August Housing Data - LA/Bayarea stats
Kuppam, Sudheer K
Please see below. This is with QE which is going away soon.
Sudheer
Managing Director, Asia Pacific
Vice President, Intel Corporation
m: +1 408 332 4036 / +91 990 145 5913
Admin.Asst.: Angel Mary
angel....@intel.com
m: +91 990 201 6849
The Data
August is prime, buying and selling month with people closing deals in order to get moved before school starts. There is no painting these data a pretty color.
With supply rising sharply YoY statewide, obviously this isn't a "supply problem". Why would demand increase with house prices more expensive on a monthly payment basis that in 2006?
1) August Bay Area Demand Destruction firmly rooted. Key Counties down 18% to 20% YoY.
Weakest August in four years, before Twist and $4.5 trillion in QE.
2) August SoCal Demand Destruction has become parasitic across all regions. Key counties down 19% to 23% YoY.
3) CA houses far more expensive today than in 2006 using the popular loan programs of each era.
In CA, although house prices are 19% below the 2006 peak, the monthly payment is 16% greater and income needed to qualify is 18% more. On a more apples to apples bases, to buy the 2006 priced house using today's 4% 30-year fixed rate loan, the monthly payment is 54% greater and income needed to qualify 49% more.
Leading Indicating California, Las Vegas & Phoenix Look Like Housing Bubbles
Source: www.MHanson.com
View Chart »View in New Window »
4) Popular thesis about housing shortage doesn't hold water; millions of "excess houses" have been built since 2008
The data herein refute the idea of a housing "shortage" created by demographics, formation, or end-user demand.
Given that single and multi-family rental supply is more fungible with for-sale supply and more available than since before the great crash, total available "end-user" housing supply of "shelter" is substantially higher than commonly thought. One can easily make the argument that when factoring in the surge in available rentals that month's supply is 30% to 50% greater than the 6 and 5.5 months reported.
And why do people think that "6 months supply" is "normal"? With 30% stuck or effectively stuck, more people "choosing" to rent than ever before, hundreds of thousands of single-family detached houses for rent, more multi-family rentals coming to market than in years, and for rent and for sale never more fungible there doesn't need to be 6 months supply for sale. Perhaps 3-months is the new normal...less structural demand for houses and tons more single and multi-family rental = less supply of houses for sale required.
Item 1 is the mainstream way of looking at supply, demand and housing shortages, or surpluses. By their math, over the past 5 years we have under-produced demand by 1.522 million units.
But, Item 2 is the real housing market math, which includes adjustments for the post-crash era, such as lack of demolition and "vacant" short sales and foreclosures, which after rehab act just like newly built homes to macro supply.