National Median, Sales Down In First Quarter: NAR
The realtors association has some numbers out. “Real estate gains came to an abrupt halt in the first quarter of 2006, with the median price of a U.S. home falling 3.3 percent from the fourth quarter of 2005, according to a report by the National Association of Realtors.”
“Prices were basically flat or lower during the quarter as inventories of houses for sale rose and their time spent on the market lengthened. Median prices nationwide fell from $225,300 in the fourth quarter of 2005, to $217,900, a drop of 3.3 percent.’
“Many major metro areas showed slight declines, including Boston, Washington D.C. (down 2.4 percent), Los Angeles (down 0.8 percent) and Chicago (down 0.8 percent).”
“The report quoted NAR’s chief economist David Lereah saying, ‘With the supply of homes picking up very nicely in many areas of the country, pressure is coming off of home prices.’ Lereah is optimistic that the market will soon return to growth. ‘By the time we report second quarter data, I expect most areas will be returning to normal rates of price growth in the single-digit range.’”
“Existing home sales are down more than 15% in five states that have had the hottest housing markets, the National Association of Realtors said Monday. Sales were down 22.2% year-over-year in Arizona, 19.2% in California, 18.2% in the District of Columbia, 15.7% in Florida and 15% in Nevada.”
“The hot markets now are New Mexico, Louisiana, Montana and Mississippi, with sales up more than 15% in each of those states.”
“NAR President Thomas M. Stevens said the sales pattern is expected to level out. ‘We project home sales may soften a little further before picking up in the fourth quarter.’”
“‘Condos have good fundamentals given the demographics of buyers, with baby boomers focused on the high end and their kids on more affordable units. However, in a handful of areas where there may be an oversupply, prices may level-out, so the longer your time horizon the better your investment,’ Stevens said.”
gawsh ben, did ya have to start off the work week with a quote from that meelee mouthed spineless little twerp?
mealymouthed = evasive. unwilling to state facts or opinions simply or directly.
NAR’s chief economist David Lereah must be on freaking drugs! I wonder what he’ll say when the 2nd quarter shows up with another decline? That we now we have a trend?
If “normal” price growth is in the single digit range and we’ve therefore just had many years of abnormal price growth, might I suggest that it’s merely wishful thinking to expect “normal” price growth to resume after just a one quarter “correction”?
I think the Lereah’s comment is meant to pre-emptively put a positive spin on the next YoY number, which will show a median increase of 6% or something. He will tout that as normal, even though the following YoY should be negative.
From todays Guardian:
Soaring optimism, glossing over bad news - it could be time for the bubble to burst
…But as Nick Parsons of Commerzbank, one analyst who did argue that the US housing market may not be in quite such good shape as the consensus thinks it is, noted: “When you see the post-data headlines, remember always that no major US bank/builder/mortgage lender/ federal agency or Fed official has any interest whatsoever in putting anything other than the most favourable gloss on the numbers.”…
Even China cannot feed a permanent bull
http://tinyurl.com/o6vtx
May 15, 2006 Guardian Unlimited
David Lereah on the Hindenberg:
“The fire ball erupting from the airship provided nice illumination for the landing area.”
David Lereah on the Titantic:
“Many people enjoyed a refreshing dip in the ocean.”
I sense a weekend topic forming here: “David Lereah on…”
Good one, except… Got a little coffee to squirt out of my nose. I now have to clean up my keyboard.
Rainman/Wiener — funny, funny. Glad I wasn’t drinking coffee at the moment I read these.
David Lereah on World War II: “‘Tis but a border skirmish.”
David Lereah as “The Black Knight”:
It’s only a flesh wound!
“… ensuring a soft landing”
The dip this quarter make it easier for a bounce up next quarter….
On the black plague: It is only a cold..
on Avian Flu:
“Some will benefit from the loss of weight, retch-induced abdominal crunches, and days off from work.”
David Leraeh on the Poseidon:
“Great exercise for those willing to break away from the crowd”
David Lereah on George Bush:
“Just a slight correction in his approval rating, looks very strong long term.”
