Record Price Drop, Inventory “Good Thing”: NAR
The October existing home sales numbers are out. “The price of existing homes sold in October fell for the third straight month and posted the biggest drop on record, according to an industry trade group report. The number of homes sold in the month is down 11.5 percent from the pace of sales a year earlier which led to the glut of homes on the market rising once again to a record 3.9 million, up 1.9 percent from September, and 34.4 percent from a year earlier.”
“The median price for a home sold dropped to $221,000 in October, a decline of 3.5 percent from a year ago. That was the biggest year-over-year price decline on record. It marked the third straight month that home prices have fallen compared to the same period a year ago, the longest stretch of such declines on record.”
“David Lereah, NAR’s chief economist, said market fundamentals are improving. ‘The present level of home sales demonstrates some confidence in the market, but sales are lower than sustainable due to psychological factors,’ he said.”
“NAR President Pat Vredevoogd Combs said sellers in most of the country are doing what it takes to attract buyers. ‘With the exception of parts of the West, sellers are cutting their price enough to encourage sales,’ said Combs. ‘About 10 percent of the country is experiencing economic weakness, and a fourth of the nation, areas that had the biggest boom, is in a correction that will take longer to balance.’”
“Regionally, existing-home sales in the West were 18.9 percent lower than a year earlier. The median price in the West was $340,000, down 0.6 percent from October 2005. Existing-home sales in the Midwest were 0.2 percent lower than a year ago. The median price in the Midwest was $170,000, which is 1.2 percent below October 2005.”
“Existing-home sales in the Northeast were 9.8 percent below October 2005. The median existing-home price in the Northeast was $254,000, down 5.2 percent from a year earlier.”
“Prices fell in all regions, with the South posting the largest year-over-year decline, a 6.7 percent decrease.”
“‘As expected, existing-home sales appear to be stabilizing, fingers and toes crossed,’ said Lereah. Falling prices are ‘a good thing,’ Lereah said. ‘Sellers are cutting their price enough to encourage sales,’ said Combs.”
“Sales of condos dropped 4.8% to 778,000. Median sales prices are down 5.3% in the past year to $214,300. Condo sales are down 14.5% in the past year. The inventory of unsold condos rose to 9.1 months. ‘That’s a segment of the marketplace that’s experiencing some pain,’ Lereah said.”
Interesting that the NAR left the south off the press release. This post will be updated if neccesary.
From the Atlanta Constitution today:
http://tinyurl.com/wee39
The columnist seems to have it almost right, re the dark clouds, but read the BS retorts from the responding RE broker.
The main stream media is proclaiming housing sales are up!
http://www.marketwatch.com/news/story/rise-existing-home-sales-first-since/story.aspx?guid=%7B553B8779%2D45AD%2D4616%2DB20A%2D17CF6BA8D90C%7D&siteId=
WTF? Cheerleaders!
Yeah, NPR mentioned the increase in sales this morning, but said nothing about the price declines.
Actually, the MarketWatch article stated inventories were increasing and prices falling faster than at any time in history on the second line of the article… A friend of mine bought an 1800 sq ft house on a large lot in a small PNW town five years ago for $140K…..Due to a health problem, had to move closer to Seattle, and sold in less than a month… for $165K…. Great house with an equally great price… Sold in a heartbeat, as opposed to pricing it north of 250K, where it would have languished like so many others… Caveat: the location here is 115 miles north of Portland, OR….and a touch less from the Puget Sound, so hardly a stellar example, beyond that of old-fashioned pricing.
“Actually, the MarketWatch article stated inventories were increasing and prices falling faster than at any time in history on the second line of the article”
Exactly!!! What a piece of overt manipulation and cheerleading!! Right under the head line “…housing sales… up” is:” Sales are down 11.5% from October 2005’s 7.05 million pace”
WTF??????
Just goes to show you how you can be manipulated if you don’t do your own reasearch. Reading the headlines just won’t do it.
I love this blog!
Maybe it’s because of all the Auctions
hahahaha
Pinnochio Lereah is at it again. Rah rah rah, shish goom ba…gooooooo team!
“David Lereah, NAR’s chief economist, said market fundamentals are improving.”
Are fundamentals improving when inventory growth rate (1.9 pct) exceeds sales growth rate (0.5 pct) and prices fall 3.5 pct?
This guy never met market conditions that did not look favorable.
Yes. When inventory was increasing, that was great because it meant more choices and no price declines and a stabalizing market. Now price declines mean a stabalizing market, and what he ‘predicted’ all along. What happened to the single digit increases (implied in upper single digits) he predicted earlier for 2006? David ‘Liar’ is right. Grrr.
What a load of crap!!!!
I was listening to the radio before I got to my computer and heard the following:
WOW! NEw home sales are up. Looks like the housing slow down is over - per the news anchor.
That is also a load of CRAP!
I know. We go through this every month it seems. At first the media jumps on the spin, then some actually read the data and it gets turned around.
You guys don’t get it…there are enough dumb people out there that will eat this garbage up.
As I’ve always said, if you surround yourself with idiots, it’ll affect you too.
“Associate yourself with men of good quality if you esteem your own reputation. It is better be alone than in bad company. ”
– George Washington
I concur. Most people just watch or listen to these soundbites and accept them at face value. Only a few will actually take the time to investigate the whole story. Those who blindly follow do so at their own peril.
WABC in NYC announced biggest price drop in 40 years.
Volume expanding in the direction of prices usually tells us what we need to know. In this case prices are under pressure. They will continue to fall. Each sale on falling prices is not a good thing if the buyer is taking out mortgage to do it. We are having more home owners without equity. As this continues the housing ATM is running out of money. This is bad for the near future because of the negative to flat savings rate.
speaking of load of crap….check out the pic on my new post that looks a bit deeper at the latest CAR data.
