Bottom In Housing “Pure Fantasy”
Some housing bubble news from Wall Street and Washington. “Sales of new one-family houses in November 2006 were at a seasonally adjusted annual rate of 1,047,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.4 percent (±12.9%)* above the revised October rate of 1,013,000, but is 15.3 percent (±13.1%) below the November 2005 estimate of 1,236,000.”
From Bloomberg. “The number of homes for sale fell to a seasonally adjusted 545,000 during the month from 558,000 the prior month. Even with the decline last month, the number of unsold homes remains near a record high, making it less likely homebuilding will strengthen outright, limiting economic growth, economists said.”
“Sales of new homes were down 15 percent in November from the same month last year, the Commerce Department said in today’s report. The number of homes completed and waiting to be sold rose by 2,000 to 169,000 in October.”
“The number of new homes available have averaged 555,000 this year through October, compared with 351,000 during the past 10 years, according to government figures. Existing home sales inventories are also near a record, averaging 3.515 million this year.”
“Cancellations of purchase contracts, which aren’t counted in the government’s numbers, have mounted. ‘That’s growing,’ said economist Kevin Logan. ‘There is even more inventory than actual inventory numbers suggest.’”
“Hovnanian Enterprises, New Jersey’s largest builder, on Dec. 18 reported a fourth-quarter loss on cancellations of new-home orders. Hovnanian customers canceled 36 percent of their contracts in the period, an increase of 25 percent, the company said.”
“‘We didn’t have this in other slowdowns, customers walking away,’ CEO Ara Hovnanian said.”
“The housing slowdown is costing jobs. Builders shed 53,000 workers in the last two months, according to government reports. Manufacturers shed 59,000 workers in the same period, while goods producing companies, some at companies that produce housing- related supplies or products, cut 102,000 workers.”
“‘Even if sales stabilize at this level, the contraction in construction activity is still in front of us,’ said Kevin Logan, chief markets economist at Dresdner Kleinwort in New York. ‘That’s what’s going to affect the economy in the year ahead.’”
“Building permits in November fell to a 1.506 million-unit pace, the lowest in nine years, the Commerce Department reported.”
From Marketplace. “Should today’s new home sales figures turn out as well as expected, Chris Thornberg, of UCLA’s Anderson Forecast, won’t be impressed. Thornberg: ‘Who cares? In many ways, the last number you should be looking at is new home sales.’”
“For one thing, he says, the number can’t account for building contracts which later get canceled.”
“And the survey’s statistical sample is so small the number routinely gets revised. Take last October, when the Commerce Department reported a surprising 5 percent jump in sales. Thornberg : ‘They’ve already revised it. So new home sales for October ‘06 is now below what it was for September ‘06 once the revision came in.’”
“The more important numbers, Thornberg says? Building permits, which are down, and inventory, which is up. Both point to a continued slump in the New Year.”
The Street.com. “Last week, Hovnanian Enterprises said it recorded $336 million in land charges, the largest such charges among builders to date. Interestingly, Hovnanian said on its conference call that its fiscal 2007 guidance assumes zero additional impairments and land charges. While Hovnanian is optimistic, some investors believe 2007 holds more problems.”
“‘I think there is still more to come in impairment charges,” says Carl Tash, manager of Cliffwood Partners. ‘After a 15-year upside cycle [in housing] , I don’t think the downturn is going to last 12 to 15 months,’ he says. ‘I think that’s pure fantasy.’”
“‘A lot of people are under the impression that this is a one-time event, but that’s not the way it works. The only communities that you get to impair are the ones that are currently experiencing losses,’ says Alex Barron, an analyst with JMP Securities.”
“Thus far, most of the impairment charges have been for communities in California, especially San Diego. However, Barron says more writedowns are coming for Florida and Phoenix, which are in much worse condition than Southern California.”
“The reason writedowns haven’t occurred much in markets like Florida and Arizona is that builders are building on older, cheaper land and still making profits. Eventually, newer, higher-priced land will flow through the income statement, eroding gross margins and making the risk of impairment higher.”
“‘It is safe to say there will be more impairments than are being assumed by management currently, and there will be more impairments than are already taken,’ says William Mack, an equity analyst with Standard and Poor’s.”
The Associated Press. “Prices of single-family homes across the nation rose in October at the slowest rate in almost a decade, a housing index released Tuesday by Standard & Poor’s showed. ‘We can clearly see that the monthly price declines are wide spread nationally,’ said economist Robert Shiller.”
“The data is consistent with a report from the National Association of Realtors, which showed a tiny increase in sales of existing homes in October. The realtors association showed that the median sale price 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.”
