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just any guy says

@Logan - doesn't this graph insinuate that we're in a housing bubble now?

I suppose everyone has their own definition of what a bubble is.

To me a bubble needs speculation demand, this is the worst demand curve ever in U.S. history, so .... no boom.. no bubble and majority of the heat is coming from the fact that there has been a disproportional level of home sales coming from bigger homes.

So, no bubble in my eye, the demand has been weak and there is no speculation happening in housing, especially in new homes

just any guy says

@Logan - doesn't this graph insinuate that we're in a housing bubble now?

If you define a bubble as an irrational bidding up of prices, this is not what is happening now.
What we are seeing is a deliberately maintained scarcity. Housing gets more and more expensive. Only rich people can afford to participate in the market and they compete for what is available. Young and poor people live with parents or roommates. Those who can rent, and even that is expensive.
Prices are not irrational: they reflect the underlying scarcity of housing.
At the same time builders build less than the demand is and focus on the upscale segment. This is what this chart shows.

I guess it truly is different this time.

Heraclitusstudent says

At the same time builders build less than the demand is and focus on the upscale segment. This is what this chart shows.

I am perplexed by the lack of building new homes by the builders. I don't buy the usual excuses of "land shortage" "bureaucracy"

It's always different this time, except when it isn't (every time).

just any guy says

I guess it truly is different this time.

epitaph says

It's always different this time, except when it isn't (every time).

It's not different this time

Mortgage demand is only back to 1998 levels and all loans are very vanilla

New home buyers are even much better qualified than existing home buyers..

Best home buyer profile we all will ever seen in a single cycle

Strategist says

Heraclitusstudent says

At the same time builders build less than the demand is and focus on the upscale segment. This is what this chart shows.

I am perplexed by the lack of building new homes by the builders. I don't buy the usual excuses of "land shortage" "bureaucracy"

I think it is controlled.
They want prices to be high.
They want the mortgage debt to be created.
They want bank balance sheets to be well padded.
They want homeowners to feel rich (but not renters) and spend money they don't have.
This is a system that is destroying the quality of life of millions just to maintain things as they are.

Strategist says

I am perplexed by the lack of building new homes by the builders. I don't buy the usual excuses of "land shortage" "bureaucracy"

Builders are the touchstone of housing demand. It is not like the 60s where they would build phases in the 100s.

Logan Mohtashami says

It's not different this time

Mortgage demand is only back to 1998 levels and all loans are very vanilla

New home buyers are even much better qualified than existing home buyers..

Best home buyer profile we all will ever seen in a single cycle

Then there's something you're not thinking of. Prices at these levels just can't be sustainable.

just any guy says

Then there's something you're not thinking of. Prices at these levels just can't be sustainable.

In a few years we will have a much higher supply of prime age buyers and nothing yet I see where dual income college grads can't buy ...

A better thesis is that the housing inflation can cost sales demand.. but again we are already working from the worst demand curve on record and today...

Mortgage demand is at cycle highs, so, people can still buy homes, but maybe not as much

At some point we need to supply the market with smaller homes.. we can't live off bigger and bigger homes with the positive supply demand curve coming ..

People are looking for 562K tomorrow... as long as the sale growth trend is over 540K with the revisions, which it should be 2016 will be another positive year for demand

Logan Mohtashami says

At some point we need to supply the market with smaller homes

the renovation market is one area that can and will help. lots of smaller affordable houses but they need some work. i don't buy the higher-density line, that's not what people desire in a SFH. so, certain neighborhoods will end up being modernized. this will hopefully fuel a move-up cycle next decade.

landtof says

lots of smaller affordable houses but they need some work.

Existing homes being cheaper will always be the case, my thesis is that the 4 decade run of building bigger and bigger homes has permanently supplied a higher net inflation of housing that can only be addressed if there is a long term reversal of this trend

At current pace in the next decade we will have a median sq ft. build out of over 3,000.

The builders have worked this cycle well because the demand for new homes hasn't been strong nor should it have been, but in next decade they don't have that luxury anymore.

The builders can counter by simply limiting construction to a degree in the next cycle as well.

It all goes back to the statement that I have heard for years now

If builders need to build more homes... what I am hearing ;-) ...... The builders need to build more expensive bigger homes to make housing more affordable but that thesis has terribly failed in the ramp up in construction and the slow and stead drive of construction.

If they push smaller homes, this can really help the supply chain and a few builders are trying this but all have admitted that this isn't the best money maker for them

Logan Mohtashami says

People are looking for 562K tomorrow... as long as the sale growth trend is over 540K with the revisions, which it should be 2016 will be another positive year for demand

592,000 blow out numbers.

Strategist says

592,000 blow out numbers.

This is why I wrote that article earlier

Time for New home sales to show growth

Working from recessionary headline numbers in year 8 of the expansion, these sales are way to low to be calling for peak housing

More important factor, is that revisions were positive... that's what you want to see... !!!

One of the key points I talked this year to my super bearish housing friends

They believed housing was peaking...

What I try to present is that ... when you have 154 Million working people and you have net 35 million of them making good money... New home sales around trend 560K isn't a lot homes to be calling for peak housing..

This is the best data point on why housing has legs and not peaking

Population adjusted data you're 41.8% below 1963 levels and headline is about 0.2% above 1963 levels

Ironman says

Until next month...

4 revision positive this year before August, that means the trend is fine and the only negative revision really came from that 600K print, this year is different than last year

I believe it was April 23, 2016 when I wrote the article "Time for New Home Sales To Show Growth"

Updated data line .. now you can see what I was talking about

I think the UK/US provide more than enough historical data.

Low Wages can only create a "Middle Class" if housing costs are kept to a minimum via subsidized construction for builders to use land to build for modest homeowners.

Ever since the US/UK stopped encouraging affordable housing, real estate costs have skyrocketed far higher than the rate of inflation. The correlation is almost perfect in both countries.

The government AND private industry can make money on it, while providing hundreds of thousands of jobs.

I am driving the Market Urban-ism people nuts with this thesis but none of them were versed in the data on the big home thesis and are trying to convince me that this isn't an issue

Always tell after 3 sentences if a group of people ever bothered to study the data .. then the best is just letting them talk, talk, talk until they realize they're not educated enough in the data lines they profess to be talking about