The Housing Market Has Stalled

investmentresearchdynamics.com / Dave Kranzler / October 4, 2017

The housing market headed for very “rough waters.” The title is from the National Association of Realtor’s Pending Home Sales report for August in reference to NAR chief “economist” Larry Yun’s commentary on the housing market. Pending homes sales in August, which are based on contracts signed, dropped 2.6% from August. They’re also 2.6% below a year ago August. These are SAAR numbers. The “not seasonally adjusted” numbers were worse, down nearly 4% from August and 3.1% lower than last August.

Once again Yun is blaming the problem on supply. I torpedoed that assertion with facts in last week’s Short Seller’s Journal.  Although, there is indeed a “supply” issue in one regard: there’s a shortage of end user buyers who are required to use, and qualify for the use of, the Government’s de facto subprime mortgage program (as I detailed last week). There’s also a shortage of existing home owners in the mid-price range who can afford to move-up. So yes, in that sense there’s a shortage – it’s just not in homes.

DR Horton (the largest homebuilder in the country) is carrying about the same amount of inventory now as it was carrying at the end of 2007 – around $8.5 billion. The average home price is about the same then as now, which means it is carrying about the same number of homes in inventory. It’s unit sales run-rate was slightly higher in 2007. The point here is that there are plenty of newly built homes available for purchase. Per the Census Bureau, the median sales price of a new home in August was $300k, while the average price was $368k. DH Horton is an averaged price homebuilder.

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