“Meanwhile, the inventory of unsold homes in October reached the second-highest level ever recorded. At the pace homes were being sold in October, it would take 7.4 months to sell the currently available homes.”
From Reuters. “U.S. mortgage applications plummeted last week to the lowest level in nearly five months, dragged down by a plunge in demand for home refinancing loans as interest rates nudged higher, an industry trade group said.”
“Demand for home purchase loans also weakened as the MBA’s seasonally adjusted purchase index, widely considered a timely gauge of U.S. home sales, fell 10.6 percent to 390.2, its lowest since late October. The index was also below its year-ago level.”
From CNN Money “‘We don’t think there’ll be a recession, but the risks have risen,’ said David Berson, chief economist of Fannie Mae. He now estimates the chance of recession at 35 percent for 2007, up from a 25 to 30 percent chance a few months ago.”
“‘Some of the Christmas spending wasn’t as strong as we’d hope,’ said Berson, referring to estimates that holiday sales posted the smallest gain in four years this year. ‘And I think we have not reached the bottom in housing yet.’”
“Concerned some borrowers may be over-stretching to buy homes, U.S. lending regulators on Tuesday released a new consumer handbook that warns of the risks associated with interest-only, payment-option and other exotic home loan products.”
“As home prices have stalled and begun to fall, late payments and foreclosures increased in the third quarter, with the subprime adjustable rate mortgage category producing the most pronounced increase in delinquency rates, according to the Mortgage Bankers Association.”
“‘If housing prices fall, your home may not be worth as much as you owe on the mortgage. Also you may find it difficult to refinance your loan to get a lower monthly payment or rate,’ it reads.”
I don’t know if it was mentioned, but the prices the builders report doesn’t include incentives.
Looking at the Commerce PDF, the median months to sell is 4.2. The only time it has been higher in the past 13 months was in January 06, and is higher than any month since February 06.
Here are the number of completed new homes for sale , by period, in thousands:
112 Nov 05
115 Dec
119 Jan 06
125 Feb
130 Mar
131 Apr
128 May
135 Jun
142 Jul
150 Aug
159 Sep
167 Oct
169 Nov
IMO, if they weren’t throwing in incentives, this would be far worse. I personally don’t care for overbuilding, because it is so damaging to the economy. They are pulling in the pipeline a little, but it isn’t showing up yet.
They are going to compete against the resale market all the way down.
….and win.
It’s a prisoner’s dillemma game — nobody wins.
Well, I think when the bones are finally picked clean, the HB top-cats will be sitting on a tropical beach sipping margaritas and ready headlines about the “Great Housing Debacle”.
Fair enough — the big boyz at the builders took the money and ran way back in the summer of 2005. I was talking about the future health of the companies, not the fat cats.
A fair number of early posters on Ben’s blog were professional landlords, stating they had sold out and will be on a beach with drinks for the next 5 years.
It isn’t just the CEOs.
“A fair number of early posters on Ben’s blog were professional landlords, stating they had sold out and will be on a beach with drinks for the next 5 years.”
And after the next housing bubble it will be all of us who learned valuable lessons from this one. Buy low. Sell high. Sit on a beach. Sounds good to me!
And haven’t we been calling this out for months now? Builders are going to lead the way in driving this market down. The price reductions/incentives will be too alluring for the common idiot to pass up. It’s exactly what happened when I was in So Cal in the early 90’s. As long as they were givin’ away the moon, properties kept moving for these guys - but it tanked home values in the process, and pissed of a multitude of homeowners.
Are you rady for 07?
rady?….hmmm…I think I like it more than ready.
So this is what a bottom looks like?
Sales down 8% M/M as “graveyard” inventory grows M/M.
Median sales price severly skewed as the largest price category decrease was under $150K, largest price category increase was
$300K-$399K.
Ben, are you sure you have those dates straight? Because unless my eyes are lying to me, I see
112K (1.344m annualized) Nov 05
169K (2.028m annualized) Nov 06
which suggests that new homes are currently getting added to the US housing stock at a 51% higher rate than a year ago.
So to slightly revise a calculation I put on the bits bucket, today’s announcement that November new home sales ran at 1.047m per year, versus a completion rate of 2.028m per year, suggests that November’s rate of new vacant homes added to the housing stock approached 1m per year. Good to know a soft landing is on the way…
I’m pretty sure those numbers are standing inventory numbers, not completions.
Those are completed, new homes for sale.
