Posts tagged national association of realtors
Lawler: Again on Existing Home Months’ Supply: What’s “Normal?”
Sep 9th
CR Note: This is from economist Tom Lawler.
It has become “common practice” when talking about the “months’ supply” of existing homes for sale for folks to say that the “normal” months’ supply, or the months’ supply that means it is neither a “buyers” or a “sellers” market, is around 6 to 7 months. Yet here is the history of months’ supply for existing SF homes from the National Association of Realtors.
Click on graph for larger image in new window.
As one can see, this “metric” actually has not been in the six-to-seven month range very often. From mid-1982 through 1992, the months’ supply measure was above seven months in all but a handful of months, while from 1998 to the spring of 2006 it was always below six months.
The measure, of course, is quite volatile, and sorta weird in that the inventory number (the numerator) is not seasonally adjusted while the sales data (the denominator) is seasonally adjusted. The measure also can be extremely volatile as sales tend to be impacted more by “special factors” (weather, tax credits, etc.) than listings.
But the measure is only one of many measures that may be “indicative” of “excess” supply, and it probably isn’t even close to the best measure. However, it is the most timely, so folks watch it closely – but sometimes place WAY to much meaning in month-to-month swings.
CR Note: The above was from economist Tom Lawler.
From CR: I’m one of the people who has called 6 to 7 months a “normal” months-of-supply. As the graph above shows, it is hard to define a normal based on the last 30 years.
I’ve heard the 6 to 7 months metric for years – and it fits the data I have. Perhaps the idea that 6 to 7 months is “normal” comes from new home inventory.
This graph shows new home inventory back to 1963 (unfortunately Tom Lawler’s graph only goes back to 1982).
For new homes, it does look like around 6 months supply is normal. I suspect if the existing home graph went back to the ’60s, something like 6 months would be normal.
Lawler’s caution is something to keep in mind. But double digit months-of-supply is clearly very high.
Foreclosure, Unemployment and Cash Crunch
Sep 8th
Foreclosures are persisting and so too with unemployment; sales of houses have been abysmally low mainly because of a cash crunch. Mortgage rates are at an all time low but the lenders are extra cautious about sanctioning loans. Lou Barnes of Boulder West Financial Services (lately taken over by Premier Mortgage Group) said, “In the financial markets, a lack of liquidity immediately leads to falling prices.
In the real estate market, something different happens – illiquid real estate markets freeze”. Property cannot be readily converted into cash. For many months this tax credit offered by the Obama administration had been the only oil greasing the housing sector. But with its exit the trading in houses has come to a halt.
During the bubble years of 2006 and 2007 the prime incentive for random borrowing came from lax underwriting standards. But now the opposite is happening with too strict standards ruling; fear has paralyzed the housing sector.
The potential buyer is haunted by two fears when thinking of buying a new house – unemployment and the further tumbling of house prices. David Zitting of Primary Residential Mortgages said, “A major psychological thing happens with high unemployment. Those with a job worry about whether they are going to keep that job”. Bank Foreclosures in Florida.
Secondly, despite assurances by Lawrence Yun of National Association of Realtors the ordinary America is still worried about prices falling further – they are not convinced that it has even reached the bottom as yet. In Bay Area a property that was valued at $300,000 ten years ago became worth $1 million but now it is $80,000. Realtors feel even that is too high to attract buyers.
The seller too is haunted by fear and does not want to accept the harsh reality that the house is too highly priced considering the mood of the market. To accept this truth would mean the fearful prospect of selling at a price lower than his or her mortgage dues.
There are yet foreclosed houses waiting in the wings that have not entered the stage. At some time they will and then the prices will go for another dizzy downward swing. This lot is known as the ‘shadow inventory’.
These are the houses the banks have not foreclosed upon but whose owners are not paying mortgage dues anymore; neither have the houses been put up for sale by them. There are other owners who have had their loans modified but are finding it difficult to be current on even this modified amount; many are defaulting again or about to do so.
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Foreclosure1.com provides new foreclosure listings everyday. Try to search foreclosures by state today!
