Home Sales Drop 10.7%
The good news is, the pace of the Housing slow down is now decelerating.
The bad news, there is no bottom in sight.
And seasonally, we usually see an uptick in activity in August, as last minute closings take place befroe the new school year begins. No such bump happened in August 2008, as sales slipped 2.2% for the month.
Median existing-home price for all housing types was $203,100 in August, down 9.5% from August 2007 median price of $224,400.
Single-family home sales fell to an annual rate of 4.35 million in August. This is 9.6% below the 4.81 million-unit level a year ago.
Another small positive: The inventory of unsold homes at the end of August was 10.4 months versus 10.9 months’ at the end of July. Still way too high, but improved somewhat.
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Existing Home Sales, Non Seasonally Adjusted, 2005-08
chart courtesy of Calculated Risk
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Source:
Existing-Home Sales Slide on Tight Mortgage Availability
WASHINGTON, September 24, 2008
http://www.realtor.org/press_room/news_releases/2008/ehs_tight_mortgage_slide
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September 24th, 2008 at 10:46 am
Wow, BR: There’s almost enough of a silver lining in that report for senor Kudlow to proclaim “Goldilocks lives!”
September 24th, 2008 at 10:46 am
I know this is off topic but I thought it gives an insight into Kudlows mind, he wrote this on his blog:
“Meanwhile, Sen. McCain apparently has proposed that the buying and selling banks have comp-levels no higher than the top paycheck in the U.S. government, which I guess is the president’s at around $400,000 a year. Hey, I’ve got an idea. Let’s raise the chief executive’s pay to $50 million. He probably earns it anyway.”
LOL–is he saying that Bush is worth $50 million???? How can CNBC not fire this clown?
September 24th, 2008 at 11:06 am
Not surprising.
With 9% jumbo rates, you can see why the market is static even with declining prices.
September 24th, 2008 at 11:07 am
Using home inventory figures, does this mean a housing bottom is a minimum 10 months away?
September 24th, 2008 at 11:08 am
It’s time to buy, Barry !
(I can get you a great deal on Bernanke’s town house)
September 24th, 2008 at 11:18 am
Tighter lending standards apparent
Mortgage application volumes fell 10.6% over the week ending September 19th,
with declines in both refi and purchases. Mortgage rates for fixed contracts rose
by an average of 25bps over the week, unwinding almost half of the 50-60bps
decline in the prior two weeks related to the Fannie/Freddie take-over. 30-year
fixed rates, at 6.08%, is still the lowest since late May but failed to translate into
continued refi activity (up 88% in the previous week). Importantly, purchase
applications remain depressed, accounting for less than ½ of total volumes in the
latest week and down 18.3 versus year-ago levels. While mortgage rates are
lower, tighter lending standards are apparent in these figures. As a result, we
expect little rebound in home sales activity. We continue to believe that the
bottom in housing is still a least a year away.
September 24th, 2008 at 11:21 am
http://www.youtube.com/watch?v=-t5R6lpyTRc&feature=related
John Mellencamp’s “little pink houses” seems more and more appropriate these days.
“the simple man, baby, pays the bills…..”
This song always had a much darker edge to it than most people realized. Mellencamp wasn’t exactly enamored of little pink houses springing up all over the farming communities. Like Springsteen’s “Born in the USA” it became an anthem in a way that was not exactly what its author had in mind, and now it seems even more ironic.
September 24th, 2008 at 11:27 am
Does McCain know if he sold any of his houses?
September 24th, 2008 at 11:28 am
Leftback,
Get them to hold the onions, please.
September 24th, 2008 at 11:37 am
In my neck of the woods lots of houses have been taken off the market without selling, presumably because the sellers couldn’t get the prices they wanted/needed. I think that’s the story behind the inventory drop, and it’s not a good thing.
September 24th, 2008 at 11:50 am
Lori,
This is probably due to the “Peak Greater Fool” theory.
Many recent home buyers (fools) rushed into the housing market, hoping to catch a ‘dip’ in prices without realizing that the ‘dip’ was only the beginning of a far greater downward plunge.
The ‘peak’ in this supply of greater fools has likely now passed, as reality is finally beginning to set in.
With home prices continuing to drop and lending standards tightening, most ‘rational’ people are now content to wait it out until a true bottom emerges.
The great Ponzi scheme is running out of greater fools.
September 24th, 2008 at 11:56 am
House sales will improve when prices become affordable, maybe 2.5 to 3 times median income.
September 24th, 2008 at 11:57 am
Couple of points:
1) I haven’t heard ONE person talking about the crisis we’re in or the bailout being attempted acknowledging the fact that it’s likely housing will CONTINUE to drop; slowly, sure, but slow and steady, down, down, down.