Yes, but in my read of the graph it does not mean that 169k homes were completed that month, but that at the end of the month, there are 169k completed, new homes for sale (some of which may have had construction completed in the prior month, but still have not sold). In homebuilder terms, completed homes that are for sale are called “standing inventory”.
Am I reading this chart wrong?
You are correct. That is the number of completed homes for sale at the end of the month. Here are some more stats from the PDF:
For sale at end of period, in thousands:
Total:
431 2004
515 2005
552 Nov 2006
Not started:
68 2004
93 2005
86 Nov 2006
Under construction:
260 2004
307 2005
297 Nov 2006
I wanted to make sure I wasn’t going crazy there. So, Stucco–the completion rate isn’t 169k*12=2.028MM, but something else.
I think those are the homes that were completed in each month, not “standing inventory,” which I believe was greatly in excess of 169,000 as of last month.
169,000 sounds like a low figure compared to inventory numbers that I have seen tossed around. But sorry for the misinterpretation…
Yeah, I have been trying to reconcile in my head why those numbers seem low, especially when, on a month to month basis you see how homes for sale grow relative to reported sales. I haven’t been able to get to the big numbers that I’ve seen reported for housing starts…
At the same time though, if you assume the numbers are “completions”, and not “inventory”, assuming that you start with 0 standing inventory at the beginning of the data in the PDF, you end up with standing inventory of approximately 8.6 months, which doesn’t seem crazy, but is higher than any reports I’ve seen for new homes.
I’m just going to scratch my head and accept that the take home point is that inventories continue to rise…
Ben,
Could I have the link to the pdf file from which you extracted the monthly data.
TIA.
Jas
Jas — where you been, pal? We missed your rants
Jas has been busy buying all the condos in South Florida with toxic loans.
Just kidding! Good to see a fellow big bear back.
It’s http://www.census.gov/const/newressales.pdf
–
Thanks. I did download the file earlier but didn’t see the column. On second look I did find the column.
Jas
“…Builders shed 53,000 workers…while goods producing companies, some at companies that produce housing- related supplies or products, cut 102,000 workers.”
And these numbers don’t include cuts in the service sector like RE clerks, Mortgage ‘Brokers’, Apriceraisers, and so on.
or RE employees hanging in, making no money and working a w2 retail job- which actually shows an increase in employment #s ,but w wages falling 70%
“Apriceraisers” - LOL
“Concerned some borrowers may be over-stretching to buy homes, U.S. lending regulators on Tuesday released a new consumer handbook that warns of the risks associated with interest-only, payment-option and other exotic home loan products.”
Gee thanks “regulators,” way to save the day!
Imagine the impact of those horrible regulators on the market. :rolleyes:
This morning at CNBC someone mentioned that FannieMae has till end of February to follow the new guidelines for loans which stipulates an end to EXOTIC mortgage products. Now his would definitely have an imapct on house prices as most realtwhores and builder salesmen try to sell based on monthly payment and no more exotic products would be there to make it lower.
If the market suddenly was suddenly swept cleaned of exotics, the bid would drop by 45% or so — I just ran the numbers (assuming an interest rate of 6%). So don’t expect your federal regulators to get into too much of a hurry to clean up the mess.
cleanedcleanFEMA must be writing these guidelines.
Or the heritage foundation.
Think that those FB consumers and the like will read the consumer handbook?! They don’t even read those docs they signed
Even if they read the docs, they would not understand the risks of suicide borrowing. So why waste their time?
I was just thinking the same way.
People are flooded with credit commercials, peptalkshows on tv and radio.”Buy now, think later!” And all this will be countered by a consumer handbook?
Duh!
they’ll ALL get raises !
bigger gov for all
drove by thrift office the other day- they’ll make it cabinet level
office of soviet housing security
remember housing is a right !
The consumer handbook should come with a video like the Steve Martin SNL skit “Don’t buy stuff you cannot afford”. People won’t read, but if you can pop a DVD into the TV, people might watch.
“Concerned some borrowers may be over-stretching to buy homes, U.S. lending regulators on Tuesday released a new consumer handbook that warns of the risks associated with interest-only, payment-option and other exotic home loan products.”
much too late to sound the alarm…
now that all the equity is gone - noone is really doing these loans anymore
the coffee that most of the experts are now waking up to is burnt.
Yes, it’s called “sounding the alarm after all the horses have bolted and the barn’s already burned to the ground”.
