October 25, 2006

“Price Drop Largest On Record”: NAR

The September numbers are out for existing home sales. “Sales of existing homes fell for a sixth straight month in September and the median sales price dropped on an annual basis by the largest amount on record, further documenting a lukewarm housing market.”

“The National Association of Realtors reported that sales of previously owned homes fell by 1.9 percent in September to a seasonally adjusted sales pace of 6.18 million units, the slowest sales rate since January 2004.”

“The median price of a single-family home fell to $219,800 last month, a drop of 2.5 percent from the price in September 2005. That was the biggest year-over-year price decline in records going back nearly four decades. Sales of condominiums fell by 3.2 percent. Condominium prices fell by 3.2 percent”

“‘The worst is behind us as far as a market correction — this is likely the trough for sales,’ said David Lereah, the Realtors’ chief economist. ‘When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.’”

“Regionally, existing home sales in the South were 9.0 percent below September 2005. The median price in the South was $184,000, down 1.6 percent from a year ago. Existing-home sales in the Midwest were 13.7 percent lower than a year ago. The median price in the Midwest was $169,000, which is 2.3 percent below September 2005.”

“In the West, existing-home sales were 23.8 percent lower than a year earlier. The median price in the West was $332,000, down 4.3 percent from September 2005. Existing-home sales in the Northeast were 13.4 percent below September 2005. The median existing-home price in the Northeast was $259,000, down 5.1 percent from a year earlier.”

“Compared with a year earlier, sales were down 14.2 percent, the Realtors group said. Home resales have fallen every month since March. The number of homes for sale fell 2.4 percent from August to 3.75 million, remaining at a 7.3 months’ supply. ‘There’s a stabilization in the inventory-to- sales ratio, but at a very high level,’ said Ed McKelvey, senior U.S. economist with Goldman Sachs Group Inc.”

“Home sellers have been reluctant to lower prices, while buyers wait for better deals, a standoff that leaves homes sitting on the market longer, even as mortgage rates fall.”

“‘As long as you’ve got interest rates where they are now, which is near an all-time low, interest rates can’t be blamed for the real estate market being soft,’ Toll Brothers Inc. CEO Robert Toll said. ‘Right now the real estate market is relatively low, generally speaking.’”

The Milwaukee Journal Sentinel. “U.S. house prices won’t keep pace with inflation through 2008, industry economist Douglas G. Duncan predicted Tuesday.The pace he expects, 1% this year and next, would be the slowest since the first quarter of 1995, according to the Office of Federal Housing Enterprise Oversight.”

“The country is experiencing the recoil that follows a boom, Duncan said at a news conference during the 93rd Annual Mortgage Bankers Association Convention in Chicago. Housing sales hit record peaks, with enormous price gains, in the last five years, he said. Now it’s over.”

“‘The market is normalizing. The last couple years were above what we expected,’ said Duncan, the Washington, D.C.-based trade group’s chief economist and senior vice president. ‘This may lead to more of a down bounce than we expected.’”

“Home price gains have surpassed inflation nearly every year since the Great Depression, industry experts say. That won’t happen again until at least 2009, according to Duncan’s downgraded forecast. Both supply and demand reversed course, and so did overall market conditions, the economist said.”

“Home sellers flooded the market this year just as many potential buyers stopped shopping. The reversal likely began last fall, but was disguised because sellers made concessions not in house prices but with incentives, he said.”

“The nation’s inventory of ‘for sale’ homes is higher now than it has been in many years, Duncan said. ‘It’s clearly a buyers’ market, and lots of buyers are sitting on the sidelines waiting’ to see if seller desperation will get them a better deal, the economist said.”

“Better deals may be in the offing on some new homes. ‘Builder inventory is costly to carry,’ Duncan said.”

“Market psychology is different in the resale market, where emotions often reign and homeowners may pull their houses out of the market rather than mark prices down just to move on, he said. ‘These people haven’t yet decided what to do,’ Duncan said. ‘That will play out in the next 12 to 18 months. That puts us at mid-2007 before we might be able to say, ‘We passed the trough,’ on the nation’s housing slump.”




RSS feed | Trackback URI

235 Comments »

Comment by MazNJ
2006-10-25 07:24:06

Didn’t DL say the last month of dropping was the trough? I presume about 2 years from now he’ll still be saying that.

Comment by _eljefe_
2006-10-25 08:12:33

Anyone else tired of getting their intelligence insulted? Who says America doesn’t manufacture anything anymore? As far as I can tell, lies are what America manufactures these days. Am I the only person who is angry about this day in and day out lying? First, there was no housing bubble because all housing markets are local. Now, the worst is behind us. The only thing you can count on is more lies. I find all this lying exasperating and exhausting. It really says something ominous about America. Is this how it went down in ancient Rome? What is just starting to play out in housing is so clear. The emperor wears no clothes. This denial and outright lying is outrageous. Can anyone say morally bankrupt. I thought real men tell the truth and take responsibility for their actions. Am I wrong?

Comment by Captain Credit
2006-10-25 08:28:11

Lies…… lies…… more lies….. They really aren’t lies _eljefe_ . Honestly….. It’s the new age…. don’t ya get it? We’re lied to by this government, Wall Street, MSM. Therefore, it is the truth in its unanimity. Of course there will be those that say they claim to know these verifiable lies are truth but they are usually religiously bound to an ideology or they are profiting off the lies, or both.

It is clear that we are now where near the bottom of the housing cycle. It is also crystal clear that we are NOT experiencing a “roaring economy” yet I’m sure some misguided disciple will deny these things.

Had Enough?

Comment by cayo_ron
2006-10-25 08:56:01

Wait until after the election for the real shiyat to hit the fan.

(Comments wont nest below this level)
Comment by imploder
2006-10-25 10:18:49

I think David Lier finally speak truth.

We have slid down and are now in a “trough”. Unfortunately, “trough” is little curved trough at bottom of children’s slide. Slide is poised over Grand Canyon. Everybody raise hands and say “Weeeeeeee!”

 
Comment by easthawaii
2006-10-25 10:36:09

very funny lol

 
Comment by sf94102
2006-10-25 10:41:51

This is a graph of NAR Existing Home Sales.
Can any body else see a trough?

NAR Existing Home Sales

To me it appears headed to the South.

 
Comment by CFO
2006-10-25 12:31:28

I really liked imploders “Windtalking” episode. My wife and I had to pick ourselfs off of the floor last night.

 
Comment by imploder
2006-10-25 16:48:00

thank, thank you very much…… I’ll be here all week!

bup, bup, bup,bup, bup, bup … crash!

 
 
Comment by Neil
2006-10-25 09:09:05

Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
Warren Buffett

Your premium brand had better be delivering something special, or it’s not going to get the business.
Warren Buffett

There are three kinds of people in the world: those who can count, and those who can’t.
Warren Buffet

If past history was all there was to the game, the richest people would be librarians.
Warren Buffet

Price is what you pay. Value is what you get.
Warren Buffet

(Comments wont nest below this level)
 
 
Comment by Les Pendens
2006-10-25 08:47:58

“Only when the tide goes out do you discover who’s been swimming naked” - Warren Buffett

 
Comment by Les Pendens
2006-10-25 08:52:01

“Let blockheads read what blockheads wrote.” - Warren Buffett

 
Comment by Les Pendens
2006-10-25 08:52:42

“The only time to buy these is on a day with no ‘y’ in it” - Warren Buffett

Comment by Auction Heaven in '07
2006-10-25 11:28:43

Warren Buffet? Who’s that?

I thought all the brilliant investors came from the San Diego Creative Investors Association?

Have they heard of this ‘Mr. Buffet’?

Seems like such a smart gent, that one.

Maybe he knows txchick.

(Comments wont nest below this level)
Comment by AE Newman
2006-10-25 13:47:12

posted “Warren Buffet? Who’s that?

He is the only guy that can mesure money with Bill Gates and beat him from time to time.

 
 
 
Comment by John
2006-10-25 08:52:59

Don’t take it so hard because it’s what America nowadays. Being credible, honest leads you nowhere. People soon or later will have to be cautious about who they can trust.

As for me, I never listen to those real-estate experts, not because of their knowledge but their interests. Once in a while you still hear some unbiased voice out there. IMHO, It’s best to research and think independently on our own.

 
Comment by jag
2006-10-25 08:57:03

If you think that lying about such things (if, in fact they are lies in ALL cases) is something “new” in this era you are either very young or very poorly read.
I don’t doubt that “lies” are pervasive today. But read a bit about what was going on in 1929 and other periods of economic upheaval at various times, around the world and you won’t find a dearth of dishonesty, trust me.
What may be different is simply how easy it is to spot, publish and ridicule really stupid statements (or outright lies) today.
It’s all for the better and, in time, the ability to rapidly hold either mistakes or lies up to ridicule in this day and age should mitigate some of the damage being done (at least for some of those who pay attention).
But lets not imagine “lying” is something unique to this generation. It may seem (or actually be) temporarily worse at this juncture but it isn’t likely that it is some wholesale change in American character. People at the top of any pile (business, political or organizational) have vested interests in keeping themselves in power (or at least appearing powerful). Sometimes they are tempted to lie (particularly under stress), sometimes they are just abject liars but its human nature and that hasn’t changed much for the last 2,000 years or so.
We’ll get through this and, with some luck, a demand for better data, better regulations and such will evolve in the aftermath that will lessen the liklihood of a similar debacle in the future (kind of like the work done examining a plane crash, virtually every crash today is totally novel in that mistakes or problems identified in older crashes are virtually eliminated going forward either by design or procedure).
Lying isn’t new, exposing it quickly and distributing the stupidity widely is relatively novel however.

Comment by OCDan
2006-10-25 09:15:29

While I agree with you Jag on several points I think many of us miss the mark with the lying. Besides the ability ro refute these lies quicker, I think another major problem is that we are no longer a major manufacturing society. What does that have to do with lying. First, since the trend has been to move into the service.information producing paradigm, lying is more prevalent. Hey, I have to make the commission selling my service or info, so if I fudge or flat out lie, so be it, as long as I get my piece. Second, with a strictly manufacturing model, it is a little harder to lie. If the car sucks, people find out and eventually don’t buy it. If the product is life threatening and I sell it to the masses, I may get sued if I don’t fix it. My point is when all you have is a service or information to peddle, lying becomes more prevalent in order to sustain the sales. Don’t get me wrong, there is still alot of lying going around when manufacturing real goods, but I think that when all you have to seel is your service, not a tangible product, the lying can be used more and more often, esp. to cover your butt.

(Comments wont nest below this level)
Comment by jag
2006-10-25 09:28:44

Good point. Its certainly far easier to lie about a “soft” good vs a hard good.

 
Comment by sf_renter
2006-10-25 09:45:10

They are not lieing. You can’t lie about the future, you are are either wrong or right on you opionion or predication. The listener can assign a level of confidence. 0% - 100% If you think this is the “trough, put your own money in the game. I don’t think it is. My money is staying in the bank. Rent don’t buy. Unless you really are staying in the home 7+ years.

 
Comment by imploder
2006-10-25 17:26:46

“Good point. Its certainly far easier to lie about a “soft” good vs a hard good.”

Women have known this fact for years

 
 
Comment by Bill in Carolina
2006-10-25 09:16:55

I agree 100%. The level of lying is the same as ever. But with archived information (including old quotes) readily available on the ‘net, it’s easier to expose the liars.

(Comments wont nest below this level)
 
Comment by Captain Credit
2006-10-25 10:21:46

No one here said that lying is new but there is a group of charlatans who have a patent on packaging lies that seems to work well for them…. up until recently. The lies are far more brazen, insidious and dangerous than they’ve ever been. How? Simply said that if you get enough people repeating the same lie often enough, the lie becomes the truth by virtue of its unanimity. Never in my 40 something years have I see BS so well scripted and rehearsed.

