Bloomberg Interview: Are The HomeBuilders In Trouble?

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Today I was interviewed on Bloomberg for my take on the new home sales data and national home prices.

My interview on Bloomberg:

https://www.bloomberg.com/news/audio/2019-06-26/home-builders-may-be-in-trouble-for-decades-mohtashami-radio

On the new home sales market for 2019. First and foremost, the new home sales market is still beating my estimates for this year, and the critical housing data line of monthly supply staying below 6.5 months on a 3-month moving average is still intact.

From Fred:
https://fred.stlouisfed.org/series/MSACSR

June Monthly Supply

Even with the recent miss in new home sales, we are still trending above my key 640,000 sales line, which means everything is ok in builders land.

More on that subject  here

https://loganmohtashami.com/2019/06/25/new-home-sales-still-beating-my-estimates/

For those who have followed my work over the years, they would know that I have taken a much different approach toward housing starts than the industry. I have always stayed true to my thesis that we will never see housing starts hit 1,500,000 this decade because demand simply wouldn’t ever warrant it. In the years 2020-2024 that would be a more appropriate time to see 1,500,000 total housing starts. The only variable that could change that would be the timing of the next recession.

This is the new home sales data in this expansion. This happened with these facts.

– Longest Job expansion ever recorded in history
– Longest economic expansion ever recorded in history
– Most massive job openings print ever recorded in history
– Mortgage rates really under 5% for the most part since early 2011

This is all we could muster.

June New home sales

Housing permits have stalled for 29 months now.

From Fred:

https://fred.stlouisfed.org/series/PERMIT

June permits ST

More on that subject here

https://loganmohtashami.com/2019/06/18/housing-permits-stalled-29-months/

At this stage of our economic history, the builders simply need a lot more consistent new home sales to really feel comfortable in aggressively expanding production. Their biggest competition is the massive existing home sales market that will always have a supply, cheaper home, and a geographical advantage over the builders for a while.  The most significant demographic patch we have in America are ages 25-31, they’re about to hit their first time home buyer median age. However, the median home buyer age for a new home is 52, not 32. So while we have a solid first-time homeowner profile in this long expansion and a massive swarm of people coming into their home buyer age. Not all of them are going to be buying more expensive bigger new homes compared to cheaper older ones.

From the NAR:

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Just be mindful of that going out in the next decade, demographics for housing is going to get a lot better in the next decade but doesn’t necessarily mean a boom in sales. However, we are really working from low levels not only in sales, but it starts as well. That might be the best bullish thesis for the builders going out.

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2019/06/26/new-home-sales-down-7-8-in-may

June new home sales adj pop

June Starts + Permits adj

Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page https://www.facebook.com/Logan.Mohtashami