Or, the lifeboats are all gone and half empty! Of course, everything is alright! Just don’t look at the half of the boat that is sticking straight up out of the water.
hope transactions continue strong- prices don’t matter, but if you want to keep YOUR job high turnover sure does
The last peak in the housing cycle (circa 1989) didn’t correct in a straight line and neither will this one. Get used to ping pong headlines for the next five years: “Housing’s Rebounding” “Housing going down again” “Housing hit bottom” “Housing bottom not in sight”.
what do you rthink of UK’s situation
Housing bust ‘likely in the next few years’
By Chris Giles, Economics Editor
Published: November 22 2006 02:00 | Last updated: November 22 2006 02:00
A housing market bust is likely within the next few years because house price growth has been grounded in unrealistic expectations of double-digit annual rises, a report by a prominent economist and former adviser to Gordon Brown will warn today.
Throwing cold water on the current housing market euphoria, David Miles, chief UK economist of Morgan Stanley, says it is only possible to explain the more than doubling of house prices in the past decade if people’s demand for housing has been heavily influenced by expectations that the rapid price rises would continue.
Once house price rises come down below expectations, he thinks “significant” falls are likely. “A sharp fall in real house prices is likely at some point in the relatively near future, though it could yet be one to two years away,” the report concludes.
http://www.ft.com/cms/s/4dbd683a-7a00-11db-8d70-0000779e2340.html
MT,
I agree. But the worst thing is for the industry to talk about ‘turning a corner’ every month. That only drags out the inevitable price declines and makes a recession more likely, IMO. Didn’t DL just say the other day that the problem is affordability?
And with this kind of data, the bond yields go higher which means higher mortgage rates and house prices falling even further.
One thig for sure is the “turn the corner” talk has compounded their problems come spring. You can’t believe how much buzz I here daily that everyone is waiting ’til next spring to list, when it “turns the corner”. I can just feel the dam that’s holding back the inventory about to burst. Meanwhile, we’re not moving the inventory we’ve got. All we have is a temporary reduction in inventory from those pulling off the market to re-list shortly. I really can’t wait to watch the numbers take off come the end of January. It’ll be like watching a train wreck!
I think that this announcement was the first true “dead cat bounce” of the entire episode. I’m sure there’ll be a few more bounces for the realtwhores, MB’s and HB’s to exploit.
Yes, it would be less painful to yank the band-aid off all at once rather than peel it back one excruciating millimeter at a time.
…and makes a recession more likely, IMO.
You’re kidding, right? Please tell me you’re kidding…
“The last peak in the housing cycle (circa 1989) didn’t correct in a straight line and neither will this one. Get used to ping pong headlines for the next five years: “Housing’s Rebounding” “Housing going down again” “Housing hit bottom” “Housing bottom not in sight”. ”
That, friends, is why this blog is the voice of reason during the insanity. UP and DOWN. Found this site looking for balanced perspective and facts–and found them both here. I come here often to remind myself I’m not alone in my views on this bubble. (90% of my friends and coworkers are pretty clueless on this issue–I’m sorry to say).
DOC
The financial ignorance of the American consumer is finally going to be fatal. The mortgage brokers dangled the bait and Cletis swallowed the hook. Harvest time for the money lenders.
“Shares of U.S. home builders rose after a government report showed sales of new U.S. homes rose a stronger-than-expected 3.4 percent in November, suggesting that the housing market may have reached a bottom. Trading volume was light as many traders were away in the holiday week.”
Looks like the scare was unfounded folks! It’s time to Buy buy buy!!!
‘This is 3.4 percent (±12.9%)* above the revised October rate of 1,013,000, but is 15.3 percent (±13.1%) below the November 2005 estimate of 1,236,000.’
Plus or minus 12.9%, and not counting cancellations, which have been in double digits for months.
guess everyone paid cash as mort demand dropped
plus or minus 12% ???????? WTF !
History shows that the bottom of a market will not come until there is ‘capitulation’. Only when the bulls are exhausted, and no longer believe there will be a bottom, will you find the bottom. When everyone agrees that housing is a terrible investment, you might want to buy. IMO that is years away.
I couldn’t agree more. I can’t wait for my next purchase(post 2011), when everyone around me screams “what are you nuts?Housing sucks!” It’s at that moment that I’ll feel confident I made a good decision.
It would appear then, that all the talk of the end of second quarter 2007 may be a bit early for the bottom.
I may have to agree with diceman that it may take a while longer. The bulls may have a little more tenacity to hold on past 2Q 2007.
Even those with toxic mortgages will hang in past ‘07, IF THEY CAN! The last bastion of FBs will go until they realize that their life and their family is worth more than 2 job-100 hour work weeks, OT up the wazoo, mommy sick of selling on eBay/Avon/Tupperware, and the kids want mommy and daddy, not a nanny.