(Comments wont nest below this level)
 
 
Comment by feepness
2006-10-25 09:18:59

Am I wrong?

Depends on what your definition of ‘is’ is.

Comment by manraygun
2006-10-25 10:15:12

And “mission accomplished”, “last throes”, “greeted as liberators”, and “stay the course.”

(Comments wont nest below this level)
 
Comment by asuwest2
2006-10-25 11:35:05

Depends on what your definition of ‘is’ is.

“I did not have sex with that woman”

(Comments wont nest below this level)
Comment by imploder
2006-10-25 16:58:07

now it crime to have sex with women? imploder need to leave country immediately!

 
 
 
Comment by UnRealtor
2006-10-25 10:12:03

It’s a fact lying is not allowed in France. There is also no corruption in France.

If only all humans were French.

Comment by Captain Credit
2006-10-25 10:46:45

Agreed unrealtor. I’ve been to France. It’s a beautiful country with many nice people.

(Comments wont nest below this level)
Comment by spike66
2006-10-25 11:12:24

I agree too unrealtor.France has both nice folks and truly great food. The clothes look pretty good too.

 
Comment by imploder
2006-10-25 17:14:38

ARTHUR: Now look here, my good man–

FRENCH GUARD: I don’t wanna talk to you no more, you empty headed animal food trough wiper! I fart in your general direction! Your mother was a hamster and your father smelt of elderberries!

GALAHAD: Is there someone else up there we could talk to?

FRENCH GUARD: No. Now, go away, or I shall taunt you a second time-a!
[sniff]

 
 
Comment by phillygal
2006-10-25 14:45:34

vous vous moquez de nous, n’est-ce pas?

Hilarious, Un realtor!
Parisian taxi drivers make the most mercenary Manhattan cabbies look like newbs

(Comments wont nest below this level)
 
 
Comment by Brian M. Gwyn
2006-10-25 10:13:16

Yes, this is exactly how it went down in Rome.

That is, distract their feeble minds with enough entertainment to choke a horse, steal the value from the currency while they sleep, get what you can today “for tomorrow we die, and if it so be that we are guilty God will beat us with a few stripes and at last we shall be saved in the kingdom of God. Thus, the devil cheateth their souls and leadeth them carefully down to hell.”

Comment by Mole Man
2006-10-25 12:59:16

This comparison is pretty strained. Rome had only one growth model which was explicit conquest, so the only possible scenario was for things to end badly. The only question was exactly when and how things would end and that has as much to do with inbreeding and lead poisoning as anything else.

(Comments wont nest below this level)
 
 
Comment by v1m
2006-10-25 11:48:31

There are lies, damn lies, and housing prices.

Call it the Lereah Effect: a nation that has sold its soul for short-term gain elevates those gasbags who keep its illusions warmed.

It’s interesting how this bubble seems to concentrate the worst tendencies of a corrupt system. In 2006, we have the end of the social contract, runaway militarism, leaders that molest pages and nations, corporations whose books are more cooked than charcoal, an economy built on unsustainable consumption that most can’t afford, crackpots finding a terrorist in every bush, and a news media that never ceases telling us how great and amazing we are.

And amid all this, Americans decided rising home prices were the miracle that would let them live like kings–no matter whom they hurt, fooled, saddled with debt.

Recipe for a rude awakening!

 
Comment by hd74man
2006-10-25 11:49:49

I thought real men tell the truth

Not if you are the appraiser and you want to eat tomorrow.

 
Comment by circling_vulture
2006-10-25 16:24:29

_eljefe_, i too am sick and disgusted by all the lying. actually, it’s been the foundation of our society for decades now. everywhere you turn someone is lying with the intent to rip you off. this mentality is out of hand and will eventually lead to the collapse of the country IMO.

but on the bright side i thank god for the internet and blogs like this. they are a beacon of truth!

 
 
Comment by Max
2006-10-25 08:48:16

Sellers aren’t dropping prices enough, but this is the bottom of the market. Gotta love the logic.

 
Comment by david cee
2006-10-25 08:51:05

“by the largest amount on record, further documenting a

>>lukewarm

 
Comment by david cee
2006-10-25 09:12:13

“Which leaves jittery Los Angeles homeowners with the question: Is it time to panic? ‘Absolutely not, it’s not time to panic,’ Mrs. Mitchell said. ‘All it has done is to return to a normal market as opposed to an exaggerated, overinflated market”

That was from Tues, Oct 24th… Didn’t I see Mrs. Mitchell coming out of her psychiastrist office today. I guess a few Valium will keep her from PANIC!

 
Comment by sd renter
2006-10-25 09:28:41

“‘The worst is behind us as far as a market correction — this is likely the trough for sales,’ said David Lereah, the Realtors’ chief economist. ‘When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.’”

When will Pinochio learn to stop the lying?

Comment by BanteringBear
2006-10-25 09:54:43

David Liereah does a disservice to his fellow countrymen by insulting their intelligence and preying upon the uninformed in order to push or pull them into purchasing a home at this, the worst time in history. It is shameful. I wish, for once, that someone would take a stand and call him out for the lying puke that he is.

Comment by Sammy Schadenfreude
2006-10-25 18:28:57

I’m not sure it’s possible to “insult the intelligence” of the American public, most of whom are a few IQ points shy of “moron.” But yeah, I’m waiting for Lereah’s parents to demand that he change his name.

(Comments wont nest below this level)
 
 
Comment by yogurt
2006-10-25 11:45:41

‘When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.

You see Leheah throws in the odd truism just to confuse people who think he always lies. The quote above is true for everything, not just housing. But housing is not going to stabilize until 2009 or so.

 
Comment by MD_renter
2006-10-25 14:32:06

I don’t know about you all but I’m ready to get off the sidelines and buy some houses! Weehaa! (JK)

 
 
Comment by TRich
2006-10-25 09:30:39

I think everyone here is giving Lereahhia a bad rap. I think his predictions are incredibly reliable. Listen to what he says, then assume the exact opposite is true. If we act on the opposite of what he says, I don’t see how we can lose.

For example, if he says there’s a trough and there’s tons of buyers on the sidelines itchin’ to get in with these fantastic 2.5% reductions, then you can safely assume that prices will only go down from here and there’s few buyers that want to buy right now.

Comment by lainvestorgirl
2006-10-25 11:02:46

I’m not offended by what the guy says, because I personally paid zero attention to his opinions on the way up, why should I listen to him on the way down. A big investment like buying a piece of RE is too important to trust some professional mouthpiece’s comments. In other words, you have to do your own homework. And, who knows, maybe this guy really believes what he’s saying?

 
 
Comment by housegeek
2006-10-25 14:26:38

Not that I don’t enjoy all the fun permutations on DL’s name, but give the press its share of blame for continuing to quote this oracle of oops.

 
 
Comment by WillM
2006-10-25 07:25:42

“‘The worst is behind us as far as a market correction — this is likely the trough for sales”
Yep, Mr. Liar. After 100+% increase in prices in the past 5 years, a drop of 2.5% is definitely a trough.

Comment by DAVID
2006-10-25 07:36:54

Lierah eats from a trough.

Comment by Shannon
2006-10-25 07:54:54

Lierah is the trough, full of crap!

Comment by audet
2006-10-25 08:01:34

full of decroded crap!

(Comments wont nest below this level)
 
 
Comment by Sobay
2006-10-25 08:10:39

Please do not insult the swine / hogs that already eat at the trough.

Comment by Auction Heaven in '07
2006-10-25 13:00:25

Bet you didn’t know that swine, when put into a clean environment, are neat freaks.

Plus, they don’t lie.

Thus, a swine is actually a being on a higher order than David Lereah.

Go figure.

(Comments wont nest below this level)
 
 
 
Comment by AZ_BubblePopper
2006-10-25 08:34:26

All that “liberated equity” and accumulated debt won’t look so attractive after another few record setting price declines in a long string of price declines to come. We’re only just getting started. A lot of “normalizing” to do yet. The trough, as DL likes to call it, won’t see its uptick until the defaults numbers change course and drop for a string of months that add up to a quarter.

It’s not as though these chumps don’t know this. The lying is getting old. Once the blame game gets going I expect Congressional hearings & investigations. About time the RE “experts” get the same attention as securities analysts.

Comment by hd74man
2006-10-25 11:53:14

About time the RE “experts” get the same attention as securities analysts.

Precisely…

 
 
Comment by edhopper
2006-10-25 08:52:37

“‘The worst is behind us as far as a market correction — this is likely the trough for sales,’ said David Lereah, the Realtors’ chief economist. ‘When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.’”

Lereah is driving a car with the gas pedal stuck. The car is going faster and faster when a brick wall looms up in front. Lereah says “It looks like the worst is over and we’ll be stopping soon.”

 
Comment by cayo_ron
2006-10-25 08:59:17

David Liar-Liarreah: a pedantic, pontificating, pretentious bastard, a belligerent old fart, a worthless steaming pile of cow dung, figuratively speaking.

Comment by imploder
2006-10-25 17:30:13

don’t sugar coat it, tell us what you REALLY FEEL!

LOL!

Comment by cayo_ron
2006-10-25 17:57:22

I wish I could take credit for that quote, but it’s directly, and aptly enough, lifted from the movie Liar Liar.

(Comments wont nest below this level)
 
 
 
Comment by John
2006-10-25 09:00:33

DL has no shame. The victims are those who believe in what he said.

 
 
Comment by joesixpack
2006-10-25 07:25:42

“……median sales price dropped on an annual basis by the largest amount on record….”

“‘The market is normalizing. The last couple years were above what we expected,’ said Duncan,”

Is the largest drop on record normal. These guys crack me up.

Comment by Arwen U.
2006-10-25 07:49:47

To say the market is normalizing might not be erroneous.

The largest drop on record would be abnormal if the market hadn’t bubbled from ‘03-’05. We still have sales in our area, just not nearly as many as last three years, which were the abnormality.

A normal market doesn’t make it a pain-free market for upside-down borrowers, though.

Comment by imploder
2006-10-25 08:37:02

‘These people haven’t yet decided what to do,’ Duncan said. ‘That will play out in the next 12 to 18 months. That puts us at mid-2007 before we might be able to say, ‘We passed the trough,’ on the nation’s housing slump.”

I got a feeling that an admitted Trillion dollars in ARM resets are gonna help a substantial number of sellers along in their decisions. by mid 2007 they might also be able to say:

“We are just starting to pass through the worst economic environment in 40 years. Wish I’d lowered my price 9 months ago, when I still could of gotten out and broken even. Now I know what Grandpa meant with all his stupid stories. Honey is there any Top Ramen left? “

 
 
Comment by Maverick
2006-10-25 07:54:18

It is a permanently high trough !

 
Comment by invest3
2006-10-25 08:40:41

The NASDAQ normalized as well when it dropped from 5,100 to 1,200 2 1/2 years later.

 
 
Comment by Ben Jones
2006-10-25 07:29:14

From the update:

‘Regionally, existing home sales in the South were 9.0 percent below September 2005. The median price in the South was $184,000, down 1.6 percent from a year ago. Existing-home sales in the Midwest were 13.7 percent lower than a year ago. The median price in the Midwest was $169,000, which is 2.3 percent below September 2005.’

‘In the West, existing-home sales were 23.8 percent lower than a year earlier. The median price in the West was $332,000, down 4.3 percent from September 2005. Existing-home sales in the Northeast were 13.4 percent below September 2005. The median existing-home price in the Northeast was $259,000, down 5.1 percent from a year earlier.’

Comment by Backstage
2006-10-25 07:37:16

Sounds like a national price drop. They tried really hard last month to hold up the southeast showing that nationally prices have not dropped. So much for that notion.

