Year-Over-Year Negative Numbers In Second Quarter?
Several readers suggested a topic on what the second and third quarter will bring. “In looking at some of the Florida numbers, I expect 2nd quarter we will start seeing some negative yoy numbers in some cities. I expect Sarasota/Bradenton to be down 5-10% yoy (even if April median stays where it is).”
“For a topic, how about discussing how the Realtors are going to deal with these negative yoy numbers. How will they be able to spin this? They have been able to tout positive yoy numbers even though the market shifted quickly.”
“I just got an email from a desperate Realtor telling me how the area is still up 10% from last year. What she failed to mentioned was that the median is down 15% from January ‘06!! My guess is there will be some new calculation where the result is multiplied by a (-1).”
One reader thinks it will take longer. “If things continue to unfold the way they have been, the 3rd quarter of 2006 is when (assuming they play it straight) the NAR will be reporting significant quarterly declines in existing home prices in metro areas throughout the U.S.”
“Assuming the typical data lag release, that information will hit the press, in mid-to-late November. Just before the Christmas shopping season. Time for the woman’s magazines to break out those ‘joy of a simple holiday’ articles again.”
One reader replied, “Tend to think we won’t get anywhere near that til Xmas ‘07, ‘08 though, no matter WHAT happens to RE this summer/fall. Gotta leave a little room for the ‘We’re in a dazed/shocked phase’ to pass. Americans have goten so far away from even realizing family/friends/community are there, it’ll take them a while to start noticing other people again.”
Another sees a quicker reaction. “I don’t think we’ll have to wait until Nov for Joe Sixpack to have gotten the memo about the economy/housing. We’re seeing articles on housing daily. We see all markets declining daily, interest rates rising steadily, ARMs resetting.”
“So the economy is rapidy declining right before mid-term elections. All I gotta say is Jul, Nov ‘06 is going to probably be a doozy!”
To which another replied, “The info is printed but is it being absorbed? I still see too many people around me planning big purchases and denying the stock market and housing slowdown is anything but the usual cyclical blip.”
And one reader had this reminder, “May New Home Sales: Monday June 26, 10 AM EST. May Existing Home Sales: Tuesday June 27, 10 AM EST.”
FYI, I will put up a predictions post on the last day of June or first day of July. Keep in mind, we won’t have the second quarter data complete until late July.
Which can’t be confirmed until the quarter after that, and then which will be influenced by the slow winter season, and then we’ll have to wait until spring 2007 for REAL numbers.
I can envisage the median 2nd quarter y-o-y prices reported in late July remaining positive, while the median June monthly y-o-y prices reported at the same time go negative.
(In 2005 there was a fair step up in median prices between May and June.)
Being that Florida is ground zero for the RE bust, we will some negative yoy’s for Q2. I predict the following cities will show declines:
Sarasota/Bradenton
West Palm Beach
Punta Gorda
Pensacola
Melbourne
Ft Lauderdale
Naples
The Realtor’s must be getting nervous because they know it’s coming….
Flic — good set of Florida picks. Might see Panama City/Destin in there, too.
San Diego is in Florida, right?
No? Screw it - add it to your list anyway.
I can’t believe we haven’t seen national YoY declines yet, especially since the NAR has inexplicably been post-adjusting last year’s sales prices *upward*.
Yeah, but now they are probably going back to last year’s numbers and quietly revising them downward!!
I would not believe their crooked numbers. Do the research youself and you will find the truth.
They cannot hide the truth for long, and to the extent they do, the truth will be much uglier once it becomes undeniable.
YOY negative up and down the coasts by Nov. ‘06. Open panic in the streets by Sept. ‘07.
“For a topic, how about discussing how the Realtors are going to deal with these negative yoy numbers. How will they be able to spin this? They have been able to tout positive yoy numbers even though the market “shifted quickly.”
Oh, it doesn’t take a lot of imagination to picture how they’ll spin every step down as a bottom, while terrifying the max # of FBs into cashing in their losses if there’s a penny of equity for commission.
Expect that within 3-4 years, banks will have their pick of starving agents who will handle bank-owned home sales for a modest flat fee. And I’m guessing more unemployed agents will go into property management, unless someone can figure out how to make all those foreclosed homeowners owners again in short order - which would further depress the market? The NAR will spin this negative situation as providing their industry with new career opportunities!
