The latest housing consensus as sung in three part harmony amongst the media and green shoots crowd. Their song goes something like this:

1) The worst of the housing trouble is now behind us;
2) Only recently, Housing was “Getting worse more slowly;”
3) That has  transitioned to “Housing is getting better.”

I don’t believe it. IMO, all 3 are misleading or outright wrong. This post explains why.

On Friday, the market rallied smartly –  and while expiry had something to do with it, the larger part of the gains came after the release of the Existing Home Sales data. Traders’ kneejerk reaction seemed to reflect the belief that not only is the worst of Housing now behind us, but that Housing was actually getting better.

Indeed, Housing is going to be a growth driver for the economy going forward!

Only, not so much. A close look at the data reveals this to be a false premise. If you only read the NAR spin, its easy to fall into their web of happy talk. (We’ve said it so many times, it still bears repeating: The National Association of Realtors are a highly misleading news source. Look past what they say to the  actual numbers if you seek economic truth).

In the past, I have gone so far as to imply the Realtors group are spinmeisters. This month, I will be more blunt: Their actual data has become untrustworthy, their spokesmen lie for a living, and their “news releases” is little more than misleading junk.

Investors who rely on the NAR version of the news do so at their own great financial peril.

Witht hat intro, lets dig intot he actual data to show why the real estate trade group happy talk is misleading bunk. IF YOU ARE INTERESTED IN HOUSING, then you need to thoroughly fisk the NAR data, put it into context, and strip the lipstick off the pig.

weakest-7-monthsLet’s do just that: A closer look at the actual unspun data reveals the NAR fantasies. Rather than recently improving, we see that January to July 2009 is actually the weakest 7 month period in 5 years — since the market topped in ’05.

Consider Mark Hanson’s analysis: He points out that “If not for a surprise and suspect 16k increase in Northeast condo sales, Existing Home Sales would have been lower month-over-month and only up 12k units from July 2008, which was the worst year on record for housing.”

Let’s see what happens if we back out those condo sales to look at just Single Family Homes ex Condos — which accounts for the vast majority of the US housing market. We see a very different picture. Existing home sales (ex-Condos) were down 10% from July 2007, flat from July 2008, and off 5% from June 2009.

Hence, the boom in cheap Northeast condo units accounted for all of the excitement in Friday’s EHS release. Indeed, the overall UNADJUSTED data shows not only that housing is not getting better, it is still getting worse.

Let’s go back to the NAR release. As noted on Friday, on a NON-seasonally-adjusted basis, existing home sales were nowhere near as strong as advertised. According to M Hanson Advisors:

“Even with condos included, the all-important Western Region was down 10% m-o-m. It is consensus that the housing market in the West is booming. While sales are booming at low end, I have argued for months that demand from first-timers and investors was at peak levels and July’s results prove this.Such weak results m-o-m and relative to 2008 underscore how critically injured the housing market remains.

Think about it…prices are down sharply y-o-y; rates are at historic lows; moratoriums and modification initiatives have kept hundreds of thousands of foreclosures off the market; housing sentiment is worlds better; a tax credit is available; and still, y-o-y sales are flat for all intents and purposes and down 6.5% from weak 2007 levels when pricing was near the peak. Conditions won’t get much better than this in the future — what is it going to take to sell houses?

This confirms my prior view that there are a lot of federal forces focused mightily to merely maintain housing in a gentle downdraft. But for this extraordinary government intervention, Housing would actually be much much worse. Foreclosures would be driving prices much lower — a good thing IMO, as it would hasten the cleansing of the boom’s excesses.

Recall that as the market topped out in 2005-06, cheaper Condo sales became a disproportionate source of total volume, as struggling buyers ran low on both cash & credit and were forced to move downstream.

That is now replaying over again. Perhaps its a sign of tight credit conditions or retiring boomers downsizing. Regardless, the mix of condos to single family homes is especially noteworthy.

Have a look at the chart below, which Hanson rolled out to show the impact Condos have had on the overall Housing sales:


Existing Home Sales, NSA, 2005-09
chart courtesy of M Hanson Advisors


We see  above that in 2009 (red line) Sales were behind 2008 (yellow line) until June/July. That is when we jumped 45k in sales ahead of last year — Out of 2.8 million housing units sold.

But as Hanson writes:

“Look at what was thrown at it in order to get this rounding error. We have thrown in over a trillion dollars to buy rates down, countless $8k tax credits, mortgage mods, foreclosure moratoriums plus hundreds of billions more, and it only bought 45k yoy additional sales over June & July combined. After a 50% to 70% price hit in the hardest hit areas — that are also the busiest now — only 45k sales out 2.8 million sold this year are responsible for the national consensus that housing has bottomed, which is the golden key to the consumer recovery spending chest.”