Comment by cayo_ron
2006-10-25 09:09:53

They tell us the last time prices dropped nationally was during . . . the Great Depression. So how does that bode for us?

Comment by Backstage
2006-10-25 15:49:08

This has been confusing for me, partly, IMO, because Realtors want it to be confusing. Like all their ‘facts’ they are suspect.

On the way up, they said, “prices have not declined nationally since the great depression.” Now that prices are declining they are sending the message that prices have dropped y-o-y more recently, and the Great Depression was the last time prices dropped nationally for a full year.

The last time proces dropped nationally was in 1995, with a .1% decline.

http://tinyurl.com/yc2trp

(Comments wont nest below this level)
 
 
 
Comment by dwr
2006-10-25 07:38:57

But let’s all remember, there is no national housing bubble. Only small pockets of froth here and there…

 
Comment by dwr
2006-10-25 07:48:06

Where is the link on the NAR web site to the tables of data? I can’t seem to find it.

Comment by imploder
2006-10-25 08:24:41

look for button marked “pull my finger”

Comment by DAVID
2006-10-25 08:30:05

The sad part is these numbers come from the NAR. Do they actually think we are going to believe anything they say. I bet the home sales decrease was much larger. I would not believe anything the NAR says or tabulates.

(Comments wont nest below this level)
Comment by edgewaterjohn
2006-10-25 09:02:17

No kidding! It’s anyone’s guess how much these figures have been doctored. Heck, we can’t even trust the Fed’s numbers - why even bother with the NAR!

 
 
Comment by dwr
2006-10-25 08:39:35

that data used to be on their site. Maybe I simply cannot find it today but it used to be there.

(Comments wont nest below this level)
Comment by Nikki
2006-10-25 16:32:53

Check out Calculated Risk to see how the NAR changed thier seasonal adjustment from last year, so the YoY comparisons are inaccurate and are much worse, when you compare apples to apples.

 
 
 
 
Comment by Max
2006-10-25 08:51:59

These guys routinely confuse the seller’s perspective of the market with their own. Realtors and brokers suffer when the transaction rate drops. Sellers suffer when prices fall.

A high rate of sales doesn’t help sellers if they owe more than the place is worth.

 
Comment by GH
2006-10-25 09:23:36

This does not factor in things such as only the nicest properties with plenty of upgrades are selling at all. In 2004 (At least here in San Diego) you could have sold a house in terrible condition and in a terrible area for max price the day you listed with multiple offers. Todays buyers - and there are still quite a few pick and choose, so what does this REALLY say about todays prices VS a year or two back?

 
 
Comment by joesixpack
2006-10-25 07:30:34

TOL MTH BZH CTX KBH PHM DHI CFC are all up roughly 2% on this good news.

The market must have expected worse. In due time.

Comment by txchick57
2006-10-25 07:37:15

CFC is getting into the zone where you *might* try a short or buying a few puts on a double top theory.

But if it breaks over 39.5 - 40, all bets are off and I’d cover.

Comment by joesixpack
2006-10-25 09:00:52

tx
I am rather new to trading (1 1/2 yrs) and only long positions so far, but I am wathing CFC for study.

The buyback interests me. Will they really do it, and if so, is it just to shore up ratios. Will insider selling increase during this time.

 
 
 
Comment by crispy&cole
2006-10-25 07:30:35

Once again - You can’t call the bottom when you never acknowledged the top!

Comment by DinOR
2006-10-25 07:55:48

crispy & cole,

Exactly! It’s like an alcoholic (after a lifetime of abuse) attending ONE AA meeting and then telling you he’s “clean and sober”! My apologies to those that have been down this road but I think many would agree it’s a fair analogy. The REIC has been absolutely abusive with the buying public for at least the last 5 years and is now telling us they’re ready to “play it straight” with us? I don’t get it. People are looking at their debt and they’re probably thinking to themselves (even if I could buy a still bigger home and even if it did appreciate as well as the last 5 years could I afford the payments?) Hell, I can’t afford the payments now! This “being rich” isn’t as easy as it looks.

David, they’ll stay on the sidelines.

Comment by scprofessor
2006-10-25 08:06:04

As a commission funded occupation the worst thing that can happen to real estate agents is for sales to dry up. Remember there are two primary factors in any sale transaction: (1) ready, willing, and able buyer, and (2) ready, willing, and able seller. Only way real property is going to move is if you get realistic willing sellers. That requires reprogramming them into recognizing that they are going to have to set prices that will attract buyers. That isn’t going to happen as long until you can undermine existing seller attitudes so that they change their views and begin to have realistic expectations. Hence the change is the spin provided by these so-called experts.

Comment by turnoutthelights
2006-10-25 08:30:20

True, but then why the ‘trough’ comment? If I’m a seller and read this, then screw it with the lower prices, it’s hold the line and wait for the bucks. DL’s comment may only serve to inject more rigidity into the seller/buyer standoff.

(Comments wont nest below this level)
Comment by dontbuyyet
2006-10-25 08:41:23

it’s a tough line to tow. As scprofessor pointed out, in order to condition both sellers and buyers to be ready/willing, Realtors need to foster the image that prices are down/have stabilized, but likely WON’T move up strongly any-time soon.

Seems like that’s tough to do, and as you pointed out, one group or the other will attempt to hold the line for either higher or lower prices.

Of course, we all know that buyers will be winning that waiting game over the next few years!

 
Comment by Chip
2006-10-25 08:58:53

“Realtors need to foster the image that prices are down/have stabilized, but likely WON’T move up strongly any-time soon.”

If I were the agent, though, I’d say “Look, son, things are bad and they’re gonna get worse. If you really want to sell this property, cut the price and cut it again, if you have to. Where you want to be is ‘outta Dodge,’ and you need to focus on that.”

I wouldn’t say cut “your” price, but instead “the” price, to depersonalize it slightly. And I’d explain to him how Dutch Auction works.

 
Comment by imploder
2006-10-25 09:04:42

think same thing. lack of transaction = starvation for Realtors™.
David is shooting his own guys in the foot. Should have just presented bad info and then “shrugged”. Time for “Happy talk” is over. For Realtors™ it is now time to make more money off of seller’s pain and misery.

 
Comment by Neil
2006-10-25 09:23:17

Bwa haa haa!

The REIC is stuck between a rock and a hard place.

1. Buyers aren’t buying. Unless buyers are convinced prices are going back up, they won’t buy. I just did the buy/rent calculation in my area. Homes must appreciate 7.5% year for 5+ years to break even on the buy/rent. Net difference to cost “out of pocket” is ~$400k higher to buy (excluding down payment). Out to 30 years, homes must still appreciate 4.8%. I assumed 7%/year increase in rent, 5% inflation, 6% sales comission, 2% cost of taxes/insurance (fixed on original sales price), neglected repair/MX costs, 6.5% fixed mortgage, 20% down (no loss of income on this money), and then calculated breakeven based on *nice* homes I found for rent in my area.

Once upon a time, you came out ahead even if the home never appreciated!

2. The REIC must convince sellers to lower their price.

It seems they are first trying to get comminsions and convince buyers. My… its not working…

Again from Buffet: “There are three kinds of people in the world: those who can count, and those who can’t.”

Neil

 
Comment by aflurry
2006-10-25 13:06:59

Neil,
Does that 7%/year figure take into account the opportunity cost of buying real estate with a reasonable, say 20%, intial down payment that could have been invested yielding say 10% on equal or less risk while the happy renter/investor watches their their future down-payment grow to a nice 30-40% by the time the rent-own differential alings?

If not, that 7% shoiuld be adjust higher i would say… right?

 
 
Comment by CincyDad
2006-10-25 09:04:03

I’ve always viewed the whole Buyer-Seller setup as that of 2 kids on a school playground squaring off against each other, with the crowd encircling them, egging them on. The 2 kids are the would-be seller and the would-be buyer. The crowd surounding them are the realtors. The crowd will do anything to get the action started, and isn’t happy until the 2 kids get tangled together.

(Comments wont nest below this level)
Comment by CincyDad
2006-10-25 09:05:32

ment to add… The crowd (realtors) doesn’t care who wins the scuffle as long as they get their excitement (rewards).

 
 
Comment by azSun
2006-10-25 09:27:03

What happens if there just aren’t any buyers? If the price of a house drops below it’s scrap value (i.e.- that owning real estate is a liability no matter what?) How do you spur transactions then? Dropping the price, even drastically, won’t increase transactions all that much. Dropping lending standards and interest rates to zero won’t increase transactions all that much. What then?

(Comments wont nest below this level)
Comment by Army No. Va.
2006-10-25 10:57:11

They won’t go that low that fast…empty houses will sit for years in some cases…

Or forever…recall the old western ghost towns and abandoned mining towns.

 
Comment by hd74man
2006-10-25 12:08:41

What happens if there just aren’t any buyers? If the price of a house drops below it’s scrap value (i.e.- that owning real estate is a liability no matter what?)

Lottsa bad housing idea’s have evolved in this fiasco.

I can’t count the number of times I’ve cringed watching so-called “luxuary condo’s” being built next to commerical strip malls with their constant traffic and all night lighting shining right into somebody’s bedroom.

Won’t even get into the bazillion of developments built 100 miles (one way) from major economic employments centers.

$8.00 per gallon gaz like the Europeans have, will blow these places off the map as easily as a Cat. 5 hurricane.

Only solution I can think of it that the Pelosi government will buy up all these places for convicted felons trying for a new start; foreign refugees; homeless people; mental asylum releasees; drug addicted welfare mothers etc., etc..and implement federal taxpayer subsidized payment programs.

WTF-Everybody’s entitled to the American Dream.

 
 
Comment by mrktMaven FL
2006-10-25 10:29:02

‘Remember there are two primary factors in any sale transaction: (1) ready, willing, and able buyer, and (2) ready, willing, and able seller.”

With prices where they are right now, there are fewer and fewer qualified buyers in the market place… The metrics are ripe for a crash. Everything was maximized on the supply side: price, volume, unit contribution margins, and so on, including some cannibalization of future sales. Extremely unhealthy market conditions. Now, there is very little weight on the demand side. As a result, a major shift in price is only remedy left and even that will not get demand to previous levels. Excess supply is sinking the housing market; get out while you can.

(Comments wont nest below this level)
 
 
Comment by jim A
2006-10-25 08:52:15

Reminds me of a sad scene from HBO’s The Wire : they’re passing out chits at an NA meeting.
“Anyone been clean for a year? A month? A week? A day?”
Bubs raises his hand, there is applause and he gets his chit. His frient whispers to him,”Dude, you got high this morning.”

 
 
 
Comment by NWFla
2006-10-25 07:34:59

New Florida numbers are out and they are ugly:

http://biz.yahoo.com/prnews/061025/clw025.html?.v=68

Comment by DC in LBV
2006-10-25 08:01:44

Someone needs to tell CNN/Money. They are saying Panama City is the #1 place in the country to be investing in real estate, projecting a 72% increase over the next 5 years! (Vero Beach is #2 and Lakeland is #4)…

http://money.cnn.com/popups/2006/biz2/newrules_bestinvest/index.html

Comment by P'cola Popper
2006-10-25 08:10:33

I like the caveat at the bottom of the article:

“CAUTION: Local politicians, notoriously cozy with builders, have green-lighted several master-plan communities for future development. If supply gets out of hand, prices will stall.”

Comment by David
2006-10-25 08:20:48

Hilariously, it follows immediately after
“Janet Roan, a Century 21 agent in Panama City, notes that two-bedroom beachfront condos are going for as little as $330,000 - down by more than $100,000 from 2005.”

So prices have already dropped by almost 25%, but they haven’t stalled.