You mean the “soft landing” area, right?
Leareh on pyramid schemes :
Like condo conversions , they are very profitable for some people because they are there .
“Condos have good fundamentals given the demographics of buyers, with baby boomers focused on the high end and their kids on more affordable units. However, in a handful of areas where there may be an oversupply, prices may level-out, so the longer your time horizon the better your investment’ Stevens said”
Condos are the most vulnerable to teh coming market downturn. They can make much more vertical land for condos.
David
http://bubblemeter.blogspot.com
“…and their kids on more affordable units.”
has anyone named the effect where a SFH contract falls through b/c the buyer could not sell their home b/c their buyer could not sell their condo b/c their buyer (first timer) could not afford the 270k 1BR at the new rate and had enough financial savvy not to ARM/IO it?
Dominoe Downdraft.
I call it a contingency trainwreck
It’s called the “Out of Vaseline Effect”.
Agreed. Condos are so unattractive, both physically and financially, that they are the last to rise and the first to fall. Although I admit that they can be an attractive exit strategy for landlords, they are seldom as good a deal as renting a luxury apartment. At least until you get well into the “luxury townhome” class, which behave a bit more like single-family houses.
Visited my Grandmother for Mother’s Day this weekend. She, being 74, is currently in one of the “senior community” style condos. For the life of her, she cannot figure out or known anyone her age who in any way, shape or form is interested in a condo which is 4 x the price she paid for hers. She lived in one house from the day she was born until she married, she moved out into an apartment while her new house was being built (my grandfather bought the plot next door to her parents), and she lived there until it was simply impossible to maintain the upkeep and she had to have something much much smaller as she was by herself living there. She could not understand why someone would want some of these giant condo/townhouse monstrosities at her age. Especially the multi-floor ones as she got a one level ground one so that she didn’t have to go up and down stairs all day. And from my own vantage point, why would I pay 300 a month property taxes and 250 a month in maintenance fees and pay 320K for a place I can rent for 1K a month. Sorry, but condos, if based off of these assumptions, are going to crash and burn.
Louisiana and Mississippi — anomalies/Katrina
Lereah: “By the time we report second quarter data, I expect most areas will be returning to normal rates of price growth in the single-digit range.”
Inventories and interest rates have risen since the end of the first quarter, while sales activity has slowed down over the smae time period. Hardly the stuff rallies are made of.
Exactly. How can any reasonable person reconcile a statement like this given the market conditions? And this dope is supposed to be an economist, impartial, bringing market data and science to the table. He has managed to remove all doubt about his relevance. By now he probably couldn’t convince a realtor in a room full of realtors a crash isn’t around the corner.
If the NAR has any hope of ever being taken seriously they have no choice but to sideline their tired incoherent cheerleader….
“NAR President Thomas M. Stevens said ‘We project home sales may soften a little further before picking up in the fourth quarter.’”
Anybody have a clue upon what he bases this projection of a “pick up” in 4thQ sales?
It’s a suitable distance away for a spot of wishful thinking.
I think what he’s trying to say is that the 2nd and 3rd quarter are going to be so bad, the 4th quarter may look good by comparison!
Why would you ask the basis for his projection? Everyone knows realtors don’t need a basis other than “real estate never goes down.”
Come on, everybody knows sales pick up in Winter.
I think it’s because it’s after the mid-term elections which will help to unite and heal our economy and our country. At least that’s what the newspeople said.
So long as fox news or the bush admin didn’t say it, it’s believable.
AP
Survey Shows Cooling of Home Prices
Monday May 15, 11:22 am ET
Survey Shows Cooling of Single-Family Home Prices in 1st Quarter
WASHINGTON (AP) — Although the increase in prices for single-family cooled in the first quarter, many metropolitan regions are still showing double-digit annual gains.
A survey by the National Association of Realtors shows the median price for a previously-owned single-family home was $217,900 — up more than 10 percent from a year earlier. During the final three months of last year, prices had been up more than 13.5 percent, compared with the same period a year earlier.
Of the 149 metro areas surveyed, 60 regions had annual price growth in the double digits, while 16 showed price declines.