I feel another “hoocoodanode” moment coming on here.. (sigh)
2) Is it just me or is anyone else bothered by the fact that mortgage rates are so damn low? Does anyone REALLY think the rates are commensurate with the amount of risk in the housing market? I feel like Fannie and Freddie are not pricing the risk correctly, which is now going to be borne by the taxpayers. (sigh)
I’m fucking disgusted with everything these days..
September 24th, 2008 at 11:59 am
I can’t wait to hear the NAR cut on this.
September 24th, 2008 at 12:09 pm
It would be interesting to see the above chart with years 2000-2004
September 24th, 2008 at 12:13 pm
And Manhattan pricing still appears immune to the downturn. When do we start to see declines? I’m guessing December, when realtors and sellers see what it means to eviscerate billions of dollars of bonuses that might have been pored into condos.
September 24th, 2008 at 12:13 pm
Bruce – the PPT will be on duty this Friday to make sure that you don’t get your hamburger. I have 1207.09 as Monday’s close on the S and P. That’s not too much of a reach for the PPT, and I can always ask Buffett to step in, or as you point out, buy it myself.
September 24th, 2008 at 12:16 pm
Tom,
No bonuses = no greater fools = no sales in Manhattan.
We have to go through the stage of denial before the fear and panic set in. Many of the Manhattan realtors and brokers will have to revert to their previous employment -
“Have you seen your mother, baby, standing in the shadows?”…
September 24th, 2008 at 12:41 pm
Report: NYC Real Estate in Decline
“Manhattan’s finest co-op apartments may have already lost a fourth of their value as a result of the financial crisis, and the worst is yet to come, says leading New York estate broker Kathy Sloane, of Brown Harris Stevens.”
http://calculatedrisk.blogspot.com/2008/09/report-nyc-real-estate-in-decline.html
September 24th, 2008 at 12:52 pm
Leftback,
With your money, you might just consider buying Buffett, then get him to make some commercials selling Nikes or something…you could stimulate the retail sector that way…
What about it?
(But still hold the onions, please…)
September 24th, 2008 at 1:11 pm
My home has lost 20% of its equity in the last year or so – it won’t sell – so where is MY Bailout?
That is what everyone is thinking today! Are Paulson and Bernanke going to pay ME for my mortgage losses?
Just say NO to Wall Street, then!
September 24th, 2008 at 1:18 pm
ap -
If you haven’t already called your congressman, get off your lazy butt and do it. If you have, do it again.
And again.
They’re starting to notice.
September 24th, 2008 at 1:20 pm
Not only did existing home sales fall, Mortgage applications fell 10.6% also.
http://www.cnbc.com/id/26865858
September 24th, 2008 at 1:31 pm
Thanks for these links – listings make it appear that prices haven’t moved. I’ll bet sale prices don’t reflect listing prices however. Looking forward to reading the articles linked herein.
September 24th, 2008 at 1:47 pm
Jim D.
My congressman is a Pro-Corporation “R” whose big cammpaign donors are Banks, Insurance, Home Builders, and Big Pharma.
I have called his office but they said he is waiting for more info. I have contacted both senators and many more.
You are correct that congress seems to be listening about this, at least!
September 24th, 2008 at 1:57 pm
Kai kai kai (sounds of a beaten dog).
Barry what bad news is this?
The decline pace is decelerating!
But I was expecting this in these months; we had over 2 years of sale declines and it is very interesting if bottoming out is in the same time period.
Will the house sell decline be nicely S shaped (logistic curve) or not?
That sounds like a nice future job for my SPSS crack!
And another thing to study: relation with house prices… Also logistic somehow?
September 24th, 2008 at 2:02 pm
Look at the graphic in this link…
http://en.wikipedia.org/wiki/Image:Shiller_IE2_Fig_2-1.png
I would like for anyone to “try” and tell us why the housing market shouldn’t be dropping.
Worst case, the overall housing market should revert to a long-term mean (20-30 yrs), or better case it would level out at some reasonable growth rate level above that long-term mean.
In other words, there’s a good reason the housing market is plummeting; it went too high, too fast (aka irrational exuberance). That’s the beauty of free-markets, they will correct these things in due time and we have to let them take their natural course. Interfering with the market mechanism is only going to make things worse.
September 24th, 2008 at 2:52 pm
Guy I know who lives in Naples, FLA says that the number of homes sold has increased for 7 months straight. Home values continue to decline however. He lives in a newly built subdivision and 20% are in forclosure. Home accross the street from him was never lived in, originally sold for 600,000 and now has mold growing out the walls. I guess that’s one way to reduce inventory!!
