Housing boom is over?

[tsptalk]

Housing boom is over as new home sales fall to pandemic low

Sales of new single family homes fell to an annualized rate of 676,000, 6.6% below May’s rate of 724,000 and 19.4% below the June 2020 level of 839,000.

The median price of a newly built home in June rose just 6% from June 2020

The inventory of new homes for sale jumped from a 5.5-month supply in May to a 6.3-month supply in June. Last fall, it sat at a low of just 3.5 months.

https://www.cnbc.com/2021/07/26/housing-boom-is-over-as-new-home-sales-fall-to-pandemic-low.html

 

[Bullitt]

Zillow performed a rug pull last night in announcing they were exiting the home buying business. Total shock to everyone on the call and the stock is paying for it. Down 10% yesterday, down 15% this morning.

Huge earnings miss as they're selling some 7,000 homes for losses that were purchased in overpriced markets. 25% of their workforce will be laid off. From the call below:

Fundamentally, we have been unable to predict future pricing of homes to a level of accuracy that makes this a safe business to be in. We hadn't modeled this kind of pricing market nor supply market to even be possible when we got the business going. What it boils down to is our inability to have confidence in pricing in the future, enough confidence to put our own capital at risk that we don't have to.

 

[flalaw97]

I think it is more likely just that the market has burned people out and they are giving up on putting in twenty offers over list and still not getting the house. So perhaps a bit of stabilization? I think a 6 month supply of homes is considered optimal and we are coming back to that now in some places. https://www.marketwatch.com/picks/m...ome-prices-in-the-next-few-months-01635260708

 

[bmneveu]

I'm listing my house in 3 months. Just need it to hold out for at least that much longer...

 

[Bullitt]

On the call, the CEO Barton said it was mostly a tech problem with Zillow algorithms overpricing homes in the future - ie: projecting recent history into distant future. Much of this was probably due to the COVID lockdown which did drive prices higher.

Long term there still remains the labor issue with home building, and that should keep a steady bid under home prices. It just won't be like watching TSLA stock anymore with "Zestimates".

...the need to forecast the price of homes accurately three to six months into the future. We used historical data and countless simulations to test this belief. We set unit economic targets that required us to stay within plus or minus 200 basis points in breakeven, holding ourselves accountable to these levels publicly with you all.

We have been unable to accurately forecast future home prices at different times in both directions by much more than we modeled as possible. Put simply, our observed error rate has been far more volatile than we ever expected possible and makes us look far more like a leveraged housing trader than the market maker we set out to be. We could blame this outsized volatility on exogenous black swan events, tweak our models based on what we've learned and press on. But based on our experience to-date, it would be naïve to assume unpredictable price forecasting and disruption events will not happen in the future.