When these idiots wake up and find out they have been sold more than just an overpriced PoS, then we will hit bottom because they will walk away. A foreclosure/bankruptcy on a credit report will look better and better compared with the debt slavery they are in.
When that times comes you will now it is time to buy because when you buy their 500K junk for 150K, they will think you are nuts.
“As home prices have stalled and begun to fall, late payments and foreclosures increased in the third quarter, with the subprime adjustable rate mortgage category producing the most pronounced increase in delinquency rates, according to the Mortgage Bankers Association.”
No $h*t These people were set up for failure. Bad credit, not enough income and they write loans for these folks that are going to go up every 6 months. Its unfortunate that the gov will bail out these lenders. Pisses me off. They took the risk let them eat it.
Why do you think the government will bail them out? I don’t think the FBs will get a bail out. The Fed doesn’t care about J6Pck FBs.
No.
The Fed will bail out the lending institutions. They couldn’t care less about Joe 6, but if Joe Wells Fargo or Joe WaMu falls, well then that’s “systemic risk” and it needs to be averted.
Think LTCM bailout or the S&L crisis
HIC
I wonder what % of these dud loans are FHA guaranteed?
LTCM and Ford
wow the mid 70’s was that largely from the Vietnam and Great Society BIG SPEND ?
we’he blown those numbers away w iraq and the new deal 4 ?
I’ve lost count
As long as the FB’s lose their houses and prices revert to normalcy, that will be enough.
Besides, as with all government spending, it will be future generations that pay for any bailout, not us.
I’m worried about this. When I retire and start drawing on my 401ks, the tax rate will be much higher to pay off the federal debt.
Don’t be so sure.
There’s a strong likelihood the Fed will be forced to lower rates this coming year as housing starts to fall apart. When that happens, housing may stabilize for a while… while the dollar falls to pieces.
Buy gold. Buy silver. Buy oil.
This is from my post at Money & Metals yesterday:
‘The importance of the housing figures combined with relatively thin trading could produce sharp price swings, in case of unexpectedly strong or weak data,’ said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets in New York. ‘We expect further prolonged pressure on the euro as long as the U.S. figures on new home sales and existing home sales continue to diverge from one another on a monthly basis,’ he said.’
Prices are so far elevated, with everyone using teaser-rate loans with monthly payments based on 1-2% introductory rates, that interest rates would have to fall into the 2-3% range to save the market.
Think about it. Why would lowering the true interest rate from 6% to 5% save the market, when houses would still be unaffordable at 5%? The howmuchamonth Harrys can’t pay 5%, either — or 4%, or even 3% in many cases. They’re stretched to afford the monthly payments even using their 2% teaser rates.
True, however, if the Fed slashes short rates back to 1%, many of these people could serially refi into another 100% LTV option-ARM with teaser. Of course, this scheme will only work as long as they still have some equity. In a falling price/demand market, it cannot go on forever and is only delaying the inevitable, IMO. Of course, the Fed has elevated delaying the inevitable to an art form.
Even if the gov’t bails them out with lower rates, the fed can kiss any hope of saving in this country goodbye.
Furthermore, you still have the problem of everpriced housing. Even if the interest rate on a 720K loan was 0% for 30 years, it would still cost you 2K a month for just the loan. Add in taxes at 600 a month, another 350 for HOA, another 50 for insurance and 100 for maintenance/upkeep/keeping up with the Jonse’s and you are still at a whopping 3,100/month. Add in the usual 300-400/month utilities and the grand total of that behomoth is $3500/month. Even at 3X income, one would need to bring home 10K/month or 120K/year.
Therefore, even at 0% interest, we have a long way to go because the only people left to buy are the ones who are lifetime renters, us on the sidelines, and those who are so subprime they can’t get that kind of loan I just mentioned. And selling to each other will not keep this game afloat!
Lowering rates to near zero didn’t help the Japanese. If someone wants to sell me a 2006 Ford F-150 for $100,000, zero-percent financing doesn’t matter.
The Fed raised interest rates by about 4% and mortgage rates increased by no more than 1%. So even if the Fed dropped its rates 4%, the effect on martgage rates could be minimal. This “paradox” is a result of the fact that mortgages are now securitized and sold on the OPEN market.
…and the open market’s going to “find religion” this year and start pricing risk more appropriately.
The gov does it all for big business. Tax cuts, incentives, subsidies and bail outs. Its always been that way and always will. It keeps people from rioting in the streets.
