Single Family Housing Starts At 2007 Levels

David Goldsmith

All Powerful Moderator
Staff member

Housing affordability drops to 15-year low: Zillow​

Rising prices, mortgage payments drive homebuyer metric to lowest on record​

The aughts are back in style, with early-2000s inspiration trending in fashion, music and mortgage costs.
Housing affordability last month reached its lowest point since at least 2007, according to a recent report from Zillow. That’s as far back as the company’s affordability metric goes.

Housing prices continued their rise, though the growth acceleration finally showed signs of slowing last month. Meanwhile, mortgage rates and payments continue to balloon, while inventory is not recovering quickly enough to ease the supply-demand disparity.
Mortgage rates were flirting with the 6 percent mark last week, mere months after exceeding the 5 percent threshold. The rates are still historically low, but significantly higher than they were in the first couple of years of the pandemic.
As a result, mortgage payments are rocketing. At Thursday’s average rate of 5.78 percent, the mean monthly mortgage payment in the country would be $2,127, according to Zillow. That’s a 51 percent surge year-over-year and a 36 percent increase from the beginning of the year.

In April, monthly mortgage payments took 28 percent of homeowners’ income; 30 percent is considered a cost burden.
There are small glimmers of hope for homebuyers. According to Zillow’s index, price growth in April was 20.9 percent versus 20.7 percent in May. Last month was the first in more than a year to feature a deceleration in price growth, according to Zillow; the S&P CoreLogic Case-Shiller Index for May won’t be out until late next month.

Inventory is also showing signs of recovery. Listings increased 10.5 percent from the previous month in April. Listings are still 14.2 percent below levels from the previous year, though, and 50 percent below the mark of May 2019.
Weary home buyers can’t exactly kick back and turn to the rental market. Rents are shooting up similarly to mortgage payments — May’s annual rent appreciation was 15.9 percent and the typical rent in the country was only a few cups of coffee shy of $2,000; Redfin reported that the benchmark was exceeded last month.
Despite rising rents, mortgage payments exceed monthly rent statements in all but five states. That’s a drastic change from 2019, when rent was higher than mortgage payments in a small majority of states.

David Goldsmith

All Powerful Moderator
Staff member

In just a year, renting has become far cheaper than owning​

Expense was about the same until the housing market went wild: report​

The rising cost of owning a home is making renting more attractive than it has been in two decades, according to a new report.
Owning a home in April cost $839 more per month than renting, an analysis by John Burns Real Estate Consulting found. A year earlier, the difference between the two was negligible.

The differential between owning and renting is nearly $200 higher than at any point this century.
The report calculated the costs typically associated with renting and owning. For renting, it looked at single-family listings and the cost of renter’s insurance. For owning, the report assumed a purchase price of 80 percent of the median home price in an area, a 5 percent down payment and a 30-year, fixed-rate mortgage. Taxes, insurance, mortgage insurance (required if the down payment is less than 20 percent) and maintenance costs were factored in.

Across the country, it was 31 percent more expensive to own than rent in April, according to the report. The cost to own a home increased 37 percent from a year before, while the company’s single-family rent index rose only 6 percent.

The most glaring disparity is in the Raleigh-Durham metro, where it was 42 percent more expensive to own than rent in April. The other cities with the biggest disparities were Nashville and Denver.
In both Miami and Austin, it was 30 percent more expensive to own than rent. Texas was well represented on the list, featuring a 29 percent difference in Dallas and 25 percent difference in Houston. Chicago’s ownership premium was also high, at 23 percent.

The report is more evidence of the rising cost of housing. A recent report from Zillow revealed that housing affordability was at a 15-year low because of increasing prices and mortgage payments.
Mortgage rates have been flirting with the 6 percent mark, roughly twice what they were late last year. While rates are still modest historically, they have triggered sticker shock among some home shoppers.
According to Zillow, monthly mortgage payments took 28 percent of homeowners’ income in April; more than 30 percent is considered burdensome. Mortgage payments exceeded monthly rent in all but five states. Three years ago, rent was higher than mortgage payments in a small majority of states.

David Goldsmith

All Powerful Moderator
Staff member

Homebuilder sentiment takes historic hit​

July marked second largest drop ever: National Association of Home Builders​

As the housing market turns and sales slow, homebuilders are having a hard time hiding their concerns.
The National Association of Home Builders/Wells Fargo Housing Market Index took a historic plunge this month, dropping 12 points to 55 points. It was the second largest drop in the index’s history, trailing only the 42-point drop that came at the start of the pandemic.

The index tracks homebuilder confidence regarding current and future single-family home sales and traffic of potential buyers.
Supply constraints and volatile costs for materials and construction have plagued the industry since the onset of the pandemic. But builders are now also contending with a housing market that appears to be cooling as inventory remains low and mortgage rates rise.
“Production bottlenecks, rising home building costs and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home,” NAHB chairman Jerry Konter said in a statement.

The index began showing significant signs of decline a few months ago as the Federal Reserve began raising interest rates, which made borrowing more expensive. As a result, people have become less likely to spend as heightened rates have made housing less affordable, trickling into sagging builder sentiment.

All three components of the index declined in July. The component for current sales fell 12 points last month to 64, while sales expectations for the next six months dropped 11 points to 50. The traffic of prospective buyers also fell 11 points, all the way down to 37.

Confidence for a three-month average is at the lowest in the Midwest, down to 52 points. The West region had the largest decline, though, down 12 points to 62; every region dropped at least 4 points.
While confidence is flailing, the index is still in positive territory. Any number above 50 represents a belief that conditions are good, meaning the overall sentiment is still positive, even though the traffic of prospective buyers has moved deeper into poor sentiment.
NAHB chief economist Robert Dietz deemed affordability the “greatest challenge” in the housing market.
“Policymakers must address supply-side issues to help builders produce more affordable housing,” Dietz stated.


David Goldsmith

All Powerful Moderator
Staff member
Housing Recession”: NAHB. Homebuilders Cut Prices as Traffic of Prospective New-House Buyers Plunges, Cancellations Spike

Homebuilder sentiment dives 8th month in a row, their stocks are down 19% to 36% YTD despite blistering summer rally.

“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said National Association of Home Builders Chief Economist Robert Dietz.
The confidence of builders of single-family houses, after the second-biggest plunge in the data last month, fell again in August, the eighth month in a row of declines, having gone downhill every month this year, “as elevated interest rates, ongoing supply chain problems, and high home prices continue to exacerbate housing affordability challenges,” according to the NAHB.
With today’s index value of 49, the NAHB/Wells Fargo Housing Market Index is now back where it had been in June 2014, and below where it had been in April 2006, at the eve of the Housing Bust.

The NAHB/Wells-Fargo Housing Market Index has plunged across all four regions so far this year, but unevenly, with the index hitting the lowest levels in the Midwest and the West, and with only the South still being above 50 if barely. Note that in the West (red line), after still rising early in the year, the index has plunged since March from 91 to 42. Chart shows from December through August:

Traffic of prospective buyers plunged.