SoCalMtgGuy
http://www.housingbubblecasualty.com
Someone please tear Lerehah up on the fingers and toes comment
“fingers and toes crossed”–
“and brain twisted like a pretzel”
Only 1 finger counts when I read anything for Learah. It’s the middle one on the right hand, held in a straight upright manner.
http://davidlereahwatch.blogspot.com
HAHAHHAHAHA
What an idiot.
Sounds just like what a five year old kid would do. How appropriate.
Oh man, where do we begin with this one? Without a doubt its one of the lamest, most childish, pointless comments ever uttered by this toad. THis guy is a chief economist? Imagine Bernanke using a similar comment. “As predicted, money supply and inflation appear to be contained within a reasonable range. Here at the Central Bank uur fingers and toes crossed! After all, there is only so much we can do. ” Shortly thereafter ten dollars would be worth 1 euro.
‘With the exception of parts of the West, sellers are cutting their price enough to encourage sales,’
Most sellers out here refuse to cut their prices by any meaningful level (except perhaps in the Central Valley). Most people in Eureka, CA are simply taking their homes off the market since they feel they would be “giving the home away” by listing it for any less than comparable homes sold for a year ago.
Same thing here in NorCal. Hey, if they can afford to ride this thing out for 5-10 years, more power to them. I have a feeling that by next spring they’re gonna wish they took October ‘06 prices…
Yup, the people I know who are pulling out of the market waiting for the “recovery” next year are the ones who are going to end up chasing the market all the way down.
Exactly. Over here in the East Bay, My neighborhood is a miracle in terms of market nonsense. Most homes in my area have been sitting for sale for a year or more. Some have been up for so long that the realtor signs actually faded away and had to be replaced. What’s really annoying is that there are now THREE houses for sale across the street from us. It’s funny to watch them compete with one another every weekend. At first they were all open on Sunday. That was insane- cars would be double parked on the streets around our house, which was annoying. Then they wizened up and now offset their open houses every other weekend. Most of the time the realtor sits on the porch for an hour or two then folds up the signs and leaves.
One thing I have noticed is that the open house signs have increasingly gone from being the heavy-duty metal and wood models to cheap plastic ones that blow over easily in the wind or from a passing car.
You would think that a house that sits for a year would tell the owner to lower the price. But I guess not.They might lower the prices 10k here and 10k there, but nothing that really makes a difference. Many of these people have owned here for decades yet can’t accept the situation. So there they sit. Month after Month.
Of the very few that sell, they tend to be smaller fixer-upper boring suburban looking homes. You can tell they sol recently because the new owner typically parks in the driveway with their brand new BMW. Pretty sad when the only people that can now afford homes that school teachers bought 20 years ago are now partners at law firms.
I’m so over it.
I kid you not, a new sign on a house in Phoenix (12th street north of Maryland for you locals-John Hall & Assoc.) is 4′x8′ (that’s FEET) with metal frame, designed to fit into the back of a pickup for transport. I saw another sign today on a house that’s been for sale for 6 months newly modified with 2 FLOODLIGHTS attached!
That’ll work! I always buy houses with lit signs. LOL
Lots of signs at my end of 12th Street (South of Thomas) but no fancy ones yet. I’ll mention it next time I see one of the neighborhood brokers sitting at an empty open house on the weekend.
The poor FB’s now have to pay for the electricity to see the sign.
No question, spring is going to be marked by a flood of inventory… and then the panic sets in. We’ll see Realtors sneaking out at night to remove rows of competitors’ for-sale signs just to make their listing stand out. The REOs will begin to compete in meaningful numbers by then too. The dollar is sinking again and European central banks are expected to raise rates which will fuel inflation and drive the FED to raise, all at the same time.
Can’t wait.
Be careful you (we) may get what you wish for!
Gary Watts’ idea to the rescue. REDUCE the number of all signs.
Another article about a train wreck already happend in CA.
Dumb Easterns, I sure they all leave California. I hate their arrogance, self centered attitude and Liberal crap. Just leave ! Leave! Leave! We dont need you, dont want you, Just Leave…
Femi-Nazi’s and Bible Reading creeps.
Help! Home for sale - Basile and Neuffer
Two displaced Easterners get a lesson in the realities of California real estate.
http://money.cnn.com/2006/11/17/real_estate/help_Basile_Neuffer/index.htm
I’ve heard a couple of real estate dealers in Humboldt County CA say prices have drop about 15% across the board; but in this area wages are low (median household income is $31,226; National it’s $41,994) and unemployment is high at 5.6%. The Humboldt Association of Realtors reports the median price of a house in Humboldt County dropped from $315,000 to $289,950. The qualifying income for a median prices home here is $87,385.
Generally the spin you hear from Humboldt County real estate dealers is “Our real estate is so much lower [priced] than most of California, so we won’t get hurt as much as other communities; the correction is about over here. We are encouraging sellers to adjust prices accordingly and we think things will be fine by spring — in fact, we believe buying now is smarter than waiting until next year.”
My thought on this is: Smarter for the real estate agent with no income perhaps, but I don’t think Humboldt County is any where near the end of “pricing adjustments” — though admittedly, it probably won’t be as dramatic as Southern California because they just plain have farther to fall.
Oregon would have a lot more equity immigrants if this low cost area between Southern Ca and OR wasn’t here!
ISOLDEARLY,
I agree completely. The bleeding is very slow up here. I have a co-worker who has made untold fortunes by flipping houses here. I believe he owns no less than five here in the greater Eureka area, plus some land.
Selling prices may be down a little here, but asking prices certainly are not. And, just as this area was the last in the state to actually go up (early 2003), it will probably be one of the last to fall.