How about 20 Bank Own REO’s in Las Vegas since June 1, 2006. And yes, the realtors their hired to moved their houses, priced them at current comps. However, with vacant REO’s, the agent must report every 2 weeks what is market activity, and upgraded comps for the REO. When the banks start moving this inventory at below market price, all the comps will be affected, and then we have the dot.com crash. It is a matter of weeks, not yeras.
I think that the general economy is doing fairly well and that corporate profits in many areas are pretty good (yeah, let’s leave out the homebuilders) but the global withdrawal in liquidity has put a damper on some areas like stock markets around the world. Speculators are wondering if this is a temporary thing to kill commodities for a while or if the central bankers are really serious about taking away the punch bowl. Opinions are all over the place on this and we’ll just have to wait and see.
At the moment, energy inventories are good to very good and most of the Gulf of Mexico production is back online. There is geopolitical uncertainty but a mild summer, higher interest rates and reduced liquidity could bring energy prices down somewhat.
One other thing is that people might actually rediscover saving again which could provide the fuel for growth down the road (like five or more years from now). But there could be an immense amount of pain between now and then. We’ll basically see how tough Ben Bernanke will be. Will he cave into politics? Or pop the bubbles out there?
A lot of stock market investors and traders are on the sidelines (or only making short-term trades with no commitment) waiting for the answer to that question.
I couldn’t have said it better myself. Spot on, Michael.
The index charts give at least some clue of how this will pan out in the intermediate term
I’m trying to time a rebuy of index puts sold a few weeks ago.
Most of the economic data, including earnings, have yet to reflect the distress of an overburdened American consumer. Bonds (the yield curve) and commodities have been portending the demise of the dollar. As the retail sales, durable goods, foreclosures, home price declines, and so forth continue to reveal themselves, the markets will adjust downward in accordance with the apparent weakness. The equities markets are the WORST of the forecasters, and are basically reactive. Debt markets, with the forward time horizons, are far better harbingers of the economy.
The little bit of “liquidity” they are removing at the moment is like holding a dixie cup beneath a waterfall. Japan has a a zero rate for too long, the US dropped its drawers for a negative real rate to delay the inevitable, Europe has been exceedingly accomodative and recently inflationary, and China has too.
Central banks are being given too much credit for having control over an uncontrollable situation. The Fed bailed out Long Term Capital Management in 1998 in what was an exceptionally stable environment compared the the monetary instabilites currently at work. They did it to avert what the deemed as the possibility of a “global financial crisis.” What now? How would central banks accomodate the collapse of several hedge funds which have been enabled through the carry trade and excess global liquidity?
I am suggesting that the underlying imbalances are far more compromising than a glance at the NYSE or the US housing market. For your consideration…
George Soros, commenting last week, brought home the point:
“I think we are in a situation where almost all the asset classes will be under pressure or are under pressure and the main reason for that is the reduction in liquidity. What people do not realize is that the Japanese Central Bank has withdrawn something over $200 billion worth of excess liquidity from Japanese banks. Now that money was not put to work in Japan because there was no room for it, a lot of that went abroad, went into emerging markets, there was a so-called carry trade and it is not that suddenly people are risk averse. It is really that liquidity has been drawn out of the market and that is affecting emerging markets.”
$200 billion in a global economy may not sound like a lot. But remember this was money in fractional reserve banks. They could easily multiply it several times. Pretty soon we could be talking a trillion dollars. Much of it went into providing cheap liquidity to global hedge funds and aggressive investors and banks. Thus, as the leverage went away, these groups started liquidating their very profitable emerging market trades, their commodity trades, and so forth. Everything began to go down at once. Markets that had not been historically correlated all of a sudden went down in tandem to the drumbeats of margin clerks everywhere.
The national economy is doing quite well. There are some signs of trouble, however it’s an easily manageable problem is people will take the time to decide what is more important to them and act on it. (savings or spending)
It amazes me everytime I see someone driving a new Chevy Tahoe. Unless that person paid cash, I can’t help but think the person is in denial about the true costs of ownership. Probably the same person living in the suburbs, driving 30 miles each way to work, and expecting to retire in 2010 after selling their house for double what they paid in 2005 (which was double what someone else paid in 2001).
