I think Mr. Awsumb is going to respond, but with sales still very healthy and delays in deliveries this number might confuse for some time. We will continue to watch it.
The crux to me is not whether stats are missing a % of sales but whether that delta is changing - if realtor.com etc just undercounts for-sale by 10%-15% consistently, ok fine, the market is just always less tight than #s state.
But if that delta is rising then ground is changing under our feet and that is a problem.
So - I think that is probably true in certain markets, but not others - and why I track the delta each week (stats will be published tomorrow, but you can see them in previous stacks). But, the narrative has driven a lot of the FOMO. And, if it is 30% higher then we do not have an inventory shortage as many claim.
Thank you for reading, and for the great question. MSACSR comes from the exact same Census report. It's based on their count of completed units for sale, and on sales. But their sales totals don't count cancelations for any reasons and it's based on a seasonly adjusted rate.
Reminds me of when Zoltan Pozsar said the Fed intended to take down inflation by crashing markets to take away the money of the top 20%. He said the Fed had to get rid of the wealth effect.
Thanks for the link to your debate Melody I thought it was really good. I think both you and Logan had good points. You bring up unique info that no one is talking about (pocket listings, new houses not listed, investor speculation). You both had differing views of housing the next few years. Logan sees more of a "permanent" unaffordable US housing market like Canada, Australia, Sweden, etc... Sounds like you Melody think we could see prices fall to bring back affordability.
I am not sure myself where things go. I bought some rentals 2009-2013 at the bottom and those were great investments. But got bearish WAY too soon starting in 2014, and I held back buying more (big mistake), and sold my rentals 2014-2020 (big mistake). So I have been worried about a housing market downturn for years that never seems to come. I tend to lean towards Logans side that we have more of a unhealthy, unaffordable Canadian/Australian type market for years. Unless we have bad job loss recession. Which I don't think we will have. My thoughts on this have changed. For years I thought a "big crash" or "big reset" in the economy, stocks, housing was coming. I'm not nearly as sure anymore.
I think builders have been more cautious this cycle. And of course less subprime lending. FHA and VA are low down loans and have risks. But they are still not zero down stated income like 2005-2007 loans or 580 credit score 100% financing.
Having been in real estate and lending myself since 2000, I think its all changed so much. There are so many more investors and data available now then back even in 2009. Web sites like biggerpockets barely existed back then. Crowdfunding, hedge funds that buy SFR's, SFR reits, etc. Also lenders will never dump REO inventory again like they did in 2008. They will immediately do all kinds of loan mods, delay foreclosures, etc... that will blunt any downturn. The reason prices free fell in 2008 is b/c lenders did not wise up until say mid 2009 and then they started going hard towards just not foreclosing on anyone. And it slowed the foreclosure supply greatly. Lenders had never seen a 2008 type situation before, even in the early 90s or early 80s. But now they have the playbook. Which is extend and pretend and kick the can. Especially since all the residential loans now are fannie/freddie/fha/va....back in 2008 much more "private label" loans. Since all the loans are gov't now - even more reason they won't foreclose on anyone and will kick can. This is another reason a flood of inventory will be blunted.
I also question if we have the skilled construction labor supply to build enough of homes in America anymore. And even though a lot of multifamily is coming online now, high rates are stopping MF developers from putting together new MF projects. This means in a few years MF pipeline will fall. Maybe pushing rents up more again.
Thank you so much! So, I think you may want to wait on making a call on your 2014-2020 decisions. I think you know I'm from the industry and managed the last crisis as well as oversaw originators during this boom up until 2021. I will tell you it took a long time for me to get here, but this article sums up what we are facing in many ways with GSE lending....the underwriting got more stringent, but the assumptions were faulty: https://www.wsj.com/articles/the-student-debt-bubble-fueled-a-housing-bubble-debt-income-obama-fannie-freddie-bd29b05c.
If the GSE Automated Underwriting System they force you to use says "yay" then all is good, but then the GSEs just get to transfer the risk through repurchase requests. It's getting crazy already.
And, with what I've seen on the road, I quickly realized that although the builders thought they learned, they did not learn their lesson.
And, totally agree on loss mit, but this debt fight is going to get interesting. And, if you never watched this, you might enjoy it. https://youtu.be/CYockM1NTRM
I think the fire actually starts in superprime (largely) although we are seeing early distress in all products in my books (FHA/VA/Fannie/Freddie).