“These people” that you refer to were willing participants.
“These people” are not victims, rather, they initiated the entire chain of transactions. They weren’t forced to go house shopping.
Most of the media coverage I’m seeing today is unqualified optimism: “inventory is steadily falling, prices continue to rise, if slowly, and the slump will soon be over.”
Let’s just stipulate that this is a “false dawn” or “dead cat bounce” or what have you, and get to the question of how much the media really influences buying activity. I’m sure we’re all getting emails from bullish friends saying, “See!?” as if this news is all it will take to launch a buying spree. And of course, realtors have been blaming the downturn on media coverage, which would indicate they agree that positive media coverage will turn it around.
I presume most of us here think the downturn is driven by factors like prices outpacing income, and now by price growth underperforming debt accumulation.
But I think we all also agree that expectation of future gains was a huge part of the run-up, so it follows that a necessary part of a prolonged downturn is a widespread expectation that prices will not increase near-term. So now I guess we’ll see whether the media has any power to manipulate expectations, or whether, conversely, their efforts to do so reinforce the pessism if things fail to improve in the next few months.
Ah, but you’re leaving out one uncontrollable factor the media cannot influence: Resets. They are coming in 2007 and the MSM will have no choice but to report on the situation…and it won’t be pretty.
How can inventory be falling when the flippers have left town and November new home completions were running at roughly a 1m annual rate in excess of new home sales (before factoring in cancellations)? Somebody needs to brush up on their counting skills.
“Wait ’till Spring” is the only thing holding inventory down. When the market DOESN’T rebound this spring and people start to get an inkling that it may indeed be a long way down…It’s going to get ugly.
Just imagine the number of homes: new, foreclosed, FSBO, etc., on the market next spring. UGLY is even going to cut it. If you think that this summer was busy with those 30 signs up in your neighborhood, just wait until you see 2-3X that amount. Can anyone say eyesore. The thought of seeing 40, 50, 60 signs in certain ‘hoods is going to be real painful.
As an aside, it will be funny to go in and lowball these fruitcakes, who think they will still get 600K when there are no buyer and 10 other houses for sale right next to theirs.
Well it’s the neighborhoods of new houses that will be the most sign filled because they have the most sellers reluctant to sell because they’re all taking a loss. Older neighborhoods OTOH, should have enough sellers with equity that new comps will come pretty quickly.
OTOH, the new neighborhoods will likely have the majority of “jingle mail”. Foreclosed properties can sit for quite a while without a sign in front of them.
“As an aside, it will be funny to go in and lowball these fruitcakes, who think they will still get 600K when there are no buyer and 10 other houses for sale right next to theirs.”
LOL, fruitcakes. I like it. I am eagerly looking forward to this spring when these boneheads realize that their $600k asking price is so far detatched from reality that there is no hope of selling period.
yeah, tj you may be right. It’s hard to predict exactly how this will shake out.
Total inventory for sale includes three categories — homes not started, homes under construction and homes completed and waiting for sale. It has indeed come down … a BIT … to a seasonally adjusted 545,000 units in November from 558,000 a month earlier. But let’s look at this with a sense of perspective and history. The peak was 573,000 in July. That was a 96% increase from the pre-boom level (early 2001). So a decline of 4.9% doesn’t make much of a dent in the inventory mountain, especially when you also consider that this inventory figure does NOT include the impact of cancelations. In other words, if you sign a contract to buy a house, it counts as a sale and a house is subtracted from the inventory count. If you later walk away from your deposit, the Census Bureau doesn’t add that house back to inventory. I had a post about this and some more details on the inventory situation at my blog a few days ago …
http://interestrateroundup.blogspot.com
The bean counters are drunk with optimism.
2007 will be the year of reckoning….as the pea at the top of the snowy mountain will start it’s descent slowing picking up and crashin at the end of 2009…..
Apropos to the credit discussion above:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=943524
I was out on a date when my date asked my to give her one of my fantasies. So I told her about the housing bubble, and it popping, and everything that would happen. Needless to say, our date wasn’t the same after that. Towards the end I found out she was a realtor.
“my fantasy is for you and i to be alone together… laying on the carpet in front of a fire… watching the housing bubble burst”
lol.
LOL Tom. That is awesome. I just hope your fantasy didn’t cost you a hot lay.
Be grateful it didn’t. There isn’t enough latex in Troy to protect you from the Realtwhore pox.
“I found out she was a realtor.”
What are the odds of that? 1 in 5? sarcasm off.
