Boockvar on the Housing Problem
From Peter Boockvar:
The part of the economy that remains challenged
The housing market remains the challenged part of the US economy. Pending home sales in June fell 5.4% m/o/m, well worse than the estimate of a drop of .5% and offsets the 3.5% rise in May and takes the index to a 5 month low and just off a record low for this index. There was little change in mortgage rates in June but did lift off the early part of May.
The NAR said “The highest mortgage rates in nearly a year and the record-high national median home price together are contributing to a tepid housing market that is especially difficult for first-time homebuyers. However, job gains can help support housing demand.”
I’m not sure why the NAR added this to their press release as we know that pending home sales measures just contract signings but they did say “Pending contracts are only suggestive of upcoming closed deals and do not align perfectly, due to fallout rates and contract contingencies.” Maybe they are seeing something?
Pending Home Sales
Home builders still remain sour with the July NAHB builder sentiment index falling 2 pts m/o/m to just 34 and well below the 50 breakeven. The estimate was 35. Prospective buyers Traffic fell 2 pts to just 23.
The NAR said “Many potential buyers remain on the sidelines as they wait for lower mortgage rates, more certainty on inflation and a clearer economic outlook…With the HMI below 40 for 15 straight months, affordability remains the home building industry’s primary challenge, as elevated mortgage rates, costly land, rising material prices, and persistent skilled labor shortages continue to affect the market.”
And to the extent builders are trying to drive sales, “The latest HMI survey also revealed that 37% of builders cut prices in July, up from 35% in June and 32% in May. The average price reduction was 6% in July, the same rate as the previous month. The use of sales incentives was 63% in July, up slightly from 62% in June, and marking the 16th consecutive month this share has reached 60% or higher.”
There is hope with the newly passed housing bill, “The recently enacted 21st Century ROAD to Housing Act contains important provisions on land-use and zoning, regulatory reform and financing tools that address obstacles facing builders and buyers, but these reforms will take time to implement.” But, we know that a lot of zoning and regulatory reforms need to take place at the local and state level.
Bottom line, as said above and something we know, housing remains the downer in the US economy and according to the NAHB makes up about 15-18% of the U.S. economy all in.
NAHB
Prospective Buyers Traffic
Positions: None.
