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Changing homebuyer expectations are slowing the housing market

Home sales each week continue to be at depressed levels. We counted only 59,000 new pending sales this week. Meanwhile, the available inventory of unsold…

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Home sales each week continue to be at depressed levels. We counted only 59,000 new pending sales this week. Meanwhile, the available inventory of unsold homes is growing. This week, inventory grew faster than it did last year at this time. This is alarming because this was the moment last year when the market turned south. This week was the biggest week of inventory increase all year, with inventory growing by over 9,000 single-family homes.

Since inventory is climbing by a notable percentage, we probably have a few more weeks of inventory gains before we hit the top of the curve for the year. It’s not unusual for a little jump in new listings in September. Last year, inventory climbed dramatically for months. This year, inventory is only just starting to increase. This is a trend worth watching. 

What’s happening?

Obviously, mortgage rates have been stubbornly over 7% for a couple of months. There was a psychology change for homebuyers in the late summer. That’s a change in expectation of mortgage rates. Buyers early in 2023 had slightly lower rates than now and were optimistic that mortgage rates would go lower still. At the time, most mortgage rate forecasters were assuming the economy would slow so rates would decline. Also, they thought that the spread between the 10-year bond and the 30-year mortgage would narrow, which would mean mortgage rates would end up closer to 5.5% than to 7.5%. The conventional wisdom was that rates would head lower. 

We’re hearing people imagine 8% mortgage rates. Early in the year, people were buying at 6.5% and imagining 5.5% where they could refinance. Now, you’re looking at 7.5% and imagining 8% or higher. This “higher for longer” conventional wisdom is working its way through the housing market.

I interviewed Dr. Jessica Lautz from the National Association of Realtors for the Altos podcast and we talked about the prospect of 8% mortgage rates. I checked in with Robert Dietz of the Home Builders Association and they’ve raised their outlook on mortgage rates, as well. This change in buyer expectations is adding to the slowness right now. It’s a pretty abrupt change.

There are now 519,000 single-family homes on the market across the U.S. That’s a 1.9% increase from last week. That’s a big increase this late in the year. This reflects a notable slowdown in demand with mortgage rates well over 7% and this change in expectation of future rates. As I mentioned, the 9,000 unit increase in unsold inventory this week was the single biggest increase week all year.  This is an easy way to quantify the decreased demand that goes along with increasing unaffordability. 

Context is important. A 9,000-unit increase is the biggest week all year.

Last year, we were seeing inventory grow by 20,000 or 30,000 units per week. Nine thousand is a lot for September but it’s not a lot in the grand scheme. It shows obvious slowing demand, but is also a reflection of the fact that most of the year we had more buyers than sellers of residential real estate. Total available inventory of unsold single-family homes is still 6% less than last year. It’s more than I expected a few weeks ago, but there’s still not a lot of new supply. 

The rate of sales each week is discouraging

There’s just nothing in the data that shows sales rates increasing from the very low levels we’ve seen all year. The pace of home sales this year has been both demand and supply-constrained. Right now, it’s a demand story. Most of the year, sales rates have been suppressed for lack of supply — not enough homes to buy. That condition has shifted with the cost of money in late summer. 

There were only 59,000 new pending sales of single-family homes in the U.S. this week. That pace of sales remains 10% lower than last year. I was hoping by now the easy year-on-year comparisons would show more sales in Q4 than in Q4 2022 but there’s just no sign of that happening. It’s really now looking at January before the market resets and we see what 2024 has in store for us. 

Slide3-3

There are 345,000 single-family homes in the contract pending stage. That’s 12% fewer than last year. In this chart the height of each bar is the total count of homes in contract. The light portion of the bar are the new transactions each week. Last year, that new sales rate was plummeting each week. There were still 390,000 single-family homes under contract last year mid-September. I’ve been hoping that our pending sales would finally eclipse last fall, but it isn’t getting there. 

Slide4-2

When we look at that new sales rate each week, you can see my disappointment. This is the chart of the new pending sales each week compared with last year at this time. The dark red line is this year. For a while in peak summer it looked like our sales rate would eclipse last year. But then rates surged over 7% and the sales rate responded immediately. Now each week we have 10-12% fewer sales than last year.

You can see in this chart the light red line in October took a big dip last year. That was both seasonal and unusual with a big late year surge in mortgage rates. The only way we end 2023 with more sales than 2022 is if mortgage rates start easing down again and that trend looks durable.

The expectations now are more common that rates aren’t falling, that 8% seems more likely than say 6.5%, and that means a ton to buyers. I always caution that we at Altos do not forecast mortgage rates, and I don’t have quantification of the home buyer sentiment either, this is just speculation on my part based on the information flow I’m starting to see from the people who do forecast mortgage rates. And fact is that we can see significantly fewer buyers in the last couple months. That’s what this chart shows us since July.

