Pending Home Sales Fall 10%
The NAR has the pending sales numbers. “The Pending Home Sales Index,* based on contracts signed in May, was 10.1 percent lower than May 2005. David Lereah, NAR’s chief economist, said the index appears to be moderating.”
“‘The slight change in pending home sales indicates the market is beginning to level out,’ Lereah said. ‘This is consistent with our forecast, which is showing a soft landing for the housing sector. We are entering the second phase of the transition period from the housing boom, in which sellers are becoming more realistic about their expectations, sales are stabilizing and annual home price appreciation is returning to historic norms.’”
“Regionally, the PHSI in the South was 7.3 percent lower than May 2005. In the Northeast, the index was 7.8 percent below a year ago. The index in the Midwest was 13.6 percent lower than May 2005. The index in the West was 12.9 percent below a year earlier.”
A New York television station looks at why borrowing rates are higher. “Mortgage broker Ellen Bitton wants you to remember that even with the recent rise in mortgage rates, they are still lower than they were five years ago.”
“Luther and Nellie Davis have been following the Fed announcements for a year and a half. Construction on their new home took longer than they expected, so they paid money to lock in the interest rate for nine months. ‘And then after that we paid another $75 to lock in another rate for another six or nine months, and then we gave up locking in rates,’ says Luther.”
“So much for hurrying to beat the rate hikes. And does it really matter? ‘The love affair with real estate and the mortgage business doesn’t end just because interest rates go up or go down. It doesn’t start or finish just because of where interest rates are,’ says Bitton. You can always re-finance.”
Check out the numbers on MBS’s submitted to TOMO today. You have to scroll down to see all of it.
“‘The slight change in pending home sales indicates the market is beginning to level out,’ Lereah said. ‘This is consistent with our forecast, which is showing a soft landing for the housing sector. We are entering the second phase of the transition period from the housing boom, in which sellers are becoming more realistic about their expectations, sales are stabilizing and annual home price appreciation is returning to historic norms.’”
Everything is OK, no problems, keep going. I hate this type of doublespeak.
The NAR created this index because sales are reported well after the deals are agreed upon, and they wanted something more forward looking. It has been falling for many months now. I suppose this months number will show up in July or August closings.
Look for David Liarrhea to become the Martha Stewart of 2008. After all, isn’t the NAR the spokes-organization for a number of publicly-held corporations? And does not David Liarrhea offer materially misleading information that affects their stock prices?
I’m afraid that after metaphorically screwing so many homebuyers, Mr. L. is destined to experience the same thing in prison, albeit in a distinctly more literal way.
Dennis Quattrone anyone?
“So much for hurrying to beat the rate hikes. And does it really matter? ‘The love affair with real estate and the mortgage business doesn’t end just because interest rates go up or go down. It doesn’t start or finish just because of where interest rates are,’ says Bitton. You can always re-finance.”
What a dumb-ass. Not only are you buying at the peak, you aren’t even getting good rates. The degree of irrationality associated with housing is amazing.
Speaking of that, housing inventory is down in Humboldt county, CA…778 from about 792 a week ago. People just can’t stop.
but are sales up? could be that some listings expired at the end of last month
This happened in almost every single market. It’s the end of the quarter. Should fire right back up.
But, I am expecting a lull in inventory increases since many will simply pull their homes and use the doomed, “We’ll wait this short term market drop out” tactic. When they once again decide to market their properties they’ll find that their previous asking price was 15%-20% higher than they could hope to list for…
Yup, here too. But it’s slowly building back up as the realtors get around to relisting or sellers relist with another agent because it’s the agent’s fault their overpriced shitbox isn’t selling.
There was a large drop at the end of the quarter. Look for listings to pick up again this weekend.
that’s what seems to have happened on mls long island - listing went down from about 33k to 32.5k over the weekend and are now rising again.
Listings on HousingTracker for San Diego dropped the last two weeks. Peak was 15008 (why not the real number 22k+?), then 14832 and 14787. I think it’s sellers pulling out, either realizing they missed the peak or that the spring rally didn’t happen.
Looks like lots of expiration happened on June 30.
For boulder, co: June 3 had 720 SFRs, steady ramp to 793 (!) on June 29, back to 774 on July 5.
These games won’t help, they’ll just delay the inevitable.
Yup, I’ve been watching Charlottesville, VA, which was building from 573 listings on realtor.com Oct 2005 to 1047 listings just before the end of June, then down to just over 1000 July 1, and now starting back up again.