(Comments wont nest below this level)
Comment by TG in Norfolk, VA
2006-10-25 09:10:10

I wonder how the HOA fees/insurance costs for this “beachfront condo” in Pensacola has changed from 2005 (pre-Katrina) to now?? No doubt these costs have skyrocketed. You may get a $100K haircut on the purchase price buying now, but, even so, the monthly carrying costs are probably still higher than last year!

 
Comment by TG in Norfolk, VA
2006-10-25 09:11:36

Sorry … meant “Panama City”, not “Pensacola”. Same difference, anyway.

 
 
 
Comment by sagesse
2006-10-25 08:30:46

Yes this ist hilarious, projected income increase ten percent, to 50K in 2011 in Panama City

Comment by P'cola Popper
2006-10-25 08:50:49

Dude, you need to read more carefully! Per capita income is expected to increase to a big bad $40K in 2011 from $31K in 2006!

(Comments wont nest below this level)
Comment by NWFla
2006-10-25 09:05:42

And there’s no way in hell PCI here in $30k. Most local jobs are service, hospitality, and retail. Around here people consider ten bucks an hour to be big money, and most working people have multiple jobs and pack as many people into an apartment as they can just to get by. This part of Florida has the kind of economy–and government–one normally associates with banana republics.

Rich snowbuzzards can live well here, but the locals are falling further behind every day.

 
Comment by implosion
2006-10-25 09:10:23

That’s about a 5%/yr increase in per cap income. I got 1.7% this year. They must have some “new” economy stuff going on there.

Each of the 10 places listed had a “caution” listed. The one for Wilmington, NC was good.

 
Comment by wp
2006-10-25 09:55:42

you’re right.

guess what will happen to interest rates if average incomes start increasing at 5+% per year. inflation will go through the roof as will interest rates. what will that do to housing prices???

 
 
 
Comment by Eastofwest
2006-10-25 09:01:34

RE: PCB #1 increase ???? This is utterly ,and completely incredible they have the audacity to print this….Absolutely irresponsible. If ever there was a market built on ‘quicksand’ …Sheesh. Fla in general ,but the panhandle in particular is going to crash so far it is unfathomable….but hey ,what do I know..

Comment by hd74man
2006-10-25 12:15:55

the panhandle in particular is going to crash so far it is unfathomable…

YIKES!!!….when I was down doin’ some sub-contract disaster inspection work in the Niceville/Cedarview corridor after Hurricane Ivan things looked pretty damn shaky too me.

Pretty damn bleak up there along the Alabama border.

Couldnt’ even imagine it goin’ any futher downhill.

(Comments wont nest below this level)
 
 
Comment by Les Pendens
2006-10-25 09:24:46

4. Lakeland, FL
59% Projected gain in home prices (5-year)
Median home price
2006: $178,000
2011: $282,000
Population
2006: 551,000
2011: 599,000
Per capita income
2006: $30,200
2011: $39,100
________________________________________

Let’s talk about Lakeland. I live in Winter Haven, next town over.

1) Median home price 2006: $178,000 - Folks you need to see what kinda shack that $ 178,000 will buy. It ain’t pretty. $ 178K will buy you a freshly painted, flippered cinderblock “crack shack by the railroad track ” Out of state infestors have bought up anything that had a roof and a board that you could drive a nail into. This part of Florida has been HEAVILY bought and traded.

2) Per capita income 2006: $30,200. - I question this number. Household per capita income is around $ 40K a year. Average hourly wage is like the rest of Florida: $ 10.00 hr.

I make 48K a year and work for the State. Believe it or not, my income is actually considered decent for this part of Florida. Teachers and cops start at 33K here, nurses at about 40K - 45K. That’s it folks. State Farm is the big employer here in Winter Haven and they start their (college educated) people out at around 35K. Everything else is people servicing each other for low wages. Shelley cuts Franks hair and Frank frys burgers for Shelley. No large hard manufacturing industry employer of any kind. No high tech corridor.

Winter Haven / Lakeland has ALWAYS been more of an inland pastoral/ farming area where median income snowbirds would come to retire on the cheeep. Clearwater Beach is about 75 miles west, where the Money People live.

No way on my above median income that I can afford to buy something habitable and presentable enough to call “My Home”. In 2000, yes I could have done that easily. But not now.

Comment by Les Pendens
2006-10-25 09:52:51

Oh. I forgot.

Here’s a “backdoor” link to the Florida MLS. Check out what I am writing about when I tell you what kinda house 175K gets.

Have fun with it :)

http://webapps2.planetrealtor.com/idx/pkg_IDX.pr_IDXSearch?sStateID=FL&sRealtorID=1005951&sUserType=F&sSearchStateID=FL&sSearchSource=X

(Comments wont nest below this level)
Comment by DC in LBV
2006-10-25 11:29:14

Yeah, the Lakeland MSA having an average house price of $282k really threw me. I make several times the average income for Polk county, and I could not imagine paying that much for the average house here. In 2000, the median price of a house in Lakeland was around $79k. Only 10% of the population here is college educated, and the few white collar jobs there are in the county are medical, civil service, and insurance (Geico has an office in Lakeland too). It may be half way between Orlando & Tampa, but once their boom recides, Lakeland will drop off commuters map.

 
Comment by imploder
2006-10-25 11:30:02

imploder tactfully suggest not mentioning “backdoor” around realtors™. could end up on bottom of large “dogpile”.

 
 
 
 
Comment by Bill in Carolina
2006-10-25 09:27:52

Sarasota median down 16% YOY, and they conspicuously left out about half of the data. Hmmm, do you think the numbers would have been better if they HAD included Manatee County?

I shudder when I think that we’d still be there if it hadn’t been for two active hurricane seasons scaring us (me) away last year.

 
Comment by Mike_in_FL
2006-10-25 09:37:40

You’re not kidding about how ugly the numbers were. In fact, according to the Florida Association of Realtors, median condo prices plunged 64% in Fort Walton Beach (sales volume down 53%) and 37% in Panama City Beach, FL (on a 44% decline in volume) in September. It’s on such a small sample size, and median price isn’t a great measure. So suffice it to say I doubt the magnitude of this decline is 100% accurate. But I think the trend is clear: Condos are in trouble in this fine state of ours. Incidentally, FAR stats show that West Palm Beach-Boca Raton single family home prices showed a steep 9% drop, something I haven’t seen in ages. This is my neck of the woods. I know that on my street, the house across from me has been on the market since December with several list price cuts and no sale yet. The couple living next to them on one side is planning to list soon to move back to Nebraska. The couple on the other side of the initial house just listed FSBO because they can’t afford the place any more (I/O loan and the wife is now home with their newborn. Two of the three houses at the intersection of my street and the main street are also for sale, as are a few others in the immediate surrounding area.

 
 
Comment by Backstage
2006-10-25 07:35:18

‘When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.’”

I should take DL’s word that buyers are as stupid as he? Besides a stable market does not make buyers want to rush in. They can bide their time and see what happens next month. Because they’ve waited, there’ll be another drop the next month. And they’ll wait a little more. Sooner or later the idea sinks in that there’s real declines, and that buying a house right now is a bad idea. Then start looking for a trough.

Comment by DinOR
2006-10-25 08:10:11

Backstage,

Not only does a “stable” market (which really sounds like clutching for straws btw) not inspire buyers to “rush in” the whole statement leaves me believing that for the NAR “stable” means on track to do the 60 Billion they did last year in commissions?

In spite of whatever they say you just KNOW the NAR longs for the days of bidding wars, fluffed appraisals, free money, unreal “appreciation” and 6% commissions! This their idea of stable or normal.

Comment by Karl Dahlquist
2006-10-25 08:22:05

Another 2500 layoffs at Countrywide…

http://www.dailynews.com/ci_4545017

 
 
Comment by cayo_ron
2006-10-25 09:24:41

After ginning the market for so long, and all of the crazy loans, anyone with a pulse that wanted to buy and thought that buying was a good idea in the last several years. . .has already bought. What makes Liarreah think that more fools are going to emerge from the woodwork? Anyone with half a brain is waiting for the market to bleed before they consider jumping in.

 
Comment by Jon
2006-10-25 09:59:58

“Sooner or later the idea sinks in that there’s real declines, and that buying a house right now is a bad idea. Then start looking for a trough. ”

I disagree. When buyers realize that there are real price declines, and that it is a bad idea to buy is NOT when I would expect a trough. Instead, I would expect sellers to realize the same thing, and start to panic, leading to a whole new flood of inventory and more dramatic price declines. I expect that to happen around late spring.

 
 
Comment by Stanleyjohnson
2006-10-25 07:37:57

“‘The worst is behind us as far as a market correction — this is likely the trough for sales,’ said David Lereah, the Realtors’ chief economist. ‘

I was at meeting and took this picture with my cell phone of David and another his buddy after meeting. For those of you have seen it before. Sorry. I love this picture.

http://img63.imageshack.us/img63/2567/realtorszf8.jpg

Oh, and when someone is sick you tell them they will better soon, When you are in a war you want your Generals to tell you it will be over soon, when you have a crisis someone always tells you not to worry you will get over it when price on your house is dropping thank God for David Lereah to tell you prices have hit bottom and will be going up in spring of 2007; God Bless you David.

Comment by implosion
2006-10-25 09:20:13

Hey Mon, that’s good…

 
 
Comment by userfriendly
2006-10-25 07:38:05

David Lereah needs to take off the cheerleader skirt, and put on the sackcloth…and maybe add some ashes.

 
Comment by sunshinestate
2006-10-25 07:38:08

September numbers from Florida:

Florida’s Existing Home Market in September 2006: Sales Down, Median Price Softens

ORLANDO, Fla., Oct. 25, 2006 — Florida’s housing sector continued to adjust to a more sustainable pace of sales in September with many markets reporting higher inventory levels of homes for sale; however, still-low mortgage rates also sparked buyer interest.

A total of 13,485 existing single-family homes sold statewide last month, a decrease of 34 percent from the 20,451 homes sold during the previous September, according to the Florida Association of Realtors® (FAR). Statewide, the existing-home median price slipped 1 percent to $243,900 last month; a year ago, it was $246,100, according to FAR.

In September 2001, the statewide median sales price was $134,000, representing an increase of about 82 percent over the five-year period, according to FAR records. The median is a typical market price where half the homes sold for more, half sold for less.

Nationally, the median sales price for existing single-family homes was $225,700 in August, down 1.7 percent from a year ago., according to the National Association of Realtors® (NAR). In California, the statewide median resales price was $576,360 in August; in Massachusetts, it was $352,000; in Maryland, it was $317,738; and in New York, it was $271,350.

Real estate is cyclical in nature, housing industry analysts note, and current market conditions arrived after five years of record-level growth. The U.S. housing market is showing signs of life and sales may be leveling out, according to NAR’s latest market outlook, which expects 2006 to be the third strongest sales year on record nationally. Sales activity should pick up early next year, given a positive economic backdrop of lower interest rates and job creation, says NAR Chief Economist David Lereah.

Looking to Florida’s existing condominium market, sales of existing condos also decreased in September, with a total of 3,819 condos sold statewide compared to 6,930 in September 2005 for a 45 percent decrease, according to FAR. The statewide median sales price for condos last month was $201,900; a year ago, it was $215,500 for a 6 percent decrease. The national median existing condo price in August 2006 was $223,200.

According to Freddie Mac, a 30-year fixed-rate mortgage averaged 6.40 percent last month, up from 5.77 percent in September 2005. FAR’s sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

Among the state’s larger markets, the Miami metropolitan statistical area (MSA) reported 769 existing homes sold last month compared to 872 homes sold a year ago for a 12 percent decline. The market’s median existing home price remained flat at $371,700; a year ago, it was $371,200. A total of 666 existing condos changed hands in Miami in September for a 40 percent decrease over the 1,106 condos sold the previous year. The market’s median existing condo price was $270,800; a year ago, it was $269,200 for a 1 percent increase.