Home Sales Are Back On The Rise After A 2-Month Pullback
Sep 8th
Just one week after reports of Existing Home Sales and New Home Sales plunging, the housing market is signaling that auturm may fare better than did summer.
The number of homes under contract to sell rose 5 percent in July.
The data comes from the July Pending Home Sales Index, as published by the National Association of Realtors®. By definition, a “pending home sales” is a home that is sold, but not yet closed.
Historically, 80% of such homes close within 60 days which makes the Pending Home Sales Index an excellent, forward-looking indicator for the real estate market.
Indeed, the nationwide drop in home sales this summer was foreshadowed by the Pending Home Sales report. The index dropped 30 percent in May. Then, two months later in July, it was shown that Existing Home Sales volume dropped 29 percent.
That’s a strong correlation.
Now, to be fair, the July Pending Home Sales Index is still relatively low; the second-lowest on record and well below last year’s numbers. But, the tick higher last month shows how housing may be stronger than than what the headlines report.
It appears that buyers in Lake Mary took advantage of rising inventory, cheap financing, and stagnant prices, and pushed the market forward. We should expect similarly promising numbers when September’s Existing Home Sales data is released.
Housing Market Insight – Week of September 6th
Sep 7th
Last week the sentiment in the housing market seemed to turn slightly for the better. This post will tell you why as we cover the discussion over more tax credits, interest rates, the mortgage application index, and a surprise in pending home sales.
Tax Credit Discussion, Quelled
What seemed to be a stirring of a potential renewal of the home buyer tax credit this week was squashed by the White House and several industry trade groups, including representatives from the National Association of Realtors (NAR) and the National Association of Home Builders. Walter Molony, spokesman for NAR was quoted in the San Francisco Chronical as saying, “We are not advocating another one. We think it’s important for the market to have time to recover on its own.”
Finally the people representing these associations are starting to admit the tax credits didn’t do much but pull sales from the future and disrupt the natural state of recovery. Further, I feel many people have, in fact, been waiting for another tax credit before they buy a home. This finality on the issue is good. Without these industry associations lobbying heavy, the home buyer tax credits may have seen their last days. Everyone is starting to focus on the real problem with housing; consumer confidence and ultimately job growth.
Interest Rate Update: Down to 4.32%
Freddie Mac reported interest rates fell further this week continuing a slide towards unthinkable sub-4% territory as the 30-year fixed dropped to 4.32% from last week’s 4.36%. One year ago the 30-year fixed stood at 5.08%. Meanwhile the 15-year fixed dropped to 3.83% down slightly from last week’s 3.86%.
This section seems should be called, “How much rates dropped this week”. Seriously, I think these small drops are important to the American psyche. It should pretty much ensure that some activity in the housing market will be created, whether it only amounts to refinancing right now at least means people are creating more disposable income. Even if they’re using this to save today, when people are more confident, this pent up demand in spending could open the spigot.
Mortgage Applications: Refinances and Purchases Up
The Mortgage Bankers Association reported its Refinance Index increased 2.8% from the previous week hitting a high not seen since May of 2009. The Purchase Index also increased slightly 1.8% from the previous week as low rates continue to spur activity in the mortgage markets.
This represents further evidence that people are mostly focused on refinancing. It’s important to note that activity is good and bodes that action exists in the mortgage markets. I’m hearing many of my colleagues in the mortgage business say they’ve never been busier. This activity is resetting many peoples’ debt structure. Disposable incomes are starting to build for those that are employed. This could bode well for the future.
Pending Home Sales Jump Unexpectedly
After anticipated drops in pending home sales immediately following the home buyer credit, the National Association of Realtors has reported a rise in pending home sales. The Pending Home Sales Index rose 5.2% on July contracts from a downwardly revised June. The index however, is down over 19% from July 2009.
Pending home sales are a future indicator of activity, meaning we could see a small rise in closings in August and September. Further, affordability continues to rise as absorption of inventory continues to fight a foreclosure tidal wave.
At What Point do you Invest?