NAR Chief Economist David Lereah said the drop is due to increased home inventories. And he said second-quarter numbers will likely show most areas returning to rates of price growth in the single-digit range.
I would like to know how often there has been a forth quarter rally in eal estate .Maybe a Christmas rally at department stores .
AP News is terrible. They try to spin every piece of economic news to sound better.
“The report quoted NAR’s chief economist David Lereah saying, ‘With the supply of homes picking up very nicely in many areas of the country, pressure is coming off of home prices.’ Lereah is optimistic that the market will soon return to growth. ‘By the time we report second quarter data, I expect most areas will be returning to normal rates of price growth in the single-digit range.’
Are we talking positive or negative growth? Read the above again and see if we are to assume which type of growth. Very careful wording.
About two year from now: Aaaa MR. Senator, I did not say “positive growth” I only said growth. Please do not put words in my mouth!
wow! Isn’t it true that RE industry was saying that national median never dropped in the history?
Yes. But they lied, as usual. Prices most certainly did drop (a lot) on a national basis during the Great Depression. The NAR always leaves out the “as far as our official records go,” which isn’t that far at all.
Can’t wait for the negative YOY numbers. They’ll hide behind the positive YOY gains until they can’t. Of course, it’s likely they will be using “gains over 2003 prices” as soon as YOY show declines.
They forget inflation and home size and taxes and energy and improvements and…
Don’t get me wrong, some people manage to live for free and walk away with money but for most homes the only investment is in illiquid forced savings. That’s why this time we will see a massive decline nationaly. The HELOC liquified that component and therefor made it liable to fast swings. One of the reasons I continue to emphasize the speed at which things are unraveling.
“…for most homes the only investment is in illiquid forced savings…”
I agree with that — “submitted” to it for many years because it was the only way I could force myself to save. I am very, very happy I never succombed to the temptation of a HELOC, particularly to use for the purchase of toys. The speed of the unraveling certainly does seem to be picking up. This morning there was even a faint SOS about the stock market:
http://tinyurl.com/oz3hs
though I don’t know enough about stocks to evaluate it.
The UK Telegraph had it more than a faint SOS…
The article I read last night had references to the ‘87 crash.
Here it is:
http://www.telegraph.co.uk/money/main.jhtml;jsessionid=OHHRTBUEOA4CFQFIQMGCFF4AVCBQUIV0?xml=/money/2006/05/15/cnmarkets15.xml
Buy the dip! Any free seminar from vertically challenged twins will tell you this is the no lose time to buy! NOW!
Seriously though, I just want this whole thing to end as the spin is starting to reach the realm of rediculousness.
Can’t see the reasoning. If anything, the 4th quarter should be the quarter that cements the bust - rates up, inventory up, a couple of Cat. 5’s in the gulf, oil at $100/bbl., a 8.5 on the coast of California, and a meteor strike or two - gee, this is kinda fun.
I really get the feeling that the NAR guys are talking out of their hat, with really no sense that they have a clue. Maybe it’s just that Lereah needs the extra time to dump his housing stock. Then he can get on to his first love, selling ginzo knives and Titanic deck chairs.
I am so friggin sick of the housing bulls being able to spin the numbers into anything they want and having the media lap it up without questioning. What ever happened to investigative journalism ? I wonder how many people will now run out and buy houses because of reading this. After all, prices should still go up single digits ! It is simply incredible how much friggin hype these people get away with. Just like during the dot com burst. I wonder if there is a way to sue these jokers.
Is it possible these guys learned how to lie from someone in the Bush administration? Or is it that they are just completely detached from reality…… like the Bush administration…..
Or maybe they are simply ravenous vampires from an alternate dimension whose sole desire is to coat themselves in human viscera while singing hymns to their lizard king… like the Bush administration…
Hey - that’s exactly what I was thinking!
Re Bush admin, I agree with you Lingus….but then again we’ve got” I did NOT have sex with that woman” which really only proves we should throw out the whole bunch and start over.
With the supply of homes picking up very nicely in many areas of the country, pressure is coming off of home prices.’
very nicely?
