Home Sales Plunge (New -35%; Existing -10.6%)
Sales of both new and existing homes did the cliff dive in November. Prices fell, as credit was hardly available for anyone but the best qualified buyers.
Here are the specifics:
• National median existing-home price fell 13.2% from November 2007; This was the most on record (since 1968) ; In the West, (think California, Nevada and Arizona) prices tumbled 25.5%;
• Existing home sales were down 10.6% from November 2007, and off 8.6% from October 2008 (October sales were also revised downwards); Single family sales fell to the lowest since ’97.
• Sales were for 4.49 million annualized — about 440k less than expected; This is the lowest level since the 1999, when the NAR added in Condos and Coops;
• Mortgage rates are the lowest in three years, the problem is more along the lines of credit availability.
• Existing home supply rose to 11.2 months versus 10.3 in October; (Existing Home sales are about 85% of all sales;)
• New Home Sales fell 35.3% below November 2007; (Monthly sales change of 2.9%, ±13.9%, were not statistically significant).
• Sales for November were the lowest since January 1991;
• This was the 4th month in a row New Home Sales have fallen;
• New Home Inventory represents a supply of 11.5 months at the current sales rate.>
I find the monthly spin from the NAR laughable. They attribute November’s results to a “weak stock market, job losses and low consumer confidence.” They never seem to recall that Real Estate prices remain too high relative to incomes and rental prices. This is the hangover from the credit bubble.
Not incidental to all this is the role some of the NAR’s membership played in this. The organization is not blameless in the boom and bust of home prices. Far too many Real Estate agents, either wittingly or unwittingly, helped along a massive fraud. They steered buyers to corrupt mortgage brokers and/or criminal appraisers, who knowingly inflated appraisal prices so as to get more referrals.
The NAR failed miserably at policing their own members. Question: Do they even have a division that does this? Do they teach ethics to their members? Other than running a horrific ad campaign that advised people that its always a great time to buy a house (just before a 25% drop), and spinning the monthly data, WTF do these people actually do?
via Calculated Risk
>
Sources:
Existing-Home Sales Decline in Economic Uncertainty
National Association of Realtors, December 23, 2008
http://www.realtor.org/press_room/news_releases/2008/ehs_decline_in_economic_uncertainty
NEW RESIDENTIAL SALES IN NOVEMBER 2008
The Census Bureau December 23, 2008
http://www.census.gov/const/newressales.pdf
Previously:
It’s a great time to buy or sell a home! (November 3 2006)
http://www.ritholtz.com/blog/2006/11/its-a-great-time-to-buy-or-sell-a-home/
Analyzing why “It’s a great time to buy or sell a home!” (November 4, 2006)
http://www.ritholtz.com/blog/2006/11/analyzing-why-its-a-great-time-to-buy-or-sell-a-home/
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December 23rd, 2008 at 11:32 am
As Al Jolson once said:
“You ain’t seen nothin’ yet!”
December 23rd, 2008 at 11:41 am
Realtors are the ground zero of this bubble. Nothing could happen without their being involved in the “fraud”. They are supposed to “qualify” buyers, they direct the buyer to appraisers, they set up mortgage brokers inside their offices, etc. The Real estate “profession” double dipped and kickbacked us into one hell of a mess.
The city council in the small town where I live just tried to raise the sales tax i/10th of a perdcent to install sidewalks in the poorer section of town. The biggest realtor in town stood up and talked against the proposal, citing that it was socialism. Of course, when the city paid 100% to extend a street for two miles, which opened up some 200 landlocked lots, this turd in a suit was all in favor of this forward thinking project.
December 23rd, 2008 at 11:48 am
“Ethics”??? What’s that? Surely, you jest.
Ethics was something that was discarded culturally in this country a long time ago. Sadly, we’ve all been taught that ethics (and honesty) is for chumps.
December 23rd, 2008 at 11:50 am
Glad we got rid of ours Dec. 6. Had planned to sell it after Katrina but I took too much time sprucing it up and got caught in the crash. The Gulf Coast also has serious problems with insurance coverage that is killing deals.