We discussed last week how many people are simply not making moves because of the negative sentiment in the market. As someone who works inside an opportunity fund, we’re seeing significant movement within the capital markets. Things seem to be changing on a weekly basis and while the sentiment is certainly bearish on housing, that hasn’t prevented insiders from buying stressed and distressed assets at bargain basement prices with cheap money. I think if people are focused on the national picture as their primary information source it is easy to miss the market opportunities. Smart investors are quietly buying up real estate around you.
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
Housing Market Insight – Week of September 6th
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
Housing Market Insight – Week of September 6th
Selling a Chicago home isn’t complicated, even today
Sep 6th
Selling a home, whether in Chicago, its suburbs or any other market, has never been a complicated matter. It’s all about making one big decision: Are you going to sell your Chicago condo or single-family home in an “as is” condition with a lower price tag, or are you going to update your home, perhaps with a kitchen or bathroom remodel, and price it higher?
David Dornbos, a real estate agent with RE/MAX Action, knows this. He sells homes in Naperville and other Chicago suburbs. The one thing sellers can’t do, he says, is assign high price tags to homes that need upgrades.
Sellers who do this won’t attract good offers, especially in today’s challenging residential real estate market. Remember, according to the latest numbers from the National Association of Realtors, home sales fell to a 15-year low this July.
Full story is available on ChicagoNow
Realtors help fight against identity theft in buying, selling process
Sep 6th
Identity theft is a growing problem and costs American consumers billions of dollars and countless hours each year.
This month, the National Association of Realtors marks the eighth annual Realtor Safety Month, which focuses not only on the safety of agents, but also on the safety of consumers. Buyers and sellers can be vulnerable as they allow strangers into their homes, or visit other people’s property.
Realtors do not want you to be a victim and therefore are working to make sure consumers are aware of ways to minimize your risk in everyday transactions and especially in the largest transaction most families ever make — the purchase of a home.
Identity theft is a serious crime and its impact on consumers and businesses is staggering. Current estimates by the Federal Trade Commission indicate there may be as many as 10 million victims of identity theft each year. Studies estimate that victims spend $5 billion to undo its harm, while businesses lose nearly $50 billion in revenue annually.
Full story is available on cantonrep
Grinding to a halt “Loss of a credit collapses the market”
Sep 4th
THERE was always some concern that the Obama administration’s attempts to prop up the housing market with a generous housing-tax credit could end badly. Opponents of the policy—worth up to $8,000 for first-time buyers—argued that it would merely move sales around, from after the deadline to before, and could produce a slump when the deadline passed. Such fears helped clear the way for an extension of the programme from its first 2009 deadline to April of this year.
Despite some effort, Congress in the end decided against a second extension. With the support of the credit gone, a period of housing-market weakness was inevitable, but the actual decline has been distressingly bad.
On August 24th the National Association of Realtors reported that sales of existing houses for the month of July—the first in which most sales were started after the deadline—fell 27% from the previous month. Single-family houses sold at the slowest rate since 1995.
Those grim figures may not be a one-month fluke. New home sales are counted when contracts are signed, which means that July was the third month of data after the credit had expired. It was also the worst on record (the previous low came in 1981). Sales of new houses were down 32% year-on-year and down 80% from July 2005.
These rock-bottom sales figures indicate that housing markets in some cities have all but ground to a halt—despite extraordinarily low mortgage-interest rates. They may also presage a new period of declining prices. Falling prices could drive more homeowners into foreclosure, which is the last thing most markets need. At current low sales rates, it may take a decade to clear the backlog of houses owned by the banks.
If there is a bright side, it is that these numbers may force policymakers to reconsider a housing-policy approach that has clearly come up short. In the meantime, any hope that housing construction and employment may begin contributing to growth has been soundly squashed.
A Dream House After All
Sep 3rd
IF you read the coverage of the latest figures on the sales of existing homes from the National Association of Realtors, you may well have come to the conclusion that the American dream is dead. It is indeed worrisome that sales in July were down 25 percent from a year ago.
But a little perspective is in order.
First, the bad news. What has happened in the housing markets since 2005 is a catastrophe that may take years for our economy to recover from.