“And in a troubling sign that consumers are now sitting on the sidelines due to higher housing costs, the August buyer traffic number in our builder survey was 32, the lowest level since April 2014 with the exception of the spring of 2020 when the pandemic first hit,” the NAHB report said.
Traffic is an indication of interest by buyers. And with the headwinds buyers face, including sky-high prices and 5%+ mortgage rates, they’ve lost interest:

Homebuilders cut prices to prop up sales and limit cancellations: 19% of the builders said they cut prices over the past month to “increase sales or limit cancellations,” the NAHB said. This was up from 13% of the builders who’d reported having cut prices in the prior month.
In terms of cancellations: Based on data from John Burns Real Estate Consulting, the cancellation rate homebuilders experienced in July, despite their efforts to limit them by cutting prices, spiked to 17.6%, out-spiking lockdown April 2020 (click on the image to enlarge):

In terms of price reductions: They’ve started sooner and faster in California, Texas, and the Southwest, according to John Burns, for the three months through July. The price reductions include incentives:

The Census Bureau reported earlier that the median price of new single-family houses sold had plunged by a combined 12% in May and June:

The NAHB index for current sales has dropped every month since February, and in August dropped 7 points, after the 12-point plunge in July, to a value of 57. A value of over 50 means that still more builders rated current sales as “good” rather than “poor,” and price reductions would certainly help.
Future sales look worse: The NAHB index for sales over the next six months fell by 2 points, after having plunged by 11 points in July, to an index value of 47, the second month in a row when more builders rated their future sales as “poor” rather than “good.”
Homebuilder stocks, despite the blistering summer rally, are down between 19% and 36% so far this year, including between 0.8% and 2.1% so far today (data via YCharts):

David Goldsmith

All Powerful Moderator
Staff member
Housing affordability hits 33-year low

Prices and mortgage rates primarily to blame: NAR​

To see the last time housing affordability was this low, you would have to go back to the early days of the George Bush administration — the first one.
Housing affordability hit its lowest point since 1989 in June, the Wall Street Journal reported. That’s according to an index kept by the National Association of Realtors, which considers income, mortgage rates and sale prices of existing homes.
Record home prices are one of the factors that have pushed buyers, particularly first-time buyers, out of the market. According to NAR, existing home prices have soared 46 percent in the past three years, hitting a median of $423,300 in June.
Mortgage rates, which were historically low during the early months of the pandemic, also soared amid rate hikes from the Federal Reserve first implemented rate hikes. After ending last year at 3.1 percent, the average mortgage rate was 5.6 percent in June.
These two factors, along with inflation, low inventory and other economic headwinds, are leading to a slowdown in the housing market. Redfin reported Friday that homebuyer competition fell to its lowest levels since the beginning of the pandemic, likely because fewer people are in a position to buy.

The good news for Americans is that a July affordability report would probably not match the frenzy recorded in June, as mortgage rates are tempering. While they remain highly volatile, the mortgage rate was at 5.22 percent this week.
“Thankfully, the worst in affordability could already be over for this cycle,” NAR chief economist Lawrence Yun said. “Mortgage rates have calmed down in recent weeks, and the consistent wage growth … is narrowing the gap with home-price growth.”
Still, there’s a growing body of evidence that many buyers are experiencing some of the worst affordability problems of a generation. Zillow reported in May housing affordability reached its lowest point since 2007, when the company started tracking the metric.
Consumers are fretting. Recent data from the Federal National Mortgage Association noted that consumers were more pessimistic about housing than any time since 2011, when the global financial crisis caused prices to bottom out, amid heightened concerns about home affordability and job security.

David Goldsmith

All Powerful Moderator
Staff member
Sales of New Houses Collapse (in the West by 50%!) Inventories & Supply Spike to High Heaven, Worst since Peak of Housing Bust 1

Forget “housing shortage.” It’s about crazy prices: For sales to revive at these mortgage rates, prices have got to come down a lot — and they’re starting to.

The plunge in home sales is just stunning. Sales of new single-family houses collapsed by 12.6% in July from the already beaten-down levels in June, and by nearly 30% from July last year, to a seasonally adjusted annual rate of 511,000 houses, the lowest since January 2016, and well below the lockdown lows, according to data from the Census Bureau today.
New house sales plunged in every region compared to July last year. Note the West, oh dear:
  • Northeast: -37%
  • West: -50%
  • Midwest: -23%
  • South: -21%.

A similar plunge, but now quite as bad, occurred in sales of previously owned homes, which plunged by 20% across the US in July compared to a year ago. In California, sales of existing homes collapsed by 31% year-over-year; and in the previously hottest market, San Diego, by 41%!

Sales obviously would be a lot higher if prices were a lot lower, and more people could actually buy at these mortgage rates – today, the average 30-year fixed rate is at 5.7% again, according to Mortgage News Daily – but it takes a sustained plunge in volume to hammer the message into increasingly motivated sellers what they need to do if they want to sell: They have to go where the buyers are, and the buyers are a lot lower.
Homebuilders know this because they have been lamenting for months the plunge in traffic of prospective buyers, according to the survey of homebuilders, conducted by the National Association of Home Builders:

Suddenly no “housing shortage”: Inventories and supply spike to high heaven.​

Inventory for sale in all stages of construction jumped to 464,000 houses, up by 28%, from July last year, and the highest since March 2008:

Supply of unsold new houses spiked to nearly 11 months of sales, on this surge in inventory and the collapse in sales. This was the highest since the worst months of Housing Bust 1 in late 2008 and early 2009:

By region, unsold inventory jumped in three of the four regions, in terms of the percent increase year-over-year:
  • Midwest: 51,000; +59%
  • South: 272,000 houses; +27%
  • West: 116,000 houses; +29%
  • Northeast: 28,000 houses; unchanged.

Prices must come down at these mortgage rates, and they’re starting to.​

The median price of new single-family houses that were sold in July rose to $439,000, not quite undoing the plunge in June. This was down by $20,000 from the peak in April, whittling down the year-over-year gain to 8.2%, the smallest gain since November 2020. In a moment, we’ll look at the three-month moving average, which gives a clearer picture:

The three-month moving average, which irons out some of the month-to-month ups-and-downs of the median price, fell for the second month in a row, the first such declines since the lockdown months.
Note the crazy price distortions since then. And now with much higher mortgage rates, at those crazy prices, sales volume has collapsed, cancellations have spiked, traffic of prospective buyers has plunged. If builders want to bring in buyers and sell houses, they’ve got to cut prices – and by a lot:

Worst construction-cost inflation ever is rising less crazy-fast as demand plunges.

Over the past two years, spiking demand for new houses triggered astounding spikes in prices and shortages of materials and supplies, combined with a labor shortage that have delayed projects and inflated costs for homebuilders, and they passed those surging costs on to their over-eager customers, no problem, until suddenly customers balk, which is now.
Demand by homebuyers has collapsed by 30% year-over-year to multi-year lows. And homebuilders are throttling back their demand for materials and supplies, and suddenly the crazy price spikes abate.
Construction costs of single-family houses – excluding the cost of land and other non-construction costs – ticked up only 0.4% in July from June, according to separate data the Census Bureau released today. Although that’s still big increase (around 5% annualized), it was by far the slowest increase since November 2020. The month-to-month increases had peaked at over 2% late last year, and in May and June were still at around 1.5%.
This whittled down the year-over-year spike in costs to 16.8%. Beyond the spikes this year, it was still the highest in the data going back to the 1960s. The previous high was in mid-1979 at 14%.
This chart shows the actual construction cost index and the cumulative nature of those price spikes. Note that during Housing Bust 1, construction costs actually fell – and this might be happening again as homebuilders cut back and demand sags.
Note that none of this goes into CPI inflation. The housing costs that enter into CPI are based on rents.

