The seasonally adjusted annual pace of new single-family home sales in the U.S. dropped to 384,000 in March, down 14.5 percent from the 449,000 pace as measured in February and 13.3 percent lower on a year-over-year basis. At the same time, the inventory of new single-family homes for sale in the U.S. is up 25 percent, year-over-year.

The pace of new single-family home sales as measured in March has averaged 656,000 over the past 50 years and peaked at 1,328,000 in 2005.

28 thoughts on “New Home Sales Tumble While Inventory Jumps”
  1. There is also a flight to quality here in SF. Only the prime listings (based on location or quality)are selling over asking. They days of everything selling over asking seem to be on hold. I’m seeing lots of under bids on so-so listings these days.

  2. UPDATE: While the months of supply, a factor of both inventory levels and sales, is up 42.9 percent year-over-year, the number of new homes for sale is up 25 percent, since updated above.

  3. I think the bull case for lower value homes outside hot metros like SF is that potential millenial household formation continues with each passing day.
    I remember a recent quote on the order of 1.1mm+ new households per year average over the past 10 years. If we are running at 3-400K new homes per year and 300k new apartments (2012), there is some sort of demand accruing, or at a minimum, a lot of frustration accruing for parents (grandparents?) with full houses.
    New buyer purchasing power will ultimately come from jobs, and until employment really starts to kick back in, we are going to continue to enjoy these lower borrowing rates for longer than people forecast.
    Also, we need to radically change how politicians and lenders sell the merits of student loan debt to the public and to underage kids. That’s a debate for another time and comment section I readily acknowledge.

  4. Eddy, are you really paying attention to middle of the road type listings such as SFRs in the Sunset and condos in the Richmond, or even Excelsior or Oceanside? Because decent properties in those areas are selling for over asking regularly. Whatever “over asking” might mean or not.

  5. Well…well…well I guess this means all those Hedge funds have stopped buying homes.
    Housing recovery…..and I believe in the tooth fairy too.
    I’d be betting on falling interest rates before I’d put any money on a true housing recovery. True nation wide unemployment will remain at or above 6.5% for awhile longer.
    And here is why.
    Anecdotally, I spoke with two small business owners the other day, one on the West coast and one on the East coast.
    Each had weathered the “Great Recession” intact.
    They both tell me they have recovered and their business has improved. Each one said they are doing more business with higher profit margins…but with less employees! Much less!
    Neither had any plans to do any future hiring….zip…Nada. Both stated, “regulatory issues” and “government interference” are their reasons for not hiring. They both said, “they would rather give up expanding or taking on new projects than hire new employees”.
    So until these small business owners start hiring I wouldn’t be holding my breath for any “housing recovery”.

  6. “all those Hedge funds have stopped buying homes”
    They never bought in San Francisco, but they bought a lot in Sacramento. And you are right, they have stopped. Interestingly, it seems many have learned that landlording SFR property can be a monumental pain in the rear. If you are only trying to squeeze out 6% yield, you may be better off acting as a lender, so thinks Blackstone. See namelink.

  7. @soccermom
    “B2R’s products are tailored to serve investors with portfolios of five to five hundred homes nationwide.”
    Still going to be hard to sell those products to the unemployed.
    I’v read that BS and other Heggees are tanking due to renters fleeing with unpaid rent due. Their model of 6% return is now looking more like -6% in some areas of the country.
    Again, no jobs no recovery and no way to pay the rent.

  8. I think they went into it knowing that, but the prices have risen to the point where squeezing out that 6% yield isn’t so easy.
    From IBD, earlier this month: Will Big Investors Buy More Single-Family Rental Homes?:

    Real estate investment trusts, hedge funds and private equity firms have snapped up 200,000 distressed homes and turned them into rentals over the past few years, hoping to generate returns via yearly cash yields north of 6% and long-term home-price appreciation.

    …Even with fresh coffers of cash, big single-family landlords have acknowledged that they’ll need to adjust acquisition strategies in light of the improving housing market.

    Property researcher CoreLogic notes that U.S. home prices notched a 24th month of year-over-year gains with February’s 12.2% rise.

    Landlords can still buy homes under replacement cost in some areas. But after their buying flurry of recent years, most big operators now focus on operations and management — prepping houses for renters and increasing occupancy.

    Some REITs have already witnessed hefty price appreciation in certain markets, but REIT rules make them hold the homes for two years before disposal…

    On a year-end earnings conference call in March, Silver Bay executives noted that the supply of cheap homes in its Western markets had all but dried up and that they would look in Florida, Texas and Atlanta. American Residential plans to “drill deeper” for deals…where it wants to build critical mass, Schmitz says.