Anyone who believed that home prices never fall has learned a tough lesson. The Case-Shiller price indexes released on Tuesday suggest that since their national peak in 2006, home prices have fallen by 29 percent. Some areas of course look better than others. Las Vegas is down 57 percent from its peak and Phoenix is down 51 percent. On the other hand, Boston is down just 13.5 percent and Dallas only 4.2 percent.
Full story is available on The New York Times
Pending home sales rise 5.2 percent in July
Sep 2nd
WASHINGTON (Reuters) – Pending sales of previously owned U.S. homes rose unexpectedly in July, an industry group said on Thursday, suggesting a tax credit-related housing market decline was close to bottoming.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in July, increased 5.2 percent to 79.4 from June. June contracts were revised to show a slightly bigger 2.8 percent decline instead of the previously reported 2.6 percent fall.
Compared to the July last year, pending home sales fell 19.1 percent. Economists polled by Reuters forecast the index, which leads existing home sales by a month or two, falling 1.0 percent in July.
Home sales and building activity have dropped sharply following the end in April of a popular tax credit for home buyers.
“Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” said Lawrence Yun, NAR chief economist.
Real Estate News: Pending Sales Rise in July
Sep 2nd
Here’s a look at the real estate news in today’s WSJ:
- Residential Properties Ltd.
Pending Home Sales Rise in July: Stocks gained on Thursday after the National Association of Realtors reported that pending sales rose by 5.2% in July.
Five Mistakes Home Buyers Make: From snubbing the real-estate agent, to failing to determine how much a buyer can truly afford, this list should help avoid some common pitfalls.
Surprising Shelter: Real-Estate Funds Gain: Despite continued bad news about the economy and real estate’s role in it, mutual funds and exchange-traded funds in the real-estate sector have rebounded during this past year.
Fed’s Pianalto: Multiple Solutions Needed on Housing: The housing crisis needs multiple, coordinated policy solutions, Federal Reserve Bank of Cleveland President Sandra Pianalto told a conference on Thursday.
House of the Day: Providence Poet House: The poet who’s lived in this 6,800-square-foot former carriage house finds it well-suited for writing. The Rhode Island home features seven bedrooms and an indoor fire pit.
HUD Secretary Still Concerned About Housing
Aug 31st
Shaun Donovan, Department of Housing and Urban Development Secretary spoke with CNN on its “State of the Union” show about the Obama Administration’s plan to set up an emergency loan program for the unemployed and a new government mortgage effort to help homeowners.
The programs include $2 billion of additional assistance for states hit hardest by unemployment so they can help homeowners struggling to make their mortgage payments. Additionally, HUD will launch a complementary $1 billion Emergency Homeowners Loan Program to provide assistance to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition.
RMD asked HUD whether the emergency loans could be used to help seniors with reverse mortgages pay their taxes and insurance, but the details are still being worked out. There is clearly a need for some type of government assistance after a report from the Office of the Inspector General shows that nearly 13,000 HECM borrowers are in default from failure to pay taxes and insurance.
According to HUD, the emergency loan program will be a deferred payment “bridge loan” (zero percent interest, non-recourse, subordinate loan) for up to $50,000 to assist eligible borrowers with payments on their mortgage principal, interest, mortgage insurance, taxes and hazard insurance for up to 24 months.
When asked about the National National Association of Realtors report that shows the sale of existing U.S. homes sank 27.2% in July, the Secretary said it needs to act.
“The July numbers were worse than we expected, worse than the general market expected, and we are concerned,” Donovan said during the interview. “That’s why we are taking additional steps to move forward.”
Obama Plans Refinancing Aid, Loans for Jobless Homeowners, HUD Chief Say
Home Prices Saw Modest Improvement in Q2 2010
Aug 31st
Second Quarter of 2010 Saw Modest Improvement in Home Prices
Standard & Poor’s/Case-Shiller Home Price Indices show that the U.S. National Home Price Index rose 4.4% in the second quarter of 2010, after having fallen 2.8% in the first quarter.
Nationwide home prices are 3.6% above their year-earlier levels.
Housing prices have rebounded, however recent housing indicators point to weakening housing recovery as tax incentives have ended and foreclosures continue. Sale of new homes and existing homes fell declined sharply in July 2010.