“Prices are slowly trending down,” says Pat Dahne, chairman of the Realtor Association of Greater Miami and the Beaches and broker-owner of Pat Dahne Realty Group. “As real estate professionals, we need to remind people that real estate is a long-term investment. Miami has many positive economic factors that continue to attract buyers — for example, job growth from international business, continued interest from foreign investors and continued growth in our immigrant population.”

Of the state’s smaller markets, the Pensacola MSA reported a total of 466 existing homes sold in September compared to 564 homes sold a year earlier for a 17 percent decline. The area’s median existing home sales price rose 3 percent to $167,900; a year ago, it was $163,400. Thirty-seven existing condos sold in the MSA last month for a 35 percent decrease from the 57 condos sold a year ago. The market’s median existing condo price was $212,500; a year ago, it was $185,000 for an increase of 15 percent.

“Our white-sand beaches are some of the most beautiful in the world and this area is just a great place to live,” says Auby Smith, president of the Pensacola Association of Realtors and broker with Real Estate Counselors Inc. “Interest rates are still good, so there are many attractive financing plans available for buyers. Plus, many builders are offering great incentives, as are sellers of existing homes, which are drawing buyers to the market. Our prices remain attractive and that’s making a difference.”

http://media.living.net/

 
Comment by txchick57
2006-10-25 07:38:49

The “Ville

Also, Housing

No Fed statement these days can be complete without referencing housing in some bizarre, illucid manner. The September 20 statement noted that the housing market “appears to be cooling.”

Meanwhile, mortgage applications for the purchase of new homes fell 0.6% in the week-ending October 20, 16% lower than a year ago.
Refinancings actually rose slightly, 1.8%, as homeowners rushed to lock in fuel for their rising bonfire of debt and vanities. (Literally, vanities. We were browsing home Depot last weekend and noticed a veritable dearth of bathroom vanities.)
What is weird is that Adjustable Rate Mortgages (ARMs) slipped 0.9% and are down 23% year-on-year while the percent of new home loans being taken down that are ARMs is barely more than 25%, down from a peak of 40%.
Why is that weird? Because as the Existing Home Sales numbers (-1.9%) suggest, the probabilities are that the Fed will be taking down interest rates in 2007 and perhaps even into 2008.
So this means that while Mr. and Mrs. Wrongway were piling on the ARM debt into a rising interest rate environment in 2004 and 2005, they are now turning to fixed interest rate debt into what will probably be a declining interest rate environment in 2007 and 2008.

Comment by Auction Heaven in '07
2006-10-25 13:40:38

People are ‘betting’ with their home equity now.

They are ‘betting’ that the banks won’t take their homes after their HELOC’s have fallen beneath the falling value.

This is why refi’s are on the way up, when it appears to make no sense whatsoever.

Will banks take homes that fall too far below the value/HELOC line?

Probably not.

Thus, it might not be a bad bet.

Of course, you ain’t going nowhere for a long, long time…

…so you may as well ‘Get Stucco’…as it were…

Stucco, care to respond?

 
 
Comment by DAVID
2006-10-25 07:39:27

‘That will play out in the next 12 to 18 months. That puts us at mid-2007 before we might be able to say, ‘We passed the trough,’ on the nation’s housing slump.”

So the new word is “Trough”.

 
Comment by denverKen
2006-10-25 07:43:54

David Lereah…the world’s dizziest man

spin spin spin spin spin spin spin

 
Comment by GH
2006-10-25 09:25:53

The man has no credibility what-so-ever.

 
 
Comment by WT Economist
2006-10-25 07:46:29

It all depends on forced sales and foreclosures. At the end of the 1980s boom, sellers held out for years. But if forced sales and foreclosures establish new comps, and appraisers and lenders stick with them, the market could stabilize at affordable levels 12 to 18 months from now. Better for almost everyone, except those who stretched to buy at the top and those who lent to them.

Comment by cayo_ron
2006-10-25 09:28:41

“Better for almost everyone, except those who stretched to buy at the top and those who lent to them.”
That’s a big “except” there, in that during the 80’s boom, at least most sellers had a semblance of staying power. I don’t think a lot of sellers are going to be able to hold out for years.

 
 
Comment by jmunnie
2006-10-25 07:46:38

OT, from WSJ:

Real-Estate Finance: U.K. Property Stocks May See Boost; January’s Debut of REITs Raises Prospect in Britain For Wave of Consolidation

LONDON — First it was the booming United Kingdom commercial- property market. Now the prospect of takeover deals could send the country’s property stocks even higher.

The catalyst is the British government’s decision to allow the launch of real-estate investment trusts beginning Jan. 1. REITs will give a bevy of tax breaks to companies that adopt the structure and make it easier for them to buy other property companies. In the past three months alone, four deals have been announced, and the Dow Jones U.K. Real Estate Index had surged 14% as of last week, compared with a 7.6% rise in the FTSE 100 stock index.

While the heady gains mean some property stocks now trade at very high premiums to their portfolios’ net asset values, fund managers and analysts are unperturbed. They say property stocks remain attractive because they are already priced to reflect higher net asset values expected when REITs come into effect.

Mike Prew, property analyst at Lehman Brothers, said in a note to clients that NAVs were “depressed by layers of costs which we think will prove inappropriate for the post-REIT world.” He estimates NAVs will rise by an average of 8% following conversion. This, combined with the expected sharp increase in values in their property portfolios when they are revalued at year end, should mean those that convert to REITs will trade broadly in line with NAV.

To be sure, the bull market in property stocks could fizzle if U.K. interest rates rise and the global economy slows. The Bank of England is widely expected to raise its key lending rate by a quarter percentage point to 5% early next month. Tim Wheeler, chief executive of industrial-property specialist Brixton, said he was concerned individual investors could be jumping into property stocks with unrealistic long-term expectations and without understanding the cyclical nature of the property market. Though property prices have been rising for three years and show no signs of abating, he warned that the rise can’t continue indefinitely.

So far, 15 companies have announced their intention to convert to REITs, and more are expected to follow next year. Unlike U.K.-listed property companies today, REITs will pay no corporate or capital-gains tax as long as they distribute 90% of their income to shareholders as dividends. Purchases of rival firms will also be free of capital-gains taxes.

Buyers acquiring properties through a corporate structure will avoid a 4% tax on property purchases, known in the U.K. as stamp duty. Companies that want to convert to REITs must pay a one-time, 2% charge on the value of their assets.

“There will be consolidation because REITs can trade more efficiently than non-REITs,” said Boudewijn van Loen, Amsterdam-based fund manager of the 1.3 billion euros ($1.6 billion) F&C Real Estate Securities Fund, a Luxembourg-based mutual fund that invests in U.K. property stocks.

Mr. van Loen favors Great Portland Estates PLC, Derwent Valley Holdings PLC and Shaftesbury PLC, which specialize in central London offices and shops, and Hammerson PLC, an office and retail specialist. He expects all to convert to REITs and says the first three are contenders for either being taken over or agreeing to a merger.

Great Portland has already announced it is in discussions to merge with central London rival London Merchant Securities PLC, and analysts suggest Derwent Valley may also consider a merger.

“They have the potential to really profit from growing market rents and demand in the West End market, which has a high barrier to entry,” Mr. van Loen said.

Great Portland, Derwent Valley and Shaftesbury all trade at sizable premiums to net asset value. But Mr. van Loen said the stocks are fairly valued. He said stock prices reflect a surge in central London property prices in the past six months that will be reflected in semiannual portfolio valuations as of Dec. 31.

Other merger targets could be companies that are unlikely to convert to a REIT in their current form because they don’t fulfill the conversion criteria, such as having no single shareholder owning more than 10% of the company. Mr. Prew identifies CLS Holdings PLC and Daejan Holdings PLC as the most likely candidates. CLS specializes in office property with long leases, while Daejan invests in offices, shops and residential property predominantly in London.

Residential investor Grainger Trust PLC, which said in June that it was unlikely to convert, last month received an approach from property company Regis Group PLC and Merrill Lynch & Co. While the original offer was rejected, the pair, along with private property company William Pears Group, are putting together a second bid for Grainger, whose stock has soared in the past three months.

Comment by Freeloading Roommate
2006-10-25 08:26:19

The UK is beginning to look more and more like Japan of the 1980s.

 
 
Comment by Luke
2006-10-25 07:47:37

A largest decrease of median prices at any point can never be classified as a trough, because a trough is where the first derivative is zero and the second derivative is positive. We all know this DL guy is full of crap, but seriously, does he expect the mathematically suave public not even notice the inherent inconsistent of the data and his statement?

Comment by oxide
2006-10-25 08:25:56

Er, being a college grad, I’m a little more mathematically suave than the general public, but you’ve stumped me. If the first derivative of an equation is 0, then isn’t the second derivative 0 too, not positive? Or do you mean that the first derivative goes from negative to 0 to positive again?

David’s “trough” is indeed a local minimum, one of the first of many successively lower local minima. The largest decrease (global minimum) hasn’t hit yet.

Comment by GetStucco
2006-10-25 08:44:21

He said it correctly.

First derivative is zero = flat spot

Positive second derivative = increasing slope / at the bottom of the “trough”

Since the first derivative is negative at the moment and increasing in magnitude, DL’s spin is laughable.

Comment by jim A
2006-10-25 09:08:29

For those who took more physics than math, first derivative=velocity and second derivitave=acceleration. For a ball tossed vertically, the first derivative=0 at the apex of its flight, when it is neither going up nor down, but the second derivate is a constant at ~ -32 ft /sec squared.
Of course I’ve been arguing for more than a year that propper analogy for the housing market is found in quantum, not classical mechanics. No house has a price until a sale (observation) is made. Even your best appraisal is merely an expectation value, a function of the “market operator” on the “house condition” function.

(Comments wont nest below this level)
Comment by GetStucco
2006-10-25 09:12:03

“No house has a price until a sale (observation) is made.”

But each house has a market value, even if it is not directly observable. Good evidence can be obtained from failed auctions, like the one at Bressi Ranch (Carlsbad, CA) last weekend, where we learned the highest bids were about 33% or so below the sellers’ wishing prices.

 
Comment by jim A
2006-10-25 11:15:26

I would argue that a failed auction indicates that in that case there is no market, and therefore no market value. A normal market is a case of trying to settle on combination of price and sales conditions that is within the set of possibilities acceptable to both of them. As has been discussed here before, contract conditions can have considerable effect on the sale price. From builder added ameneties, inspection clauses, owner financing, or autos and closing help, all can change the price a buyer is willing to pay. To stretch the quantum mechanics analogy almost beyond recognition, conditions are equivalent to momentum and price is equivalent to position. You can either be sure of the price you want or the contract conditions, but not both.
An auction essentially fixes the terms of sale and determines the highest price any bidder will pay with those terms. In a failed auction we determine that with those conditions there is no intersection between the prices the buyer is willing to pay and the prices that the seller is willing to accept. We have a failed market. There is NO market value, at least with those contract conditions.

 
Comment by GH
2006-10-25 11:28:33

I am thinking probability law and not quantum or classical mechanics. One can determine with a good degree of accuracy the value of a property by examining recent sales of other similar properties as well as other factors such as demand etc… It IS possible a home may sell today for an amount greater than in 2004, however unlikely. Clearly in the case of the recently failed Carlsbad auction, the odds were against a sale given current market conditions and seller expectations.

as for the trough.. I would expect to find a high side on BOTH sides of the trough. Right now, we are accelerating a downward trend into what appears to me to be an abyss… maybe he meant abyss?