Few offers, more price reductions as inventory builds

As inventory builds, with fewer offers, so too must the price reductions climb. Sure enough the were more price cuts this week. Up to 36.6% of the homes on the market have taken a price cut recently from their original list price. See the dark red line here, that’s this year’s curve and in the last couple months the trend has reversed from improving conditions for sellers to weakening conditions for sellers. Remember that the price reductions are a leading indicator of where future sales will complete. 

Slide5-2

There’s a lot of signal in the local markets too. The Texas markets like Austin and San Antonio and even Dallas are the ones where inventory is building and price cuts are climbing. 

Home prices still higher than last year

Home prices meanwhile are still on a different seasonal trajectory from last year. The median price of single family homes in the US is $444,900 now. Home prices are still 1% higher than last year. Those comparisons are about to get easier still. The question is whether weakening demand now brings prices lower as quickly as last fall. My suspicion is no. You can see the slope of the dark red line here. Last year home prices peaked higher than this year, and were ratcheting lower, especially in October and November.

Slide6-2

This year the slope of seasonal price declines has been much more gentle. That implies the year over year home price gains will hold or even improve in the 4th quarter. Though I’d point out that home price gains are less important this year than the total transaction volume. The supply and demand constraints. In order for the market to feel more healthy, we need more transactions. The fact that home prices are up year over year just helps us see that there is no 2008 apocalypse happening. 

The price of the newly listed properties this week popped up a bit. That’s not unusual for mid-September. So I wouldn’t read too much into it. The price of the new listings is more volatile each week. At $399,900 that’s higher than last year at this time, but can bounce down next week. It’s not plummeting, so again, if you have a hypothesis that the housing market must be crashing, if you assume that home prices are crashing, using the leading indicators like the price of the new listings is helpful to confirm or reject that hypothesis. 

Mike Simonsen is president and founder of Altos Research.

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US Dollar Index Higher on JOLTs Data

Hiring was unchanged at around 5.9m (3.7%); total separations, which, according to the Bureau of Labour Statistics (BLS), include quits, layoffs, discharges…

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October 4, 2023

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Hiring was unchanged at around 5.9m (3.7%); total separations, which, according to the Bureau of Labour Statistics (BLS), include quits, layoffs, discharges and other separations, was also little changed at 5.7m (3.6%). The quit rate came in at 3.6m and was almost the same as the previous month at 2.3%. The BLS noted that the number of quits increased in accommodation and food services, finance and insurance, as well as state and local government.

 

Markets were not totally reactive on the back of this release. However, it did initially guide major US equity indices lower and lift the US Dollar Index to fresh YTD pinnacles, pulling price action to within striking distance of resistance on the daily timeframe at 107.61. The release also sent the USD/JPY beyond the ¥150.00 handle for the first time since October 2022 and weighed on the EUR/USD further under monthly support at $1.0516.

 

As seen from the monthly and daily charts below, the US Dollar Index demonstrates room to continue exploring higher levels.

 

 

 

 

 

 

 

 

 

 

 

 

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

 

The post US Dollar Index Higher on JOLTs Data appeared first on LeapRate.

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Crypto Ponzi scheme AirBit: All but one exec now sentenced

AirBit Club co-founder Dos Santos is now the last AirBit defendant not yet sentenced but is scheduled to learn his fate on Oct. 4, 2023.
…

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October 4, 2023

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AirBit Club co-founder Dos Santos is now the last AirBit defendant not yet sentenced but is scheduled to learn his fate on Oct. 4, 2023.

The United States District Court for the Southern District of New York is progressing with the sentencing procedure of key individuals behind the cryptocurrency Ponzi scheme AirBit Club.

The office of the U.S. attorney for New York on Oct. 3 announced the sentencing of three of the five surviving defendants in the AirBit case, including Scott Hughes, Cecilia Millan and Karina Chairez. The sentences came months after all three defendants pleaded guilty to money laundering and other charges in the AirBit case in early 2023.

Hughes, an attorney who allegedly laundered approximately $18 million in AirBit Club fraud proceeds, was sentenced to 18 months in prison. Millan, a senior-level promoter of AirBit Club, was sentenced to five years in prison. Chairez, another senior-level promoter of AirBit Club, was sentenced to one year and one day in prison.

Additionally, Hughes was sentenced to three years of supervised release. Millan and Chairez were also sentenced to three years and three months of supervised release, respectively.

The AirBit Club scheme was launched in late 2015 and was promoted as a “multi-level marketing club” in the cryptocurrency industry. The defendants provided promising presentations to trick investors into thinking that AirBit Club had guaranteed daily returns from crypto mining and trading. But instead of funding AirBit’s promoted crypto operations — which in fact had never been the case — $100 million of investors’ money went to the pockets of its founders and promoters.

Despite some users complaining about withdrawal delays and hidden fees in early 2016, the AirBit Club scheme managed to maintain its fraudulent activity until 2020.

AirBit Club presentation by Cecilia Millan from 2019. Source: YouTube

Announcing the sentences, U.S. attorney Damian Williams stressed that Hughes, Millan and Chairez each played a key role in perpetuating the AirBit Club pyramid scheme.

