New home sales plunge in March


The seasonally adjusted new home sales pace of 384K in March is 14.5% below that of February and 13.3% lower than a year ago. It's the slowest pace since July, and 14.5% is the 3rd-largest decline in 20 years. The median sales price of $290K is up 12.6% Y/Y. The supply of new homes on the market is 6 months at the current sales pace, up from 5 months in February.

Homebuilder ETFs: ITB -1.7%, XHB -1.2%.

Toll Brothers (TOL -1.6%), Lennar (LEN -1.9%), Hovnanian (HOV -1.5%), Pulte (PHM -1.6%), KB Home (KBH -3.3%), Beazer (BZH -2.4%), Ryland (RYL -2.6%)

The 10-year Treasury yield dips two basis points to 2.69%. TLT +0.4%, TBT -0.8%

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Comments (19)
  • june1234
    , contributor
    Comments (4356) | Send Message
     
    Everybody knows March weather was much worse than Feb. Less demand higher prices, makes sense to an eskimo
    23 Apr 2014, 10:24 AM Reply Like
  • CautiousInvestor
    , contributor
    Comments (3090) | Send Message
     
    I'm not so sure weather was a factor as there were declines in three of the four reporting regions with an increase reported in the Northeast, an area one would think to be very sensitive to harsh weather but which reported a gain. The Mid-west, South and West all reported declines. Possible explanations include rising prices, tighter underwriting and higher downpayments.
    23 Apr 2014, 11:00 AM Reply Like
  • optionsgirl
    , contributor
    Comments (5202) | Send Message
     
    We should take a look at mortgage originations as sign of real estate strength.
    According to Michael Lombardi in his article "Dead-Cat Bounce Over For Real Estate?" dated April 23rd,2014 in Profit Confidential:
    "In the first quarter of 2014, mortgage originations at Citigroup Inc. (NYSE/C) declined 71% from the same period a year ago. The bank issued $5.2 billion in mortgages in the first quarter of 2014, compared to $8.3 billion in the previous quarter and $18.0 billion in the first quarter of 2013. (Source: Citigroup Inc. web site, last accessed April 14, 2014.)

     

    Total mortgage origination volume at JPMorgan Chase & Co. (NYSE/JPM) declined by 68% in the first quarter of 2014 from the same period a year ago. At JPMorgan, in the first quarter of 2014, $17.0 billion worth of mortgages were issued, compared to $52.7 billion in the same period a year ago. (Source: JPMorgan Chase & Co. web site, last accessed April 14, 2014.)"

     

    It's not a good sign.
    23 Apr 2014, 02:45 PM Reply Like
  • Darren McCammon
    , contributor
    Comments (3804) | Send Message
     
    Along this same line, weather was much better than normal in the West. Very little rain and snow all winter long including March. Rising prices, hedge fund net sales, unemployment, rising rates, tighter underwriting are all reasons. Personally, it would not surprise me to see prices start to fall again. Was the last two years just one big head fake? We'll see.
    23 Apr 2014, 03:45 PM Reply Like
  • notta lackey
    , contributor
    Comments (131) | Send Message
     
    Another possible explanation is that there has been no recovery in the economy and we are all screwed.
    23 Apr 2014, 05:33 PM Reply Like
  • 1GreatCFA
    , contributor
    Comments (1354) | Send Message
     
    Or dam speculators driving up prices.
    23 Apr 2014, 10:06 PM Reply Like
  • wallstreetpro1
    , contributor
    Comments (9) | Send Message
     
    Problem with housing is maintenance on house, taxes on house, insurance on house, and prices are back to pre recession levels whereas income still lagging. The only good thing about buying a house is you don't have to rent. But until you actually pay it off or borrow against it to buy other income producing assets your not making any $ so I would rather own stocks
    23 Apr 2014, 11:44 AM Reply Like
  • mobyss
    , contributor
    Comments (2595) | Send Message
     
    There are definitely pros and cons to buying a house. But if you rent instead of buy, you ARE paying for the maintenance, taxes, and insurance. They are built into your rent. Do you really think that the landlord would just eat those costs on your behalf? In fact, you are also paying the mortgage, and even a little extra so the landlord makes a profit.