The National Association of Realtors reported sales of existing homes in July fell 27% from the month a year ago to a seasonally adjusted annual sales rate of 3.83 million.
The Commerce Department reported that sales of new homes in July fell 13% from June, to a seasonally adjusted annual rate of 276,000 units.
“The monthly Composites cover June and the national index covers the second quarter, when the government’s program for first time home-buyers was winding down. While the numbers are upbeat, other more recent data on home sales and mortgages point to fewer gains ahead,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.
“Even with concerns about near term developments, we recognize that the housing market is in better shape than this time last year. Further, California’s cities have moved from some of the hardest hit to three of the four leading cities based on year-over-year gains. Among the other hard hit cities, the news is also a bit encouraging – Las Vegas, however, remains among the weaker cities.”
“Seventeen of the 20 MSAs and both Composites saw home prices increase in June over May – Las Vegas was down 0.6%, Phoenix and Seattle were both flat. Through the second quarter, 15 of the 20 MSAs and both Composites have positive annual growth rates, and no market is registering a double-digit decline.”
“The worry starts when you remember that the Homebuyers’ Tax Credit has expired, foreclosures are still at high levels, and July data on home sales and starts were very, very weak. The inventory of unsold homes and months’ supply data were particularly troubling. If this relative weakness in demand continues, it will likely filter through to home prices in coming months.”
|
2010-Q2 |
2010-Q2 2010-Q1 |
2010-Q1 2009-Q4 |
|||
|
Level |
Change (%) |
Change (%) |
1-Year Change (%) |
||
|
U.S. National Index |
138.03 |
4.4% |
-2.8% |
3.6% |
|
|
June 2010 |
June/May |
May/April |
|||
|
Metropolitan Area |
Level |
Change (%) |
Change (%) |
1-Year Change (%) |
|
|
Atlanta |
109.74 |
1.7% |
2.1% |
2.0% |
|
|
Boston |
157.83 |
1.2% |
1.6% |
3.4% |
|
|
Charlotte |
117.24 |
0.7% |
0.3% |
-2.7% |
|
|
Chicago |
124.90 |
2.5% |
1.2% |
-0.1% |
|
|
Cleveland |
107.26 |
1.3% |
1.0% |
0.8% |
|
|
Dallas |
121.14 |
1.0% |
1.5% |
1.2% |
|
|
Denver |
129.19 |
0.7% |
0.6% |
1.8% |
|
|
Detroit |
70.04 |
2.5% |
0.8% |
0.8% |
|
|
Las Vegas |
101.77 |
-0.6% |
-0.5% |
-5.2% |
|
|
Los Angeles |
175.66 |
0.6% |
1.7% |
9.2% |
|
|
Miami |
146.92 |
0.4% |
0.9% |
1.1% |
|
|
Minneapolis |
125.91 |
2.5% |
2.8% |
10.7% |
|
|
New York |
172.76 |
1.3% |
0.9% |
0.2% |
|
|
Phoenix |
110.98 |
0.0% |
0.9% |
6.0% |
|
|
Portland |
148.73 |
0.5% |
1.2% |
0.2% |
|
|
San Diego |
163.82 |
0.4% |
1.1% |
11.2% |
|
|
San Francisco |
142.55 |
0.3% |
1.7% |
14.3% |
|
|
Seattle |
146.83 |
0.0% |
1.2% |
-1.8% |
|
|
Tampa |
138.58 |
0.2% |
0.9% |
-1.6% |
|
|
Washington |
185.77 |
1.7% |
1.7% |
7.3% |
|
|
Composite-10 |
161.04 |
1.0% |
1.3% |
5.0% |
|
|
Composite-20 |
147.97 |
1.0% |
1.3% |
4.2% |
|
|
Source: Standard & Poor’s and Fiserv Data through June 2010 |
|||||
Housing Market Summary – Week of August 30th
Aug 31st
A busy week of mostly negative news for the macro housing market offers; a look at NAR’s Existing Home Sales report, numbers on new home sales, interest rates, mortgage applications, and the Mortgage Bankers Associations quarterly report on delinquency and foreclosures.