Homebuilder stocks: -25% to -40% year-to-date.

The stocks of homebuilders are down between 25% and 40% year-to-date, despite a powerful summer rally, and have by far out-dropped the S&P 500 Index (-13% year-to-date):
  • Horton: -32%
  • Lennar: -29%
  • PulteGroup: -28%
  • NVR: -29%
  • Taylor Morrison: -25%
  • Meritage: -32%
  • KB Home: -33%
  • Century: -40%
  • LGI Homes: -34%


David Goldsmith

All Powerful Moderator
Staff member

Sentiment sinks deeper as market sidelines buyers and sellers​

Fannie Mae index hit 10-year low after six-month slide​

Consumer outlook keeps dropping as both buyers and sellers face the negatives in the fluctuating housing market.
The Fannie Mae Home Purchase Sentiment Index fell again in August, decreasing 0.8 percentage points last month, the government-sponsored company announced Thursday. The index was at 62 points in August, down 13.7 percentage points year-over-year.

The report marks the sixth straight month of declining sentiment. Perception of the market has been on a downhill slide among both buyers bogged down by rising mortgage rates and sellers discouraged by cooling prices.
More consumers appear to think it’s a good time to buy as the housing market cools. The net share of those saying it’s a good time to buy increased 8 percentage points month-over-month, though only 22 percent think it’s the right time to make a purchase.

If more think it’s a good time to buy, fewer think it’s a good time to sell. Seller sentiment dropped 16 percentage points from July to August. A majority (59 percent), however, still believe it’s a good time to sell.
In addition to sliding sentiment based on current indicators, more respondents aren’t expecting the market to heat up any time soon, as the net share who think home prices will increase in the next year declined by 9 percentage points.

There’s also a growing belief that the mortgage market may have topped out. The net share of those saying mortgage rates will drop in the next year increased by 11 percentage points.

The survey comes as Freddie Mac this week recorded the average 30-year fixed-rate mortgage at 5.89 percent, the highest in 14 years. Rates will likely continue to rise if the Federal Reserve hikes interest rates, which it appears poised to do by the end of the month.
With the frenzied changes unfolding in the housing market, some buyers and sellers may feel too paralyzed to pull the trigger on any deals, instead waiting to see if the market shifts further in their respective favor soon.
“Both homebuyers and home-sellers may be incentivized to remain on the sidelines — homebuyers anticipating home price declines and potential home-sellers not keen to give up their lower, fixed mortgage rate — contributing to a further cooling in home sales through the end of the year,” Fannie Mae senior vice president and chief economist Doug Duncan said in a statement.

David Goldsmith

All Powerful Moderator
Staff member

We’re entering the next stage of the housing market downturn—3 things to expect heading forward​

Back in June, Fed Chair Jerome Powell made it clear: The housing market would go through a “reset.”

“I’d say if you are a homebuyer, somebody or a young person looking to buy a home, you need a bit of a reset. We need to get back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again,” Powell told reporters.
Whenever a central bank moves from monetary easing to monetary tightening, there’s going to be an impact on a rate-sensitive sector like real estate. That impact, of course, is going to be even greater when monetary tightening comes after the asset class—residential real estate—spiked 43% in just over two years. Powell admitted that much in June. However, Powell was noncommittal as to whether the rate shock would push home prices lower.
Fast forward to September, and we no longer need to question if the housing “reset” will affect home prices. Back in June, the U.S. housing market was still just in the early innings of a sharp drop in housing activity. Since, we’ve seen housing activity, including home sales and home construction levels, go much lower. But as data rolls in for August, we now have clear evidence that the housing market downturn has moved beyond that first stage (i.e. a sharp drop in housing activity) and into the second stage (i.e. falling home prices).
“The longer that [mortgage] rates stay elevated, our view is that housing is going to continue to feel it and have this reset mode. And the affordability resetting mechanism right now that has to happen is on [home] prices. And so there are a lot of markets across the country where we’re forecasting that home prices are going to fall double-digits,” Rick Palacios Jr., head of research at John Burns Real Estate Consulting, tells Fortune.
Let’s take a deeper look at the three elements that’ll shift as we move into the second stage of the housing market downturn.

1. The home price correction is spreading.​

As mortgage rates spiked—going from 3.2% to 6.3% this year—industry insiders knew it'd cause a sharp contraction in housing activity. However, many housing bulls thought it wouldn't pull prices down. In March, Zillow went as far as to predict another 17.8% jump in home prices over the coming year.

It's clear that housing bulls got it wrong. Among the 148 regional housing markets tracked by John Burns Real Estate Consulting, 98 housing markets have seen home values fall from their 2022 peaks. Just 50 markets remains at their peak.
In 11 markets, the Burns Home Value Index* has already dropped by more than 5%. That includes a 8.2% drop in San Francisco home values. While it's common for median list prices to drop around this time of year, it's not common for home values or "comps" to fall because of seasonality. Simply put: The home price correction is sharper—and more widespread—than previously thought.
A growing chorus of research firms—including Moody's Analytics, John Burns Real Estate Consulting, Zonda, and Zelman & Associates—expect this home price correction to continue into 2023. Peak-to-trough, Moody's Analytics thinks U.S. home prices could soon fall 5%. In significantly "overvalued" housing markets, Moody's Analytics thinks that price drop could range from 5% to 10%. If a recession manifests, Moody's Analytics predicts those price drops would double. But even that scenario would still be below the peak-to-trough U.S. home price decline of 27% we saw between 2006 and 2012.

There are still some firms that don't think the home price correction—which is driven by an affordability squeeze created by spiked mortgage rates—will carry over into 2023. That includes Zillow. The Seattle-based home listing site acknowledges that 62% of housing markets should see falling home values in the third quarter of 2022. However, Zillow economists predict that only 28.5% of markets are headed for year-over-year declines between August 2022 and August 2023.

2. The housing downturn will soon spread beyond housing.​

On a year-over-year basis, the ongoing housing downturn has seen new home sales and existing home sales fall by 29.6% and 20.2%. Real estate firms like Redfin,, and Compass have already issued layoffs. Homebuilders are calling off projects, while some mortgage lenders are teetering on bankruptcy.
That said, most of the financial pain of the housing downturn has been contained within the real estate industry. That's about to change.
Researchers at Goldman Sachs recently released a paper titled “The Housing Downturn: Further to Fall.” The investment bank forecasts that U.S. housing GDP will drop by 8.9% in 2022 and another 9.2% in 2023. In the lead-up to the Great Recession—which officially started in December 2007—housing GDP fell by 7.4% in 2006 and 21.4% in 2007.
If Goldman Sachs is right, it'll mean the contractions in the U.S. housing market will soon sprawl out into the broader economy. That's not surprising. After all, the Federal Reserve has upped the Federal Funds rate in an attempt to slow the economy.