Related: 5 highlights of Sam Bankman-Fried’s first day of trial

“At the top-tier of promoters, Millan and Chairez for years aggressively solicited investments from and misled hardworking and unsophisticated investors to line their own pockets,” Williams said, adding:

“Today’s sentences send a message that anyone who facilitates cryptocurrency investment schemes — not only those at the very top of the pyramid — will face serious consequences for such crimes.

This comes after AirBit Club co-founder Pablo Rodriguez was sentenced to 12 years in prison in late September 2023. Dos Santos, another co-founder who has pleaded guilty to charges including wire fraud conspiracy, money laundering and bank fraud conspiracy, is scheduled to be sentenced on Oct. 4, 2023.

Santos will be the last defendant to be sentenced out of a total six defendants behind AirBit Club. Jackie Aguilar, who pled guilty in February 2023, reportedly passed away in May, a few weeks prior to sentencing.

Magazine: Blockchain detectives — Mt. Gox collapse saw birth of Chainalysis

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Here’s how Bitcoin investors can trade amid tension surrounding a US gov’t shutdown

Rumors of a U.S. government shutdown impact asset prices, including Bitcoin. Here’s how BTC options traders can capitalize on the 45 day funding deadline….

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October 4, 2023

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Rumors of a U.S. government shutdown impact asset prices, including Bitcoin. Here’s how BTC options traders can capitalize on the 45 day funding deadline.

Bitcoin’s (BTC) price bullish action toward $28,000 on Oct. 1 was partially fueled by the uncertainty regarding the United States debt limit. However, United States President Joe Biden signed the spending bill just hours before the Sept. 30 deadline, avoiding a government shutdown.

Investors now question whether the momentum remains favorable for cryptocurrencies, given that the worst-case political-economic scenario is no longer on the table. However, it is worth noting that this bill merely provides extra funding for the next 45 days, giving more time for the House and Senate to work on their funding plans for 2024.

At first glance, it might be tempting for investors to use futures contracts to go long on Bitcoin. However, there’s a significant risk of getting liquidated if the price suddenly drops, and it’s impossible to predict whether a successful budget discussion down the road will benefit cryptocurrencies.

With the current extension in place, lawmakers now need to find a solution before Nov. 17. According to Margaret Spellings, president and CEO of the Bipartisan Policy Center:

“We can’t continue postponing our fiscal health and negotiating on the brink of government shutdowns and debt defaults.”

There’s no doubt that, despite narrowly avoiding a crisis, the overall risk of an economic recession remains. The U.S. Federal Reserve is grappling with persistent inflation and rising energy prices, factors that have driven the S&P 500 to its lowest point in 110 days and pushed the 10-year Treasury yield to levels not seen since October 2007.

Additionally, oil prices have surged to $90, marking a 27.5% gain in just three months. This upward pressure on inflation is expected to further constrain economic activity.

On Sept. 27, Minneapolis Fed President Neel Kashkari expressed uncertainty about whether interest rates have been raised sufficiently to combat this price growth.

Bitcoin’s initial reaction does not guarantee bullish momentum

Amid all this turmoil, Bitcoin has increased in value, breaking through the $28,000 resistance on Oct. 2. This performance prompted investors to anticipate heightened volatility for the cryptocurrency as the upcoming debt ceiling decision approaches.

Professional traders will avoid directional risk, given the uncertain outcome of the political debate, and opt for the reverse (short) iron butterfly, a limited-risk, limited-profit trading strategy.

Profit/loss estimate. Source: Deribit Position Builder

The prices mentioned were accurate as of Oct. 2, with Bitcoin trading at $28,326. All options listed expire on Oct. 27, but this strategy can also be adapted for different time frames. It’s essential to remember that options have a set expiry date, meaning that the price increase must occur during the defined period.

The recommended neutral-market strategy involves selling 5.4 contracts of $26,000 put options while simultaneously selling 5.4 call options with a $30,000 strike. To complete the trade, one should buy 5.8 contracts of $28,000 call options and an additional five contracts of $28,000 put options.

While a call option grants the buyer the right to acquire an asset, the contract seller assumes a potential negative exposure. To fully shield against market fluctuations, an investor must deposit 0.253 BTC (approximately $7,170), representing the maximum potential loss.

Conviction in volatility is essential, as the risk-reward is reversed

For this investor to profit, Bitcoin’s price must be below $26,630 on Oct. 27 (a decrease of 6%) or above $29,280 (an increase of 3.4%). In essence, the trade offers a potentially substantial profit zone, but losses are 90% higher than potential gains if Bitcoin remains stagnant.

The maximum payout is 0.133 BTC (roughly $3,770). However, if a trader believes that volatility is imminent, a 6% movement within 24 days appears achievable.

It’s important to note that investors have the option to reverse the operation before the options expire, preferably after a substantial Bitcoin price movement. To do this, they should repurchase the two options they had initially sold and sell the two options they had originally bought.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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