Dave reminds me of Subliminal Guy on SNL…”Lets go back to my apartment hot sex and we can watch a movie hot sex.”
He makes it sound like he was HOPING for a rise in inventories, so that sales would slow, prices would drop and realtors would be looking for new jobs. I guess that’s how he defines NICELY.
With the supply of homes picking up very nicely in many areas of the country, pressure is coming off of home prices.’
Now all of a sudden the ‘pressure’ on home prices is something that thankfully is starting to ease so we can get back to making a sustainable 12% per year.
Maybe DL should write a book on the benefits of smoking.
“With the number of cancer related deaths picking up very nicely, pressure is coming off cigarette prices”.
Anybody have a clue upon what he bases this projection of a “pick up” in 4thQ sales?
Super Bowl???
I would guess that following the major 2nd and 3rd quarter drops, the 4th may acually show a slight rise, at least above the 3rd. The problem for the NAR is getting their YOY, MOM and DOD numbers strsight.
Not a chance. The only thing that’s gonna show a really nice pop at the end of the year is REO activity. That will set the stage for a major meltdown in ‘07.
I can’t wait to see the NAR’s spin on how good the auctions and boarded up windows are for the real estate business and how those investments panned out…
OT: Gold is going down nuts…I thought for sure it would be up given the bad dollar news. Guess there was a selloff or lessened institutional demand, because sheeple don’t stop their buying enough to cause that much of a blip, until they can’t.
Commodity bubbles can exist too. Too many people want gold right now while very very few people need gold. Worse, the people that need gold are using this run up in price to seek alternatives. Hard, shiny yellow beanie babies.
There are these people called Asians and Middle Easterners that too much of this thing we call the American dollar. They need something else, like, err… GOLD to change their currency into. It is funny that gold dropped today. Actually it doesn’t make much sense that it did. China announced it will let its currency rise. OK. That probably means they will sell US dollars and put the US dollar down. OK. What are they going to buy instead ? I bet gold. So why did gold fall ?
Looks like a well co-ordinated bear raid on all commods at the london open. Well done I must say!
See. Guardian Observer May 14, 2006
IMF acts to avoid markets meltdown
http://tinyurl.com/jcbxg
The IMF is selling gold and commodities buyin dollars to try to stabilize.
I had been suspecting some central bank(s) started to intervene. It doesn’t surprise me. Gold is down and bonds are being bought up like crazy today. So now, it’s a game of hedge funds vs. central banks/IMF now.
Fun!
There is a tangible reason why NO ONE wants the US economy to even get a cold, as when the US gets a mild cold, the rest of the world gets the equivalent of Ebola….
NO, the IMF, WorldBank, and even the fed, will stop at nothing to protect the dollar…. If the dollar plunges, I doubt that there is a currency out there, except maybe the yen, that could hold up.
Where’s that guy who was buying another 20K of silver hedged by the 20K of silver he bought before?
Buffett dumped his silver holdings.
A little report from Montana. I watch BIllings in eastern Montana. This isn’t the tree-and-stream beauty of western Montana, but rather mostly flat, dry plains about an hour east of the first mountains. Five years ago, “starter” houses could easily be had for 75k (since I’m a young renter, this is mostly the market I watch). Now you’re looking at 125k minimum. Median sales price for all houses is about 185k, up at least 50% in five years. Household income here is about 35k-40k.
Anyway, I’ve been watching inventory since the first of the year. It’s climbed from about 600 on Jan. 1 (which was reportedly up 30% from a year before) to nearly 850. That’s SFH only in a town of about 90,000. If you include land, it’s more like 1250. After a month pause, it seems to be ticking upwards again. There are still a lot of sales, but apparently still not enough to keep up with the massive building (downtown hotel condo conversions, yay!).
Interest-only and ARMs are not so prevalent here, but money is still easy. No one does down-payments, everyone talks about housing as “investment”, and I hear scattered reports of people getting in over their heads. So sales may be up for now, but inventory is on the rise and I don’t expect Montana to escape the decline.