As home shoppers across the country put their home search on pause it causes homebuilders to pull back. That sees decreased demand for things like refrigerators, lumber, windows, and paint. Those economic contractions should, in theory, help to rein in runaway inflation.
"It [housing] is not the target, but it [housing] is essentially the target," Bill McBride, author of the economics blog Calculated Risk, told Fortune earlier this summer.

3. Sellers are calling timeout.​

As the Pandemic Housing Boom fizzled out this summer, we saw inventory jump across the country. In bubbly markets, like Austin and Boise, that inventory jump was greater than 300% between March and August.
But that inventory spike is already fizzling out.
Active listings on jumped by 106,900 homes in May. That was followed by 102,900 and 128,200 jumps in June and July. However, that slowed in August to just a 31,900 inventory jump. And through the rest of the year, Altos Research predicts inventory will actually fall.

What's going on? For starters, sellers are realizing that buyers are done paying top dollar. Rather than take less, some sellers are simply waiting out the housing downturn.
There's also the rate lock-in effect. The vast majority of outstanding mortgages have rates below 5%—with a big chunk even below 3%. If they sell now, they'd be giving up their historically low mortgage rate. That payment jump is hardly appealing for move-up buyers.
"It's going to be very very hard to persuade people to let go of those insanely low rates," Palacios tells Fortune. While many industry insiders believe tight inventory will help to prevent a housing crash, Palacios says it won't be enough to prevent the home price correction.

David Goldsmith

All Powerful Moderator
Staff member

More homebuilders lower prices as sentiment falls for ninth straight month​

  • Homebuilder sentiment in September fell 3 points to 46 in the National Association of Home Builders/Wells Fargo Housing Market Index. Anything below 50 is considered negative.
  • Nearly a quarter of builders reported lowering prices as rates surged.
  • Higher costs for land, labor and materials have made it harder for builders to lower prices, but they are now being forced to.

More builders are lowering prices for homes as their confidence in the market continues to tumble.
Homebuilder sentiment in September fell 3 points to 46 in the National Association of Home Builders/Wells Fargo Housing Market Index. Anything below 50 is considered negative.
That is the ninth straight month of declines and the lowest level since May of 2014, with the exception of a short-lived drop at the start of the coronavirus pandemic in 2020. Sentiment was at 83 in January of this year, when interest rates were about half of what they are now.

Indeed, builders blame rising rates for their falling sentiment. The average on the 30-year fixed started this year around 3% and then began rising steadily, crossing 6% for a few days in June, according to Mortgage News Daily. It then fell back a bit and almost hit 5% in August, before rising sharply again, back over 6% this month. That made an already pricey housing market even less affordable. The Federal Reserve, meanwhile, is expected to again raise its benchmark rate this week as inflation remains high.
"Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households," said NAHB Chairman Jerry Konter, a homebuilder and developer from Savannah, Georgia.
Nearly a quarter of homebuilders also reported lowering home prices, up from 19% in August, Konter added.
Of the index's three components, current sales conditions dropped 3 points to 54, sales expectations in the next six months fell 1 point to 46 and buyer traffic declined 1 point to 31.
Builders continue to report elevated construction costs, in addition to higher interest rates weighing on their market. Higher costs for land, labor and materials have made it harder for builders to lower prices, but they are now being forced to.
"In this soft market, more than half of the builders in our survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions," said Robert Dietz, chief economist at the NAHB.
On a three-month moving average, sentiment in the Northeast fell 5 points to 51 and also dropped 5 points to 44 in the Midwest. In the South, it slipped 7 points to 56, and in the West, where home prices are highest, sentiment declined 10 points to 41.

David Goldsmith

All Powerful Moderator
Staff member
August Housing Starts: Record Number of Housing Units Under Construction

Housing Starts Increased to 1.575 million Annual Rate in August​

From the Census Bureau: Permits, Starts and Completions
Housing Starts:
Privately‐owned housing starts in August were at a seasonally adjusted annual rate of 1,575,000
. This is 12.2 percent above the revised July estimate of 1,404,000, but is 0.1 percent below the August 2021 rate of 1,576,000. Single‐family housing starts in August were at a rate of 935,000; this is 3.4 percent above the revised July figure of 904,000. The August rate for units in buildings with five units or more was 621,000.
Building Permits:
Privately‐owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 1,517,000. This is 10.0 percent below the revised July rate of 1,685,000 and is 14.4 percent below the August 2021 rate of 1,772,000. Single‐family authorizations in August were at a rate of 899,000; this is 3.5 percent below the revised July figure of 932,000. Authorizations of units in buildings with five units or more were at a rate of 571,000 in August.
emphasis added
The first graph shows single and multi-family housing starts since 2000 (including housing bubble).

Multi-family starts (blue, 2+ units) increased in August compared to July. Multi-family starts were up 33.1% year-over-year in August. Single-family starts (red) increased in August and were down 14.6% year-over-year.

Note that the recent weakness is in single family starts (red).

The second graph shows single and multi-family starts since 1968.

The second graph shows the huge collapse following the housing bubble, and then the eventual recovery. Total housing starts in August were above expectations, however, starts in June and July were revised down, combined.

The third graph shows the month-to-month comparison for total starts between 2021 (blue) and 2022 (red).

Total starts were down 0.1% in August compared to August 2021. Total starts, year-to-date, are up 2.7% compared to the same period in 2021.

Record Number of Housing Units Under Construction

The fourth graph shows housing starts under construction, Seasonally Adjusted (SA).

Red is single family units. Currently there are 812 thousand single family units under construction (SA). This is below the previous four months, and 16 thousand below the peak in April and May. Single family units under construction have peaked since single family starts are now declining. The reason there are so many homes under construction is probably due to supply constraints.

Blue is for 2+ units. Currently there are 890 thousand multi-family units under construction. This is the highest level since February 1974! For multi-family, construction delays are probably also a factor. The completion of these units should help with rent pressure.

Combined, there are 1.702 million units under construction.
This is the all-time record number of units under construction.

Comparing Starts and Completions

Below is a graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12-month rolling total for NSA starts and completions.

The blue line is for multifamily starts and the red line is for multifamily completions. Builders are still starting more multifamily units than they are completing. Multifamily completions (red) should pick up soon.

The last graph shows single family starts and completions. It usually only takes about 6 months between starting a single-family home and completion - so the lines are much closer than for multi-family. The blue line is for single family starts and the red line is for single family completions.

The recent gap between starts and completions is decreasing since builders are now starting fewer single-family units - and completions (red) are increasing.


Total housing starts in August were above consensus expectations, however, starts in June and July, were revised down, combined. The month-to-month increase in August starts was mostly due to multi-family starts. The recent weakness has been for single family starts.

A record number of housing units are under construction due to construction delays, but the number of single-family housing units under construction is now declining.

Homebuilders are reporting that demand is slowing, yet a large number of housing units will be delivered later this year and in early 2023 (with all these units under construction). Yesterday, the National Association of Home Builders (NAHB) reported that builder confidence declined in September, and we should expect starts to decline in coming months.