Existing Home Sales: Expected Fall
The National Association of Realtors reported that existing home sales dropped 27.1% from June to 3.37million in July (seasonally adjusted annual rate). This leaves existing home sales nearly 26% lower than a year ago. This represents the lowest level of existing home sales since May of 1995.
While this fall has been expected, many are thinking the drop after the home buyer credit would have been softer showing signs that the market is healthy in the summer months. This did not happen. Home sales have been plummeting since the expiration of the tax credit showing consumers are very concerned about getting off the fence and buying. Further this shows that the $8000 credit received weighed heavily on peoples minds whether to buy or not.
New Home Sales: New Low
HUD and the Census Bureau reported new home sales dropped sharply in July to a seasonally adjusted annual rate of 276,000. The 12.4% drop caused the supply of new homes to grow to 9.1 months. The pace of new home sales is now 32% lower than July 2009′s pace of 408,000.
This is startling. As the pace of new home sales continues to decline, people who are buying (and not many of them are), are choosing to buy foreclosed properties. The silver lining (and I’m always looking for it), seem to be the fact that nearly 1.6million new homes need to be built annually to keep up with demand. While the number of new homes being constructed vs. sold are 2 different things, an unhealthy market for builders to build will accelerate supply reduction.
Interest Rate Update: Another Record Low
Interest rates continued their decline this week as Freddie Mac reported the 30-year fixed rate dropped to 4.36%, down 0.7% from the prior week. Last year at this time, the 30-year fixed averaged 5.14%. Rates on 15-year loans continued to decline as well dropping to 3.86%, down 0.6% from the week prior.
What’s there to say? Rates are declining as investors sink money into bonds. A bond bubble may in fact be forming and the hint that inflation is coming back could topple the recent inflows into the bond market accelerating the reversal in the current interest rate trend. A nearly unbelievable opportunity still exists for those looking to lock in long term on cheap interest and real estate prices, despite the uncertainty in the housing market.
Mortgage Applications: Refinances Dominate, Purchases Up
Refinances continued to capture attention due to declining interest rates as the Mortgage Bankers Association reported the Refinance Index jumped 5.7% from the prior week and reached its highest level since May 1, 2009. The Purchase Index increased 0.6% from the prior week but is 38.8% year-over-year lower than this time last year.
People simply aren’t confident enough today to do more than refinance existing debt. This is pretty fascinating and likely will continue until the sentiment turns positive. With another European debt crisis around the corner and the unlikelihood of good news in the housing market, I doubt we’ll see Americans start buying houses anytime soon.
Foreclosures and Delinquency Decline
The Mortgage Bankers Association also reported that delinquency rates for mortgages on 1-4 unit properties dropped .21% to a seasonally adjusted rate of 9.85% on all loans in the second quarter. This represents a year-over-year increase of .61%. Further, the percentage of loans on in which foreclosure proceedings started was 1.11%, down .12% from last quarter and down a full .25% from a year ago.
Ending our coverage on a good note, is the fact that delinquency trends may finally be reversing (even if slightly). We have a long way to go yet assuming unemployment remains constant, 6 months from now we’ll be seeing this number in decline. Outside of job growth, time is the only thing that is going to heal the wounds of the sub-prime and alt-A mortgage boom.
Investing in Uncharted Waters
I’m getting a feeling that pent-up demand in the market is becoming real. People are just too scared right now to do anything, but fortunately, you can. With rates at all time lows and prices at deep discounts, opportunities are around every corner. Not only are smart investors buying right now, but they’re buying heavy. I’ve noticed they’re investing in real estate like a stressed bond, knowing the asset won’t decline to zero(deriving a floor). They’re buying real estate for yield. If one is factoring in potential declines in rent and additional price declines, real estate today can be highly profitable. Creating bond floors to determine declines in these rents can still produce sufficient yield to beat other asset classes. Real estate doesn’t have to be the falling knife that stocks at the end of 2008 were. Buy for yield.
- Housing Market Insight – Week of August 16th
- Housing Market Insight – Week of August 23rd
- Are You Glad You Did, Or Do You Wish You Had?