And, there are NINJA loans now - they are called DSCR. About 5% of total MBS, but they are really, really not good.
Not trying to convince you, but I would say, keep reading. I think many are going to be surprised.
I think you have a lot of terrific unique insights Melody. And kudo's for you & Logan taking the risk to do a debte. You did a fanstatic job by the way Melody, and came off very professional and articulate. I would love to see more bull/bear debates in many areas of the financial markets. There are almost none of these debates, so I was so exicted to see your debate!
Most podcasts today are really just monologues with the interviwee giving their views without much of a challenge. We could see so many more debates. But I think many analysts are probably afraid to do debates as one side may be made to look bad in the debate. For instance, I would like to see Luke Groman debate lots of people (like Lacy Hunt, Dave Rosenburg, etc...). Because Luke has such strong (and scary!) views! I would like to hear the other side of his views.
Also, I agree there were some shady fha/va loans being done back from 2009-2015 (I got out of residential lending in 2016). I was shocked at the back end DTI's they were letting some of these loans be approved at even way back then (50%!). I thought for sure those FHA/VA loans would default, but they haven't. And those loans were 8-14 years ago. Now those people have huge equity if they held on and didn't sell.
There has also been a ton of "shadow" lending that really took off I would say 2014. Where SOOOOO many new players got into hard money lending. Before 2008 very few people anywhere even knew what "hard money lending" was! Crowdfunding, private debt reits, individuals, etc... have done of ton of private lending this cycle. I'm not sure where this data shows up. This could be a risk factor, who knows. But I have grown weary of thinking this or that was a "risk factor" and predicting any crashes are coming . Because I have been so wrong about this market now for almost 10 yrs! As have soooooo many economic pundits out there. And being a conservative investor since 2014, I have watched stocks and real estate boom despite not really being on that train myself. I got off in 2014....which turns out was WAAAAAY too early!
How do we reconcile this picture of growing unsold new home inventory with this stat that shows months of inventory coming down?
https://fred.stlouisfed.org/series/MSACSR
I think Mr. Awsumb is going to respond, but with sales still very healthy and delays in deliveries this number might confuse for some time. We will continue to watch it.
The crux to me is not whether stats are missing a % of sales but whether that delta is changing - if realtor.com etc just undercounts for-sale by 10%-15% consistently, ok fine, the market is just always less tight than #s state.
But if that delta is rising then ground is changing under our feet and that is a problem.
So - I think that is probably true in certain markets, but not others - and why I track the delta each week (stats will be published tomorrow, but you can see them in previous stacks). But, the narrative has driven a lot of the FOMO. And, if it is 30% higher then we do not have an inventory shortage as many claim.
Certainly “inventory is tight in my location” has become conventional wisdom everywhere.
Thank you for reading, and for the great question. MSACSR comes from the exact same Census report. It's based on their count of completed units for sale, and on sales. But their sales totals don't count cancelations for any reasons and it's based on a seasonly adjusted rate.
Melody answers your question in the piece.
The Fed relies on incomplete info at realtor.com. They are in the stone age of data collection.
Reminds me of when Zoltan Pozsar said the Fed intended to take down inflation by crashing markets to take away the money of the top 20%. He said the Fed had to get rid of the wealth effect.
Thanks for the link to your debate Melody I thought it was really good. I think both you and Logan had good points. You bring up unique info that no one is talking about (pocket listings, new houses not listed, investor speculation). You both had differing views of housing the next few years. Logan sees more of a "permanent" unaffordable US housing market like Canada, Australia, Sweden, etc... Sounds like you Melody think we could see prices fall to bring back affordability.
I am not sure myself where things go. I bought some rentals 2009-2013 at the bottom and those were great investments. But got bearish WAY too soon starting in 2014, and I held back buying more (big mistake), and sold my rentals 2014-2020 (big mistake). So I have been worried about a housing market downturn for years that never seems to come. I tend to lean towards Logans side that we have more of a unhealthy, unaffordable Canadian/Australian type market for years. Unless we have bad job loss recession. Which I don't think we will have. My thoughts on this have changed. For years I thought a "big crash" or "big reset" in the economy, stocks, housing was coming. I'm not nearly as sure anymore.