There do seem to be two types of people buying still here:
1. Washed-up Bay Area folks who decided that they’ve had enough of city life and want 20 acres and to be reclusive the rest of their life.
2. The 50-65 age group still employed that are trading up.
Other than that, market activity is pretty slow. In fact, the realtor that helped us make the decision *NOT* to buy (not from anything he said, but from the BS he was feeding us) is trying to sell his primary residence, perhaps to get out while the going is good.
Do as I say (Buy), not as I do (sell). Can’t trust these realtors when it comes to money. Do your own research and make a decision from there.
The last to go up are the first to fall, all other things being equal - no fundamental business drivers influencing the uptick in the first place.
This was a rolling bubble wave fueled by liquidity movement. As the wave pulls back as it’s doing now the last ones to go up will be the first to get spanked.
I also sold early (Sac in ‘04), now a happy renter.
20% yoy reduction in the median price here in Arcata. Wow!
Maybe things will turn around next spring?
Yea Right! We’ll see.
I *have* noticed that the Home section in this past Sunday’s LA Times was not it’s usual impressive thickness… are people simply taking their homes off the market for the holidays?
“are people simply taking their homes off the market for the holidays? ”
Some truth to that. My SIL in Colorado has had her place on the market for several months with no action and has decided to let it ‘rest’ then relist with a fresh listing after jan 1. Mostly I think she doesn’t want to be depressed about it around Xmas time.
NAR is crowing about a 0.5% uptick in sales when it came with a 3.5% decline in price??? Maybe it’s good news for RE agents, but I’d be a tad worried as a homeowner. And the single biggest recorded drop to boot!!
I agree with Lisa.
Volume expanding in the direction of prices usually tells us what we need to know. In this case prices are under pressure. They will continue to fall. Each sale on falling prices is not a good thing if the buyer is taking out mortgage to do it. We are having more home owners without equity. As this continues the housing ATM is running out of money. This is bad for the near future because of the negative to flat savings rate.
From the last link:
‘ September’s sales were revised higher to 6.21 million from 6.18 million initially reported.’
Volume is not expanding; actual (not adjusted) sales are down in all regions except the west, which is up a little from last month. Which is not good news for realtors, since presumably they don’t get seasonally-adjusted commissions.
Oh , I guess they decided to not adjust the numbers for the 10% incentives/cash back averages given to make sales .Why doesn’t the media question these numbers ? The NAR/CAR gets to say anything they want without being challenged . What a joke .
Let them produce cheerrleading reports. They will have no reason to beg the FED to drop rates!
This catch 22 must keep the NAR spinners scratching their heads at night. What to root for….the positive or the negative. Damned if you do, and damned if you don’t. Housing has painted itself into a corner for sure.
Yup. But I’m glad to hear it’s good news! I’m really looking forward to more good news in the future, like bigger price drops and more inventory growing. Keep the good news coming NAR!!
great point banker. also, did you see where bernanke came out publicly and said that housing was going to continue to cool into 2007? i thought greenspan said housing had hit the bottom. i’m confused.
sarcasm off.
In Lereah’s own words months-supply is the most important statistic. Months-supply continues to rise. The market fundamentals are deteriorating according to Lereah’s own metrics.
How about all the sellers/speculators the NAR/realtors convinced that they take their house off the market and re-list in 2007 . Many ghost listings out there that would create such a supply problem that houses would crash in value if the truth be known .
Agreed. Next spring will be a make it or break it scenairo. Maybe some people will wake up!
Well then its a good thing we have a 60 month supply down here in Palm Beach. I was afraid we might run out soon!! Where are they finding all this land, I thought they were not making anymore?
David Lereah, NAR’s chief economist, said market fundamentals are improving.
OK…Housing bust is over…Shut the blog down…Hey bud…Yea…Grab those chairs over there…OK shutdown the server
and turn those lights out…
Yep. Time to get a real job, Ben. It’s been fun.
And Cramer wanking his head off too. Give me a 55% off deal and I might buy too. Asshole.
Yep!…..hurry up and jump back in, the water’s fine!……c’mon…..go ahead………..c’mon, c’mon…….what’s wrong with you guys, didn’t you hear the man, the housing shark is dead….it’s safe god damnit, JUMP!……….ah, you guys suck…
I think you’re gonna need a bigger boat.
Yep, I’ll miss you all. Might invite some of you in the house I will have to buy now, before there are no more left.
John…Are you kidding?…We have more work to do…Im thinking either peak oil, global warming or aids…We cant stop
here…Fixing this housing thing was easy….Lets roll up our sleeves and tackle one these hard ones.
Lereah, April 1912:
“Yeah, I know we hit this iceberg, but it wasn’t completely unexpected… in fact, it’s a good thing to have this ‘correction’ in the ship’s hull… Ship’s fundamentals still look good, fingers and toes crossed… those people screaming and fleeing for lifeboats are really basing their actions on ‘psychology’….”
“David Lereah, NAR’s chief economist, said market fundamentals are improving. ‘The present level of home sales demonstrates some confidence in the market, but sales are lower than sustainable due to psychological factors,’ he said.”
That did it. The NAR has officially lost it’s collective mind.
Market fundamentals are “improving” because “sales are lower than sustainable”.
What kind of crazy ass drug is DL taking?
I dunno what DL is taking, but I’d love to have a puff of it.
Just another Lereahism. Is anyone writing a book on these? Where would it be? The comedy section of the bookstore?
He’s sounding like Baghdad Bob. “The great Satan, Ben Jones, has not hurt the housing market!”
“Sales are lower than sustainable due to psychological factors” … I couldn’t even figure out what he meant by this. If anything. Sales are indeed lower than they once were. I consider the current sales pace unsustainable, so with the inventory rising, a true crash may be looming.