    Emphasis added.
    Personally, and just out of curiosity, I’d love to know what kind of return is being paid out to ABS investors buying into these rental income streams that have been securitized.

  9. tipster, is that you?
    The depressed morose tone is a dead giveaway.
    This is a recovery. Real Estate has done its job and now other sectors are picking up. The virtuous circle is in full speed. If we compare it with the 90s, we’re in the period that was called “jobless recovery” (94-96?) but that was actually the ramp up of many sectors prior to a boom. Companies were rebuilding their balance sheets and thought they could do without hiring people. They were proven wrong.
    Compared to other western nations, our recovery is pretty solid. Europeans have sacrificed their young for the sake of “fiscal responsibility” when everyone knows now that the only way countries get out of debt is through growth, not austerity. We are really really lucky.

  10. It has to be Tipster. Way, way too many shibboleths for it not to be.
    “Anecdotally, I spoke with two small business owners”
    “Neither had any plans to do any future hiring….zip…Nada.”
    etc. etc.
    Tipster, how did that
    “anyone who buys in SF right now is a complete idiot” 2011 mantra work out…?

  11. I mostly agree with KeepItUp’s point.
    Until the employment situation improves, we are likely to have sideways prices and low interest rates in non-hot-metro (sf) markets.

  12. What ru eddy, another clueless realaturd? You don’t know what you’re talking about. Priced anything in D10 in the last 18 months? Over. Asking. Big. Time.

  13. In my “real world” company I have had the best 3 months in many years … on the Real Estate side of my world, supply has all but vanished and I am no longer actively looking for properties or deals. I still took about a million-dollars in profit over the past two years, so I am not unhappy. The party’s over and the easy money is gone… and so am I.
    It’s much easier to make money doing real work these days.

  14. Agree with soccer mom- flyover states neutral until job growth.
    Also agree heggies don’t know WTF they’re doing managing tons of SFH’s. Big question is, will they dump their inventory and cause price depression? These schmucks could easily cut their losses and do that, and that’ll be bad for those markets.
    Probably won’t effect ess eff though, so why should I really care? OTOH that scenario will probably prolong low interest rates, so that works to my acquisition mode advantage. OK, I care…a little.

  15. “I remember a recent quote on the order of 1.1mm+ new households per year average over the past 10 years.”
    That could have been a result of strong economic conditions. Household formation has dropped sharply recently. And price wise, there’s just a limit to how much of peoples income can go towards housing.
    “At the same time, the inventory of new single-family homes for sale in the U.S. is up 25 percent, year-over-year.”
    There’s some potential for feedback here onto employment. A chuck of the unemployment in the recession was in the construction sector. If new home inventory goes up too much, builders will slow building which causes construction employment to drop.
    “Each one said they are doing more business with higher profit margins…but with less employees!”
    At some point, businesses will find new things to do which require new people. But there has been a long running trend of jobs being eliminated during dips and not retuning in subsequent booms.
    “Interestingly, it seems many have learned that landlording SFR property can be a monumental pain in the rear.”
    I wonder a bit if they ever had a serious plan to be long term landlords. Buy low, sell high seems like more their MO. And if you google a bit you can get a taste of the ridiculous deals that were had buying property in bulk from banks, GSE’s, funds and the like a few years back.

  16. “That could have been a result of strong economic conditions.”
    Household formation is (has been until recently) very closely tied to population growth, not economic activity (see namelink).
    “I wonder a bit if they ever had a serious plan to be long term landlords.”
    I don’t think any institutional money that was raised specifically to buy SFH RE has started selling yet. They are still landlording. I’m speaking from my familiarity with the Sacramento market, but the institutional money there bought lots of homes for cash, under $200K. The purchase side of that sector of the market has slowed down. If those same houses come to market for sale, you will read about it (‘Big investors depress home values’).
    Price increases were getting out of hand in Sacramento until this time last year (May 2013) when the bond market got religion on ‘taper talk’ for the withdrawal of QE bond purchases by the Fed. Since then, there has been a much more even balance between buyers and sellers with 30 Year rates in the mid 4’s and not low 3’s. And institutional buyers have bowed out.

  17. @truth, the sales volume in SF is such that its not that hard to read the data and see the broad trends in the week to week numbers. So yes, I’ve looked at pretty much all areas of the city. You are correct that the outer areas are seeing lots of activity and overbids are still common.
    FYI, SF agents price listings to get overbids. So I don’t attribute much to overbids other than its a sign when agents have lost touch with buyers propensity to accurately “price” homes.
    Nice work lol! Again.