 
 
Comment by oxide
2006-10-25 09:27:29

Ah, got it. I may have just been thinking about the bottom point, not the entire curve.

Guess I’m not too suave after all. Sign me up for a 1.5% neg-am!

(Comments wont nest below this level)
 
Comment by implosion
2006-10-25 09:33:45

Actually, it’s not quite even that. f’=0 and f”>0 might only signify a local (vs global) min, and that’s assuming the derivatives exist. Would need to look at the discontinuities in the function and its derivatives for min/max points as well. Those local min’s and max’s make optimization problems difficult.

(Comments wont nest below this level)
 
 
Comment by TS
2006-10-25 09:14:53

Hi, from what i remember, if the first derivative is zero for a given value (say x), you shouldn’t calculate the second derivative for the exact same x. The second derivative is calculated for x-delta and x+delta where delta is assumed to be a very small value.

If the second derivative at x-delta is negative and x+delta is positive, then x is a maxima and if vice versa, then x is a minima. My memory is a bit hazy, but I think this is roughly correct. Any mathematicians abroad?

 
Comment by JJ
2006-10-25 09:30:39

He’s right. What he means is the first derivative is zero at this point - not that it is always zero. Therefore, the second derivative isn’t simply zero. If it’s positive, that means that the line is curving upwards (i.e. first derivative is increasing).

Anyway, Lereah is saying that the price change will be positive next month so we are at the trough right now. Stupid, yes, but it isn’t mathematically impossible.

 
 
Comment by mrktMaven FL
2006-10-25 09:28:50

“…this is likely the trough for sales”

Does that say trough in prices or sales?

 
 
Comment by eddy
2006-10-25 07:51:24

DL is like the Iraqi Minister of Defense. “There is no housing bubble”

 
Comment by Rental Watch
2006-10-25 07:57:50

A few questions at this point in the cycle.

1. How many people have pulled their home (primary or otherwise) off the market because they can’t get enough out to pay off the mortgage, but are not in enough distress to warrant discussions of short sale, etc.? I suspect we are going to see continued increase in home rental inventory. I also suspect that these folks are going to be eaten by their alligators eventually–their homes will come back on the market.

2. What happens to the pace of sales when decreases in home values cease to be the exception and become the rule? I suspect we will have continued decreases in home sales, partly because of the above, but also because ultimately, we need to have new homeowners jump in for the housing market to work normally.

3. What happens when we have a convergence of ARMs adjusting AND banks tightening lending? Fewer new homeowners, more inventory, fewer sales, lower prices.

It’s a vicious cycle.

I suspect there are a lot of extra prayers going to the big man and plenty of sleepless nights. Buy stock in companies that make sleeping pills.

 
Comment by jmunnie
2006-10-25 08:01:53

OT from WSJ:

House Prices Start to Ease in Europe

Following a decade of unrelenting gains, during which the value of many homes doubled, price growth has slowed this year in most European markets, even the United Kingdom. Europe’s stretch of low interest rates may be coming to an end, and people are starting to be priced out of the market, particularly in the U.K., Ireland and Spain. “We expect price growth to continue to slow in the next two years across most countries,” says Liam Bailey, head of residential research at real-estate advisory firm Knight Frank LLP in London. In the U.S., rising interest rates also have helped damp the market.

Markets have been driven in part by strong local economies but also, in many cases, by a long tradition of homeownership, especially in markets such as the U.K., where it is typically less expensive to buy than to rent a home. Just 43% of people own their own home in Germany, far below the European Union average of 63%, according to Berlin-based real-estate consulting firm BulwienGesa AG. In Spain, 85% of people own their own home, compared with 71% in the U.K. and 63% in France. In the U.S., 68% of the population are homeowners.

Comment by JWM in SD
2006-10-25 08:32:01

Uh oh, don’t tell NHZ about this. It would destroy his world.

 
Comment by sagesse
2006-10-25 08:41:34

Friend told me in Spain 40-year mortgages have become common.

 
Comment by cayo_ron
2006-10-25 09:35:49

“We expect price growth to continue to slow in the next two years across most countries,” says Liam Bailey

Is this guy the UK’s answer to Liarreah?

 
 
Comment by denverKen
2006-10-25 08:05:20

A lot of the decrease in listings is purely seasonal. Sellers try to sell in the summer, but if a sale doesn’t materialize they decide to stay put until next spring.

Who wants to make the kids change schools in the middle of a school year? Also, Christmas is 2 months away, and most people don’t want to attempt selling their house during the holidays.

DL is having to look WAY under the bed to find something to crow about in this report.

But…the stock market really really wants to go up right now, so his feeble attempt at spinning is working…for today. The HB stocks have been the strongest part of the market for 2 days now. In my opinion this is just setting up another great shorting situation.

Comment by jim A
2006-10-25 09:20:04

But this is why they are talking about year over year numbers. By comparing this September with last September we largely eliminate seasonal factors. In fact, I would argue that houses are probably taking longer to go from contract to closing now because of more conditions (inspection etc) and slightly more difficulty getting financing. Longer times under contract mean that some of this years September sales would have closed in August if the market was moving with the same frenzy as last year. Since some of the September sales have been moved from a busier month, the artificially inflate the September numbers. Over all, the market is probably WORSE then the YOY numbers would tend to inticate.

 
 
Comment by Brandon
2006-10-25 08:05:20

‘When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.’

Where are home sales stabilizing? We’re going into the slow sales season and who knows whats going to happen over the winter. Around Boise, new home sales have gone into a black hole. Builders are now rolling out 25-50k price cuts on houses- that’s gonna kill “flippers” who own inventory and they’ll need to cut prices . Some markets may be stabilizing, but many more have a ways to go. Does anyone think for a second that markets like Phoenix, Las Vegas, Sacramento, Fresno, Modesto, and the entire state of Florida have “hit bottom’? No way!

Comment by tauceti96
2006-10-25 10:11:53

I’m sitting in a rented house in Fresno whose 335k “value” dropped 10k over the last two weeks. I love it! The whole market is sailing into the crapper. This house isn’t worth 200k.

 
 
Comment by dude
2006-10-25 08:05:21

CNBC just showed some good charts and called BS on liereah’s comments.

HB stocks up, do you feel that? Those are my shorts being squeezed, hard.

Comment by txchick57
2006-10-25 08:10:11

Next time, use charts, and I am saying that very kindly.

 
 
Comment by WT Economist
2006-10-25 08:06:15

And the lawsuits begin. It appears likely that any corner cut in the boom will be litigated, as people grope for some way out. Exaggerating square footage, for example.

http://la.curbed.com/archives/2006/10/1100_wilshire_l.php

Comment by Anonymous
2006-10-25 11:45:49

I think this is a VERY important issue. I tried to post a comment on this a while ago, but it wasn’t posted. The square footage being off is more common than people think.

Because I believe in due diligence and because the information was readily available from the Tax Assessor’s site (http://sdatcert3.resiusa.org/rp_rewrite/), I used to run my own comps in Maryland when we were looking for a house there. I found two neighborhoods in which the square footage for almost all of the houses was off by several hundred square feet.

On one house we looked at, the square footage was off by 700 sq. ft. Most of the houses in the neighborhood were off by the same amount or more. When we questioned the Selling Agent about it, he made up one excuse after another. As far as I was concerned, he had NO excuse for misrepresenting the sq. ft. because he lived in the same neighborhood in the same model home as the one for sale.

When I contacted his broker about it, they did nothing. I said that the squaree footage was a material fact about the home that they had a duty to disclose to the buyers. They said that they were protected by their “information is deemed accurate, but not guaranteed” statement in the advertising. I said the they can’t deem the information to be accurate if they KNOW it is not. They said that people would not care if the square footage is off, that if they like the house, they will buy it and still pay the price. I said that if this was the case, what was the harm in telling them the truth. They failed to tell the buyer and the house was sold quickly. They said I had no standing to complain further, since, because I had not entered an contract on the property, I had not been harmed. Although I disagreed, I dropped the matter.

I can’t imagine that people wouldn’t care about this. The houses were already extremely expensive. When houses are selling at $300+/sq.ft., at 700 sq. ft., we are talking about overpaying by an additional $210K+ on top of the already inflated prices.

We’ve since sold our house and moved to CA. We are renting and waiting for a good time to re-enter the market. Because I have been unable to find the detailed information here, it makes it even scarier to buy. By not making this information readily available to the public, the state is forcing consumers to rely on RE Agents who do not have their best interests at heart. I can’t even imagine how easy it is to get away with such scams here.

Sorry for the long post, but, I think this issue is something that is very important and needs more coverage.

Comment by San Diego RE Bear
2006-10-25 12:56:28

I say you visit the nice present owners and tell them about this little meeting you had. :D

Comment by Anonymous
2006-10-26 08:12:26

I thought about contacting them, but didn’t want to get entangled in it since we decided to move to CA. I learned an important lesson, though, and wanted to share it with others so posted the story here.

This was a problem I didn’t know about until I started finding discrepencies between the MLS, public records, and builders plans. My realtor had reasonable explanations for some of the homes, but, when whole neighborhoods are off, it looks like something fishy is going on.

I hope the lawsuit will draw more attention to this issue. Carefully checking the square footage to ensure we are getting what we are paying for(not overpaying) is just one more thing we all need to do when buying a house. Since this has now been exposed, there will probably be many more of these lawuits on the way.

(Comments wont nest below this level)
 
 
Comment by hd74man
2006-10-25 15:45:18

I found two neighborhoods in which the square footage for almost all of the houses was off by several hundred square feet.

Most assessment revaluation companies use quasi-illiterates dolts to do the actual house interior inspection and external physical measurements because of the bid for work process.

Friend of mine in Burlington VT had a 400SF error in his GLA calculation for a reassessment.

The reval company involved bid for the community was like $50.00 per home.

Not much room for hiring quality at that amount.

So you get what you pay for.

Garbage in-garbage out.

 
 
 
 
Comment by Kurt
2006-10-25 08:21:37

Dave: Open the pod bay doors, please, HAL. Open the pod bay doors please, HAL. Hello, HAL. Do you read me? Hello, HAL. Do you read me? Do you read me, HAL? Do you read me, HAL? Hello, HAL. Do you read me? Hello, HAL. Do you read me? Do you read me, HAL?
HAL: Affirmative Dave, I read you.
Dave: Open the pod bay doors, HAL.
HAL: I’m sorry Dave, I’m afraid I can’t do that.
Dave: What’s the problem?
HAL: I think you know what the problem is just as well as I do.
Dave: What are you talking about, HAL?

The problem David is that prices are going lower.

Comment by Premature Curmudgeon
2006-10-25 09:29:15

How long do you think it will be before nobody gets 2001 references? I watched it for the first time a few months ago and had a “duh” moment when I realized who “Hal” is.

 
 
Comment by Mo Money
2006-10-25 08:37:06

“Sales of existing homes fell for a sixth straight month in September and the median sales price dropped on an annual basis by the largest amount on record, further documenting a lukewarm housing market.”

I heard this on KGO news while driving to work, it was followed by a commercial from Coldwell Banker saying it was never a better time to be in the market. Oh the irony.

 
Comment by Susan Jacobson
2006-10-25 08:39:14

One factor to add to the mix is the homeinsurers. I sat in recently on several sessions with insurance agents for State Farm and Allstate and they basically tell me and others in my office that they are increasingly vigilant about checking the past insurance claims on a home before writing a new policy for a new buyer (of an existing home). So i the future as cash dries up for homeowners (because they’ve maxed out their home equity) and they enounter the inevitable problems with basement flooding, ice jams during a winter storm, etc., they will have to think twice before they turn in a claim if they are planning to sell their house within the next five years. Ultimately–if I am understanding the agents correctly– homeowners’ insurance is only good for the worst of worst-case scenarios yet, of course, any buyer is required to purchase it if they are taking out a mortgage. I think that this issue will mushroom in the coming months.

