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Things just continue to get even worse for the U.S. housing industry. New homes sales have been absolutely plummeting, homebuilder stocks have lost over a third of their value, and existing home sales just posted their biggest decline since 2014.
For years, we had been witnessing a real estate boom in the United States, but now that has officially ended. It is starting to feel like 2008 all over again, and many of those that work in the industry are really starting to freak out. The Federal Reserve has been aggressively raising interest rates, and it is having the exact same effect on the housing industry that it did just before the last recession.
It wasn't supposed to be this way. A supposedly "booming" economy was supposed to lead to a surge in demand for housing, but instead sales of existing homes had an absolutely terrible month in October...
Sales of previously owned U.S. homes posted their largest annual decline since 2014 in October, as the housing market continues to sputter due to higher mortgage rates that are reducing home affordability.
And this certainly was not an anomaly. Existing home sales have been down on a yearly basis for quite some time, and it doesn't appear that things will turn around any time soon.
Just look at what is happening in California. Not too long ago prices were soaring, but now a luxury estate has just sold for more than 50 percent off.
That would have been unthinkable just a few months ago.
Meanwhile, sales of new homes have been depressingly low as well. As a result, homebuilders have been implementing extreme measures in order to get sales. The following comes from Bloomberg...
Ram Konara, a real estate broker in suburban Dallas, is raking in freebies this year: trips to Lake Tahoe and Santa Barbara in California, Cabo San Lucas in Mexico, and a dude ranch in Wyoming. The homebuyers he represents are cashing in, too. They're winning price cuts of more than $100,000, on top of free upgrades such as media rooms, cabinets, and blinds.
This generosity flows from increasingly desperate homebuilders. Hot markets are cooling fast as interest rates rise. In the great housing slowdown of 2018, shoppers are reclaiming the upper hand, after years of soaring prices that placed most inventory out of reach for many families. "Everybody is hungry for the buyers," Konara says.
Unfortunately, buyers are rapidly disappearing from the landscape. One recent survey discovered that just 13 percent of all Americans plan to purchase a home during the next year. That number has declined for three consecutive quarters, and it has now fallen by nearly half over the past 12 months.
But of course Americans still need homes. That hasn't changed at all. In fact, we have millions of young adults that should be buying their first homes right now, but instead record numbers of them are living with Mommy and Daddy.
If you can believe it, one new study just found that a third of all young adults in the United States live with their parents...
More adult millennials are moving home to save money, and its making them more depressed, new research reveals.
And it's making their parents pretty miserable too, according to other recent research.
A full third of young adults in the US live with their parents. In fact, millennial men and women are more likely to live with mom and dad than in any other living arrangement.
Thanks to a lack of good paying jobs, a lot of those young adults simply cannot afford to buy homes.
And as the middle class disintegrates, the number of Americans that are homeless just continues to rise.
Just consider these numbers...
In Seattle, the number of "unsheltered" homeless counted on a single night in January jumped 15 percent this year from 2017--a period when the value of Amazon.com Inc., one of the city's dominant employers, rose 68 percent, to $675 billion. In California, home to Apple, Facebook, and Google, some 134,000 people were homeless during the annual census for the Department of Housing and Urban Development in January last year, a 14 percent jump from 2016. About two-thirds of them were unsheltered, the highest rate in the nation.
At least 10 cities on the West Coast have declared states of emergency in recent years. San Diego and Tacoma, Wash., recently responded by erecting tents fit for disaster relief areas to provide shelter for their homeless. Seattle and Sacramento may be next.
More than half a million Americans are homeless right now, and all of them could use homes.
So it isn't as if we have too many homes in America. We have plenty of people that could fill all of the homes that already exist, but our broken system is not able to connect those people with homes.
In order to have a healthy housing industry, we need a thriving middle class, and right now the middle class is shrinking. Most American families are barely scraping by from month to month, and debt delinquencies are on the rise.
In fact, credit card debt delinquencies at small banks are now even higher than they were during the last recession...
In the third quarter, the "delinquency rate" on credit-card loan balances at commercial banks other than the largest 100 banks - so the delinquency rate at the 4,705 smaller banks in the US - spiked to 6.2%. This exceeds the peak during the Financial Crisis for these banks (5.9%).
The credit-card "charge-off rate" at these banks, at 7.4% in the third quarter, has now been above 7% for five quarters in a row. During the peak of the Financial Crisis, the charge-off rate for these banks was above 7% four quarters, and not in a row, with a peak of 8.9%.
Most Americans seem to believe that the problems that caused the last crisis were fixed, but that never happened. They simply patched together the old system and inflated the bubbles bigger than ever before. As a result, we have a giant mess on our hands now.
What we are doing now is simply not working, and as the U.S. economy continues to fall apart hopefully that will become increasingly apparent to everyone.