“psychological factors” Now Lereah is adding medical terms to his research. Should we call him Dr. Lereah? His speciality is proctology.
Interproctological psychology?
Well, I know his lips have moved south!
“Sales are lower than sustainable due to psychological factors.” That’s rich. Even realtors have to be shaking their heads at this Bozo and his Alice in Wonderland pronouncements.
There are two kinds of psychological factors in play right now, David: fear and greed. Would-be buyers have a well-founded fear of buying at the top of the market. Greedy sellers want the same prices their neighbors got in 2005 — their mass denial and willful self-delusion, rather than low sales, are what’s unsustainable.
existing home sales got the boost due to very low mortgage rates//but benny boy better prop that dollar or everything will fall apart.
Interesting point on the dollar.
Any thoughts on Ben Bernanke and the Fed raising interest rates in order to entice the BRIC nations to purchase more U.S. bills, notes, and bonds? I’m trying to fathom how the Fed can lower interest rates to save housing when the primary U.S. creditors are balking at extending additional credit through the financing of the U.S. trade deficit at current interest rates. Wouldn’t lowering interest rates on the short end of the curve reduce demand for U.S. debt further from its already tenuous position and therefore put the dollar under more pressure? The only scenarios I see are the following:
1) Dollar is devalued but housing is saved (Nominally) = Stagflation
2) Housing deflates but Dollar is supported = deflation
3) An attempt is made to save housing with the dollar devalued through lower interest rates only to see creditors flee U.S. debt instuments. This could create the worst case scenario of a dollar devalution followed by housing deflating due to a necessary reactionary increase in rates in order to entice creditors to re-enter the U.S. debt market.
Any thoughts on H. Paulson’s and B. Bernanke’s trip to China in the next month? My guess is there looking to get an additional credit extension on the current $1 Trillion line of credit already drawn against.
I’m still searching for the dollar supported, housing stabilized, economy remains on sound footing scenario but I just don’t see it. If there is a viable scenario for this outcome I’m all ears.
The fed could talk like inflation is tame, warning they might have to raise rates, all the while printing money and leaving
rates unchanged.
I can understand how that scenario would potentially work on JSP, however; I would imagine other central banks have caught onto this game and have done the following:
1) Peg their currency to the dollar (China)
2) competitively devalue their respective currency (akin to a peg)
3) refuse to purchase U.S. debt instruments in order to avoid devaluation of their foreign reserve holdings via US printing.
1 and 2 are mutually exclusive with 3 being an additional policy that could be added to 1 or 2.
I just don’t see FCB’s being that stupid. If members of the public can see this surely someone who is in a position of power can not only see it but can actually implement a change to mitigate the issue.
I agree…There is no silver bullet…Something has to give.
” I’m still searching for the dollar supported, housing stabilized, economy remains on sound footing scenario but I just don’t see it. If there is a viable scenario for this outcome I’m all ears. ”
There is just too much debt out there (Gov, consumer, and private) to provide a stable basis for a dollar recovery. The easiest path is that of inflation. Inflate away your (gov.) debts.
The dollar will decline in value over time (a controlled devaluation), that’s what inflation really is (and has been happening for some time now). I think they are talking to China to make sure the devaluation is controlled. But, China will want a way out of their US Treasuries (who wouldn’t?). That’s the trick - how do that. For some time now there have been rumors of FED monitization of the debt. Thus allowing the good ole’ boys to get out before the rest of us catch on. The good ole’ boys will transfer their wealth to non-US denominated assests. Eventually, interest rates will have to raise when everybody sells their US bonds, bills, and notes.
Either way, a dollar crash or raising interst rates will finish off the housing market (and consumer spending) and a full blown depression will set in.
Remember, we have lost our manufacturing base (and white collar good paying jobs) over the last three decades. We are now a consumer/service economy.
IMO We are toast!
IMF has 60 tons of gold. Maybe they’ll sell it to China for dollars, then the IMF can bail-out the dollar and demand “austerity” measures be enforced on big-spending Americans?
The FED is between a rock and a hard place. My guess is that they will raise rates because inflation is understated and it would help buoy the dollar. They don’t give a rip about housing per se but the consumer ATM drying up, that is the other fear. They don’t want corporate earnings/stocks dropping at the same time as housing.
Or has been said before, leave everything “as is” and increase M3 ala stagflation with less severe house price decreases and modest salary increases over time. With the resuls of undermining foreign debt, devaluing your 401K, pension, savings, etc.
I hope they raise rates, housing crashes, the economy takes its medicine, and then we can all move forward again.
“Or has been said before, leave everything “as is” and increase M3 ala stagflation with less severe house price decreases and modest salary increases over time. With the resuls of undermining foreign debt, devaluing your 401K, pension, savings, etc.”
This is the part I don’t get. It’s not as if this is a static system. If the FED is monetizing then why aren’t FCB’s walking away from the dollar. If I had my assets in dollars I sure as hell would get irritated by this devaluation and attempt to stem the losses by reallocating. The one question I can’t figure out is why haven’t FCB’s decreased their exposure as the FED has increased the printing press?
“The one question I can’t figure out is why haven’t FCB’s decreased their exposure as the FED has increased the printing press? ”
I say they have been and are continuing to do so covertly. That’s why the trip to China.
Option 4: Fascism and World War
Reinstate the draft, invade oil rich territories under whatever convenient pretense available. Tax the oil from the conquered territories to pay the cost.
War will silence dissent and create jobs in the only industry we have left. Problem solved
Sometimes I wonder if they are just waiting for the right exogenous event on which to blame that which they have been planning all along to do.
Maybe. but it’s still done with debt.