- A Government Program That Works?
- The Delaware Statutory Trust (DST) Continues to Gain Popularity as an Alternative Investment Vehicle for Savvy Real Estate Investors
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
Housing Market Summary – Week of August 30th
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
Housing Market Summary – Week of August 30th
Commercial Real Estate Awash in Landlord Incentives
Aug 26th
The commercial real estate sector, suffering from the impact of ongoing economic slowdown, is growing more lenient with landlord concessions — such as allowing more time to make the rent 00 which is helping vacancy rates to level off.
In the latest Commercial Real Estate Index, from the National Association of Realtors, reports that subleasing in [...]
Why America stopped buying homes
Aug 26th
Earlier this month, talking about a housing market unsupported by Uncle Sam’s billions, I said that “the entire housing-finance business in the U.S. would come to a screeching halt. No one could buy, no one could sell, and home values would be entirely hypothetical.” What I didn’t realize was that we were plunging towards that state of affairs even with the vigorous and active involvement of Fannie Mae and Freddie Mac.
The National Association of Realtors said sales dropped a record 27.2 percent from June to an annual rate of 3.83 million units, the lowest level since May 1995.
This number is the lowest that the NAR has ever reported, and I can see why it spooked the markets, sending 10-year Treasuries breaking through the 2.5% level: we’re seeing less housing market activity now than we were even during the depths of the crisis. According to the NAR, there were 4.94 million existing homes sold in 2007, 4.34 million sold in 2008, and 4.57 million sold in 2009. The latest annualized number in that series, for July 2010, is just 3.37 million. That’s a 26% fall from last year’s rate.
Full story is available on Financial Post
Nobody In America Wants to Buy Old Houses
Aug 26th
Anyone who needed convincing that the economy is on the rails should’ve tried selling a house last month. In July, sales of gently-used single-family homes in the U.S. plummeted to a 15-year low, according to the National Association of Realtors. Existing-home sales came in at an annualized rate of 3.8 million. The slowdown was worse than Wall Street had expected; per Briefing.com, analysts were expecting 4.7 million houses to sell. The NAR also reported that its June sales figure was worse than initially thought, revising that number downward to 5.3 million from 5.4 million.
The number of houses still sitting on the shelf waiting for buyers rose 2.5% to 4 million. At the current rate, it would take 12 and a half years to get rid of the housing glut.
Full story is available on Observer
New Home Sales Drop In July — Just Like Existing Home Sales
Aug 26th
One day after the National Association of Realtors released the softest Existing Home Sales report since 1995, the U.S. Census Bureau released a similarly-weak New Home Sales report.
Americans bought just 276,000 newly-built homes in July. That marks the fewest units sold since the government started keeping records in 1963.
In addition, although new home inventory actually dropped 2,000 units in July, the slowing sales pace still managed to push the national supply higher by 1.1 months. At July’s rate of sales, the nation’s new home inventory would be exhausted in just about 9 months.
None of this news should surprise you, though. It’s all been foreshadowed for weeks.
First, Single-Family Housing Starts have dropped in every month since April. A “housing start” is a when a home starts construction and, because fewer homes are under construction, we should expect fewer homes to be sold.
Second, Building Permits are down. The number of new permits peaked in March and have fallen 23 percent since.
And, lastly, home builder confidence ranks at its lowest levels since early-2009. A contributing factor in that pessimism is dwindling buyer foot traffic.
Regardless, there’s two sides to the story. Although the New Home Sales data looks bad for builders, it can be terrific for you. This is because new homes are more likely to be discounted when the sales cycle favors buyers.
Coupled with ultra-low mortgage rates, the cost of buying a newly-built home in Lake Mary may have just become cheaper.
Why You Shouldn’t Worry About the Economic Recovery
Aug 25th
The stock market is rolling over. The Dow went down 133 points yesterday. Gold gained $4.
Stocks went down early in the summer. We thought that was the beginning of the big “second shock” we’ve been waiting for. But we were wrong. The stock market rebounded.
But now it is back at its July lows…and appears ready to keep going down.