Remove government interventions, and the housing market collpase would continue unabated.

Finally, let’s look at one last factor: The impact of Foreclosures on Seasonal adjustments. We know that the NAR’s takes each month’s data, then runs it through their own meat grinder:  They annualize the number, they hamhandedly seasonally adjust it, they do whatever they can to accentuate the positive, while ignoring some of the ugly context the data exists in.

Like Foreclosures.

Have a look at this chart — showing total sales, with foreclosures broken out.


Foreclosures as a Portion of Existing Home Sales
chart courtesy of M Hanson Advisors


The three part harmony that the consensus is singing is out of tune. While the very worst of housing trouble may be behind us, we are still looking at falling prices and increasing foreclosures. The Housing getting worse more slowly camp is ignoring the massive Federal subsidies required to get worse more slowly. As to “Getting better,” the data argues persuasively otherwise, and I will make appropriate bets against this viewpoint.


Special thanks to Mark Hanson for his assistance with this piece.

Category: Contrary Indicators, Data Analysis, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

75 Responses to “Existing Home Sales Far Worse Than Advertised”

  1. Mark Hanson says:

    The NAR has been asked how it is handling foreclosure sales but the NAR avoided answering the question on its web site.

    Below is an excerpt from the monthly NAR Existing Home Sales press release. They make no mention that 31% of total national sales are distressed by definition however, they do talk about the ‘weather’. Because distress sales make up so much of the market, ‘seasonally adjusted annualized’ figures should be looked
    at very skeptically.

    How can NAR model seasonality when this is the first year in history — and the history of NAR — when distress sales made up so much of total sales and distress sales have not been proven to follow any historic trends…?

    “The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.”

    (emphasis added)

    Also note that on a not seasonally adjusted basis, existing home sale were up only 12k units; Northeast Condo sales jumped 16k; Existing Home Sales would have been negative without the jump in Northeast Condo sales; Single-Family Detached sales DECLINED 5k unit m/m; and foreclosure increased 24k m/m, which is more than existing home sales.

    The inventory of unsold homes on the market increased to 4.1 million, from 3.8 million, a 9.4-month supply at the current sales pace, unchanged from June…Is this data a sign of economic recovery?

  2. Bruce in Tn says:

    Exactly. Massive government intervention, and almost nothing to show for it. And the “it must be done now, or we’ll perish” aspect of all of this that so troubles my wife, it seems to me is also wearing a little thin…

  3. mcHAPPY says:

    Great interpretation and analysis of the numbers, Barry and Mark. It is so refreshing to get insight on the numbers without the hype and spin.

  4. dead hobo says:

    I don’t think many people are really fooled by this. Just media people, mostly, I suspect. And day traders who want to make money in the financial markets on the certain bubble inflation that will follow the news. It’s all a scam anymore. The business news doesn’t print analysis, only headlines. Happy news makes happy advertisers who make TV station owners happy. The public doesn’t believe it anymore. While the average person can be very stupid, they’re mostly past this point now.

  5. jc says:

    The BLS and NAR are furiously pumping sunshine up our butts! Like Jim Rogers said “you can’t trust the government”.

    The NAR has been asked how it is handling foreclosure sales but the NAR avoided answering the question on its web site. (Hanson)

    “Two months ago, we asked BEA economists how they reconciled the huge declines in real-time tax deposits with their report of a modest decline in wages and salaries,” said Biderman. “They could not answer our question. We know now that by ignoring real-time data, the BEA was providing an inaccurate view of the economy’s health.” (Trimtabs CEO Biderman)

  6. austincompany says:

    Just like the lack of press coverage over the (now happening) CRE debacle, the complete lack of press understanding about the current housing market is very unsettling. What is missing in the news reports and analysis is the WHY’s. Why are sales up? Is it a “normal” increase or simply a fluke due to other factors?

    Unfortunately for the masses (I disagree with dead hobo on this one), most people are generally stupid and do not look beyond what they are told. Most people now believe that the housing market is now “recovering” and we are well on the way to a new construction boom and $500 per sq. ft. land once again… oh Happy Days!

    Personally I think this “it is all getting better now” reporting has to do with politics (Obama and the Dems did indeed rescue us from the gates of economic hell… etc.) and the stock hucksters who are attempting to get the retail masses back into the market.

  7. jc says:

    I should have said spuriously not furiously!

    The BLS and NAR are furiously pumping sunshine up our butts!

  8. VennData says:

    I doubt – from my personal experience – that people who bought homes on the “American Dream” hope and/or the “Home prices never go down” nonsense haven’t figured that out yet. I haven’t met a person in the last couple years that’s still living in NAR fantasyland circa 2007.

    The issue is it’s not that important. The global economy simply doesn’t hang on American suburban house prices. That’s the current “conventional wisdom” that people who’ve missed the generational bottom need to change their thinking about, not that house prices are down.

