So when’s the housing bubble bursting?

@DC_Dude



Keep hearing bad things about the food in your city


Naw bro, first it's a restaurant in a hotel....I mean it's a very nice big ass new hotel, but still....

I've never been to the restaurant, but it's wayyyy more spots where the food is good.....There's about 10 other spots within 3 blocks of where that hotel is that has good food.....

That's one thing DC has...Plenty of good restaurants EVERYWHERE
 

Census Bureau Revises Away 25% of Pandemic-Era Price Spike of New Single-Family Houses​

by Wolf Richter • May 23, 2024 • 4 Comments

OK, file this away under the category, “Things that drive me nuts.”

By Wolf Richter for WOLF STREET.​

The Census Bureau and the Department of Housing and Urban Development jointly produce the data on new single-family houses: permits, construction starts and completions, inventories at all stages of construction, sales at all stages of construction, median and average contract sales prices, and related data.
Whatever happened during the pandemic in collecting and processing the data, the Census Bureau and HUD decided that the pricing data was totally screwed up and needed to be fixed, and they dramatically revised the sales prices that had been collected during the pandemic.
And today, as part of this, they announced huge revisions to the pricing data going back through 2020. For example, they chopped off $36,000 from the median price at the peak in October 2022, taking it from the old $496,800 to the new-and-improved $460,300.
We look at the three-month moving average because it irons out much of the month-to-month squiggling. The revisions chopped off $38,000 from the three-month moving average of the median price at the peak, taking it from $480,000 to $442,000.

In other words, the revisions unwound $38,000, or 25%, of that $150,000 pandemic-era spike. The spike, based on the old prices went from $330,000 in April 2020, to $480,000 in October 2022.
There were three phases of these revisions:
  • April 2020 through January 2023: All median prices were revised down.
  • February 2023 through December 2023: Median prices were not revised at all.
  • January 2024 through March 2024: All median prices were revised up.
This chart shows the old median prices through March (blue line) and the revised median prices through April (red line), as a three-month moving average.
US-new-house-sales-2024-05-23-median-price-3mma.png

For your amusement, here is the chart with the monthly data, not three-month moving averages:
US-new-house-sales-2024-05-23-median-price.png

The announcement.​

The Census Bureau, when it announced the revisions today, provided some details, including the five items below. Note #4:
  1. “The sales price range groups in Table 2, ‘New Privately‐Owned Houses Sold, by Sales Price’ have been updated to better reflect the current distribution of new home prices.
  2. “New price groupings have also been introduced in our time series file ‘New Houses Sold and For Sale by Price Range.’
  3. “Data between January 2020 and March 2024 have been re‐calculated incorporating any additional data and revisions received since initial publication and re‐released in the new price groupings.
  4. “All tables containing historical median and average sales price data have been revised between January 2020 and March 2024.
  5. “With this release, seasonally adjusted estimates of housing units sold, housing units for sale, and the months’ supply of new housing have been revised back to January 2019.

Data collection was totally screwed up during the pandemic?

This single-family residential data is collected as part of the broader Survey of Construction. The Census Bureau explains the details in the Methodology. It starts with construction permits that are then followed by field staff, including visits to the permit offices. A sample of projects are then followed through various stages of construction, to determine starts, completions, and sales. This data is obtained from builders via surveys:
“The Census field representatives use interviewing software on laptop computers to collect the data. Facsimiles of the computer-based questionnaires are provided to respondents to familiarize them with the survey. These facsimiles show the questions that are asked for housing units in single-family buildings on Form SOC-QI/SF.1 and in multifamily buildings on Form SOC-QI/MF.1….
Then the data has to be compiled and extrapolated to the overall US economy.
Now imagine doing all this in 2020 and on, when people were working from home, or pretending to work from home, when travel and other activities were restricted, when all kinds of shortages and delays and huge cost increases drove the construction industry up the wall, so to speak….
Whatever happened, the Census Bureau and HUD decided that somehow the pricing data got totally screwed up and needed to be fixed, and they revised the figures that were collected during the pandemic. But the sales and inventory data of new single-family houses going back to 2020 were revised in relatively minor ways, compared to the pricing data.
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Why would he need more than this?
 


