by Calculated Risk on 1/27/2014 03:25:00 PM

Here are two graphs I haven't for some time ...

As part of the new home sales report, the Census Bureau reported the number of homes sold by price and the average and median prices.

From the Census Bureau: "The median sales price of new houses sold in December 2013 was $270,200; the average sales price was $311,400."

The following graph shows the median and average new home prices.

Click on graph for larger image.

During the bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales. With fewer foreclosures now, it appears the builders have moved to higher price points.

The average price in 2013 was $320,900, above the previous high of $313,600 in 2007. The median price in 2013 was $265,800, above the previous high of $247,900 in 2009.

The second graph shows the percent of new home sales by price. At the peak of the housing bubble, almost 40% of new homes were sold for more than $300K - and over 20% were sold for over $400K.

The percent of home over $300K declined to 20% in January 2009. Now it has rebounded to around 39%. And less than 10% were under $150K in 2013.

Earlier on New Home Sales:
• New Home Sales at 414,000 Annual Rate in December
• New Home Sales: Weak Finish, Solid Growth in 2013

by Calculated Risk on 1/27/2014 11:35:00 AM

Earlier: New Home Sales at 414,000 Annual Rate in December

Although sales in December were weak, the Census Bureau reported annual sales were up 16.4% from 2012.  This was the highest level for sales since 2008, but still the sixth worst year on record.

Sales would have been higher in 2013, except some homebuilders were land constrained (not enough entitled land), and many homebuilders pushed prices sacrificing a little volume.  Still a 16% annual increase in sales is solid growth.

This table shows the annual sales rate for the last ten years.

Annual New Home Sales
Year	Sales (000s)	Change in Sales
2004	1,203	10.8%
2005	1,283	6.7%
2006	1,051	-18.1%
2007	776	-26.2%
2008	485	-37.5%
2009	375	-22.7%
2010	323	-13.9%
2011	306	-5.3%
2012	368	20.3%
2013	428	16.4%

Even with the sharp increase in sales over the last two years, 2013 was the sixth worst year for new home sales since 1963. 

The sales rate was only lower than 2013 in the worst housing bust years of 2009 through 2012, and the worst year of early '80s recession (1982).

Worst Years for New Home Sales since 1963
Rank	Year	New Home Sales (000s)
1	2011	306
2	2010	323
3	2012	368
4	2009	375
5	1982	412
6	2013	428
7	1981	436
8	1969	448
9	1966	461
10	1970	485
11	2008	485

Based on estimates of household formation and demographics, I expect sales to increase to 750 to 800 thousand over the next several years - substantially higher than the 428 thousand sales in 2013.  This suggests significant upside over the next several years.   So I expect the housing recovery to continue.

Note: Inventories of completed and "under construction" homes are still historically low. The Census Bureau reported 40 thousand completed homes for sale, just above the record low set in June 2013. And there were 97 thousand homes "under construction" in December, well below the median of 185 thousand over the last 40 years. So there are no concerns about too much inventory (inventory is probably too low in some areas).

And here is another update to the "distressing gap" graph that I first started posting over four years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next few years.

Click on graph for larger image.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through December 2013. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. The flood of distressed sales kept existing home sales elevated, and depressed new home sales since builders weren't able to compete with the low prices of all the foreclosed properties.

I expect existing home sales to decline some (distressed sales will slowly decline and be partially offset by more conventional sales).  And I expect this gap to close - mostly from an increase in new home sales.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

by Calculated Risk on 1/27/2014 10:00:00 AM

The Census Bureau reports New Home Sales in December were at a seasonally adjusted annual rate (SAAR) of 414 thousand.

November sales were revised down from 464 thousand to 445 thousand, and October sales were revised down from 474 thousand to 463 thousand.  

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Sales of new single-family houses in December 2013 were at a seasonally adjusted annual rate of 414,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 7.0 percent below the revised November rate of 445,000, but is 4.5 percent above the December 2012 estimate of 396,000.