BTW for all those of you who remember me from 6 months ago - finally sold my house in Pittsburgh and closed end of June. Was negotiating an offer with a local buyer for well below asking when a transferee from a hot Oregon market blew into town and bought my house for full price after spending
damn, damn, forgot about the less than sign again.
BTW for all those of you who remember me from 6 months ago - finally sold my house in Pittsburgh and closed end of June. Was negotiating an offer with a local buyer for well below asking when a transferee from a hot Oregon market blew into town and bought my house for full price after spending less than 30 minutes in it. Deal closed end of June. Am now renting in Charlottesville and enjoying seeing inventory increase regularly. My rent for a nice house is easily $1k below ownership costs, even with very conservative maintenance estimates. I can wait.
Spoke to a local custom home builder who tells me he is getting calls from crews who live 2 hours away looking for work - they are desperate for anything. He tells me a local builder has 85 properties on the market, half of which were sold, but the buyers walked on their deposits. Market not saturated yet, but everyone is seeing the slowdown.
Interestingly, Virginia-wide May sales are down 14% YOY but Charlottesville May sales are up 6% YOY. However, YTD sales in VA are also down 14% YOY and in CVille are down 1% YOY. I think the blast from DC cratering is going to take another few months to hit our market. Luckily I am a patient man.
I read this blog regularly - thanks to all of your encouraging comments. At times (esp when the damn sales numbers persist in not dropping off) my resolve weakens but always returns when I can see what’s happening across the nation. Thank you all!
Inventory seems to be droppng slightly over the last few weeks in the Boston area. I think there will be a sales rise in June from May, but still below last June, and prices will show another decline. The most expensive houses are not selling. And some listings are being pulled unsold. But inventory still remains at a much higher level than previous years. New England sales are always strongly seasonal no matter what, so once the summer peak is past, and it becomes clear that prices are going down, sales will fall off again fast.
I have noticed this in my city too. Suburbs of Boston. Inventory was hanging tough at 450-460 units for nearly 6 weeks, but abruptly dropped to about 430 in the last week. I believe these are listings being pulled. I think a lot of people must have had the mentality that if it doesn’t sell by July 4th, on to Plan B. Plan B is either a painful price reduction or “wait until the market bounces back”.
I know for a fact this is happening–listings are being pulled. It always happens after July 4, which is considered the start of the dead days of summer for the housing market. The last time we visited open houses, a week or so earlier, we were told the flipped properties we were viewing were available for either sale or rent. They are coming off the market, and will come back on in time to crush next year’s sales even further.
Feb ‘06, Miami inventory stood at 17,359. Today it’s 24,762. At current sales levels, it would take more than a year to clear this glut out… and yet a huge amount of construction is nearing completion and being prepped for closings.
By historic norm he means that home price is starting to crash after a period of unsustainable accelerating gain
‘A buyer’s market’ in Central Valley
COMMUTE COSTS, INTEREST RATES ON THE RISE, SPURRING SLOWDOWN
http://www.mercurynews.com/mld/mercurynews/business/14976554.htm
Nice article- I was raised in the San Joaquin Valley and am perplexed by how high home prices are. I can see how being a bay area bedroom community has pushed up pricing, but $500k plus?! The area is not all that nice- consider that Los Banos, a city mentioned in the story is spanish for “the bathroom”.
Let’s call a spade a spade. The Bay Area does have a lot going for it, but much of the architecture is fifties fugly.
Mortgage broker Ellen Bitton wants you to remember that even with the recent rise in mortgage rates, they are still lower than they were five years ago.”
_______________________________________
This is something that is starting to really piss me off!! I refinanced my home in 1998 to a fixed rate of 6.75%! That same loan today is around 7.00% - SO NO! RATES ARE NOT LOWER THAN THEY WERE 8 YEARS AGO! WAGES ARE FLAT SINCE 1998, HOWEVER, Home prices are up 200%.
200% in the crappy areas. 600-1000% on the coast.
A house that was 200k 5 years ago and is now 600k is a bad ****ing deal at 3%, let alone 7%. Rates aren’t the issue here, prices and affordability are. I’d agree that, historically speaking, 7% is not a bad rate. But a decent rate does not make something that is way over priced a good deal. That’s like going to your local auto dealer and seeing a car you know should retail for 30K priced at 50K and having the salesman argue “But we’re offering an extremely low rate”, like it somehow makes it a good deal.
“But a decent rate does not make something that is way over priced a good deal.”