Probably could have gotten 25-30% more without fixing it up in the post-Katrina bubble where unflooded houses were going for a premium. We had lookers after I finally got it on the market, but no one who could get a loan. One bottom fishing broker tried a lowball bid. We finally did much better than most other people are doing these days; God sent us some nuns with cash who had seen the house two years ago and thought it was ideal for them. (I did too.) The Lord moves in mysterious ways.
I’ve been wondering how earnings for brokers and agents are doing recently. I imagine the NAR isn’t going to honestly admit how bad things are. Since most are commission only, they won’t really be fired. But can they get paid?
December 23rd, 2008 at 12:02 pm
As you sow, so shall you reap.
As in any endeavor, success takes hard work, integrity and intelligence. These seemed to be in short supply in many real-estate related professions. Consequently, it was very easy to be a successful real estate broker in the early aughts. Now, not so much.
December 23rd, 2008 at 12:12 pm
When the Fannie Mae Freddie Mac implosion was first reported and the reportage included statements such as FM/FM had to be bailed-out because some people were under the impression that FM/FM was backed by the full faith and credit of the U.S.G. Reading that my bullshit detector went off and I found on the Fannie Mae web site a .PDF file of the Prospectus for FM bonds where it explicitly stated on the front page in bold black print that the Interest and Principal were NOT backed by the U.S.G.
Right then I knew two thing: 1) The Gov’t was going to throw money down that rat hole. 2) The Real Estate Market was going to tank & 3). I needed to get me and my mother (whos money I manage) out of the stock market fast.
I also started to wonder, “How many people really know that we the people of the USG did not guarentee the investors in FM/FM?”. It was a nice Friday afternoon and I decided to do a survey. I printed 25 copies of the front page of the prospectus withe the originating web address typed on it and then I walked out onto the corner of Chestnut St. and Michigan Ave. in Chicago, IL (The Southwest corner of the John Handcock building) Where I began to ask people if the would read the bold print on the prospectus page I offered and if they would answer a question after reading it.
I got no takers everyone blew me off so I went in to a bank and got $50 in singles and then went back on the corner offering a dollar to people that would take my survey. Money talks. Many people stopped for a buck some took $5. A few wouldn’t stop no matter how much I offered.
Anyway, after participants read the prospectus and were asked, assuming that piece of the prospectus is accurate and in fact obtained from Fannie Mae, do they belive the USG — us, we the people– should reimburse people who made an investment in FM/FM.
After they answered, I asked if they knew of the FM/FM situation. All most all were vaugely familiar with it. I also asked there political philosophy and occupation.
Of the 25 people I asked, working class and professional, men and women, caucasion and people of color, every one except one said he’ll no we shouldn’t bail then out.
The one person that answered, “maybe” when pressed for a yes or no answer said, “yes” the G should bail out FM/FM was a lawyer and a real estate agent.
The NAR is full of it.
December 23rd, 2008 at 12:26 pm
Real estate agents are/were part of the problem. They are not unlike drug pushers on a street corner. They will sell what they are given to the highest bidder – regardless of where the buyer got/gets the funds.
However, this is a paradox for not only real estate agents but others that sell things of dubious price – like stock brokers! Just like a real estate agent will talk up the (real estate) market, a broker will do the same with a particular stock or the market in general. Both make a commission on the sale. The same can be said for car salesmen, and many other sales oriented positions. The solution, of course, is to end commissions of all kinds for all products and services. This will never happen of course as commissions based on sales is a basic tenant of free Capitalism.
December 23rd, 2008 at 12:29 pm
NAR is essentially a labor union. They never push for transparency and only care + promote for the benefit of the members. We should not expect more from them (translation: just ignore everything they say).