Comment by crispy&cole
2006-10-25 08:42:32

Susan-

First, I am glad we have not scared you off.

Can you tell me/us why the NAR puts out these constant spin campaings?
Was there a significant run-up in your area - if so, were you adivsing your clients to buy, during the run-up?

crispy (TM)

Comment by dwr
2006-10-25 08:51:45

“Can you tell me/us why the NAR puts out these constant spin campaings?”

Honestly, which group benefits when Lereah lies? Your friend Susan. Would Susan belong to a group whose position was “Do not buy any real estate for the next three years”? C’mon now.

“were you adivsing your clients to buy, during the run-up?”

OK, now I see what you’re trying to do.

Comment by imploder
2006-10-25 09:16:57

lack of transaction = starvation for Realtors™.
David is shooting his own guys(Susan) in the foot. Should have just presented bad info and then “shrugged”. Time for “Happy talk” is over. For Realtors™ it is now time to make even more money off of seller’s pain and misery on the ride down. 1 Trilliion in loan resets will ensure that ride. Susan need not worry. Business will be good.

(Comments wont nest below this level)
 
 
Comment by Susan Jacobson
2006-10-25 10:25:11

The NAR and its spokesmen no more speak for me than the head of the National Education Association speaks for all teachers. Clearly, the NAR functions separately from almost everyone they collect dues from and of course this makes many realtors I know extremely unhappy. In my opinion, the origin of the spin is that several NAR employees’ jobs are strictly public relations. Yes, it sucks, but, frankly, I’m not sure it’s any more underhanded or despicable than what Tony Snow does every weekday for George Bush. The world would be better served without PR, but I’ll be ten feet under before that day arrives.

Comment by imploder
2006-10-25 10:46:54

imploder just pointing out David sending out wrong message. He should help you by making sellers realize that they are going down, and if need to sell should reduce sell now. That kind of honesty would help you and other realtors™ capitalize on the sellers situations. Then he’d be helping you with what your doing.

(Comments wont nest below this level)
 
Comment by crispy&cole
2006-10-25 10:48:23

Point taken - now the second question I asked you?

Thanks

(Comments wont nest below this level)
Comment by Susan Jacobson
2006-10-25 11:24:25

The run-up here in Wisconsin is basically a non-starter. In the suburbs of places like Madison there has been significant new homebuilding, but, then again, a lot of new jobs have arrived there within the past decade, many of them in the biotech industry. Yet it statistically there has been much less speculaton and flipping than in other states. So my experience is limited almost exclusively to those who are buying or selling their primary home–and I always advised buyers to sell first before they would purchase a new home. But that is common around the state as most here are practical and cautious.

Having grown up on the west coast but lived in the midwest now for a long time, I think it is fair to say that midwesterners are, by nature, much more skeptical about get-rich-quick schemes than those on the coasts. Guess they like to keep both feet planted on the ground or something on that order.

 
Comment by crispy&cole
2006-10-25 11:26:48

Thanks!

 
 
Comment by dwr
2006-10-25 11:13:55

Yeah, it’s pure coincidence that 99% of all real estate “professionals” say exactly the same thing, approximately 3-5 days after Liareah makes the same comments.

(Comments wont nest below this level)
Comment by crispy&cole
2006-10-25 11:27:40

That was my point. But it sounds like where she lives there was littlie speculation.

 
Comment by crispy&cole
2006-10-25 11:29:03

I wonder what she would have said if she lived in Fl, Az, NV, DC, et al during the run-up?

 
Comment by dwr
2006-10-25 11:46:10

Something tells me she says exactly the same things that agents in Ca, Fl, etc say. “Better buy now before it’s gone, that’s what bridge loans are for!”

 
Comment by Susan Jacobson
2006-10-25 11:46:26

I would never choose to live in any of those places for the very same reasons that things are so askew there now. Too flakey for me. FYI, I am a financial conservative as are the vast majority of my clients. I have never been part of a no-money-down transaction nor have my colleagues as far as I know. That’s why when people say “real estate is local” I think there is some truth to it.

 
 
Comment by oc-ed
2006-10-25 19:10:20

Susan,

I too am glad we did not scare you off. We need the perspective you can bring here.

Your point about NAR and public relations is understandable. My issue with NAR is not so much that they do not voice the perspective nor opinions of the agents and brokers on the front lines, but rather that MSM and indirectly the customers believe the spin from NAR. And Crispy’s point is valid, why sit by idly and allow an organization you are paying to represent your business interests do you the disservice of mismanaging the expectations of potential customers? In addition, the utterances of DL et al are being heard in DC. Do you want such misrepresentation to drive regulation in the future? We all understand the disconnect between PR fantasy and actual reality, but be forewarned, this is going to get very ugly and dishonesty from those who are supposed to speak for RE may lead down a dark and dangerous road for the rank and file in REIC. If DL has no problem failing to speak for those who pay his salary, think how quickly he will abandone you when the reaper comes looking for someone to fall on the sword.

(Comments wont nest below this level)
 
 
 
Comment by WT Economist
2006-10-25 08:42:51

(homeowners’ insurance is only good for the worst of worst-case scenarios yet, of course, any buyer is required to purchase it if they are taking out a mortgage)

My insurer requires a $10,000 deductable for hurricanes. I asked for a $10,000 deductable for everything. NO ONE would give it to me. I guess they are counting on profits from people not filing legitimate small claims.

 
Comment by GetStucco
2006-10-25 09:08:37

“(because they’ve maxed out their home equity)”

Does this mean they borrowed against their equity and blew their life’s savings on consumption expenditures? Sorry, I am not well versed in Realtorspeak (TM).

 
 
Comment by GetStucco
2006-10-25 08:39:31

“‘The worst is behind us as far as a market correction — this is likely the trough for sales,’ said David Lereah, the Realtors’ chief economist. ‘When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.’”

Prospective buyers who believe this professional liar can look forward to catching a falling knife.

 
Comment by rent2home
2006-10-25 08:48:53

“‘The market is normalizing. The last couple years were above what we expected,’ said Duncan, the Washington, D.C.-based trade group’s chief economist and senior vice president. ‘This may lead to more of a down bounce than we expected.’”
Down Bounce..

Yes Sir!, housing market is normalizing with characteristic Down Syndrom.

 
Comment by GetStucco
2006-10-25 09:06:08

“U.S. house prices won’t keep pace with inflation through 2008, industry economist Douglas G. Duncan predicted Tuesday.The pace he expects, 1% this year and next, would be the slowest since the first quarter of 1995, according to the Office of Federal Housing Enterprise Oversight.”

So, Doug, now that you are expecting prices to start rising again after their extremely brief correction, have you stopped waiting out the storm (while renting) and bought a home?

For those who are not aware of the fact, 1995 was at the end of the last six-year-long real estate bust; at the moment, we are just at the beginning (1-year in). Or, if you choose to believe the industry “experts,” we just experienced a shallow price dip at the end of a record seven straight years of the highest real housing price inflation ever experienced in US history and are now ready for prices to resume their ascent into the stratosphere.

 
Comment by flatffplan
2006-10-25 09:07:45

anyone have a LIErah link or email we need to contact him soon

 
Comment by Michael Viking
2006-10-25 09:15:02

“That was the biggest year-over-year price decline in records going back nearly four decades. ”

It’s lines like this that get to me (along with Liarrhea’s lies). Of course it’s the biggest! It’s my understanding from realtors that there’s never been a year-over-year price decline. Yet, I keep seeing declines compared to previous declines. I thought there weren’t any previous declines! What am I missing??

Comment by jim A
2006-10-25 09:24:48

And of course they’ll probably be able to use that sentance in their reports for the next few years running.

Comment by Michael Viking
2006-10-25 09:41:51

Good point! And also, since there’s never been a year-over-year price decline, at some point somebody will realize that along with being the biggest ever, it’s also the smallest ever!

 
 
Comment by GetStucco
2006-10-25 09:25:38

The claim is that there has never been a decline in the national median price “on an annual basis,” whatever that means. It probably means very little, given the NAR’s documented propensity to lie about anything and everything that might help prop up flagging home purchase demand.

 
Comment by dwr
2006-10-25 09:51:37

these are declines for one month compared to the same month for the previous year. the other declines you’re referring to are for an entire year compared to the previous year, which hasn’t happened since the 30s.

Comment by GetStucco
2006-10-25 10:43:43

And how, exactly, does one measure the median price “for an entire year”? Does this mean that the YOY median has to remain negative every month for an entire year, or is there some meaningful way to compute the median price on a national basis for an entire year?

Comment by dwr
2006-10-25 11:11:37

Are you being serious? If you can determine a median for a month of sales, why is it hard to do the same thing for a year’s worth of sales?

(Comments wont nest below this level)
Comment by GetStucco
2006-10-25 18:41:56

You have two dimensions — time and space (geography) — over which price varies over the course of the year. So there is no obvious uniquely best way to measure the median. For instance, one might order all prices over all markets over the entire year, then pick the middle price (ignoring the lumping together of prices across different points in time and space). Or one could first compute the median price in each month, then pick the median price across the twelve month period. In both cases, the median would represent a different point in time and space across years, making the comparison rather meaningless.

 
Comment by dwr
2006-10-26 08:49:36

“In both cases, the median would represent a different point in time”

Isn’t that what happens when you compare Sept ‘06 to Sept ‘05? You’re either overthinking this or your math skills are not quite as impressive as you claim they are.

 
 
 
 
 
Comment by mina
2006-10-25 09:20:33

can anyone point me to the link for the graph that shows the x-axis as the date and the y-axis as the $$ of the major stock index for 1929. at each graphed point there was a quote showing the powers that be cheerleading the market’s return.

Mina

Comment by mina
2006-10-25 11:52:45

found it! here’s a great chart. stock market crash of 1927 vs. quotes:
http://www.gold-eagle.com/editorials_01/seymour062001.html

Comment by GetStucco
2006-10-25 18:38:01

“I cannot help but raise a dissenting voice to statements that we are living in a fool’s paradise, and that prosperity in this country must necessarily diminish and recede in the near future.”
- E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928

And I cannot help but raise a dissenting voice that we are currently living in a fool’s paradise, and that prosperity in this country must necessarily diminish and recede in the near future.

 
 
 
Comment by GetStucco
2006-10-25 09:23:36

“Home sellers flooded the market this year just as many potential buyers stopped shopping. The reversal likely began last fall, but was disguised because sellers made concessions not in house prices but with incentives, he said. The nation’s inventory of ‘for sale’ homes is higher now than it has been in many years, Duncan said. ‘It’s clearly a buyers’ market, and lots of buyers are sitting on the sidelines waiting’ to see if seller desperation will get them a better deal, the economist said.”

So now that inventories are growing and evidence of falling prices on a national level has appeared in the main stream media, buyers are going to come back into the market? I would guess that most would-be buyers will become even more precautious at this point, which will lead to less demand, lower sales volumes, higher inventories and further price declines. I frankly have a hard time even imagining plausible conditions that would make Lereah’s and Duncan’s predictions for near-term resumption of housing price inflation come true. Can anyone (besides nhz) even envision a scenario where this occurred?

 
Comment by Mike
2006-10-25 09:27:51

This guy David Lereah sounds more like George W. Bush talking about Iraq every day. “The worst is behind us.” I think Bush was saying that about Iraq 3 years ago and I suspect David Lereah will be saying that 3 years from now. “The worst isn’t behind us. Mission accomplished.”