On our planet, this is true. What you missed is that we have all been temporarily transported to Bizarro World, where all that matters is the monthly payment. The MSM, especially television, have been driving this point home for years now. For example, automobile companies are some of the biggest spenders on television adverts. When was the last time you saw a car commercial that actually stated the price of the product? All they tell you is the promotional twist du jour, and the monthly payment. Endless repetition of this meme from the advertising industry has programmed consumers to not even notice that the actual sale price of the product is missing, and to treat it as irrelevant.
Any day now, I expect my alarm clock to tell me when to go to sleep, and the government to tell me that I must go into debt in order to support the economy. Oh, wait, they already did that for me by selling all of those T-Bonds.
I suspect that the dimensional translation back to the normal world will be much like a failed transporter lock in a Star Trek episode, with millions of consumers stuck in the transporter buffer for ten years while technicians struggle to repair their credit and free them from the netherworld.
Yeah, but 5 years ago prices were a lot more reasonable. These people are idiots.
Why did you not refinance to a 15 year fixed at 4.75% two years ago?
I did in 2003 at 5.25%. I didn’t catch the bottom. But it was close enough for me.
Good job! Glad you got a great rate.
Good post on Lending Insantity today
http://www.oftwominds.com/blog.html
At the end of that flyer flogging a 1% Option Arm: “It could be the phone call that changes your life.”
You bet it could.
I absolutely love that blog…very wise.
First everything was going up - no problem here
Then the “plateau” - no problem here
Now a couple months later 10% decline - is a “slight change”
When will the numbers show DL there is a problem here ???
Right before the congressional hearing on this mess in 2010! He will then die of a massive heartattack!
No, he won’t. If you mean a guilt, worry or stress-induced heart attack it’s not going to happen. To achieve that you first have to have a conscience or a soul with which to feel guilt with. Obviously that’s lacking in his case.
I think the reference was to that Enron guy, Ken Lay. I doubt he had a soul and yet was lucky enough to die just before his sentencing.
Maybe Kenny Boy was haunted by the conscience his Baptist preacher father tried to instill in him during his upbringing.
Maybe. I’m skeptical. I wonder if Kenny-Boy’s (as Dubya fondly referred to him) corpse will be getting an autopsy and a DNA test. With all that $$$$ it might be worth determining whether the dead guy is actually Kenny Lay.
Heh, my associates here at work are suspecting a very similar thing…
Yeah, the simplistic explanation is that it’s not him. You don’t even need to be a conspiracy theorist. With that kind of money it is very easy to “die” while sipping margaritas in the Carribean. He did his best legally… didn’t work… what’s the best remaining option?
To achieve that you first have to have a conscience or a soul with which to feel guilt with.
Ken Lay had neither but still kicked off. Mostl likely stress from the horrible injustice of actually being held accountable…
“When will the numbers show DL there is a problem here ???”
Exactly. If you consider that going through a closing can easily take 30 days, then these numbers might be from late March and April. I don’t know how they calculate their figures, but I would guess that you have to use the closing as the actual sale, not just the agreement. Isn’t spring supposed to be the BIG home selling time? What’s going to happen when they get to July? I think the general consensus is that July 2005 was the peak, and we’ve been heading downhill ever since.
“You can always re-finance.”
No! You can’t! Liar! If you barely qualify at interest rate x%, then you won’t qualify if you want to refinance at (x+1)% later on as rates stagger upwards. So no, you can’t refinance. Even for those who could qualify at a higher rate, why would they? Future refinancing is hardly an option, but the mortgage brokers just can’t seem to get rid of that platitude from their sales talk.
It is the same thing if housing prices fall. You cannot refinance an underwater mortgage (unless you want pay down the difference).
Ellen Bitton wants you to remember that even with the recent rise in mortgage rates, they are still lower than they were five years ago.
And house prices are 100% more . . .
You can always re-finance.
Until you can’t.
I can’t believe this guy thinks a 10% decline is a “slight change in pending home sales .”
To put it in context…if somebody’s 401K is down 10%, then feel like its the end of the world..but when it comes to your biggest illiquid asset with no market mechanism to dump it in a hurry (a la stock) then its just a “slight change.”
Incredible….this David Lerah guy should be hauled into court for giving bad “investment adivce” like Henry Blogget and Jack Grubman.
That isn’t quite the right comparison though because it isn’t prices that dropped 10%, it is the number of sales.
Price declines are happening too, but that’s another (not unrelated) story.