David Goldsmith

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Home prices are dropping like it’s 2009​

The average home price is down 2% ($8,800) from its June peak nationally
October 3, 2022, 12:43 pm By James Kleimann

Home prices are now posting the biggest monthly declines since January 2009, according to the latest Mortgage Monitor report from Black Knight.
Median home prices in August fell 0.98%, only slightly better than July’s 1.05% monthly decline. The average home price is down 2% ($8,800) from its June peak nationally as we enter the historically slower fall-winter homebuying season.
The housing market has not seen such a significant two-month drop in prices since shortly after the collapse of Lehman Brothers in winter of 2008, Black Knight said on Monday.

Skyrocketing mortgage rates – now in the 7% range for some buyers – and limited inventory have driven mortgage affordability to its lowest levels since the early 1980s, a reversal from the frenetic boom in buying during 2020 and 2021.
With mortgage rates at 6.7% as of Sept. 29, it takes 38.2% of the median household income to make the monthly mortgage payment on the median-priced home bought with a 30-year mortgage and 20% down, Black Knight said. That monthly payment is up $930 from August 2021, a 73% increase.
“Historically low inventory – along with record low interest rates – was one of the key drivers behind U.S. home prices seeing essentially a decade’s worth of appreciation in just two-and-a-half years,” added Ben Graboske, Black Knight’s president of Black Knight data & analytics.

Home prices are beginning to fall from post-pandemic peaks but remain up 12.1% from Aug. 2021 due to the record growth seen in late 2021 and early 2022, Black Knight said in its report. Annual home price growth rates are poised to continue falling in coming months, though it’s unclear where the bottom is.
Much of that depends on how much inventory returns to the market. After seeing an uptick in listings from May through July, inventory levels stalled in August, growing at just 1/10th the rate of recent months. The market grew from just 1.7 months of for-sale inventory to 3.1 months before dropping down to three months in August.
“Right now, prospective sellers are not only coming to grips with falling demand and declining prices due to sharply higher interest rates, but they also have a growing disincentive to give up their own historically low-rate mortgages in this environment,” said Graboske. “Some may be waiting out the market to see if demand – and prices – return in the spring.”
While 20% of markets have seen only marginal declines (less than 1%) so far, a third have experienced drops of 3% or more – including nine where prices have fallen more than 5%, Black Knight researchers found. The sharpest correction was in San Jose (-13%, or, about $203,000), followed by San Francisco (-10.8%, or roughly $137,000) and Seattle (-9.9%, or about $83,000), but other formerly scorching-hot markets have also cooled majorly since June. Las Vegas, Austin, Minneapolis, Washington, D.C., Raleigh and Nashville have all shed 3% of home value in recent months.


David Goldsmith

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Investors are scoring bulk discounts from strapped homebuilders​

Future single-family rentals up to 15% off as traditional buyers pull back​

Builders stuck with a stockpile of extra homes are turning to the boogeyman of residential real estate: investors.
Homebuilders are offering discounted bulk sales of homes to investors, the Wall Street Journal reported. The move comes as rising mortgage rates are sidelining traditional buyers from the market, saddling builders with more inventory than they know what to do with.

In August, homes under construction increased 14 percent year over year, which seemed desirable in a market hamstrung throughout the pandemic by a lack of inventory. But sales were hotter a year ago, when mortgage rates were significantly lower than the 7 percent they’re now approaching. As the market cools, builders need to find different ways to offload new construction homes.
To that end, builders are offering discounts in the range of 10 to 15 percent from estimated retail value, brokers and investors told the outlet. Some are offering as much as 20 percent off for a bulk sale, an attractive option for investors who can save money and energy by keeping holdings close together.

Single-family rental investors pulled back on home purchasing activity in the summer, waiting to see if home prices would start to come down; they haven’t yet, but price growth is slowing. The rising cost of financing was also hampering investors, slowing the likes of KKR & Co.’s My Community Homes, American Homes 4 Rent and Amherst Holdings.
New homes accounted for only 2 percent of investor purchases in July, according to John Burns Real Estate Consulting.

These companies are still eager to be part of the single-family rental market, however, as long as it comes at the right price. Sustained demand and a short supply of homes sparked a boom, making built-to-rent homes the fastest-growing housing sector in the nation. Rents have been on an upward trend, improving investors’ return.
Surging mortgage rates and continued economic uncertainty could endear even more to the rental market in the near future, as financing a home purchase becomes more untenable. Investors scoring discounts on home purchases may wind up reaping even bigger benefits than before.

David Goldsmith

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Homebuilders say they’re on the edge of a steeper downturn as buyers pull back
  • Homebuilders say 2023 is going to bring an even sharper downturn in the market, as high interest rates scare away buyers.
  • Housing starts for single-family homes dropped nearly 19% year over year in September, according to the U.S. Census. Building permits, which are an indicator of future construction, fell 17%.
  • “It is definitely a hard landing for housing,” said one homebuilder in the Denver area.

The once-hot housing market is cooling off at an alarming rate, and some homebuilders say it will only get worse come the new year as new orders dry up.
Fast-rising mortgage rates have caused once-frenzied homebuyers to turn on their heels and become worried about their potential investment and the health of the overall economy.

“There’s this cliff that’s happening in January,” said Gene Myers, CEO of Thrive Homebuilders in the Denver area, which was one of the hottest markets in the years leading up to and through the coronavirus pandemic.
U.S. homebuilders were a major beneficiary of the Covid economy. Record low interest rates, combined with surging demand from consumers looking for more living space, caused a run on housing unlike most had ever seen before. Home prices surged over 40% in just two years, and homebuilders couldn’t meet the orders fast enough. They even slowed sales just to keep pace. All of that is over.
Housing starts for single-family homes dropped nearly 19% year over year in September, according to the U.S. Census. Building permits, which are an indicator of future construction, fell 17%. PulteGroup
, one of the nation’s largest homebuilders, reported its cancelation rate jumped from 15% in the second quarter of this year to 24% in the third.
The public homebuilders that have reported earnings so far showed surprisingly strong results, but that is because much of it is based on a backlog of homes that went under contract last spring. That was before mortgage rates crossed 6% and then 7%.
Now builders are preparing for what’s coming next. Myers said that his company’s balance sheet is incredibly strong right now, thanks to a backlog of homes sold at high prices, but he predicted that the market will be “ugly” by the start of next year.

“It is definitely a hard landing for housing,” he said. “Any hope of a soft landing really evaporated last spring, when it became so clear that our customers who are accustomed to such low mortgage rates just were going to go on strike.”
Myers was around during the last housing crash, which was brought on by a faulty mortgage market where just about anyone, qualified or not, could get a home loan. It caused a massive run on housing, based almost entirely on speculative buying and selling by investors. Single-family housing starts fell a stunning 80% from January 2006 to March 2009, but Myers notes that it was a slower turn compared with what is happening now.
“I think we’re seeing the most abrupt change in the market in my career, and I’ve been around a while,” he said. “I’ve never seen sales just turn off, which for us happened in May.”