Why? Because small investors are leaving the stock market. And large investors are beginning to realize that there is no real recovery taking place.
“Worries about US recovery deepen,” says a headline in The Financial Times.
Not here! Not at The Daily Reckoning headquarters. We’re not worried about the recovery. Because there is none.
None of the key components of recovery – housing, jobs, or consumer spending – suggest that the economy is returning to its pre-recession habits.
This from Bloomberg:
Sales of existing houses plunged by a record 27 percent in July as the effects of a government tax credit waned, showing a lack of jobs threatens to undermine the US economic recovery.
Purchases plummeted to a 3.83 million annual pace, the lowest in a decade of record keeping and worse than the most pessimistic forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. Demand for single-family houses dropped to a 15- year low and the number of homes on the market swelled.
“Today’s data do not bode well for home prices,” said Michelle Meyer, a senior economist at BofA Merrill Lynch Global Research in New York. “There is a decent chance we reach a new bottom for home prices. There’s going to be a prolonged, painful drop.”
Record Low
The pace of existing home sales is the slowest since comparable records began in 1999. The agents’ group revised the June sales figure down to 5.26 million from a previously reported 5.37 million.
Economists projected sales would fall 13 percent. Estimates in the Bloomberg survey of 74 economists ranged from 3.96 million to 5.3 million. Previously owned homes make up about 90 percent of the market.
Purchases of single-family homes also dropped 27 percent, the biggest one-month decrease in data going back to 1968. July’s 3.37 million annual rate was the lowest since May 1995.
But fear not, dear reader, the feds are on the case. As usual, they are making things worse. The obvious problem in the housing market is that there are too many houses and too much mortgage debt. And the obvious solution is to clear the market by allowing prices to fall and let the debt wash itself out.
Instead, the feds are trying to prevent the market from clearing. Bloomberg continues:
To help prop up the market, the Obama administration will offer $1 billion in zero-interest loans to help homeowners who’ve lost income avoid foreclosure as part of $3 billion in additional aid targeting economically distressed areas.
The Department of Housing and Urban Development plans to make loans of as much as $50,000 for borrowers “in hard hit local areas” to make mortgage, tax and insurance payments for as long as two years, according to an Aug. 11 statement. The Treasury Department will also provide as much as $2 billion in aid under an existing program for 17 states and the District of Columbia, according to the statement.
That’s right. What a plan! Do you have too much mortgage debt? Heck, the feds will lend you more money!
Bill Bonner
for The Daily Reckoning
Why You Shouldn’t Worry About the Economic Recovery originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”
New Home Sales drop 12.4% to record low in July
Aug 25th
Sales of new homes in the U.S. dropped to the lowest level on record in July 2010, as demand from consumers has dried up after tax breaks for home buyers expired in April 30, 2010.
Purchases dropped 12.4% to a seasonally adjusted annual rate of 276,000 in July, from a downwardly revised 315,000 in June. It is the weakest since data began in 1963, figures from the Commerce Department showed today in Washington.
Inventories of unsold homes remained flat in July at 210,000 for the second straight month, which represents a 9.1-month supply at the July sales rate, up from 8.0 month supply in June.
The median sales price fell 4.8% over the past year to $204,000. The lowest since late 2003.
Home sales had soared in March and April as home buyers rushed to purchase home ahead of the April 30 deadline for the $8,000 tax credit. As was expected, home sales plummeted in May, the first month after government support is removed.
Even with mortgage rates at record lows, buyers are waiting it out. The average rate on a 30-year fixed mortgage dropped to 4.42% in the week ended August 19, according to Freddie Mac.
Job loss and security is hurting consumer confidence, leading to a plunge in home demand that threatens to undermine economic recovery.
Private payrolls rose less than 71,000 in July and were revised down for the previous month, the Labor Department reported August 6. Unemployment will end the year at 9.5%, unchanged from the rate in June and July.
Existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units, the National Association of Realtors reported yesterday.
Foreclosures and short-sales are boosting the shadow inventory. Home seizures increased almost 4% in July from the previous month, with 325,229 properties last month getting a notice of default, auction or bank repossession, according to RealtyTrac Inc.