Although a 10% decline is easier to stomach when it’s been preceeded by several hundred percent gains…
I’ve noticed something very unwelcome in one of my favorite sites for market stats in my area. I regularly visit virginiamls.com to get inventory updates. They don’t update everyday, they often have a few days go by between updates. I noticed that they were stuck on July 1 until today. The bad news is the July 1 inventory number reported has changed since a few days ago. Yup, yesterday Fairfax county had July 1, 9037 - now July 1st inventory is 8347.
I noticed the same thing. I also check rentals on Craig’s list which have shot up. My theory is that people are delisting and trying to rent. However, I noticed that since May the inventory number jump around a lot…so we might see a lot of inventory come on-line in the next week or so. That is what happended in the past. I also think there is still pent up demand which result in several dead cat bounces. What’s your theory?
I can’t explain why inventory for the same exact day would be changed, that is either from inaccurate original stats or manipulation to make the data look better on the part of virginiamls.
As for the inventory buildup slowing down I think we are seeing some of the people that have had their houses on the market since early spring giving up and delisting. Some of these people don’t need to move and were looking to make a bonanza and then either trade up, move out of the area, or rent. There is a huge desparity in asking prices between similar properties which can probably be explained by the people that actually have to move versus those that are just trying to make a windfall.
I expect resale inventory to keep increasing through fall, although at a slower rate and dip again in the winter.
I noticed the same thing. I also check rentals on Craig’s list which have shot up. My theory is that people are delisting and trying to rent. However, I noticed that since May the inventory number jump around a lot…so we might see a lot of inventory come on-line in the next week or so. That is what happended in the past. I also think there is still pent up demand which result in several dead cat bounces. What’s your theory?
You’d think me crazy, but I see evidence of price defending here. I thought to myself, who would defend housing prices like stock. They’d have to be ridicusously rich and leveraged and have a motive. Then I realized independent builders probably have 30-40 million “worth” of unsold homes rebuilt here just in a couple of square miles. If they buy up the last remain crap shacks at above market rates — schwing!!
This happened at the same time last year (at least in SF/Bay Area, CA). Inventory started moving up again on Monday, July 11th in 2005. I think it’s the end of month combined with the July 4th holiday.
lunar -
Are there any Y/Y inventory numbers (May? June? I recall that you started tracking April 2005?) from your area you can give us?
I was on vacation from 7/02-7/10 last year (so I’m missing an exact YOY for today), but here are the YOY for 6/30 (sfh/condo combined):
2005
Cupertino 109
Sunnyvale 149
Mountain View 89
Santa Clara County 3634
2006
Cupertino 126
Sunnyvale 186
Mountain View 126
Santa Clara County 5251
I didn’t start tracking Saratoga, Los Gatos, and parts of San Jose until August/September last year. I will post those when I have YOY numbers.
Btw, I’m getting reduced email listings from agent almost daily now. I received a great one today from Mountain View - not only did they reduce the price, but they said the plasma t.v. and Sony surround sound can stay. LOL
Ya know, I would not be surprised to see inventory level off or start trending down in a couple of months. People who have listed their houses only to fish for complete fools willing to grossly overpay should start taking down the signs pretty soon now.
As prices move down, most of the active listings will be people who need to sell now. I’ll bet that most of the rest (who have not already sold out) will try to wait this out and hope for better days.
By next spring, the inventory should be climbing like crazy again as a new batch of FBs join the “need to sell NOW” group. But we should also see a dip between now and then.
And wait until there are much lower comps…the properties that will sell in the next couple of months or so will be at lower prices, hence driving all comps down….so when these “need to sell NOW” people go to re-list in a few months, they are going to be…upset.
On most web sites the May pending sales were reported as a 1.3% increase over the April results. Although I am a bear on housing, this does seem to indicate some stabilization.
On the other hand, another stock research company has just cut most of the builders. This change is based on the expectation that the housing decline will continue through 2007, rather than improving sooner.
http://news.morningstar.com/news/MW/M07/D06/CEF26221-39D7-4C8D-8A15-990DA03075F2.html?pgid=pfsnapshotbt
I agree that the headline should be May pending sales increase 1.3% from April but down 10.1% YoY.
However, we’re in July now. And given the large increases in inventory we’re still seeing “stablizing” probably isn’t the right word here.
ms bitton has strange tastes in lovers…..i think a threesome with hillary and rush limbaugh would be healthier.
You know, if we removed all “extrapolation” from the calculations and did something that required real work and real evidence, such as checking the number of title deeds which were recorded last month in Fairfax, Prince William, Arlington, and Alexandria, I’d bet we get an entirely different number from the one being propounded by the official sources.