I am in Las Vegas – epicenter of the bubble and the subsequent housing deflation. Unit sales are way up this year but prices are down (about 30%) from same time last year. Unit sales are up bcs most sales are bank owned properties going for reasonable prices. New homes are being priced reasonably for this market (now about $100/sq ft) + new residential permits are at record lows. To me this is all good news – we are soaking up the excess inventory and houses are indeed selling when priced right. Vegas will be one of the markets to watch to see when the housing market is starting to turn around – and I do not think it is that far off. The national figures are not that meaningful IMO.
December 23rd, 2008 at 12:38 pm
“Ethics”??? What’s that? Surely, you jest.
He’s serious. And don’t call him Shirley.
Ethics was something that was discarded culturally in this country a long time ago. Sadly, we’ve all been taught that ethics (and honesty) is for chumps.
I thought Ethics was an old, old wooden ship that was used during the Civil War era.
December 23rd, 2008 at 12:40 pm
Kunstler on fire with this post…
Speaking of ethics Kunstler is on fire with this post…
Legitimacy Dwindles
http://jameshowardkunstler.typepad.com/clusterfuck_nation/
The tipping point seems to be the Bernie Madoff $50 billion Ponzi scandal, which represents the grossest failure of authority and hence legitimacy in finance to date in as much as Mr. Madoff was a former chairman of the NASDAQ, for godsake.
It’s like discovering that Ben Bernanke is running a meth lab inside the Federal Reserve.
What seems to spook people now is the possibility that everybody in charge of everything is a fraud or a crook. Legitimacy has left the system.
The bums who ran the US banking sector into a ditch have to account for their turpitudes. They can’t be allowed to hide under a TARP.
December 23rd, 2008 at 12:42 pm
As I recall, at the peak there were numerous stories of people leaving their jobs to become real estate agents, including at least one stripper. We will know we’re at the bottom when we start to hear lots of stories about this trend reversing. So when we find that story about a real estate agent becoming a stripper, we’ll know we’re seeing the bottom.
My father was an agent, however he knew when to retire. By the time I go to sell my current house, I cannot imagine that real estate agents will even be needed. Ever hear of the Internet?
December 23rd, 2008 at 12:50 pm
kxf: Real estate agents can’t all work as strippers, they will be out on street corners….luckily they have experience.
Inventory continues to accumulate. Only the high end remains to crumble. I looked at some sales data in a few towns in Connecticut recently, and there are houses that sold for $3-400,000 in the 90s, now on the market at $650K up to >$1M. Dream on…. there is a lot of deleveraging still to be done.
December 23rd, 2008 at 12:57 pm
C’mon Barry,
Stop beating a dead horse.
“Self-regulating” markets are an oxymoron, we had 35 years of prosperity where everybody gained…rising tide and all that..until Jarvis, Friedman & Reagan sold us “Freedom to Lose” er..ah “Free to choose” and we did choose…and did lose…we decided making things was too hard on management’s tiny little brains…much easier to sell shit back and forth…problem was…wealth is only created when you “add value” to a raw material…the rest of the economy is based on palming a few bucks on a transaction. Small countries can do this without harm…but at the end of the day, well paid productive workers are the key to economic success.
Henry Ford figured this detail out…and America Flourished when it applied this principle.
December 23rd, 2008 at 2:05 pm
yeah … rates are low.. but most don’t qualify.
especially if you need a jumbo.. which around here is just about anything.
December 23rd, 2008 at 3:08 pm
I give you now the top headlines of 2009 (Check my site for the bonus other 10)
2009 Headlines of the year!
Top 10 Headlines in 2009
1) China-USA trade war
2) Civil unrest in detriot
3) Drug War violense spreads to US from Mexico
4) Obama’s Massive Tax increases.
5) cali and NY decalre Bankruptcty
6) The fall of muniplicials tied to SCDO
7) The Great Pension Crises
8) Why Gold did not play out as expected
9) Oil at $100 Again
10) FDIC requires Bailout money
December 23rd, 2008 at 4:13 pm
“The tipping point seems to be the Bernie Madoff $50 billion Ponzi scandal, which represents the grossest failure of authority and hence legitimacy in finance to date in as much as Mr. Madoff was a former chairman of the NASDAQ, for godsake.