September 24th, 2008 at 3:12 pm
And really, isn’t this the crux of the real problem? Too many sellers and obviously not enough buyers. Fix this and you fix the financial problem as a bonus. Buy one and get one free.
September 24th, 2008 at 5:54 pm
Another view of months supply, using Case Shiller
http://www.nowandfutures.com/images/case_shiller_home_month_supply.png
September 24th, 2008 at 9:21 pm
I don’t think the decline in housing is slowing. Here in the suburbs of Chicago, capitulation in asking prices is just beginning to appear — all through the summer, holders of vacant homes were in denial, with asking prices and rents at completely unrealistic levels. Now they’re starting to slide — and the number of unsaleable homes being put up for rent has jumped significantly in just the last week.
As increasingly desperate owners of vacant homes slash asking prices and asking rents, it will become increasingly obvious to potential buyers that prices are headed far, far lower, and they’ll have even more incentive to hold off.
Note that inventory of homes for resale is twice what it was at bubble peak, though the only homes on the market now are the ones people really, really need to sell, whereas at bubble peak many of the listings were by people who had no need to sell, but were willing to if someone wanted to pay them enough for a move up to a nicer home.
September 24th, 2008 at 10:28 pm
I lived through two different real estate crashes in two different places — southern California in the early 90s and Vancouver, Canada in the early 80s. What I saw is that it takes homeowners a good while to get it through their heads that house prices ain’t going up no more, and in fact have come down. It doesn’t matter how obvious it might be to you, they don’t want to hear it.
Another thing I learned is that even in the hottest, flippingest home markets, a lot of people have already paid off or almost paid off their mortgage. They don’t have to go anywhere, and they don’t. If nobody wants to pay them what they think their home is worth, they take down the sign and stay there.
One more thing I learned is that sellers figure out that the market is down — of course for them, it’s exactly what they want to hear. Quicker than you might imagine, they start thinking, “Why should we buy it now? If we just wait a week/month/year, we’ll save a bundle!” Sure enough this kind of approach doesn’t pump prices back up. Not to mention that if inflation is 2% – 4% – 8% a year, but house prices are flat, then guess what? Real estate is steadily depreciating.
September 24th, 2008 at 10:32 pm
Aarrgghh. Of course I meant to say BUYERS figure out quickly that the market is down.
September 25th, 2008 at 8:16 am
Housing market is simple. Supply and demand for both inventory and credit.
First of all, until monthly inventory goes back down to around 5-6 months there will be downward pressure on prices. Plus, nobody knows how much “shadow inventory” the banks really have and will eventually get back. I suspect you can add at least another 4 months worth, bringing us to approximately 15 months of “real inventory”
Credit has all but shut down with Jumbos now over 9.00% (Wells Fargo). This will only get worse as we pay for the impending bailout. Double digit interest rates are just around the corner. Until prices come down much further, they will remain unaffordable for most people.
Many of the affluent areas of the country are just now beginning to feel the pain. They are next to be punished.
Westside of Los Angeles has already started taking it’s hits.
Http://www.westsideremeltdown.blogspot.com
September 25th, 2008 at 9:39 am
Inventory dropped because everyone a) realized that all their competition comes from REO and prices fell in the three month summer so much that they can’t sell b) gave up and went into loan default.
It is amazing to me how they can report inventory dropped when I report every month that banks are taking back nearly 2x the amount of REO than they sell each month. True inventory levels, including shadow inventory, is staggering.
Just wait until next year when all of the loan defaults from Jan 2008 through Sept 2008 turn into REO. Remember, the foreclosure related sales you are seeing right now are a result of borrowers missing their first payment maybe more than a year ago. At that time, defaults were half of what they are today. The real foreclosure boom has not even hit us yet.
September 28th, 2008 at 10:26 am
August raw inventory was down 2.9% from August 2007. Sales volume in August was down 15% from last year. As a result, months of supply in August reached a new high (compared to all other August’s over the last 10 years).
I don’t see any significant signs of improvement. Sure, raw inventory may be down slightly from the year before, but sales are down by even more.
All real estate comparisons should be made on a year-over-year basis. We should have expected raw inventory and the months of supply to be lower in August compared to July because of all the closings that take place before the start of the new school year.
We should also expect the numbers in September to be lower than the numbers in August. As the summer and fall seasons wear on, inventory is reduced during the peak sales months. Then many sellers who are not able to get their home sold during the summer or fall seasons end up taking their home off the market until the new year. That is how the cycle works.
I fully expect raw inventory and the months of supply in September to be lower than the levels from August. But the key will be how they compare to September 2007.
Check out these graphs. They tell the story of the August numbers without any spin.
http://www.trendingrealestate.typepad.com/