Yep , what agency double checks those clowns . The new self serving directions of the NAR/realtors is the “Oh just rent your house until the market turns around “. This will take inventory off the market and be good for the realtors . This is not the right advice to be giving people who truely should sell given there are many signs that it will take a long time for the market to go beyond todays prices .
Knowing that there are so many people who want to sell ,(but went to plan B) , shows you there are many more people wanting out than people wanting in ,even if the inventory goes down .
It’s a bad market went you can’t sell when you need to or want to .
Builder might even turn condos to rentals , than try to turn them back into resale condo conversions again once the market turns again .
So I’m going to call these homes “ghost listings ” which are people just waiting to list the second the market turns up ,(they got a long wait ).
For those interested, I graphed the pending home sales data for the Northeast from 2001-2006, gives a good idea of the trend and seasonality of the data..
Northeast Unadjusted PHS
Grim, your Nov.- Dec. data declines makes one fear the 2006 winter. good stuff.
That’s a great graph. It shows clearly that the largest number of pending sales was March-June 2005, which correspond to actual sales in April-August 2005. Add a year for teaser/suicide loan rates to reset and we’re in April-August 2006; add three months for people who were at the breaking point the day they got the keys to miss mortgage payments and go into foreclosure, and you get July 2006. The first wave of foreclosures of the bubble’s official Biggest Fools begins at the end of this month.
Housing is just beginning to falter. Buyers who entered the market anywhere near the peak or indulged in equity extraction (and there were plenty of them) could find themselves upside down for many years. Lereah claims this is a transition into a soft landing - but it’s actually a perfect storm coming together.
Lereah says “soft landing” so much either:
a) he really believes it OR
b) he knows the truth but hopes everyone else believes it
Just like the wild west in the 1800s, there may be a good old fashion hanging of this guy if this market completely blows. Why does the media always listen to those making ludicrous predictions from those who have the most to lose?
Does the MM actually believe the NAR’s chief economist is the person best suited to predict where housing is headed? Unbelievable.
The floppers couldn’t sell the overpriced dumps so now they are trying to find suckers for their overpriced rentals. When that fails, look out below.
Today’s funnies:
Explained to a rather animated and frustrated client selling their home why they had to pay more than the original loan amount. Ironically, they had their original loan officer phone us, telling us (escrow) that we were wrong with the payoff. THE loan officer that sold her the NEGATIVE AMORT loan. calling us to tell us we were wrong! Oh, the humanity! (was laughing so hard, had tears streaming down my cheeks) This song and dance went on for almost TWO HOURS.
That’s hilarious! OK, maybe not for the client, but… So do you suppose the loan officer (or broker?) doesn’t even know the mechanics and calculations of the loans he’s selling? That’s pretty sad.
Then again, the last guy trying to sell me a mortgage couldn’t even tell me what the adjustable rate was based on, nor what the margin above that benchmark would be. And I sincerely doubt he’d have been able to work out an amortization and tell me what I’d owe in ‘x’ years, even if you gave him an Excel spreadsheet to do it. His job was sales, sales, sales, pure and simple. Used cars, cell phones, and lately, mortgages…
so MANY so-called lenders are really, totally, ridiculously incompetent….like so many in the RE business these days…
the flood waters floated all rats.
I knew a lender who was going to personally pay off a lien (in first position!) for a potential client just so he’d get the deal, which of course, was a 80/20….those guys made a killing on those loans. Didn’t matter to him that perhaps his client had NO BUSINESS buying a house.
Did they need to bring cash to the closing? Or did they pass that baton on to the greater fool that just purchased their PoS?
Thanks for the anecdote. I appreciate your posts from in the trenches.
I can just see a long time escrow guy laughing with tears for 2 hours. Got any videotape?
Thanks
Sounds like perhaps some Loan Officers don’t even fully understand these loans they’ve been peddling?
“So much for hurrying to beat the rate hikes. And does it really matter? ‘The love affair with real estate and the mortgage business doesn’t end just because interest rates go up or go down. It doesn’t start or finish just because of where interest rates are,’ says Bitton. You can always re-finance.”
What a complete moron. And the press is just as clueless. Wasn’t it those rock-bottom interest rates after 9/11/01 that really got the home investing lovefest rolling? And if interest rates don’t matter because you can always refinance, then why doesn’t everyone who gets into a little bit of a financial jam because of the higher interest rate on their Option ARM just go out tomorrow and get a fixed rate loan with a lower monthly payment than the lowest optional payment level on their ARM?
We would love a video, or a cartoon of that ‘today’s funnies’. I am sure there will be several cases. LOL