economy has significantly over-invested in housing. So what should monetary policy do? To strengthen the central bank’s commitment to price stability. During the housing boom, some parts of the U.S. housing market were experiencing rapid price appreciation while others were not. Asking monetary policy to do what it cannot do, as influence asset prices, risks creating more instability, not less. Decisions to grant subsidies to specific industries or firms must rest with Congress, not the central bank. Monetary policy is not going to be able to speed up the adjustments in labor markets or prevent asset bubbles. Nor should monetary policy be asked to perform credit allocation in support of particular sectors or firms. Ensuring long-term price stability is how monetary policy is best able to support full employment and sustainable growth in the USA and anywhere else.
    23 Aug 2013, 04:31 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    Ok, so you have read Milton Friedman. Did you ever consider he was wrong.
    23 Aug 2013, 04:52 PM Reply Like
  • six-oh
    , contributor
    Comments (525) | Send Message
     
    You lost me at "fiat currency"... Yawn... We should all put that term to rest since it is redundant, and irrelevant. It also undermines one's credibility by using it.
    23 Aug 2013, 05:51 PM Reply Like
  • CaladesiKid2
    , contributor
    Comments (271) | Send Message
     
    Proof that Milton was wrong? Perhaps I should ask the question this way. Would you share your wisdom with us on why the economy is struggling after Trillions in deficit spending? One request, in your answer please do not blame it on one political party or one particular family name.
    24 Aug 2013, 10:31 AM Reply Like
  • CaladesiKid2
    , contributor
    Comments (271) | Send Message
     
    Fiat currency is not redundant. Perhaps you struggle with the concepts discussed. I am curious with how a fiat currency is irrelevant. I encourage you to briefly review the stock market performance of emerging markets (i.e. India in particular) over the past two weeks if you think fiat currency irrelevant.
    24 Aug 2013, 10:32 AM Reply Like
  • Peregrinus
    , contributor
    Comments (113) | Send Message
     
    Half of the country's population are living off newly printed dollars. This will lead to inflation. If you don't believe this why not have the government simply give each of us $100,000 each and every year? We've seen massive inflation before and the result is that people rush to buy things with their rapidly depreciating dollars. This will happen in the housing market as it did before. When prices are rising interest rates are irrelevant.
    The cost of building a house has increased considerably since 2007. New homes are way more expensive than comparable existing homes. This situation is temporary and existing home prices will increase accordingly. Short bonds and avoid retailers.
    24 Aug 2013, 09:37 AM Reply Like
  • Gsrand
    , contributor
    Comments (4) | Send Message
     
    New homes sales were up in July compared to last July. That's an increase folks. Month to month numbers in housing are like second to second numbers in the stock market. Irrelevant.
    26 Aug 2013, 09:35 AM Reply Like
  • WallStreetDebunker
    , contributor
    Comments (2100) | Send Message
     
    Are you're getting worried that the buzz will wear off on real estate just like 2007? You should be worried. The interest rate subsidies pulled demand forward just like the homebuyer tax credit in 2010. Home prices jumped. Mortgages jumped. Inventory is jumping. Buh-bye recovery.
    26 Aug 2013, 12:10 PM Reply Like
  • Tack
    , contributor
    Comments (12436) | Send Message
     
    WSD:

     

    2007 didn't have anything to do with "buzz." The market collapsed because credit was exhausted and had been extended to completely unqualified buyers on absurd terms and in amounts often exceeding purchase prices by 25%. The situation, presently, looks nothing at all like 2007 and neither will be the results. Forty percent of sales are for cash, and those getting financed have more money down and much better credit.
    26 Aug 2013, 12:14 PM Reply Like
  • WallStreetDebunker
    , contributor
    Comments (2100) | Send Message
     
    Tack, You're wrong. The buzz (sentiment) declined before credit tightened. 50-60% of sales are for cash. Of course this is different than 2007 for the obvious reasons. Rather than a crash, there will be a whimpy market in aggregate, just like the job market.

     

    A few regions have a renewed bubble. Those regions will likely see price declines. Some regions will do fine, like parts of Texas.

     

    Multifamily housing will continue to thrive. The rental market will weaken but still hold up pretty well.
    26 Aug 2013, 12:32 PM Reply Like
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