Freddie Mac Economist: Housing Dip is a 'Mental Recession'

December was a cold month for home sales around the country as well as Las Vegas. The Wall Street Journal reported sales nationwide were the weakest since 2015. Sales were down 10.3 percent from December 2017. The Journal blames the choppy stock market and the government shut down. Then there’s the nagging lack of affordable product and higher mortgage rates (that have since fallen).

Wolf Richter writes,

But this rising supply is still the wrong supply – it’s too darn expensive after years of rampant price increases, as NAR report said, “there is still a lack of adequate inventory on the lower-priced points and too many in upper-priced points.”
The market, if allowed to do its job, will fix that problem by bringing prices down across the board. And ever so gradually, averaged out across the country – with prices still soaring in some markets but falling in others – this is starting to happen.

“We’re in a mental recession,” chief economist at Freddie Mac Sam Khater told the Journal (presumably with a straight face). “It’s a constant stream of negative headlines for a couple of months…it wears on you.”

Laura Kasisto and Sarah Chaney write,

December’s drop “is much more precipitous than we thought,” said Cheryl Young, a senior economist at Trulia, a housing-data firm. She said the data help confirm the “housing market’s postrecession zenith has come and gone.”

“Zenith has come and gone,” is a harsh assessment. It doesn’t sound like Ms. Young believes this is just a pause that refreshes the housing market.

Here in Las Vegas, Dennis and Andrew Smith report a Y-o-Y dip of 17 percent in resale closings in December. The LV market changed dramatically in Q4 2018 with listings and days on the market growing rapidly while the median list price flattened out.

Home Builders Research January 2019 Vol 375

Smith and son preach no doom and gloom. They contend the Las Vegas market is normalizing and that builders are being careful not to over do it this time. However, their month newsletter, The Las Vegas Housing Market Letter, has a couple charts which depict troubling trends: falling net sales and falling traffic. And just as the XHB homebuilders ETF peaked in January of last year, Sales peaked in Q1 of 2018 and have fallen steadily since.