Besides war sucks of recources for wasteful spending not investment.
I’m still searching for the dollar supported, housing stabilized, economy remains on sound footing scenario but I just don’t see it.
Let us know when you do. Damned if I can find one that doesn’t lead to a depression.
The equity and debt markets have been rallying on the notion that ben will do like his uncle al and cut rates, thereby supporting the housing market and in turn the consumer driven economy. Like good old David Learah the markets have cherry picked the possible outcome.
Already the dollar is sinking as the European central bank is hinting at rate hikes while gentle ben is waiting for the facts. Well there are a number of key imports that are denominated in $s that will likely adjust to a rate cut: Crude, copper, steel, lumber, anything electronic, and most importantly debt.
So will gentle ben choose to cut overnight rates and drop the dollar resulting in $5 gas and higher mortgage rates? Or leave rates alone and continue to play the open mouth (”inflation is under control,” “inflation is a little too high,” Fed is vigilant”) game while he pretends to be data dependent?
Either way gentle ben is no savior for this housing bubble.
Either way
“So will gentle ben choose to cut overnight rates and drop the dollar resulting in $5 gas and higher mortgage rates? Or leave rates alone and continue to play the open mouth (”inflation is under control,” “inflation is a little too high,” Fed is vigilant”) game while he pretends to be data dependent?”
Remember, the main stream media will tell the sheeples one thing, in the mean time the good ole’ boys will be doing something else.
My guess is prepare for inflation first and then a fire sale of assets as the sheeples wake up and discover they need more money to live on then they have saved or are earning (unemployment/under employment).
CNBC is all over the sales data - apprently housing stocks are up…..however, no mention of the YOY price decline. Of course, as soon as I heard the news, I came to Ben’s Blog to find out the real skinny…
Same here! The only place for truth on Housing!
Home builders trade group is now calling negative press coverage “media inerference with home buyers..”
http://realtytimes.com/rtapages/20061128_interference.htm
Ben, stop interfering!
Darn that media! Everytime I go to sign a contract on a house purchase a reporter tackles me, hold me down and tells me not to do it!
YOU TOO!
That entire website is run by that dill-hole, Blanche Evans. If you only remember one thing about her, it is this:
She is a 100%-certified pathological liar.
On the honesty scale, she makes Liareah and his croneys look like Abe Lincoln. She is so full of shiite that her eyes are brown.
So is marketwatch.
I too came here for the real news.
“…, but sales are lower than sustainable due to psychological factors,’ he said.”
‘Lower than sustainable’?!? WTF is that supposed to mean? From a realtor’s point of view it might be ‘unsustainable’, but from mine it is unavoidable.
Right. Didn’t see your post when I asked a similar question above.
“Lower than sustainable” means total sales are too low to sustain the lifestyle that most realtors became accustomed to.
Since they redefined “affordibility” they’ve also redefined “sustainability.” The definitions will be forthcoming (but seasonally adjusted and revised for the preceding months and quarters).
I love that comment! and your user-name!
I gotta check into this blog more often again; it’s so much fun.
cheers all!
He is correct, there’s a problem - The level of sales is too low to sustain the bloated RE Industrial Complex.
So the problem, the RE complex got too bloated, will conveniently correct itself. Simple economics.
I thought DL was hired as an economist so he cound explain compicated things like this to the Realtors? Another problem for the NAR - They need a real economist, not a dolt cheerleader masquerading as an economist.
These data are pleasing to everyone except sellers. Prices are falling — good for buyers. Sales increased a little — good for REIC. Inventory increasing — also good for buyers. Moreover, the trend vindicates the bears’ position.
Suppose that there is a ‘false rally’ and some volume of potential buyers jump in to the market. These buyers will be quickly swallowed up into the bloated inventory, without making a dent in the months supply of homes. Then, even more listings will come online over the next year.
Once the larger market sees how these human guinea pigs make out, or better analogy “lemmings going over the cliff”, it will be forever until the market comes back. And only after an even more painfull bust.
While the overall sales figure shows how infected Americans have become with, Real Esate as a Investment, the Oct numbers show clearly that the greater number of sales were below the median. Combined with higher inventory numbers this report is a strong indicator of further price declines. Probably the only way to stem J6P from financial destruction is tighter lending standards!.
Holy S#!+ !!!!
Florida Realtors released Oct results today too, and what happened in FT. Myers? Median Price Oct 05 $445k, median price Oct 06 $249K, for a decline of 44%. I realize hurricane Wilma impacted the last week of the month in the prior year, but that is a massive haircut.
http://media.living.net/releases/Oct%2006%20Stats%20Release.htm
Those statistics seem suspect to me, especially when comparing the numbers from other locations in the state. Not that I don’t wish the drop to be real. Remember, the median price isn’t any more reliable or telling now that prices are dropping instead of rising.
the counties effected by wilma last year are propping the state as a whole. look at sarasota/bradenton, tampa/st. pete , naples and other west coast counties for the real story
Being in Fort Myers, I can tell you the median was never $445,000. I’m thinking more around $300,000 in Oct. 05.
$300K works — that would still be a 17% drop.
I have a friend selling homes through Foxtons (2% realators) in Newark NJ. He tells me low priced inner city homes are selling very fast. In contrast homes in the higher priced suburbs aren’t even generating foot traffic.
Could be the same sort of process working in FT Myers, where the last of the greater fools are purchasing houses that never really got moving during the bubble.
“‘As expected, existing-home sales appear to be stabilizing, fingers and toes crossed,’ said Lereah. Falling prices are ‘a good thing,’ Lereah said
So this is how Lereah gets away with his lies - as long as his fingers are crossed, what he says doesn’t count…
Don’t know if this was posted…
The Top 25 Suburbs in the U.S.