This is only tangentially related but I might as well mention it here… whenever I glance quickly at the username “Rental Watch” it looks like “Raquel Welch”. Not that I get off on 65-year-olds or anything, but she did keep her looks for a long time.
bubbly: re: Raquel Welch. agreed! Not an Academy Award winner, but definitely one of the hottest babes during the past half-century! She still looks good, IMO.
sounds like a deal killer tom lol
So do you self-gratify to this fantasy? You need some time away from this blog.
I was kinda getting a boner while I was reading it…
She asked you to “give her one of her fantasies” before you even knew each other well enough to know what she did for a living? Sounds like a hot number…
Typical woman’s reaaction (mine): good thing you found out pretty fast about her underlying personality defect. Realtwhorehood is just not consistent with sanity and reason.
Wow, i bet thats the end of that relationship.
No wonder she left disappointed. She was hoping to hear a fantasy from you that didn’t entail her getting an ass-pounding.
LOL!
Absolutely classic! LMAO!
I think they will rename KY Jelly into FL Jelly, CA Jelly, DC Jelly, and AZ Jelly.
LOL
All the male jokes of self whoredom and self deprecation are tiring. This one is hilarious.
Hilarious.
LOL.
The male jokes of self-whoredom and self-deprecation are tiring. This one is witty!!!
LOL
Hilarious
Much better than the usual male self-deprecating jokes about sluttttting oneself at any opportunity. Some real alley cats around.
This is 3.4 percent (±12.9%)* above the revised October rate of 1,013,000, but is 15.3 percent (±13.1%) below the November 2005 estimate of 1,236,000.”
Are those margins of error for real? So the first could be really -9.5% and the second 2.2%? If so, those statistics are useless.
yessir
I assumed that 3.4 percent (+/- 12.9%) meant:
minimum is 3.4 * (1 - 0.129) = 2.96%
maximum is 3.4 * (1 + 0.129) = 3.84%
Most articles in the business and financial press are extremely sloppy when reporting statistics, so there’s always ambiguity when trying to discern what is meant. Real estate reports are no exception to this.
If they really meant +/- 12.9 percentage points as you suggest, then I agree that it’s utterly meaninless to report the statistics at all.
From Origination News:
‘Homebuilders are likely facing a slow recovery, according to Standard & Poor’s Ratings Services. S&P said the reasons for this expectation are affordability problems in key coastal markets, a glut of unsold homes that could worsen, and a reluctant consumer that is still waiting for the market to hit bottom despite builders’ price concessions. ‘Our bet is on a slower recovery with plenty of mixed signals and false starts along the way as undercapitalized homebuilders falter and consumers maintain their pricing power,’ said S&P credit analyst James Fielding. ‘The picture is likely to become clearer after the first half of 2007, when homebuilders report results from the important spring selling season.’ The S&P report is titled ‘Industry Report Card: Mixed Signals and False Starts Ahead in the U.S. Homebuilding Sector.’ The rating agency can be found online at http://www.standardandpoors.com.’
‘NAHB Sees 15% Drop in Starts Next Year
Homebuilders are forecasting that housing starts will bottom out early next year, but they say they still expect a 15% decline in single-family starts, similar to this year’s decline. Housing starts will be negative in the first quarter and steadily increase over the next three quarters, according to National Association of Home Builders economist David Seiders. New-home sales will be flat in 2007 after this year’s 17.6% decline, he told reporters. Meanwhile, purchase mortgage originations declined this year, and Fannie Mae chief economist David Berson says he expects a larger decline in 2007. ‘It will be the first two-year fall in purchase originations since the early ’90s,’ Mr. Berson said. His forecast calls for purchase originations to decline to $1.28 trillion in 2007, down from $1.45 trillion in 2006 and $1.51 trillion in 2005. Existing-home sales should be off 1% in 2007 following a 9% decline in 2006, according to National Association of Realtors chief economist David Lereah.’
‘NAHB Sees 15% Drop in Starts Next Year’
That sounds like pure BS to me.
November completions were running at 2m per year (according to what Ben posted at the top). November new home orders were running at around 1.5m annualized. It sounds like starts will drop about 25% next year, and that will still result in a rate of new home completions about 0.5m in excess of the recent rate of new home purchases. Anyone want to catch yourself a falling knive?
Ok, can someone explain how a house that was never for sale be sold? or at least never shown on the MLS or ever had a sign in the yard for a FSBO, two in my area show closing for abnormally high prices recently, and I have been watching the market very closely, (obssessively so even) ???? WTF? something stinks…
sounds like fraud, husband selling to wife or other family member type of bs
Could be fraud or unsolicited offers. I know some people who when looking for a house would write a letter and drop it in the mailbox of the home that they wanted to purchase. This can yield an actual sale when either a) the house wasn’t for sale, but was soon to be, or b) the offer was ridiculously high, high enough for the owner to sell even when they weren’t considering it.