An estimated 428,000 new homes were sold in 2013. This is 16.4 percent above the 2012 figure of 368,000.

Click on graph for larger image in graph gallery.


Even with the increase this year, new home sales are still near the bottom for previous recessions.

The second graph shows New Home Months of Supply.

The months of supply increased in December to 5.0 months from 4.7 months in November.

The all time record was 12.1 months of supply in January 2009.

This is now in the normal range (less than 6 months supply is normal).

"The seasonally adjusted estimate of new houses for sale at the end of December was 171,000. This represents a supply of 5.0 months at the current sales rate."

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is near the record low. The combined total of completed and under construction is still very low.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In December 2013 (red column), 28 thousand new homes were sold (NSA). Last year 28 thousand homes were also sold in December. The high for December was 87 thousand in 2005, and the low for December was 23 thousand in 1966 and 2010.



This was below expectations of 450,000 sales in December, and there were downward revisions to prior months.


I'll have more later today - but this was a weak ending to a solid year. 

by Calculated Risk on 1/26/2014 08:38:00 PM

From the WSJ: States Weigh New Plans for Revenue Windfalls

Wisconsin Gov. Scott Walker and New York Gov. Andrew Cuomo are pushing for tax cuts as collections rise, while putting money into job-training and prekindergarten programs, respectively. In Georgia, Gov. Nathan Deal is proposing the largest increase in K-12 school funding since the recession to mark what he called the end of the "deep freeze," while Missouri Gov. Jay Nixon is calling for a boost in K-12 spending and holding tuition steady at state colleges.

The improving fiscal picture is coming in an election year in many places, which is further animating debates over whether to restore recession-era budget cuts, fund new programs or reduce taxes. Some governors or legislators want to use the money as a cushion against likely swings in income-tax collections or to address mounting pension and health-care costs.

The states are just starting to see surpluses, so the correct initial policy is to pay down debt and restore some funding to severely cut programs. 

Monday:
• At 10:00 AM ET, the New Home Sales report for December from the Census Bureau. The consensus is for a decrease in sales to 450 thousand Seasonally Adjusted Annual Rate (SAAR) in December from 464 thousand in November.

• At 10:00 AM, the Dallas Fed Manufacturing Survey for January. The consensus is a reading of 5.0, up from 3.1 in December (above zero is expansion).

Weekend:
• Schedule for Week of January 26th

• FOMC Preview: More Tapering

The Nikkei is down about 2.5%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are down 2 and DOW futures are down 20 (fair value).

Oil prices have declined with WTI futures at $97.12 per barrel and Brent at $107.87 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.27 per gallon (about the same as a year ago).  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 1/26/2014 07:15:00 PM

Unfortunately "debt ceiling" sounds virtuous, but it isn't - it is actually a question of "paying the bills".   And Congress will "pay the bills".

As I pointed last January, a poker analogy is that the GOP is bluffing into the best possible hand - and everyone knows it.  They will have to fold, and everything they say is just political posturing.

Senator McConnell said today that he intends to fold and not go "all in" with his bluff:

"[W]e’re never going to default. [House Speaker John Boehner] and I have made that clear.”

Note: There are certain politicians who think it is OK to not pay the bills as long as the U.S. makes interest and principal payments on the debt.  That is crazy talk.  There is a name for people who don't pay their bills: deadbeats.  If politicians don't pay their personal bills, they are deadbeats.  But if they stop the government from paying the bills, we are all deadbeats.  And there will be serious economic consequences for not paying the bills on time.  The consequences will build over time, but in a few months, not "paying the bills" will ripple through the entire economy.

Last year I pointed out that the election impact of a partial government shutdown would probably be minimal.  BUT if Congress stopped paying the bills, people would remember.  It was Republican Senator Mitch McConnell who said in 2011, if the debt ceiling isn't raised the "Republican brand" would become toxic and synonymous with fiscal irresponsibility.

 So it won't happen; Congress will pay the bills.  No worries.