BusinessWeek Online
http://tinyurl.com/ynjboq
Interesting that of the “The 25 Best Affordable Suburbs in the U.S.,” only three had a cost of living index below 100. I guess “affordable” is subject to the author’s generous interpretation.
True price decrease Nationwide -13 to 15% ,( if you include incentives ,kickbacks and paying unqualified buyers to move into houses ). Now the NAR/CAR/MEDIA just can’t report a true stat like that now can they ?
Here’s another about all the rookie Realtors
Babes in Bear Land
CNNMoney.com
http://tinyurl.com/ybgw84
Just 22% can afford O.C. starter home
http://tinyurl.com/yzkpdr
It looks to me that these numbers represent the “new” way of calculating affordability. Namely, a 10% downpayment with a 6.something% ARM considering they’re saying a person making $125k can afford a $600k home. (going by the old income * 3 rule, 125k * 3 = 375k)
I also suspect this fabled 22% that can afford a starter home already own homes around here.
oct =sept in a slow market
sept is a perky month for sales- get ready for nuclear winter
Some of the figures may have already been covered in other peoples’ posts, so forgive me if mine repeats. But I consider this report a mix of “the good, the bad, and the ugly.” A full summary with my thoughts can be found at my blog:
http://interestrateroundup.blogspot.com
But in a nutshell, I’d call the sales rate news “good,” the inventory news “bad,” and the price data “ugly.” More later.
The real story here is the inventory … we’ve been hearing recently how it’s so great that inventory levels declined from their July high. But lo and behold, they popped right back up in October. The months supply at current sales pace inventory measure is at a new cycle high, whereas the absolute number of properties for sale spiked to 3.854 million units from 3.783 million in September. That 3.854 mln is only 7,000 units below the all-time high in July of 3.861 mln. And this is during a time of year when inventories usually slump (because people pull houses off the market if they don’t sell by the holidays/winter, then re-list early in the new year to catch the “red hot” spring selling season).
At some point, a combination of lower rates, lower new home production, and other factors will help work down inventory. But eventually, we’re all dead too. I think it’s going to take much longer than people realize given the magnitude of the run up.
Can’t wait for the SoCal spin machine to start cranking the “it’s not as bad as 1990″ bit again when it’s clearly already worse (and the real bloodletting is six months off).
CNN money site changed their “Millionaire in the Making” bits to “Help! [FBs] in Trouble” or something like that: http://money.cnn.com/2006/11/28/news/economy/homesales/index.htm?postversion=2006112810
They did change the name (I thought you were kidding). LOL
they still have “millionaire in the making” stories, but they used to have “tycoons in the making” or something along those lines, and now it’s stories about helping FBs.
So for a young professional interested in buying his first home, does the potential of the bubble bursting mean I should wait a year or a year and a half, or buy now? If the bubble “bursts” or is teetoring on the edge, will this decrease interest rates in an attempt to save it, or will the feds increase interest rates to balance out the decreasing costs of homes? Could someone help me out with a little forecasting?
Don’t buy until rents equal PITI, within 5-10% if you want to live there for 7-10 years.
jswords, history shows that real estate corrections are predictable once they are confirmed to be underway, which this one most assuredly is. To more specifically address your question, prices will fall dramatically for at least 2 and probably 4 more years, and then will spend an excruciatingly long time getting back to where they were at the peak. If interest rates are cut, it won’t make much difference because historically low rates are already baked into current prices, whereas rising rates will cause prices to adjust downward even more violently than they are now.
If you (i) are ready to commit to a home for at least 10 years, (ii) are willing to be substantially under water in the meantime and (iii) don’t mind paying way more than you would for rent between now and then, then by all means, purchase a house now.
Are you in a hurry? Do the math and you’ll see renting is cheaper right now. You have a choice of renting a house or renting the money to buy one. But renting a house dosn’t have the risk/commitmment the other does. Right now it’s a no brainer.
I hope David Lierah crosses the street when four cars come by with blind guys at the wheel.
Don’t hope that for David. We need that idiot at the helm rather than someone who is competent. David is bad for house sellers, good for us bubble sitters.
hope transactions stay high- if prices fall that some pain- if transaction halt , we’re all dead
As a young professional, I am looking to buy my first home. What is my best bet: buy now and get some incentives, or hold out for 6-12 months? If it gets really bad, will the houses just decrease in cost, or will the feds lower interest rates as well to save it? (or will they increase rates?) Please advise and forecast.
There’s no real “if” about it getting really bad. It’s a when. Buying a house during the short time-frame you mentioned is a near guarantee of losing tens of - if not a couple hundred - thousand over the next decade. If you can comfortably manage a traditional mortgage - 20% down/30 yr fixed - with pmts for PITI under 28% of your income, have at it…. just don’t plan on selling at break-even or a profit anytime soon. If you’d be forced into any flavor of ARM, you’d be smarter to cut your own off first…. We’ve passed the tipping point, but the momentum down won’t begin till next August, when the miraculous uptrend fails to emerge.
As for interest rates, they may be an influence on a purchase, but only a moron who can’t figure out how to use a calculator will let a point or two in rates vs price let him/herself be shoehorned into a timebomb mortgage. BB is making inflation noises, and the $ is dropping like a stone, so yes, I’d vote with seeing rates beginning to nudge up…. Meanwhile, rent.
Can’t forecast interest rates, but prices will almost certainly continue down. Beyond that I think you will need to read some more on the blog and form your own opinion.
As a young professional, there’s a fairly high chance you’ll have to relocate to take advantage of new job opportunities. Buy now and you can kiss those opportunities goodbye…
‘The present level of home sales demonstrates some confidence in the market, but sales are lower than sustainable due to psychological factors,’ he said.”