Downward spiral​

Barely six months ago, single-family housing starts were still up 10% year over year. That was just before mortgage rates really started to jump quickly. To go from a 10% annual gain in construction to a 19% drop in that time frame is an historically sharp turn.
While sales of newly built homes are falling, prices are still higher compared with a year ago. Much of that has to do with still-inflated prices for labor and materials. Part of the price strength may just be indicative of which homes are selling, namely the more expensive ones. But that may change soon, as well.
Sheryl Palmer, CEO of Arizona-based homebuilder Taylor Morrison
, which just reported strong earnings for its third quarter, said entry-level buyers are clearly struggling. But she also admitted that higher-end buyers are not flooding in the door either anymore.
“When we look at our move-up and our resort lifestyle buyers they absolutely can still afford to buy, but emotionally, you need to have the confidence,” Palmer said Friday on CNBC’s “Mad Money.” “Even at today’s rates, both our FHA and conventional buyers have a great deal of room, but being able to afford it doesn’t mean they have the confidence, given everything that’s going on in the economy today.”

Demand for new homes down 86% since last year

Palmer told analysts on the company’s earnings call that new orders were down “sharply” in September, and that the slowdown has been felt across a wide range of price points, geographies and consumer groups. As a result Taylor Morrison is pulling back on land investment, lowering its pace of new construction starts and offering buyers additional incentives.
Sales of newly built homes dropped below pre-pandemic levels in September, and cancelations are now double what they were a year ago, according to the National Association of Home Builders.
“This will be the first year since 2011 to see a decline for single-family starts,” NAHB Chief Economist Robert Dietz said in a release. “While some analysts have suggested that the housing market is now more ‘balanced,’ the truth is that the homeownership rate will decline in the quarters ahead as higher interest rates and ongoing elevated construction costs continue to price out a large number of prospective buyers.”
Supply of newly built homes remains elevated, unlike in the existing-home market, where listings are still scarce. NAHB reported that one-quarter of builders are now slashing prices.
And that is the big unknown. Prices are cooling down for both new and existing homes, but analysts are divided as to if they will actually show year-to-year declines, and how wide those declines might be. Myers said he has heard talk of a 20% drop in prices for new construction.
“And it sounds really harsh, but when we were looking back, because our construction costs have gone up so rapidly, we only have to dial back a little over a year to be 20% less than we are now,” Myers said. “So to think about, well, we’re just going to go back to 2020 doesn’t sound nearly as crazy as a 20% price correction. But I think it definitely has to happen if we’re going to get velocity back.”

David Goldsmith

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Homebuilder Comments in October: "As negative as I've seen"​

"October was the worst sales month in 12 years. No buyers, no sales."​

CalculatedRisk by Bill McBride
19 min ago

Here are some very negative homebuilder comments from around the country. In October, sales have fallen “off a cliff”.
Homebuilder comments courtesy of Rick Palacios Jr., Director of Research at John Burns Real Estate Consulting (a must follow for housing on twitter!):
Twitter avatar for @RickPalaciosJr
Rick Palacios Jr. @RickPalaciosJr
Home builder commentary from our survey this month was about as negative as I've seen to date. Here's some of the market color that jumped out...

8:53 PM ∙ Nov 9, 2022


#OklahomaCity builder: "Biggest challenge is your customers who just closed their home and see you drop prices by $30,000."
#Jacksonville builder: "Buying land at the top of the market and having to pull every incentive lever to sell is not a recipe for success. We'll cut starts ~60% to 70% in 2023."
#Boston builder: "October was exceptionally weak."
#Harrisburg builder: "October was the worst sales month in 12 years. No buyers, no sales."
#Baltimore builder: "The market is terrible."
#Birmingham builder: "The market is weakening demonstrably."
#Wilmington builder: "The market is falling off a cliff."
#Phoenix builder: "October started strong, then there was a head fake and in the last two weeks things dramatically worsened."
#Austin builder: "Cancellations spiked again in the second half of October."
#Dallas builder: "Traffic has completely dried up. We're spending considerable dollars keeping backlog in place and closing."
#Houston builder: "Anticipating 2023 being off 40% or more from pre-pandemic 2019, and 2019 was a typical standard year for us." THE END

David Goldsmith

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Lennar Offers 5,000 Homes to Investors With Buyer Demand Sliding
Homebuilders are seeking to move inventory by selling discounted subdivisions to rental landlords.

Lennar Corp., one of the biggest US homebuilders, is offering to sell thousands of homes to rental landlords at a time when sales to everyday buyers have slumped.

Lennar is circulating lists of properties to potential acquirers, according to people familiar with the matter, who asked not to be named because the process is private. Many of the properties are located in the Southwest and Southeast, the people said, with the builder giving landlords the chance to acquire entire subdivisions in some cases.

A representative for Lennar said the company offers single-family landlords the chance to buy unsold completed homes, as well as homes that are nearing completion, as part of its normal marketing efforts. The most recent inventory list had about 5,000 homes, the representative said, though the number changes monthly.

The average price of home Lennar sold in its fiscal third quarter was $491,000. That gives the properties currently on offer to landlords a potential value of roughly $2.5 billion, though buyers generally demand significant discounts from retail prices for making bulk purchases.

It has been a turbulent year for builders, who saw frenzied demand for suburban homes slow sharply when mortgage rates soared. Higher borrowing costs pushed homebuyers to cancel contracts, leading builders to abandon deals to acquire land.

Lennar isn’t alone. In recent months, builders have sought bids from rental operators on at least 40,000 homes, said Jeff Cline, executive director of the single-family rental advisory arm of SVN. Many of those properties had been under contract with individual buyers who walked away from purchase agreements. Increasingly, builders are looking to sell one or more subdivisions at a time, Cline said.

Single-family landlords have been eyeing builder inventories for months, with some, like industry giant Invitation Homes Inc. seeking to raise new funds to pounce on opportunities. Transactions have been muted as investors wait for greater clarity on interest rates and for pricing to come down.

Lennar has also raised money to acquire rental houses, tapping Allianz Real Estate and Centerbridge Partners for $1.25 billion in equity commitments in 2021. But Lennar, which plans to spin off a subsidiary that owns and operates single-family rentals and apartment buildings, has been a cautious buyer.

The company sold about 1,000 rental homes in its fiscal third quarter, with most of those properties going to outside investors, rather than Lennar’s single-family rental operation.

“Our program has taken a very disciplined approach to stepping back and waiting for the market to kind of reconcile itself,” Lennar Chairman Stuart Miller said on a September call with investors. “Contrary to what you might have thought, we’re probably selling less to our own program and more to other SFR programs outside of Lennar.”

David Goldsmith

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Home sales tumbled more than 7% in November, the 10th straight month of declines​

  • Home sales declined 7.7% on a monthly basis in November.
  • Sales were down 35.4% year over year, marking the tenth straight month of declines.
  • The median sales price rose 3.5% to $370,700 from a year ago.
Sales of existing homes fell 7.7% in November compared with October, according to the National Association of Realtors.
The seasonally adjusted annualized pace was 4.09 million units. That is weaker than the 4.17 million units housing analysts had predicted, and it was a much deeper fall than usual monthly declines.