  18. @truth, i was unintentionally confusing. sorry about that.
    @pam, as clarified above, i do not disagree with d10 and other “outer” and historically “non-prime” markets. My original comment is more about the higher end listings that have been up up up for the last 40 months. Further to the point of the last “bubble” that was fueled in part by relaxed lending standards, and creative neg-am mortgage schemes, this current run up is being driven by insane rents and buyers seeking out homes pretty much anywhere with a heartbeat. Only question is what is going to happen long term. Are these D10 buyers going to get stuck holding the bag if/when the market pops? Or will the demand in SF hold strong enough to turn these outer areas into more sought-after and “primey”?

  19. Tipster bullish on tech stocks and housing prices???
    Anyone know when the next lock up period ends for some of those IPO’s like Twit—-er?
    My guess, volume and price rises accordingly once those newly minted Twits cash out.
    Posted by: Keepitup at February 14, 2014 7:23 PM
    Tipster flipping condos???
    Me thinks not.

  20. @anon
    Son, you got to get out of the bubble. It’s a whole other world outside of SFBA.
    SF is a anomaly.
    Unemployment in SF is about to drop below the 2000 mark. Less than 4%.
    Of course “affordable housing is $1.4M”
    Job growth in SF is exponential. Intern making $5~6K a month….”Interns”!
    Heggy’s don’t look at markets like SFBA. They look at the Central valley CA, Atlanta GA,Jacksonville Fl, and other middle economy markets. Flat job growth or shrinking job markets.
    Bubble land is off the charts. SF is a one of a kind market….second thought….Obamaland in D.C. is off the charts too. Driven mostly by big time lobbyist pond scum.
    Neither SF or DC are heggy friendly markets.
    Tip…Invest in Gold, guns and ammo….
    Supreme’s just ruled today…”it’s OK for the cops to pull you over, if you just flipped off the guy driving behind you and he called in a tip to CHP”. Once pulled over they can search your vehicle for contraband on suspicion of a “tip”.

  21. Eddy- ok, thx for clarifying.
    Sorry I got pissy. Have the folks staying with me. Not the requisite 2-3 days, but 10 frickin days! Just going a bit batty. Don’t take it personally 🙂 cheers.

  22. “folks staying with me . . . 10 frickin days” – ouch, in my book, you have a license to rant all you want!
    Back to the big picture – we had a really surprising and remarkable run-up in housing prices over the last two years. In SF and nationwide, trend was the same. The 2010-2011 lows were so low that some climb back up was inevitable, but I don’t think many (or anyone) called such enormous and quick price gains. This has really done wonders for the typical household balance sheet. Very good. But it looks like prices (in both SF and nationwide) have now hit a point where the laws of economics say they just can’t go up much more, or perhaps at all, in the near term. Hence the sales slow-down. Supply and demand . . . and incomes . . . come into play. Unless the unemployment rate substantially falls or incomes substantially rise (usually those go hand in hand) housing price gains should moderate. Already have. Silly stuff like NINJA loans could prime the pump like in 2005, but that won’t happen.

  23. anon,
    1 – Never say never. Banks are slowly going to be starved of their bread and butter for 5 years now: borrow at 0% and lend at 4+%. In addition they have swamped the market with cheap mortgages and there is very little growth left except expanding the number of qualifying borrowers. Banks WILL go back to some level of “safe” subprime. They will give us the reason that the last crisis made everyone much more responsible. Since they will also end up saturating the market of the “safe” subprime, they’ll expand little by little. Price growth will bring back more greed, more creative underwriting and less oversight. Rule of bubbles: we will never learn.
    2 – 2010-2011 was not really cheap per se in SF. rent-vs-own was either perfectly balanced or slightly towards owning. But rent increases in 2011-2013 changed all that. I wish I had known in advance, I would have bought 3 times what I bought. Now I have to hunt for bargains over the pond.
    3 – “laws of economics say they just can’t go up much more”. In any rational market, yes. If 200 houses are for sale and you have 1000 buyers, then the top 200 buyers will define pricing. My bet is that these 200 have funny money in their hands, more than we think. But maybe I am wrong and they’ll start developing some rational behavior. Yeah right.

  24. Every day I read the comments section hoping tipster will one day return. I miss the guy (gal?).
    Hedge fund investor Einhorn is calling a tech bubble, mortgage standards are reportedly being loosened, and other anecdotal data like this leads me to think this is not an aberration. Unfortunately, if this bubble does pop, my tech-related job will probably go with it.

  25. I followed tipster when I was a bear, but then he totally lost me when he went on rambling the same thing over and over again even when confronted with evidence of a recovery and a SF RE boom. That’s the mythical broken clock personified. Maybe he’s waiting for the right time to pounce (with much I Told You Sos) or maybe he’s finally gotten happy pills for what he has. At least LMRiM had the internal fortitude to switch gears and seek greener pastures.

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