1887 propertys for sale in kingman az 86401 realtor.com population 28,000. plus 100s of new homes for sale by builders not on re. listings.
Thanks for the report — I don’t recall reading about the Montana market before. It does seem to have had plenty of price inflation, 50% in 5 years. Without knowing average family size, it’s pretty difficult to speculate on the impact of that inventory level. I don’t see how even areas like this can escape the pop in prices.
The house price statistics are skewed favorably also. When the buyers get money towards down payment/no closing costs/homeowners assoc fees paid for a year/free massages these real dollars of decline are not reflected. “Our house prices are flat for the past quarter” means “We paid 10% down and 3% closing fees for everyone so we’re only down 13% last quarter”.
sales up in LA and AL = rebuilding from Katrina
prices do fall !
It’s not so much the bland assertion that sales will resume in a future quarter, it’s the unstated assumptions and premises which gripe me. For example, how can areas return to “normal rates” of growth next quarter when there is a current 400% increase in inventory and 25% decrease in sales and contracts, coupled with increased contract defaults? There is no new data offered which would indicate a change in either supply or demand. For sales to “return” you need either an increase in demand or a decrease in price. Where either of these will come from is completely missed by Mr. Lereah. Any Econ 101 student could tell you that if demand remains static or declines, then for sales to keep their current level, prices must decline. If prices remain constant, then sales will continue to decline.
Moreover the huge current inventory is several months’ supply at “normal” demand levels. What does this mean? Even if nobody listed a single new house for the next three months, the existing inventory would take five to seven months to dissipate, depending on where you are. If buyers are scared or disinclined to gamble, the buying levels are less than normal, and the inventory would cover many more months. However this plays out, there is no way the inventory problem will correct within one quarter or even two, never mind that the summertime is a lousy time to try to sell.
The bland assertions from NAR are based upon assumptions or presumptions which are not evident in the record and which are contraindicated by existing data. Mr. Lereah’s reassuring words have no substance behind them.
The data shows big price declines since the third quarter of 2005 in many metros in…the Midwest? Cleveland down nearly 15%. But Detroit still going up, as only expensive homes sell (and many fewer of those).
So much for Fortune’s prediction that the low-cost markets would be a haven.
(Hard, shiny yellow beanie babies.)
ha ha.
I’ve got Goldy-lox, Silvy Silver, and Plutonium Platypus but I’m scouring e-bay for a Palladium Pussycat and I just can’t find one! I’ll pay anything!
I can’t wait until we are in the middle of Hurricane season. What will the spin be then?
David Learah,”The 5 hurricanes that have taken place in 2006 are providing builders with a tremendous amount of land to develop on where there were once exisiting homes. As soon as these little winds die down and they remove those pesky boats and trees from the streets, buyers can start shopping for bargains.”
“The hot markets now are New Mexico, Louisiana, Montana and Mississippi, with sales up more than 15% in each of those states.”
Everybody wants to live in those places! See, fundamentals in action!
clouseau
Let’s talk hot and cold markets shall we. Hot markets: Montana, Missippi, Louisiana and New Mexico. Cold markets: California, Florida, Arizona, and Nevada (+ DC).
Hmmm, there’s equivalence in that we’re talking about four states each, but lets think of it another, like say… population.
Cold Markets: 55 million
Hot Markets: 10 million
I think you get the picture, I wonder what happens if you throw New York, New Jersey, Massachusetts, Texas, Michigan, Illinois and Pennsylvania into the mix (wherever they fall) How do you think that market looks?
I love CNN.com mor eand more every day, they are really removing the spin! Their top right box of headlines now says “CNNMoney: Home prices fall the first quarter”. Hey, not “home price apprecation slows” or RE market cools further”–the “f” word was posted, it’s a landmark day, IMHO.
Fox News would never post that.
Could be why Bush is so out of touch with reality. All they watch is Fox News on airforce one. If they actually started watching CNN, he might figure out why his poll numbers are so f*ed up.
I’m not going to go partizan here but I’m not sure what gets advanced with these decades long implications that GW is a stupid ideologue. Even if he is who’s left to sway?