Sales were down 35.4% year over year, marking the tenth straight month of declines. That was the weakest pace since November 2010, with the exception of May 2020, when sales fell sharply, albeit briefly, during the early days of the Covid pandemic. In November 2010, the nation was mired in the great recession as well as a foreclosure crisis.
These counts are based on closings, so the contracts were likely signed in September and October, when mortgage rates last peaked before coming down slightly last month. Rates are now about one percentage point lower than they were at the end of October, but still a little more than twice what they were at the start of this year.

"In essence, the residential real estate market was frozen in November, resembling the sales activity seen during the Covid-19 economic lockdowns in 2020," said Lawrence Yun, NAR's chief economist. "The principal factor was the rapid increase in mortgage rates, which hurt housing affordability and reduced incentives for homeowners to list their homes. Plus, available housing inventory remains near historic lows."

At the end of November there were 1.14 million homes for sale, which is an increase of 2.7% from November of last year, but at the current sales pace it represents a still-low 3.3 month supply.
Low supply kept prices higher than a year ago, up 3.5% to a median sale price of $370,700, but those annual gains are shrinking fast, well off the double digit gains seen earlier this year. It is still the highest November price the Realtors have ever recorded, and, at 129 straight months, it is the longest running streak of year-over-year price gains since the realtors began tracking this in 1968. Roughly 23% of homes sold above list price, due to tight supply.
"We have seen home prices come down from their summer peaks over the past five months. At the same time, we have also seen rent growth retreat for 10 consecutive months," wrote George Ratiu, senior economist at in a release. "However, the cost of real estate remains challenging for many households looking for a place to call home, especially as high inflation and still-elevated interest rates have been eroding purchasing power."
Sales decreased in all regions but fell hardest in the West, where prices are the highest, down nearly 46% from a year ago.
Homes sat on the market longer in November, an average 24 days, up from 21 days in October and 18 days in November 2021. Despite the slower market, 61% of homes went under contract in less than a month.
With prices still high and mortgage rates hitting a cyclical peak, first-time buyers remained on the sidelines. They were responsible for 28% of sales in November, which was unchanged from October, and up slightly from 26% in November 2021. Historically first-time buyers make up about 40% of the market. A separate survey from the Realtors put the annual share at 26%, the lowest since they began tracking.
Sales fell across all price categories, but took the steepest dive in the luxury million-dollar-plus category, dropping 41% year-over-year. That sector had seen the biggest gain in the first years of the pandemic.
Mortgage rates have come off their recent highs, but it remains to be seen if it will be enough to offset higher prices.
"The market may be thawing since mortgage rates have fallen for five straight weeks," Yun added. "The average monthly mortgage payment is now almost $200 less than it was several weeks ago when interest rates reached their peak for this year."

David Goldsmith

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Pending sales dip to second lowest on record

Contract signings down for sixth straight month: NAR​

Pending home sales fell to a near record low in November, but the plunge powered by higher borrowing costs and economic uncertainty may not have much further to go.
Pending home sales declined for the sixth consecutive month in November, according to an index by the National Association of Realtors. Contract signings to purchase previously owned homes dropped 4 percent from October, down slightly from the 4.6 percent monthly drop seen in October.
NAR’s forward-looking indicator, which dates back 20 years, measures contract activity compared to 2001 — 100 means activity is equal to that year. In November, the index recorded a score of 73.9, the second-lowest monthly reading in the index’s history.
Year-over-year, pending home sales are down 37.8 percent, likely a result of how much mortgage rates have surged since a year ago. After rates recently surpassed 7 percent amid the Federal Reserve’s inflation-fighting interest rate hikes, however, they’ve hovered closer to 6.5 percent in recent weeks, which could bring sidelined buyers back into the fold.

“There are approximately two months of lag time between mortgage rates and home sales,” NAR chief economist Lawrence Yun said in a statement. “With mortgage rates falling throughout December, home-buying activity should inevitably rebound in the coming months.”

Contract signings in the four regions tracked by NAR all posted month-to-month and year-to-year declines. The Northeast had the biggest monthly decline, falling 7.9 percent. The West only recorded a 0.9 percent drop from October, but the 45.7 percent year-over-year drop was the largest among the regions.

Pending home sales are often seen as an indicator for existing-home sales, though not all contract signings result in a closed sale. Unexpected appraisal values and fickle mortgage rates are among the factors that can lead to a canceled contract.
While prices remained much higher than a year ago, home price growth slowed once again in October. The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index recorded a 9.2 percent gain year-over-year in October, down from a 10.6 percent annual jump in September.

David Goldsmith

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Homebuyer’s remorse: Thousands of Americans are backing out of signed contracts — what you need to know before you cancel a purchase​

Sigrid Forberg
January 9, 2023, 7:00 am

Homebuyer’s remorse: Thousands of Americans are backing out of signed contracts — what you need to know before you cancel a purchase
The housing market is cooling as homebuyers contend with increasing interest rates and high prices — and some are even pulling out after they sign the dotted line.
About 60,000 home purchase agreements fell through in October, according to RedFin. That’s the most on record since the real estate brokerage started tracking that data in 2013.

Deal cancellations and price cuts also hit record highs as prospective buyers moved more tentatively following the biggest mortgage-rate jump in over four decades.
While Redfin noticed a slight decrease in canceled purchase agreements in November, home sales in general dropped to their lowest rates since 2012. Buyers at every stage of the process are clearly having second thoughts about this massive commitment.
Once you’ve made an offer on a home and the seller has accepted it, there are still a few steps before the house is officially yours.

From the time an offer is accepted and when it goes through, you’ll be in a limbo period called “under contract.”
Here’s what you need to know if you decide you want to back out of the deal.

Once you’ve made an offer on a home and the seller has accepted it, there are still a few steps before the house is officially yours.
From the time an offer is accepted and when it goes through, you’ll be in a limbo period called “under contract.”
Here’s what you need to know if you decide you want to back out of the deal.

What does it mean when a house is under contract?​

Making an offer that's accepted is just the middle of a real estate transaction, not the end. And homebuyers can afford to be choosier now as demand and competition softens.

“House hunters today are taking their time and exploring their options, whereas six months ago, they had to act quickly and pull out every stop to compete because homes were selling almost immediately,” says Tzahi Arbeli, a Redfin real estate agent in Las Vegas.
“Homebuyers now will agree to buy a house and be doing the inspection, and then back out because they found another home they love more.”
When you buy a home, this period when you’re under contract allows you to clear any conditions you wrote into the offer, like if you said your bid was contingent on your ability to get financing.
The contract is a legally binding purchase agreement, but the seller is still allowed to show the home, and other potential buyers can prepare backup offers in case the deal falls through.
However, the seller can’t drop out of the contract simply if a better offer than yours comes along.

Can a buyer back out of an accepted offer?​

If you or the seller can’t meet the contract contingencies for the sale, it will be voided and you can back out. Once you sign the contract, you’ll be given a set period of time to clear these contingencies or cancel the transaction.
Common contingency issues would be: not being able to nail down financing; finding major defects during the home inspection; or finding out through the appraisal process that the home’s value doesn’t match the purchase price.
Home inspectors don’t usually look for lead-based paint, evidence of pests, or issues with the roof, sewers or private wells. You’ll need to hire specific inspectors for those issues if you have concerns.