I think builders have been more cautious this cycle. And of course less subprime lending. FHA and VA are low down loans and have risks. But they are still not zero down stated income like 2005-2007 loans or 580 credit score 100% financing.
Having been in real estate and lending myself since 2000, I think its all changed so much. There are so many more investors and data available now then back even in 2009. Web sites like biggerpockets barely existed back then. Crowdfunding, hedge funds that buy SFR's, SFR reits, etc. Also lenders will never dump REO inventory again like they did in 2008. They will immediately do all kinds of loan mods, delay foreclosures, etc... that will blunt any downturn. The reason prices free fell in 2008 is b/c lenders did not wise up until say mid 2009 and then they started going hard towards just not foreclosing on anyone. And it slowed the foreclosure supply greatly. Lenders had never seen a 2008 type situation before, even in the early 90s or early 80s. But now they have the playbook. Which is extend and pretend and kick the can. Especially since all the residential loans now are fannie/freddie/fha/va....back in 2008 much more "private label" loans. Since all the loans are gov't now - even more reason they won't foreclose on anyone and will kick can. This is another reason a flood of inventory will be blunted.
I also question if we have the skilled construction labor supply to build enough of homes in America anymore. And even though a lot of multifamily is coming online now, high rates are stopping MF developers from putting together new MF projects. This means in a few years MF pipeline will fall. Maybe pushing rents up more again.
Thank you so much! So, I think you may want to wait on making a call on your 2014-2020 decisions. I think you know I'm from the industry and managed the last crisis as well as oversaw originators during this boom up until 2021. I will tell you it took a long time for me to get here, but this article sums up what we are facing in many ways with GSE lending....the underwriting got more stringent, but the assumptions were faulty: https://www.wsj.com/articles/the-student-debt-bubble-fueled-a-housing-bubble-debt-income-obama-fannie-freddie-bd29b05c.
If the GSE Automated Underwriting System they force you to use says "yay" then all is good, but then the GSEs just get to transfer the risk through repurchase requests. It's getting crazy already.
And, with what I've seen on the road, I quickly realized that although the builders thought they learned, they did not learn their lesson.
And, totally agree on loss mit, but this debt fight is going to get interesting. And, if you never watched this, you might enjoy it. https://youtu.be/CYockM1NTRM
I think the fire actually starts in superprime (largely) although we are seeing early distress in all products in my books (FHA/VA/Fannie/Freddie).
And, there are NINJA loans now - they are called DSCR. About 5% of total MBS, but they are really, really not good.
Not trying to convince you, but I would say, keep reading. I think many are going to be surprised.
Thank you again!
I think you have a lot of terrific unique insights Melody. And kudo's for you & Logan taking the risk to do a debte. You did a fanstatic job by the way Melody, and came off very professional and articulate. I would love to see more bull/bear debates in many areas of the financial markets. There are almost none of these debates, so I was so exicted to see your debate!
Most podcasts today are really just monologues with the interviwee giving their views without much of a challenge. We could see so many more debates. But I think many analysts are probably afraid to do debates as one side may be made to look bad in the debate. For instance, I would like to see Luke Groman debate lots of people (like Lacy Hunt, Dave Rosenburg, etc...). Because Luke has such strong (and scary!) views! I would like to hear the other side of his views.
Thank you so much! And, I agree. I wish we could all debate productively a little more. And, if only egos were not so valued.
Also, I agree there were some shady fha/va loans being done back from 2009-2015 (I got out of residential lending in 2016). I was shocked at the back end DTI's they were letting some of these loans be approved at even way back then (50%!). I thought for sure those FHA/VA loans would default, but they haven't. And those loans were 8-14 years ago. Now those people have huge equity if they held on and didn't sell.
There has also been a ton of "shadow" lending that really took off I would say 2014. Where SOOOOO many new players got into hard money lending. Before 2008 very few people anywhere even knew what "hard money lending" was! Crowdfunding, private debt reits, individuals, etc... have done of ton of private lending this cycle. I'm not sure where this data shows up. This could be a risk factor, who knows. But I have grown weary of thinking this or that was a "risk factor" and predicting any crashes are coming . Because I have been so wrong about this market now for almost 10 yrs! As have soooooo many economic pundits out there. And being a conservative investor since 2014, I have watched stocks and real estate boom despite not really being on that train myself. I got off in 2014....which turns out was WAAAAAY too early!