It’s like discovering that Ben Bernanke is running a meth lab inside the Federal Reserve.”
This says it all about Madoff. This guy really was the gold standard and when he was arrested it was like Mother Theresa strangling orphans.
The bs surrounding the whole “who knew what” is reaching farcical levels. Apparently, according to the WSJ he was doing next to no trading, just taking money in and paying it out. His sons and the entire staff of his trading operation knew nothing, of course. They were just running the trading ops side of his firm and getting next to no business from a roughly $20 billion asset management fund that would be expected to generate literally hundreds of thousands of trades each year . What is wrong with this picture?
Meanwhile the WSJ ed page thinks the president’s most important priority is granting a pardon to Scooter Libby!!!!!!
December 23rd, 2008 at 6:00 pm
You mean mother Theresa didn’t strangle orphans?
December 23rd, 2008 at 8:14 pm
I wonder if Lawrence Yun is a subscriber to TBP?
Also in today’s news, 55% of Mortgage reworks end in failure. What a surprise! Why do we keep talking about the Govt doing something and just let things take their natural course so we find a base and move on? The fact is, most of the problem motgages are with folks who can’t afford to and shouldn’t be there. What is the Govt going to do; hand out cash to folks who can’t afford to be in a home? If that happens, if I were an American taxpayer (Which, praise the Lorde, I am not. Don’t remind George Brown that the UK doesn’t levy taxes on non-resident citizens) I would be truly p*ssed if this happens, especially if I was responsible enough to buy a home I could afford and still apy the mortgage every month. In fact, I think I would call it a day and emigrate to, well anywhere really, even Canada.
December 23rd, 2008 at 8:56 pm
So, this data is pointing out how bad sales are – and a number of people have also noted that a lot of people do not qualify for new refi rates – but what this new data is not point out is how much the home values continue to fall.
At this point how many people are in the red? How much have home values actually fallen?
I know a lot of discussion has taken place in the media about individuals simply walking away from their house, but if values continue to drop (not sales mind you) one has to think that people will just simply give up and walk away.
V
http://vansantos.com
December 23rd, 2008 at 9:18 pm
>> NAR is essentially a labor union.
We humans sometimes lump together things we dislike. But, is it fair to now “cross-tar” unions for NAR’s spinning? I think there’s a risk of overly hardening our dislike for oranges even though we really should’ve just limited our wrath to the rotten apples.
December 24th, 2008 at 12:14 am
NAR is essentially a labor union.
It’s that damned minimum wage that’s keep the housing market down.
December 24th, 2008 at 12:48 am
Not only are there 11.5 months of new homes on the market, but there are also months and months of new cars stacking up in port cities, and months and months ahead of looking for a new jobs.
On a related note, one of the best investements that can be made in a 0% return environment is to pay off existing debt. And the Fed is trying to increase consumption through debt….yeah….like that has a chance to work…..
About $8T of ficticious real estate wealth has now evaporated from the U.S. landscape due to an unchecked outbreak of reality – while consumption has resumed its rightful word place as describing an illness.
December 24th, 2008 at 1:31 am
I’ve often wondered how many NAR members drank David Lereah’s kool-aid themselves.
Anybody know what inning we’re in now?
December 24th, 2008 at 9:48 am
As a licensed CA real estate broker (no, I don’t do that for a living anymore), ad former realtor (which just means you belong to the trade organization), here is what I think the organization mostly does:
1) lobby
2) PR
3) collect stats
4) sponsor trade shows & training
I long ago decided that it wasn’t worth my money to pay them for the benefits I wasn’t getting.
As to the appraisers, I doubt they were all crooked. One definition of market value is what a willing buyer will pay a willing seller (i.e. not a distress sale) in an arm’s length transaction. So if an appraiser takes that seriously, in an environment where prices are constantly headed up, then whatever the sales prices is, is what the property will appraise for.