Let’s just call this game “Retirement the easy way; flipping houses to riches”.
MoM declines started in June 2005 as can be measured by the Builders stock which also peaked in June 2005. In some areas we have already started to see MoM declines. Once we cross over to June 2006 in July we will see YoY declines starting. In some areas we have already started to see Y0Y price declines.
The media will just say “As part of the ‘housing slowdow’ latest report from …..”. Most will call for flat or moderate drops. They are already behind in the coverage of the bubble.
The Street already priced in the “Slowdown”, “Moderate to Flat”, etc…etc softlanding nonsense … Last Year!
No surprise for many on this blog who have been tracking prices.
I will predict early
Stock market says flat to slightly downward as traders can’t really figure out what the conflicting signals mean. I am calling for a “Black Friday” this October. What happens after that is beyond me. I did, in fact, pull every dime I have invested out of Stocks this week. I figure the worst that happens is I lose about 6 months of stock market gains. I think I can live with that.
The fed as at least 50 basis points left in it. That is either 25 + 25 over the next 2 sessions for a 50 point “El Kabong”. At this point my hunch is it’s “El Kabong” time.
Housing markets will post nationwide year over year decreases in Q3 2006. No one will care in the general population. At least one major high profile mortgage blow up remaining this year. The amount and severity of FB sob stories reported will slowly creep up. Inventory will continue to rise. Where it stops, nobody knows. I think it is possible for San Diego to break 30K homes for sale by the end of the year. Prices to remain sticky within a 20% range in most cases. If conditions are right we may see our first small market RE melt-down by the end of the year. Not a major metropolitan area, but a small tier 2 / tier 3 city where it gets so bad that folks are starting to capitulate.
Street has already given up on Soft Landing last month.
MoM trends downward will break the YoY trend. Places like Sonoma and Marin in the SF Bay Area are already going negative.
I agree. “Black Friday” in October is most likely going to happen. But that too will be a bottom. …. A nice buying point right around Thanksgiven!
“Realtors are going to deal with these negative yoy numbers”
Who will listen?
The main bear voice will come from Wall Street as reflected by builders stock and financials. Exposure to ARMS will be a second blow. Banking earning will be depressed because banks will take larger hits to reserve for bad debt. Defualts due to Arms resetting and loan holders, already max’ed out unable to pay.
“Expect that within 3-4 years, banks will have their pick of starving agents who will handle bank-owned home sales for a modest flat fee.”
Back in 91-92 the bank repo fire sales. Had first come first serve. A buddy of mine made the only offer out there. LOL! He was able to get 50 cents on the dollar. Banks are not RE companies, there are SEC and FED limitiations on RE holdings.
did it before, ready now, can’t wait!
I think you’ll be faked out this time. I think banks will become property managers this time around and buffer the severest price declines. Just a hunch, though.
Banks have listed 20 REO’s in Las Vegas since June 1, 2006 with real estate agents. They are listed at market, but the banks will not carry vacant houses on their books like they did last time. Since you can find out what the bank paid for the house at auction, you can offer their purchase price, plus paying their costs ang get yourself a below market deal
Good commentary w/links. Maybe people will start to get the memo. This bubble won’t be unwinding anytime soon.
http://www.itulip.com/forums/showthread.php?p=753#poststop
“Economics focus
News from the home front
Jun 8th 2006
From The Economist print edition
Several housing markets are vulnerable to higher interest rates”
Isn’t that David Lereah’s line? (”Vulnerable to higher interest rates…”)
I am not sure I get your point here (”This bubble won’t be unwinding any time soon”). I know that you know there is a major inventory correction in progress which began in early 2004 in most markets formerly referred to as “hot”, so I would submit that the bubble is currently unwinding and has been for some time now, except the process is much slower than many here have suggested it would be.
GS,
This bubble won’t completely deflate until the credit bubble deflates. Although there was a “natural” peak in San Diego in 2001 (IMO) and another “credit/affordability” peak in 2004, there are still too many fools with access to credit who are looking for a 15% drop. We need to get to a place where the buyers have something serious to lose (a lot of their own money and a superior credit score for which they’ve worked for years). That way, they will once again think HARD about fundamentals and not just be willing to throw excessive amounts of OPM at houses.