     

    The best thing about renting is the flexibility it gives you in terms of moving or upgrading/downgrading.
    23 Apr 2014, 12:02 PM Reply Like
  • caupachow
    , contributor
    Comments (524) | Send Message
     
    mobyss, there are a lot of landlords eating the loss in my area (central FL) for they are so underwater and what they can charge for rent doesn't cover mortgage, insurance and maintenance and taxes. Matter of fact 31% of all mortgages in the Orlando Metro area are underwater. Nice recovery eh?
    23 Apr 2014, 02:10 PM Reply Like
  • Darren McCammon
    , contributor
    Comments (3804) | Send Message
     
    mobyss, just because it's logical that they average landlord covers his cost does not make it true. Many landlords have a net negative each year. Many others don't only because they have significant equity and thus a low mortgage cost. As an real estate investor and financial analyst, I can tell you that most landlords (well more than half) need prices to increase just to break even from a return on investment point of view.
    23 Apr 2014, 03:50 PM Reply Like
  • Nettligent
    , contributor
    Comments (1346) | Send Message
     
    wallstreetpro1, we call it "mortgage slavery."
    23 Apr 2014, 06:33 PM Reply Like
  • doughave
    , contributor
    Comments (81) | Send Message
     
    Weather is not an issue here in San Diego. The issue is that prices went up too much too fast so buyers are rejecting the price increases.
    23 Apr 2014, 12:23 PM Reply Like
  • Palladium31
    , contributor
    Comments (546) | Send Message
     
    Agreed. Here are a few other reasons:

     

    1) the PE/single family home REIT money has pulled out of the homebuying market in California for the most part as there are too few deals left.

     

    2) the lax borrowing standards in China have reversed course in recent months so the all cash speculators have largely pulled left the market.

     

    3) those that have sold their homes in socal over the past year have not been reinvesting in CA with a move-up buy. Instead, they are leaving the state and becoming all cash buyers in Texas (where you can get a mansion for the price of a starter home in most of CA).

     

    4) with low wage starting jobs and high grad school debt, a lot of folks that would be first time homebuyers are not in the market at the moment. Instead they are renting near the job opportunities & nightlife, or commuting and living with parents.

     

    That said, when the folks in #4 feel comfortable about the future and start forming families with children in stronger numbers, we'll see a return of first time home buyers, which should help re-invigorate the move-up market.
    23 Apr 2014, 01:47 PM Reply Like
  • SoCalNative+(RIP)
    , contributor
    Comments (651) | Send Message
     
    "3) those that have sold their homes in socal over the past year have not been reinvesting in CA with a move-up buy. Instead, they are leaving the state and becoming all cash buyers in Texas (where you can get a mansion for the price of a starter home in most of CA)."

     

    Living in SoCal my whole life and just returning from Houston, you are 100% correct.
    23 Apr 2014, 02:10 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (13374) | Send Message
     
    Even Fannie Mae and Freddie Mac are fretting and trying to yank volume because when the housing market takes a real dip they will be dipping into the taxpayer through the government yet again. IPO: not until they clear the hundreds of billions of dollars in losses from the next recession whether it is now or later.
    23 Apr 2014, 12:26 PM Reply Like
  • katmandu100
    , contributor
    Comments (81) | Send Message
     
    The home prices are too expensive for people who are first buyers.
    The job market is not improving for most americans, and security in
    the job market is low. This was predicted.
    23 Apr 2014, 02:40 PM Reply Like
  • GoGowadof100s
    , contributor
    Comments (128) | Send Message
     
    Summer of recovery.......
    23 Apr 2014, 08:52 PM Reply Like
  • notta lackey
    , contributor
    Comments (131) | Send Message
     
    That's what they said about gramma, right before she died.
    24 Apr 2014, 10:43 AM Reply Like
  • mski2003
    , contributor
    Comments (34) | Send Message
     
    Shocking how none of the 'experts' mention the massive drag that hit our economy on January 1. The Affordable Health Care Act forces tens of millions of Americans to either 1) pay for a health care plan, or 2) pay an additional tax liability.

     

    This is a drag on discretionary spending to the tune of tens-of-billions. These so-called analysts are worthless.
    23 Apr 2014, 09:03 PM Reply Like
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