WTF???? I stopped reading when I got to this point in the post… Does this mean exactly?
I’d love to beat this guys ass. Publicly. With cameras rolling. I mean literally slam this little bastards dick in the door…. hard…. over and over again until it falls to the floor.
I just flashed to the scene in Kill Bill when Uma Thurman is slamming the door onto the rapist nurse’s head.
Yep, that would about do it for DL.
The problem is that Dave might actually enjoy it.
Let’s see. Sales went up most likely due folks wanting to not buy in the winter. Prices went down? They will really go down in the winter when volume historically drops.
‘The present level of home sales demonstrates some confidence in the market, but sales are lower than sustainable due to psychological factors,’ he said.”
WTF???? I stopped reading when I got to this point in the post… Does this mean exactly?
I’d love to beat this guys a$$. Publicly. With cameras rolling. I mean literally slam this little ba$tards dick in the door…. hard…. over and over again until it falls to the floor.
“WTF???? I stopped reading when I got to this point in the post… Does this mean exactly?”
You have to understand that anything NAR says comes from the point of view of what is best for NAR. So “but sales are lower than sustainable” means that there are not enough sales to sustain the income level of NAR brokers which means that NAR is not getting enough money coming in to sustain NAR and of course this means that NAR will not have enough money to sustain David Lereah.
http://news.yahoo.com/s/ap/20061128/ap_on_bi_ge/homes_sales
“David Lereah, chief economist for the Realtors, said he expected home prices to continue falling for the rest of the year as sellers, accustomed to the booming market conditions of previous years, reluctantly cut their prices.
“Many buyers remain on the sidelines,” Lereah said. “After a period of price adjustment, we’ll see more confidence in the market and a lift to home sales should be apparent in the first quarter of 2007.”
This ass clown can’t even keep his stories straight for ONE day.
Could someone a little better at reading graphs than I am, please tell me if these charts: http://dianecohn.blogs.com/reno/files/chasemarketreno.pdf
really indicate that Reno is now at a 17 month supply on the market? Pretty telling stuff for the last two years. I’m surprised the local realtor actually posted them.
Yep, the graphs show 17 months of inventory. Hard to believe it is that high already. Don’t see any ads for Reno homes in the Bay Area hardly anymore. Seems the price differential got too small to make it really worth it except for retirees.
The graphs show 17 but the math works out to be about 10 months. (sep 06 invetory/sep 06 sales)
“David Lereah, NAR’s chief economist, said market fundamentals are improving. ‘The present level of home sales demonstrates some confidence in the market, but sales are lower than sustainable due to psychological factors,’ he said.”
They are lower than sustainable because most would-be buyers would rather not catch a falling knife in the wake of the largest price drop on record.
I don’t understand. Today the newswire on the radio station I listen to said that there was “good news” from the housing market - existing home sales were up for the first time in 4 months. Is that regarding data more recent than October, or were they just completely lying?
Read the whole thread Ben posted…here’s an excerpt:
WASHINGTON (MarketWatch) — Sales of existing U.S. homes rose 0.5% to a seasonally adjusted annual rate of 6.24 million in October, the first increase since February, the National Association of Realtors reported Tuesday.
Inventories of unsold homes on the market continued to grow, while sales prices fell at the fastest pace ever recorded.
The report was better than expected. Economists were forecasting sales to fall to 6.15 million annualized, according to a survey conducted by MarketWatch. September’s sales were revised higher to 6.21 million from 6.18 million initially reported. Sales are down 11.5% from October 2005’s 7.05 million pace.
Here’s a clue to the spin:
“Sales are down 11.5% from October 2005’s 7.05 million pace. ”
To the main stream news media lie is such an ugly word.
http://www.ofheo.gov/media/pdf/PRConfLoan07.pdf
2007 CONFORMING LOAN LIMIT TO REMAIN AT $417,000
Washington, DC – Office of Federal Housing Enterprise Oversight Director James B. Lockhart today announced the maximum 2007 conforming loan limit for single-family mortgages purchased by Fannie Mae and Freddie Mac (the Enterprises) will remain at the 2006 level of $417,000 for one-unit properties for most of the U.S.
The conforming loan limit determines the maximum size of a mortgage that an Enterprise can buy or guarantee. By law the maximum conforming loan limit is based on the October-to-October change in the average house price in the Monthly Interest Rate Survey (MIRS) of the Federal Housing Finance Board (FHFB). The FHFB reported the decline in the average price was $501, or 0.16 percent, from $306,759 in October 2005 to $306,258 in October 2006. This is the first decline in the MIRS since 1992-93.
OFHEO announced November 15 it would keep the limit at 2007 levels if there was a decrease in October-to-October house prices and would defer that decline for one year. “This amount is in keeping with OFHEO’s recent announcement of an orderly and transparent process for any downward adjustment,” said Lockhart. “We made this decision so as not to disrupt the end-of-the-year pipeline of mortgages or the market for mortgage-backed securities,” said Lockhart.
OFHEO also stated previously that additional guidance for the 2008 limits would be issued early next year.
Conforming Loan Limit Percentage Increase
2007 $417,000 0
2006 $417,000 15.9%
2005 $359,650 7.8%
2004 $333,700
I guess I just do not get it. A 4% decline in YOY prices does not make a bursting bubble or any reason to celebrate in my view. How does the YOY stats compare to CY reductions? Are there any 10 - 20% reduction from CY 05 median prices in any bubble area? How do the median CY 06 sale prices compare to the 05 nationwide median price? Sustained YOY drops are a good indicator of what may be in the future - but - a $10K CY drop on a $300K overpriced pos may not be enough to justify or validate the perception of a win for the housing bears. Then again it is most probably just me….. hell, I cannot yet understand how prices could get anywhere near current levels. Apparently I have spent the last 35 years of my adult life using 1930’s rules. Bummer, never owned something I could not afford.