Agree w/other posters, we will rent forever, if that’s what it takes.
The assumptions made to an unwinding or deflation of some kind usually presume an orderly departure or soft landing when speculating time horizons. What about an exogenic shock to the financial systems? What if things are not orderly? Does order unwind manias? Or does disorder inherently follow?
Forever!! It really is different this time.
Then I will rent until I retire. I will NOT catch a falling knife.
I’m prepared to do that too if necessary. It’s not the falling knife I worry about. I simply will not pay more than I consider a property to be worth. End of story.
The real estate spin meisters have already started their mumbo jumbo with the sales numbers:
“May is the 3rd best May since sales records started being kept”
The Sheeple just key on the “3rd best” and could care less about the big picture.
And this is what the really wealthy do, not the poseurs:
http://news.yahoo.com/s/afp/20060625/en_afp/afplifestyleusbuffett
Too bad he is giving so much to MicroSloth, whose charities look suspiciously like Third World marketing operations…
I also don’t necessarily agree with the Gates Foundation’s choices but I didn’t make the money and they did. Bless them at least for realizing it’s not what you have, it’s what you give. Very few people understand that.
“(assuming they play it straight)”
Are you suggesting the NAR does not always play it straight? How outlandish!
I myself would have thought we would have seen more signs of negative YOY numbers by now. But we have seen at least a few hints thereof — for instance, the zip code where I live in SD (92127) shows 33.4% YOY *drop* in the median price for all homes sold, while other SD zip codes still show increases.
http://www.dqnews.com/ZIPSDUT.shtm
SD Ziprealty inventory
1/2/06 = 13,896
6/25/06 = 22,510
- Up by 62% in less than 1/2 year.
- Projected to 1-year 162% increase by year-end.
- At what point will this weight of inventory piling up collapse the ceiling on SD prices?
I think we need ot see a lot higher percentage of the inventory be short sales and court sales. People are grabbing short sales and will watch them decline in market price. When short sales sit on the market ….that will mean something. Hopefully that will indicate the next trough. Looking back to the early 90’s this was certainly the case in San Diego
It seemed to me that last year’s numbers really stepped it up going into May/June…
We are a ways away from YOY price declines up here.
Here is Seattle it is turning out to be “The Summer of The Locust”. Sales of mid to high end properties are keeping prices from declining as the CA equity locusts start chowing down on the inventory up here. But even the CA hordes can’t reverse the ever increasing inventory up here. Up 14% since first week of May. Until the CA “spigot” is turned off Seattle bubble will continue to have “fuel”.
Whats funny is that “a rising tide floats all boats” phenomenon is even lifting the bottom end sales prices….but nobody is buying those so they are even more disconnected from potential buyers.
It is really gonna be bad up here.
Something different seems to be happening in the Reno area. A local realtor sends me regular updates on new listings within pretty broad parameters (price, size, etc.)
Up until about a month ago, there were regularly 10-12 new listings/week, most in the new subdivisions where I expect speculation was focused for the past several years. However, there have only been 2-3 new listings/week for the past month.
Inventory is still high (as are prices), but I wonder what is going on with the slowdown in the rate of increase in inventory? Is this happening elsewhere? Anybody have a theory/hunch about this?
Homepop: Hometracker has Reno inventory going up approx. 120 houses a week, presently 5700 homes. Washoe County Assessor site also indicates a huge drop off in sales for May and June. As NNVMrtgbrk has stated, “the Reno market is toast.” If your a potential buyer your Realtor may not want to scare you into extinction since your a rare bird in that market.
Thanks, you may be right. Can that tracking site tell me if the rate of inventory change is increasing, decreasing or pretty much staying the same over the past few months?
Housing Tracker will give you percentage of increase m o m and yoy. As of 6/21 there has been a 50 % increase in inventory in the last 9 months.
