Housing bubble 2.0? New and existing home sales drop at same time prices reach record highs
Since the only thing the Federal Reserve knows how to do is print money and create asset bubbles, it should come as no surprise that nine years after the bursting of the last housing bubble, the economy has achieved success in the creation of another one. ¬†And as data comes out for the month of April showing slumping sales in both new and existing homes, the contradiction to the this data is in the fact that home prices have soared to record highs.
Supply and demand no longer compute in the Fed’s idea of economic policy.
New home sales fell 73k in April, with the¬†Median new home price falling 3.8% y/y to $309,200.
Following yesterday’s collapse in new home sales, NAR reports that¬†existing home sales in April also disappointed – dropping 2.3%¬†(and March revised lower). This drop happens as¬†median home prices spiked 6.0% YoY to record highs¬†as sales declines are blamed once again on a lack of supply (forget affordability?).
- Existing-home sales at 5.57m, vs est. of 5.65m
- March at 5.7m; revised from 5.71m
- Existing-home sales fell 2.3% after rising 4.2% prior month
- 4.2 months supply in April vs. 3.8 in March
- Inventory rose 7.2% to 1.93m homes
- 1st-time buyers 34% of total sales;¬†all cash 21%; investors 15%
Distressed sales 5% of total sales – Zerohedge
Ironically, one has to ask the question of what data the Fed is really looking at as they conduct their ongoing policy of raising interest rates when it is quite obvious that the economy is turning downward in both GDP, and here also with home sales.
The biggest driver to this new bubble was by far the number of foreign buyers purchasing real estate overseas over the past eight years. ¬†And as countries like Canada adopt new laws imposing massive tax penalties on foreigners, and governments in Asia begin to implement capital controls to stem the flow of capital flight, April’s housing data could be signalling the end of this decade’s housing bubble, or it could force central banks to reverse their policies in the attempt to avoid the stigma of history repeating itself.
Kenneth Schortgen Jr¬†is¬†a writer for The Daily Economist, Secretsofthefed.com,¬†Roguemoney.net, and Viral Liberty, and hosts¬†the popular youtube podcast on Mondays, Wednesdays and Fridays.¬†Ken can also¬†be heard Wednesday afternoons giving an weekly economic report on the¬†Angel Clark radio show.