A Historic Housing Disconnect Is Forcing Prices Down

When new homes start selling at a discount to re-sale houses, it’s time to sit up and pay attention. Apollo Global Management’s Chief Economist Torsten Slok noted the anomaly in a recent note , the first time it’s happened in more than five decades.

Competition to attract buyers is fierce out there. The data on relative prices understate the dynamic because homebuilders have largely relied on mortgage-rate buydowns to move property in recent years, an effective discount of several percentage points that isn’t reflected in the nominal sales price. Existing home sales data, on the other hand, only track successful transactions, ignoring the growing numbers of disappointed would-be sellers.