And if your inspector finds evidence of dangerous problems like radon gas, mold or asbestos, additional inspections may be recommended. These can be costly issues to resolve, so it’s best to uncover them before the sale clears.
Closing on a sale also involves doing a title search. If there are any liens or bankruptcies against the property, it may not be possible to transfer the title. The search also will uncover any easements or covenants, conditions and restrictions, commonly known as CC&Rs.
If there are easements and CC&Rs that interfere with your plans for the property, those are grounds for you to back out of the contract. So if an easement interferes with where you’d install a pool or swing set, and the CC&Rs limit what you can do with your yard or how you can enjoy it, you can cancel the deal.

What if the contingencies aren’t met?​

If there are significant issues that come up during the contingency process — like, say, there's water damage, or the roof needs replacing — you can go back to the seller to negotiate. They may agree to come down on the price or fix the issues before closing.
If the seller refuses, it’s within your rights to back out of the deal.
While you likely got preapproval for a loan before making an offer on the home, financing sometimes does fall through. Your financial contingency ensures you’re not on the hook for a loan you can’t afford if you can’t secure a lender.
These are all fairly standard contingencies that will lead a home sale to fall through.
But make sure you’re aware of the timeline for meeting each of your contingencies, because they can vary. You generally have 30 days to secure a loan, but only seven to 14 to have the home inspected.
Be sure to read the fine print to be sure you won’t miss your opportunity to back out gracefully.

What if I don’t have a contingency?​

When you made the offer on the home, you put down a security deposit, known as earnest money. Your earnest money shows the seller that you’re serious about buying the house.
You’ll typically pay between 1% to 5% of the purchase price, but this can shoot up to 10% depending on the market.
Backing out of a sale while you’re under contract without a contingency puts you at risk of losing your earnest money.
And the seller could even take you to court to force you to close on the home, under what’s called "specific action." Winding up in court is less common, but it’s a serious risk.

When is it too late to back out of buying a house?​

After you’ve signed the contract and once the contingency period has passed, it becomes much harder to back out of real estate contracts, especially if the reason is a sudden case of cold feet.
Some states may require you to go into mediation with the seller if you have a serious dispute, in the hopes of keeping the matter out of court.
But once you’ve arrived at this point as a buyer, you’ve made it clear that you’re serious about purchasing the home.
If you need to back out and have good reasons, you should put those in writing to explain things to the seller. Ask your real estate agent to help you with the messaging on your letter.
If you’re still at odds with the seller even after mediation, you may need to bring in a real estate attorney to help you go over your options.
Ultimately, you may lose the money you put up in earnest, especially if you don’t have a good reason for backing out. But if you can no longer afford the home or mortgage, it’s a small price to pay in the short run to avoid an even more expensive issue of foreclosure or bankruptcy down the road.


David Goldsmith

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First time ever more "Built-for-Rent" Units started Quarterly than "Built-for-Sale"

Quarterly Housing Starts and Completions by Purpose and Design​

CalculatedRisk by Bill McBride

Along with the monthly housing starts report for January last week, the Census Bureau released Housing Units Started by Purpose and Design through Q4 2022.

This graph shows the NSA quarterly intent for four start categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and multi-family built for sale.

Single family starts built for sale (red) were down 34% in Q4 2022 compared to Q4 2021. And owner built starts (orange) were down 10% year-over-year. Multi-family built for sale decreased and are still low.

The 'units built for rent' (blue) and were up 15% in Q4 2022 compared to Q4 2021. For the first time since this series started in 1974, there were more units built-for-rent started in Q4 2022 than single family units built-for-sale started.

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NAR: Existing-Home Sales Decreased to 4.00 million SAAR in January​

Median Prices Down 13.2% from Peak in June 2022​

CalculatedRisk by Bill McBride

13 hr ago

From the NAR: Existing-Home Sales Descended 0.7% in January
Existing-home sales fell for the twelfth straight month in January, according to the National Association of Realtors®. Month-over-month sales were mixed among the four major U.S. regions, as the South and West registered increases, while the East and Midwest experienced declines. All regions recorded year-over-year declines.

Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops – slid 0.7% from December 2022 to a seasonally adjusted annual rate of 4.00 million in January. Year-over-year, sales retreated 36.9% (down from 6.34 million in January 2022).
Total housing inventory registered at the end of January was 980,000 units, up 2.1% from December and 15.3% from one year ago (850,000). Unsold inventory sits at a 2.9-month supply at the current sales pace, unchanged from December but up from 1.6 months in January 2022.
emphasis added
The sales rate was below the consensus forecast (due to the change in seasonal factors).

Sales in January (4.00 million SAAR) were down 0.7% from the previous month and were 36.9% below the January 2022 sales rate. Sales were just below the pandemic low of 4.01 million SAAR. This was the lowest sales rate since 2010.

Sales Year-over-Year and Not Seasonally Adjusted (NSA)​

The second graph shows existing home sales by month for 2022 and 2023.

Sales declined 36.9% year-over-year compared to January 2022. This was the seventeenth consecutive month with sales down year-over-year.

The third graph shows existing home sales for each month, Not Seasonally Adjusted (NSA), for a few selected periods. Black and light Purple are the maximum sales per month during the bubble (2005) and the minimum sales during the bust (2008 - 2011). The most recent five years are shown (2019 through 2023).

Sales NSA in January (231,000) were 34.4% below sales in January 2022 (352,000). On an NSA basis, sales were the lowest for January since 2009, and sales were only 6.0% above the record low for January in 2009.

This decrease in sales, NSA, was similar to change in the markets I track each month.

Housing Inventory Increased in January​

The fourth graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 0.99 million in January from 0.96 million in December.

Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The fifth graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory was up 15.3% year-over-year (blue) in January compared to January 2022. This includes some pending sales - and doesn’t match some other measures - and it seems likely that active inventory was up year-over-year much more in January than the NAR is reporting.

Months of supply (red) was unchanged at 2.9 months in January from 2.9 months in December.

Median House Prices​

On prices, the NAR reported:

The median existing-home price3 for all housing types in January was $359,000, an increase of 1.3% from January 2022 ($354,300), as prices climbed in three out of four U.S. regions while falling in the West. This marks 131 consecutive months of year-over-year increases, the longest-running streak on record.
Median prices are distorted by the mix (repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices).

The YoY change in the median price peaked at 25.2% in May 2021 and has now slowed to 1.3%. Note that the median price usually starts falling seasonally in July, so the 2.0% decline in January in the median price was partially seasonal, however the 13.2% decline in the median price over the last seven months has been much larger than the usual seasonal decline.

It is likely the median price will be down year-over-year soon - and the Case-Shiller index will follow.

Existing home sales are reported when the sale closes. So, sales in January were mostly for contracts signed in November and December when mortgage rates had come off the peak in October. Sales are likely near a bottom but might fall further since mortgage rates have increased recently.

Note: January is usually one of the slowest months for closed sales. The reason the seasonally adjusted sales rate was below the consensus forecast was due to a change in the seasonal factors. January 2022 was revised down (due to factor changes) to 6.34 million from 6.49 million. Without the change in seasonal factors, the sales rate would have been above the consensus forecast.