My personal opinion is that FOX is only slightly conservatively inclined but the other networks are so unabashedly liberal it looks extremist right by comparison.
Fox News isn’t conservative. It’s pro-Murdoch and pro-business. Bush isn’t conservative either. He’s a crony capitalist.
I’m not going to go partizan here but I’m not sure what gets advanced with these decades long implications that Murdock is a stupid pro-Murdoch and pro-business ideologue. Even if he is who’s left to sway? That’s even if he has the sway on the network implied.
My personal opinion is that FOX is only slightly conservatively inclined but the other networks are so unabashedly liberal it looks extremist right by comparison. It is also my opinion that they are imune from rational criticism because ration people are not upset and that leaves only tinfoil hat wearing lefties to complain.
Robert -
“Slightly” conservative…. yeah and Lincoln’s slightly dead.
I’m looking at the CNN article, which I think raises an interesting question. If you look at the areas which experienced YOY declines, most are areas not associated wtih grossly inflated bubbles: Toledo OH, Wichita KS, Danville IL, Rochester NY. The obvious exception is Boston.
So, what gives? Is this data telling us something? Do we expect these sorts of areas to continue to lead the way down? Or, does this data show generally weak economic growth, and it won’t be until next quarter when the real bubble collapse starts to become evident in the YOY numbers?
If you study real estate bubble cycles you’ll often see the same pattern of price changes vs. geography over time repeated. The bubbles usually start in the urban centers where prices rise quickly. This is followed by concentric circles of price increases out to the suburbs and finally out to the most distal rural areas. So you start with price increases in the center first and then these price increases spread from proximal areas to distal areas over time. The last places to increase (and the least volatile) are generally the areas furthest from the urban core.
However, when prices start to deflate they start to deflate in the distal rural areas first. Then the price decreases spread towards the urban core. The urban core is the last place to fall. However, because the differential in price is least in the distal areas and most in the proximal areas and urban centers you see the price swings are more volatile in the center and least volatile in the rural regions. In other words the higher they go the harder they fall.
Aside from your macro-example of the Midwest and Great plains dropping the most in the US first you can find the same pattern repeated on a state level. For example here in California the central valley which is our rural distal section of the state is seeing inventories explode and this explosion of inventory is moving country by county towards the major urban areas. The price drops will follow the inventory increases. The rural areas of the central valley will get hit first, but not as hard and then when it hits the urban core it will explode baring extreme intervention. In the end the cores will get hit the hardest as a general rule. There are clearly exceptions.
“If you look at the areas which experienced YOY declines, most are areas not associated wtih grossly inflated bubbles: Toledo OH, Wichita KS, Danville IL, Rochester NY. The obvious exception is Boston.”
Caveat Emptor, Haven’t done the research but at quick glance I’m wondering if we can equate these areas with any large scale layoffs? Quite a few have been announced as of late.
Danville is a hole. A few years ago they were trying to outlaw glass 32oz bottles, because of all of the broken glass littering the sidewalk caused by the bums breaking their bottles…
“Lereah is optimistic that the market will soon return to growth.”
And I am optimistic that all of the Realtors who listened to David lying to them for the last 8 months will get together and brandish knives to disembowel him with.
A large degree of phucked flippers are Real Estate Agents.
And a large degree of those agents bought their 20 homes based on his absurdly optimistic predictions.
It kinda sounds to me like he knows he’s on his way out the door.
Make no mistake about it:
David Lereah is a couple of months from the unemployment line…
Unless his own kind kill him first.
I am reporting that David Lereah was seen having a secret redevouz lunch with Gary “It’s in the BAG” Watts making copious notes on how to future spin all negative news coming their way. They had the Maestro there giving them the best training ever. BUBBLE CITY, here we come.
New Mexico actually has many attractive things to come and live there. A warm climate, pretty scenery, clean air, mountains, etc. Montana would be OK - not ready for the cold, but a lot of beauty there. You could lay waste to LA, and MS and I wouldn’t miss em’. CA has turned into a sewer, just go and ask Arnie “I’ll be back” Governator.