Haven’t seen much in the way of price declines here in LA, so I know what you mean. But, I think the idea is, this is the beginning, it took like 6-7 years to get where we are, so now the tide is turning and it will take however many years to get to the bottom of the bust. After following this thing for as long as I have, I’ll take a 5% declines as a victory, for now.
Yes Arcata, CA. had a 20% reduction in mediam prices from last year. And this is not considered a bubble area.
‘Home prices continued to slide in October as the supply of unsold homes grew. The new statistics are the latest to suggest that the once-booming housing market is continuing to deflate. The housing data reinforced the message from other economic indicators released today, that the economy is slowing down.’
‘Orders for durable goods, which include everything from jet engines to computers to refrigerators, declined in October by 8.3 percent, or $19 billion at a seasonally adjusted annual rate, from the month before. ‘This perhaps suggests that the U.S. economic slowdown is spreading to the corporate sector, adding to worries about the prospects for U.S. growth,’ James Knightley, an economist with ING Financial Markets, wrote today.’
Comment by SUSPICIOUS 2
2006-11-28 09:27:28
The main stream media is proclaiming housing sales are up!
http://www.marketwatch.com/news/story/rise-existing-home-sales-first-since/story.aspx?guid=%7B553B8779%2D45AD%2D4616%2DB20A%2D17CF6BA8D90C%7D&siteId=
WTF? Cheerleaders!
Ok that link answered my question. See the talk radio station I listen to puts AP newswire news segments on during commercials. The ONLY thing they reported was the half percent increase in sales. No mention whatsoever about the drop in prices, rise in inventory, and all the other “less than stellar” housing news.
Cheerleading indeed.
“As expected, existing-home sales appear to be stabilizing, fingers and toes crossed,” said David Lereah, chief economist for the Realtors. Market fundamentals are improving, he said.
Keep those toes crossed Dave. A whole new wave of GFs are just around the corner now! There will be confetti, flowers, candy…….puppies farting rainbows…..
That’s what amazes me. All of a sudden we’re not looking at Y-o-Y data, but cheering a 0.5% rise from last month:
http://wiadomosci.onet.pl/1441287,10,1,0,120,686,item.html
“Home resales rose to a 6.24 million annual rate, a 0.5% increase from September’s revised 6.21 million annual pace, the National Association of Realtors said Tuesday. September’s rate was originally estimated at 6.18 million. The median home price was $221,000 in October, compared with a revised $221,000 in September and $229,000 in October 2005. It was the largest year-over-year decline ever and a record third consecutive decrease, NAR said.
NAR chief economist David Lereah said market fundamentals are improving.”
“After a period of price adjustment, we’ll see more confidence in the market and a lift to home sales should be apparent in the first quarter of 2007,” Lereah said.”
Just wait for the comparisons with two years ago, once both month over month and Y-o-Y show declines. The San Diego Union Tribune has already had an article about the 5 year increase in prices and how most seller make a lot of money….
yoy sales decreased by 11%!
Well, at least CNN has a good headline! Darn that media!
“Home prices: Record drop in October
Median price sinks 3.5 percent from a year earlier, trade group see more price declines ahead.”
http://tinyurl.com/ulbrf
This is just too funny:
I went to NAR’s web-site:
http://www.realtor.org/Research.nsf/pages/presentations_use
and looked at the titles on DL’s presentations:
“The Changing Housing Market” (April 2006)
“It’s Getting Better All the Time” (May 2006)
“After the Boom” (May 2006)
“Reality Check” (August 2006)
“The Road to Recovery” (November 2006)
Are their 40 Million dollars in Ads listed there too?
Lereah: “…due to psychological factors”
When people decide enough is enough, then he coins it as “psychological.” As if there is a disconnect/absurdity to sales declining and prices declining out there…. and the upward stratospheric price escalation was normal, logical and not psychological?
Here’s a term: illogical spin from NAR.
“When people decide enough is enough”
And people have decided enough is enough when asked “Had enough?”. Enough of RE, Liareah, “booming economy”, “the lowest unemployment rate in history”, etc etc….
I guess when those in power continually lie, people get fed up.
We can only hope people get fed up with the liars in positions of reponsibility!
We all need to get fired up and stop these liars, con artists, and front men!
my old man’s house in ft myers
listed 1.1 mil w pool -dock- canal to gulf access
offer 650k
how’s that for a new direction
lol
OK YOU BUYERS!!!
PRICES HAVE FALLEN 3 PERCENT!!!
EVERYTHING IS BACK TO NORMAL!!!
PLEASE START BUYING AGAIN SO I CAN MAKE MY MERCEDES PAYMENTS!!!
and i’m hungry…..
One thought that has crossed my mind regarding the increase in sales activity for Oct ‘06:
Do you think the marketing wonks at the NAR are high-fiving each other right now, celebrating the great success of their advertising blitz last month? (the “It’s a great time to buy!” campaign)
Personally, I think it may be a “statistical out-lyer” month, but who knows? Maybe people ARE that gullible to full-page ads. How scary is that?!
Scary but true!
In Riverside, Ca I visited newly built MBK homes in Nov. 2005, the price of their 3 bed room home was 389K, only 2 more unsold homes but was told that phase 2 comming up and will be 419K. Fast forward, I visited them last thursday phase 2 ready, price- 385K, hold on- 5K off if I buy this week, 15K leder incentive, floor upgrade free, a refregrater and washer dryer free and still somemore when I come back to close the deal. Now if we calculate its about 10% decline in good located homes close to 91 freeway.
read ‘lender’