This mess is only in phase one of a 3 to 5 phase correction which will take prices back to 2000/2001 levels. Actually, there is even a small chance prices will drop lower because when bubbles burst they usually overshoot. As for the lower inventory in places? It has nothing to do with sales. It has to do with people taking their homes off the market because this is not the time of the year which brings out house hunters. Those that take houses off the market are a mix of underwater speculators and those who decided to sell their homes after owning them for years and decided to cash in. Maybe buy something smaller now that the kids have gone and pocket the excess cash. As usual, psychology kicks in (combined with sucking up b.s spoken by hype merchants like Lereah) and they figure they might just as well wait and get a better price since the price they figured they would get a few months ago has passed. The increase in inventory will probably start in February, gather momentum and be high in April/May.

Also we need to take in consideration the number of Fb’s. Next spring will be their last chance to unload. Also take into consideration the number of foreclosures due to hit in 2007 as resets of exotic loans kick in.

“The worst is behind us,” my ass.

Comment by steinravnik
2006-10-25 12:57:03

That’s right, inventory always goes down this time of year.

 
 
Comment by GetStucco
2006-10-25 09:28:50

“‘These people haven’t yet decided what to do,’ Duncan said. ‘That will play out in the next 12 to 18 months. That puts us at mid-2007 before we might be able to say, ‘We passed the trough,’ on the nation’s housing slump.”

History matters here. Lereah and Duncan are predicting the longest boom on historical record with the highest price peak will be followed by the shortest downturn ever with the shallowest dip in prices. Were the “experts” making similar predictions at the start of the tech stock bust in 2000? (My guess would have to be YES.)

Comment by Pointlines
2006-10-25 09:52:13

If home prices are at a bottom and sure to go up due to such a strong economy, then these experts surely wont mind if the Fed raises rates again will they?

 
Comment by dwr
2006-10-25 09:56:47

were the experts making similar predictions regarding the SoCal housing market in 1991? 92? 93? 94? Yes, yes, yes and YES.

 
 
Comment by tom stone
2006-10-25 09:32:10

we’re behind the curve here in santa rosa,i keep hearing that the market is rebalancing,not stabilizing,or normalizing…had another person assure me this am that” the market will take off after the holidays,count on it” MAYDAY!,MAYDAY!,MAYDAY!

 
Comment by gal
2006-10-25 09:51:05

Those Mr. Lereah’s should be prosecuted like Enron executtives for causing thousands of Americans to be in a conditton of loosing trillions of dollars in this fake “prosperrity” call, when middle class in this country is going to hell…

Comment by Pointlines
2006-10-25 09:53:27

losing, not loosing

 
Comment by David
2006-10-25 21:00:39
 
 
Comment by truthbetold
2006-10-25 09:57:56

I dont understand how there can be YoY declines in my house value. I have granite countertops!

Comment by WaitingInOC
2006-10-25 16:50:09

But do you have SS appliances?

 
 
Comment by terrier
2006-10-25 10:04:08

think the outcome will be the one nobody expects (as always) and don’t see any winners here. think 10% dip in median, deadcat bounce next spring to attract new suckers (markets do what hurts the most ppl involved) and then a 30%-40% mother of all busts, after which prices stagnate there for maybe 7-10 years due to new structural econ changes. so in any case the light is not near

Comment by SimpleSimon
2006-10-25 11:16:47

I don’t think were going to see a “dead cat bounce” in RE. It’s just not that type of market. With all the existing inventory and lack of liquidity, the trend will stay down with possibly some periods of flat prices. If I let my imagination run wild, the only thing that could cause it would be some massive goverment bailout/incentive program, but I think the odds of it are slim.

Comment by Anonymous
2006-10-25 12:10:55

Do you think the “dead cat bounce” was in the Spring-Fall of ‘05? Prices were falling in Fall - Winter ‘04, but then went up again before starting the steady fall in ‘06.

Comment by SimpleSimon
2006-10-25 13:19:28

I’m not sure what market(s) you are referring to. Most of the high profile bubble markets never experienced a decline at all, so where’s the bounce?

In a speculative market like stocks, currencies, futures,etc it is the short selling combined with long liquidation which sets up the “dead cat bounce”. Eventually shorts look to cover at what they think may be a bottom. If enough begin buying it sets off a short term buying frenzy. Short term buyers(the equivalent of flipping buyers in RE) also step in buy for a quick profit. In RE, there is not short selling involved so there are no shorts to cover. Combine that with fact that all the speculative flipping buyers are absent, and you have no spark to cause the massive reduction in inventory which would lead to higher prices, hence no “dead cat bounce” IMHO.

(Comments wont nest below this level)
Comment by SimpleSimon
2006-10-25 13:27:06

I believe we have seen a “dead cat bounce” in the builder stocks. Eventually i expect the downward momentum to resume once the reality of the RE situation reasserts itself.

 
Comment by GetStucco
2006-10-25 18:33:57

Eventually we will all die, to paraphrase J M Keynes.

 
Comment by CA renter
2006-10-26 03:23:40

Anonymous is correct. In So Cal, we had rapidly declining sales and prices in fall/winter 2004. I even saw Realtors on RealtyTimes call the “end of the bubble”. All of a sudden, spring 2005 came and the market bounced back up.

I personally think we will see DCBs all the way down. Yes, it does happen because rates will change, policies/regulations will change, prices will change (causing many to rush in and temporarily hold or cause prices to rise), etc. If you look at past busts, there were many times along the way that the REIC said the worst was behind them because the nubers improved.

We should **expect** DCBs so we do not get scared into buying early (and losing everything).

 
Comment by CA renter
2006-10-26 03:26:39

BTW, San Diego never really recovered from the 2004 slowdown. We got a slight uptick in spring 2005, but never again saw the frenzy that characterized 2002-2004. Prices have been relatively flat since fall 2004.

 
Comment by Anonymous
2006-10-26 07:51:39

I was indeed talking about SoCal. I was watching homes in OC from MD because we were considering moving. When prices started to fall, we were encouraged that we’d be able to move and buy. But, then prices took off again in Spring ‘05.

After that I found Lansner’s Blog, this one, and others. It was very encouraging to find people who agree about the prices and reasons that they are out of whack and need to come back down.

We sold our house in MD and moved to CA this past summer. We are renting until prices drop. I only have a basic understanding of economics, so I appreciate all of the informed opinions and references to articles on these blogs. I don’t know whether there will be another dead cat bounce, but I’ll keep reading all of your valuable opinions.

Thanks!

 
 
 
 
 
Comment by jaxbchcondo
2006-10-25 11:10:31

I would love to see a chart with the negative information we know is out there on inventory and prices compared to comments from David Lereah. That would be funny to see.

 
Comment by Steve
2006-10-25 11:10:40

Does anyone closely read CNNMoney.com. It’s hilarious to me that in the Real Estate section doesn’t even list the NAR’s newest report as a top billing but headlines the section with: “Top 10 Cities…Where to Buy Now”. In fact, the NAR’s report of the LARGEST PRICE DROP ON RECORD, isn’t even a top headline on the main page. This is the type of irresponsible journalism that should be condemned…even if it only costs one first time home buying couple their shirts.

This market is like firing a toy rocket straight up in the air. If little Timmy breaks all records and fires a rocket WAY past the height of little Joey’s rocket…Timmy’s rocket is going to fall faster and harder than Joey’s.

Hopefully common sense will prevail in this market. If there are more homes on the market for less of a price than in the past, the market is in a downturn.

If it’s raining outside I don’t need a high-paid Meteorologist to tell me it’s raining. Just like I don’t need them to tell me when the rain is letting up… I can look outside for that too.

This market is going down….and down for some time. Even if you have a savings account that earns .0001% each year. Keep putting your money there…because you’re going to do better.
section

 
Comment by Steve
2006-10-25 11:11:14

Does anyone closely read CNNMoney.com. It’s hilarious to me that in the Real Estate section doesn’t even list the NAR’s newest report as a top billing but headlines the section with: “Top 10 Cities…Where to Buy Now”. In fact, the NAR’s report of the LARGEST PRICE DROP ON RECORD, isn’t even a top headline on the main page. This is the type of irresponsible journalism that should be condemned…even if it only costs one first time home buying couple their shirts.

This market is like firing a toy rocket straight up in the air. If little Timmy breaks all records and fires a rocket WAY past the height of little Joey’s rocket…Timmy’s rocket is going to fall faster and harder than Joey’s.

Hopefully common sense will prevail in this market. If there are more homes on the market for less of a price than in the past, the market is in a downturn.

If it’s raining outside I don’t need a high-paid Meteorologist to tell me it’s raining. Just like I don’t need them to tell me when the rain is letting up… I can look outside for that too.

This market is going down….and down for some time. Even if you have a savings account that earns .0001% each year. Keep putting your money there…because you’re going to do better.

 
Comment by tj & the bear
2006-10-25 11:33:54

Has anyone extended the old & new national medians and calculated the total drop in “household wealth”?

A clever bubble site could even put up a counter showing a calculated, real-time wealth figure (declining of course and based upon the most recently reported rate-of-change) alongside another counter showing the increasing national LTV ratio.

 
Comment by Steve
2006-10-25 13:08:21

Can someone tell me how web sites (like CNN or MSNBC) benefit from hiding these big stories and focusing on how things might be getting better? I get why the idiots at the NAR say the things they say, but what about the various media outlets that seem to shed a positive light on things? Thanks for any help…

Comment by Betamax
2006-10-25 13:37:06

People like feel-good stories, and bad news turns off viewers. They’re in the entertainment business, after all.

 
Comment by Patriotic Bear
2006-10-25 13:54:38

Here in Naples the “Naples Daily News” never reported that at the October 21st auction the average price was 44% less then the Zillow.com appraised value. Why should there be a surprise since it appears that 90% of the adds are realestate and auto related.

 
Comment by Dr.Strangelove
2006-10-25 15:50:15

“Can someone tell me how web sites (like CNN or MSNBC) benefit from hiding these big stories and focusing on how things might be getting better? ”

Read Chompsky on media control. Or better yet, watch DVD’s on Chompsky’s lectures. Very enlightening.

DOC

 
Comment by WaitingInOC
2006-10-25 16:56:53

Lazy reporters that simply write down what the “experts” say and call it reporting. No fact checking, no asking tough questions, just get a few good quotes and you’re done with your article.

Comment by Steve
2006-10-25 18:02:38

Thanks everyone! It makes more sense now. CNNMoney is littered with sponsors that have a stake in a positive market… Home, Century 21, etc…

Before I head off to sleep, is there a Santa Claus?

 
 
 
Comment by GetStucco
2006-10-25 18:47:21

“Sales of existing homes fell for a sixth straight month in September and the median sales price dropped on an annual basis by the largest amount on record, further documenting a lukewarm housing market.”

Lukewarm — largest ever median sales price drop on an annual basis — does anyone else sense a bit of cognitive disconnect here? By how much would the median need to drop for them to suggest the market was cold?

 
Comment by Russell
2006-10-25 19:30:28

“‘The worst is behind us as far as a market correction — this is likely the trough for sales,’ said David Lereah, the Realtors’
Notice that he said sales not price.
The market has corrected very significantly for agents, lenders,apraisers etc. ect. as far as volume and income go the market is probably in a trough. The correction is almost over it is time to slog through for those that stick with it. The Nar’s ability to collect dues if graphed is probably in a trough. He may have said prices have stabilized too but I didn’t see it it the excerpt Ben provided. If he says prices have stabilized he is almost 100% wrong an wrong big in terms of percentage drop in prices to come. Property is way to unaffordable relative to the purchasing power or loan repayment capabilities of potential participants in the market as you all know. The national median will most likely stabilize sooner or take a gentler path down than it will on the coasts/ bubbletropolis zones and he will probably cling to that one.

 
Name (required)
E-mail (required - never shown publicly)
URI
Your Comment (smaller size | larger size)
You may use <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> in your comment.

Trackback responses to this post