 








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Secret #2 – The Real Reason House Prices Skyrocketed After Covid


What the Real Estate Industry Won’t Tell You


Investors in Phoenix bought more than TWICE as many homes in 2021 than in 2019.


Live-in home buyers in Phoenix actually bought FEWER homes in 2021 than in 2019.


Live-in home buyers didn’t cause Phoenix home prices to skyrocket. Landlords did.


It looks like investor demand was FAR, FAR more sensitive to the sharply falling interest rates of 2020 and those investors crowded out some primary home buyers.


More Demand = Less Supply. Almost everyone agrees the main culprit that caused our skyrocketing house prices from the second half of 2020 through the first half of 2022 was the extremely low number of houses for sale.


In the metro Phoenix MLS at the end of 2019 (before Covid), 9,500 single-family houses were for sale. Two years later at the end of 2021, only 4,500 single-family houses were for sale in the Phoenix MLS.


We had 5,000 fewer houses for sale – that’s less than half the number of homes for sale – and home prices were skyrocketing.


The real estate industry loves to say the only solution is to build more houses. The industry conveniently ignores the other part of the supply equation – the number of houses sold.


Houses for Sale = (Houses Put Up For Sale) - (Houses Sold).


The supply of houses for sale was so low after Covid because investors bought up so many more houses than usual that they pulled down the supply of houses for sale.


Mathematically, when investors buy more houses, fewer houses are for sale.


Let’s compare normal Phoenix single-family home sales from the MLS in the boom year 2021 to the pre-boom year 2019.


Investor owners bought 6,800 more homes in 2021.


Second home owners bought 2,400 more homes in 2021


Live-in owners bought 2,800 FEWER homes in 2021.


Live-in home buyers didn’t cause house prices to skyrocket. Investors did.


We had 5,000 FEWER single-family houses for sale in the Phoenix MLS at the end of 2021 than at the end of 2019 and that’s what caused home prices to skyrocket.


Phoenix was the hottest real estate market in the country in 2021 but IF investors had bought the same number of houses in 2021 as they did in 2019, by the end of 2021, the number of houses for sale would have been back to 2019 levels and house prices would NOT have increased nearly as much in 2021 and early 2022.


Zoning wasn't the problem.


The biggest reason – by far – for those skyrocketing house prices from the second half of 2020 through the first half of 2022 was the low number of houses for sale, and the biggest reason – by far – for the low number of houses for sale was skyrocketing purchases from investors.


Think of it like an auction. If more people show up at an auction, the sale prices at the auction tend to go up. The supply of things for sale at the auction did NOT change but prices went up anyway. The sale prices increased because the additional buyers bid up prices at the auction.
 


Here is the worst person I’ve dealt with to date: guy goes under contract to buy a 15K SF building. He has 30 days of due diligence. During DD, he signs a tenant for the entire space and collects first, last and security deposit. He proceeds to use those funds as the second PSA deposit- non refundable.

Deal gets to my desk. Borrower can’t show where all the cash to close is coming from (couple million required). Claims a billionaire is his partner but can’t provide any proof. Loan declined. He defaults on PSA, loses deposits and declares bankruptcy. He was also in foreclosure on other properties.

I think about how much I despise this person of ten.
 








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Good information from the guest as he explains the business.


I listened to this episode on the morning drive ...


 
I just looked this place up and the units have a $2,575 monthly HOA fee. Crazy!

Yep, that condo that collapsed is making a bad situation worse.

"When it comes to Florida's condo market, he told ABC Action News that the next three years will be rough.

"The initial hit is going to be painful," he said.

According to Main-Baillie, if they're not already feeling the pinch of rising HOA fees and insurance hikes, many condo owners will soon be affected.

This comes after Senate Bill 154 and Senate Bill 4d were passed in response to the Surfside collapse."


Example









 
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