Ivy Market Tracking - Reno, NV MSA
————————————
Homes on MLS May 30th: 4,110
Median Asking Price May 30th: $419,900.00
Homes on MLS June 14th: 4,244
Median Asking Price June 14th: $422,500.00
Homes on MLS June 23rd: 4,397
Median Asking Price June 23rd: $419,750.00
Total Asking Price (all homes) May 30th: $2,604,675,286.00
Total Asking Price (all homes) June 14th: $2,704,448,980.00
Total Asking Price (all homes) June 23rd: $2,777,006,196.00
Census(2000) Median Price: $116,311.10
Asking Price Appreciation 361% since 2000 Census
Should be noted - these stats are for single family homes also. Ivy is also tracking condo, multi-family and land parcel prices as well.
thank you!
We will know the market has hit bottom when a subdivision gets “tractored out by the cats” and returned to agricultural use.
“Year-Over-Year Negative Numbers In Second Quarter”
Not a problem….the real estate “experts” will just comment on 2006 YTD numbers vs 2004 YTD numbers and say that 2005 is not an appropriate base to use because 2005 was an extraordinary year.
If the numbers still don’t work, they will use YTD 2006 vs YTD 2003, 2002, 2001, etc….whatever it takes to spin the story.
For realtors, it’s always a good time to buy and it’s always a good time to sell!!!
> 2005 is not an appropriate base to use because 2005 was an extraordinary year
Extraordinary indeed: 2005 was the peak.
Here is an example of how the general public isn’t listening. A friend of mine is closing on a house now in Los Angeles that they want to rent out. I asked if they were aware of the rising inventory of homes and general opinion that prices have peaked and will likely decline. They replied that perhaps they should have done better research first…B U T…”it’s an investment.” Yeah, a poor one. And this person is a CPA and (generally) pretty sharp. sheesh! I told them they better be prepared to hold the property for a long time, like maybe 10+ years. I got a look of horror.
“(assuming they play it straight)”
Are you suggesting the NAR does not always play it straight? How outlandish!
In my world, SOX 404 has changed many things. You must document everything you do these days. So when a realtor tells me we have multiple bidders already going over asking… I ask can you provide names, contact data and bids…. They laugh and turn away. How can you prove that there actual is overbidding? You can’t.
“And this person is a CPA and (generally) pretty sharp.”
So were the boys at Arthr Anderson. Didnt matter that their cleints –WorldCom and Enron –were fabricating bogus numbers.
They were sharp…. not honest but really shart..
Their client, Enron, was run by the smartest guys in the room, in fact!
http://www.imdb.com/title/tt0413845/
“Not a problem….the real estate “experts” will just comment on 2006 YTD numbers vs 2004 YTD numbers and say that 2005 is not an appropriate base to use because 2005 was an extraordinary year.”
I hope so… I want them to loose every inch of credibilty that could ever exist for decades to come. The NAR is a real bunch liars.
My god. Look at the idiot who started this thread.
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1196669
He’s gonna get ridden hard and put away wet.
Yeee-Haw!
This guy probably spends more time and attention selecting toilet paper at the local supermarket than performing due dilgence on his property acquisition. Unbelievable.
(“(assuming they play it straight)” Are you suggesting the NAR does not always play it straight? How outlandish!)
I have no reason to believe the NAR has ever managed its data to produce a particular result. It will, however, face an enormous temptation to do so in the next few quarters.
But perhaps not so much. As discussed, realtors only make money if buyers and sellers agree, and their job in the next few years will be to convince sellers to sell for a price buyers could realistically afford.
according to dataquic,marin,sonoma and napa counties posted yoy declines for may,anecdotally,i spoke to 3 people who are selling homes in the sebastopol area,all are pricing well below last years high,all are trying to get out fast…2 divorces,one who bought too much home 2 years ago.
I hope the NAR puts out good numbers. That way the fed can keep raising interest rates.
That is easy to deal with. NAR can simply claim that the numbers from the ‘05 are “inflated” and change, for example, the way categories are devided so that the ‘05 numbers are lower so that the YOY increase is maintained.
In fact, I think the current ‘05 numbers are probably inflated indeed because there have been reported cases when the agents submitted higher prices before the escrows were closed and revised the numbers 3 months later when nobody care the statistics 3 months earlier and they just argued that the initial numbers were just estimates.
(I hope the NAR puts out good numbers. That way the fed can keep raising interest rates.)
Yeah, then perhaps there will be one asset I can put my savings in that will not be overpriced and thus likely to generate inferior long term returns: cash.