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November 30, 2018 | Dallas and West Coast Ground Zero for Next Housing Bust

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
The U.S. housing boom is not ending, it’s over. Dallas and the west coast are in the spotlight.

Recent housing data has been downright miserable. New home sales fell through the floor and existing home sales had a string of six consecutive declines. That trend broke last month but it won’t last.

The pending home sales index for October is down a very steep 2.6%. The lowest Econoday guess was -0.5% with the consensus unchanged.

The Wall Street Journal reports The U.S. Housing Boom Is Coming to an End, Starting in Dallas.

A half-hour drive straight north from downtown Dallas sits one of the fastest-growing counties in the country. Cotton fields have been replaced with Toyota’s new North American headquarters, a Dallas Cowboys training facility and a sand-colored shopping strip with a Tesla dealership and a three-story food hall.

Yet even with the booming growth, Dallas’s once vibrant housing market is sputtering. In the high-end subdivisions in the suburb of Frisco, builders are cutting prices on new homes by up to $150,000. On one street alone, $4 million of new homes sat empty on a visit earlier this month. Some home builders are so desperate to attract interest they are offering agents the chance to win Louis Vuitton handbags or Super Bowl tickets with round-trip airfare, if their clients buy a home. Yet fresh-baked cookies sit uneaten at sparsely attended open houses.

Dallas has been the “canary in the mine shaft” this housing cycle, said Paige Shipp, regional director for Metrostudy, a consultant to home builders. Homes are taking longer to sell, bidding wars are rarer and price cuts are more common as buyers absorb the impact of higher rates.

Inventory Change and Valuations

Builder Speculation

Two days ago I commented Builder Speculation: Supply of New Homes for Sale Surges to 7.4 Months.

Completed Homes for Sale

DFWRealEstate commented to my post “There were no consequences for those who created the last catastrophe, so it’s not surprising to see a repeat of something similar.”

SMF commented “I’ve been in construction for almost 30 years in California. After the bubble, I worked on far more residential projects than my prior years. This housing explosion ended in 2007/2008. During the last few years, we’ve been involved in even more residential projects than in any prior time period. Way overbuilt, again. No one learned the lessons of a decade ago.”

Most Splendid Housing Bubbles

Wolf Richter at Wolf Street discusses The Most Splendid Housing Bubbles in America Deflate.

Case-Shiller National

Now let’s check out some real gems.

Case-Shiller Dallas

Case-Shiller Seattle

Case-Shiller San Francisco

Wolf has a series of 10 charts that inquiring minds may wish to check out.

Party Over in The Hamptons

The Wall Street Journal reports The Hamptons Home Market Cools.

The Hamptons, the chain of moneyed oceanfront villages on Long Island’s Eastern tip, are considered a highly desirable place to be—unless you’re a home seller.

“Every block has a ‘For Sale’ sign,” said Robert Hohmann, who has been trying to move his five-bedroom Southampton house for the past two years. First priced at $3.7 million, the roughly 5,200-square-foot home with a swimming pool is now listed for $2.999 million with Frank and Dawn Bodenchak of Sotheby’s International Realty.

The Hamptons saw a dramatic drop in activity in the third quarter, with home sales plummeting 13% to 448 from 517 in the same period last year, according to a Douglas Elliman Real Estate market report. That is the third consecutive quarterly decline, said the report’s preparer, appraiser Jonathan Miller, who said he hasn’t seen such a scenario since 2008. Meanwhile, the number of luxury listings (those priced at the top 10% of the market) surged to 452—the highest level in seven years.

Housing Bubble Two

I believe we’ve proven the Fed re-blew the housing bubble.

They do not see it. Nor does the Fed see the stock market bubble or the junk bond bubble.

Powell is Blind

On Wednesday, I noted Lovey-Dovey Interpretation of Powell Speech Sends Stocks Flying.

In his speech conclusion, Powell offered these lines: “Eternal vigilance is the price of financial stability. We will publish these reports regularly as part of our vigilance.”

I repeat my comment: Eternal vigilance my ass. These alleged wizards could not spot a flamingo in a pen full of turkeys.

Mike “Mish” Shedlock

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November 30th, 2018

Posted In: Mish Talk

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