You could be right, ft lauderdale, but I will tell you my house in Maine was sold this summer without ever being listed or in MLS or having a sign in the yard. I asked realtor friend what I could get for it, and it so happened he had a lady to whom he had been showing POS’s for about a year, and it so happened mine was a little better deal because I was a Motivated Seller with very little attachment to the house itself. So it was sold with no trace of a marketing process.
Not necessarily fraud. Sales like this often happen from an individual to an LLC. It’s moving the cash from one pocket to the other for whatever reasons they may need money.
A relative deal!!!
To pull cash out of the house.
Can anyone tell me why we have some of these overpaid Federal Agencies? One has just released a new handbook, warning borrowers about exotic mortgages, etc, because of concern they maybe taking on too much debt. Hello!! For free, I could have told them that (as most on Ben’s blog could have done) 3 years ago!
First we get the handbook and soon we get those a**hole political Washington Hacks starting to hold expensive and all paid by the tax payer expenses, hearings and meetings with these a**hole politicians suddenly looking concerned about citizens who have been suckered into borrowing money - probably by the same corporations which fund their political war chests.
The people who issued the handbook are called, The Office of Thrift Supervision. What the hell does that mean?! It sounds like a Monty Python skit. The Department Of Funny Walks. The Department Of Thumbs Up Your A**. I wonder how many more of these obscure Federal Agencies the tax payers are supporting? To think that these people get amazing medical benefits, days off up the gazoo for every national holiday, generous sick day allowences and end up with big fat federal pensions that will never go bust. Jeeez. Frankly, the whole system stinks.
and raines, a gov clerk gets millions-
FNM can’t fail ,hence its a gov agency folks
Calm down, take a deep breath, do one of those ‘funny walks’ in front of the mirror and then up and down your street and come back to this blog. You will feel relieved. It worked for me. It made me head of The Department recently.
what useless agency do you work for ?
doe
hud
there’s hundreds now
gov workers will have their jobs till the dollar tanks- like brazil
“what useless agency do you work for ?”
The Department of Funny Walks.
I’m paid by my wife and children to stay inside and by neighbour-homesellers not to come out during open houses. I don’t give a $hit about the dollar tanking, I’m paid in euros.
John:
Flat is a one note wonder. Has been around here quite some time, IIRC over a year.
Everyday it is the same post, others have tried to reason with him, but no changes in posting style.
View his/her posts kinda like an unfortunate artifact since he never really makes the case.
“‘If housing prices fall, your home may not be worth as much as you owe on the mortgage. Also you may find it difficult to refinance your loan to get a lower monthly payment or rate,’ it reads.”
Translation: Hurry up and use a suicide loan to buy yourself a new McMansion.
Thank god for this blog. Each month, I read a headline like “Sales of New Homes Rise in November”, then I come to this blog and find that, once again, the headline was basically a big, over-optimistic lie.
So, what is the consensus on resale home sales, (supposed to be released tomorow)?
the consensus is some bullsh*t fabricated number.
“From CNN Money “‘We don’t think there’ll be a recession, but the risks have risen,’ said David Berson, chief economist of Fannie Mae. He now estimates the chance of recession at 35 percent for 2007, up from a 25 to 30 percent chance a few months ago.””
Mmmm…. Economists, I’d assume, are more honest than the relestate profession. Although, no one would welcome a recession I believe the probability of a recession put at 35% by an ecomonomist seems too high to write-off as only a probability! It’s likely coming.
100% probability that David Berson is overpaid and doesn’t know his head from his ass.
“Prices of single-family homes across the nation rose in October at the slowest rate in almost a decade, a housing index released Tuesday by Standard & Poor’s showed. ‘We can clearly see that the monthly price declines are wide spread nationally,’ said economist Robert Shiller.”
How does one rank negative numbers for slowness?
Of course I share your attitude, but I think the answer to this particular question is that the composite of the (now 20) cities covered by the Case-Shiller index still showed a YOY increase, but 16 of the 20 cities (I think) showed MOM decline. Hence the consistency of Shiller’s comment with the previous apparently contradicting stmt.
I am glad HB’s keep knocking out new homes. The more inventory the better. I read where their profit margins are still in the high teens percentage wise; down from a peak of around 25-30%. So most of them have a long way to go before freezing production. gordo