  9. Steve Barry says:

    Why the big concern about volume of sales? Who cares. Volume would surge if prices tanked another 40%…you don’t need volume, you need prices to impove and they are clearly not. I calculated that dollar volume of sales was down 12% y/y in July. In a healthy market, that should be up 5% or so, so we are almost 20% below trend…that’s probably considered a depression.

  10. jc says:

    These hugh shadow inventories held by big banks makes me think there is a plan to socialize their losses by transferring title to the US gov at “fair” prices so the US can landlord these homes until (hyper)inflation brings them back up above water again

  11. Jim Greeen says:

    NAR participates in Agnotology. It’s the deliberate production and distribution of ignorance.

  12. globaleyes says:

    The Housing Crisis sure was a disease in search of a cure, but as BR points out, it received the wrong medicine. Conclusion: the prognosis remains uncertain. The ongoing battle between the forces of inflation (i.e. The Government, The Fed, etc.) and the deflation (uh, market forces) continues without interruption.

  13. Marcus Aurelius says:

    Bruce in Tn Says:

    “…it may be that the democrats, in pushing this massive rapid expansion of government, will not like the final result.”

    I don’t think government expansion is the fault, philosophy, or sole purview of the Democratic Party. We certainly had government expansion under the Republicans (unfortunately, the levels of bureaucracy the Republicans created were manned by first rate incompetents, and was largely in response to manufactured crises driven by crony capitalism).

    As I mentioned prior to the last election, it doesn’t really matter who is in power or what policy responses they initiate — once the wheels have left the pavement and the car has crashed through the guardrail and gone airborne, driver input no longer matters. Mario Freekin’ Andretti couldn’t avoid the coming impact.

    I’m more concerned about the policies that put us here than those that are being initiated in a futile attempt to get us out.

    I can only wonder what we’d be saying if the Republicans had won the last election. McCain/Palin. Do you think government growth or debt creation would be any less? Think about it.

  14. leftback says:

    Barry, in line 2, it should be “goes”, not “gores”. Although the NAR is bleeding insane.

  15. EricTyson says:

    I think it’s important to be careful not to get too focused on discussing real estate as one national market…local markets vary tremendously in their relative health and current status. The metro areas with high rates of foreclosure are clearly in the minority and distorting the national #s.

  16. Robert M says:

    I have to disagree w/ Bruce of Tn
    The massive intervention has prevented the housing market from going down faster. It was not designed to stimulate sales. The stimulation of sales was done w/ the tax credit. Are you against that?

    My preference would have been changing the bankrupcty laws to include the cram down of mortgages on primary residences which you can have for your second or vacation home.

  17. thetanman says:

    In my little neck of the woods the condomongers have finally began to throw in the towel.

    First they built until their eyes bled. Then they tried to sell at insane prices, then tried to rent at insane rates. Next came less insane, but still ludicrous, rent levels. Now they’re puking these things up at 1/5 or less of what they were asking at the peak. They had an auction for the condos built just a few feet from a Taco Bell, and another massive complex on the crummy side of town. Its right by the railroad, and a train comes through everyday at 4 am. Every single day. And the few companies still in business are building again! With rents in the toilet already.

    Major construction companies are going belly up, while their former owners plan their next foray with the 10s of millions they made off with during the boom. The banks ripped us off, but there are literally millions of people with bursting bank accounts skulking off into the night leaving decades old businesses bankrupt. And one of them told me it was intentional. They knew years ago they were going to crash, so they extracted as much money as possible. Most of these are family setups, so grandad’s creation goes to bankruptcy.

  18. [...] water, just in case we spy obstacles ahead.  Barry Ritholtz had a great article this morning about what BS the home sales numbers are – something we discussed in Member Chat last week and you know how I feel about China’s nonsense [...]

  19. Steve Barry says:

    Market put/call printed an absurd .59 on Friday and hovereing around .52 now…too bullish finally? With insiders dumping at elevated levels for the last few months?

  20. Winston Munn says:

    EricTyson wrote,
    “The metro areas with high rates of foreclosure are clearly in the minority and distorting the national #s.”

    The metro areas with high rates of foreclosure also happen to have the greatest populations. It would be disingenuous to report national figures ex-population centers, would it not?

  21. thetanman says:

    For the first time in a long time the market is boring as hell. A stock is either blasting to new highs, or pulling back a few %, and then blasting to new highs. I have a tiny biotech that IPOed 10 years ago, and has never even come close to making money. Its up 700% off the low and in 3 days levitated another 60%. When it starts catching a bid it’ll leap 5% at a time. The only thing positive is no debt. There is not only a lot of hot money rolling around looking for a fix, but some of it is downright molten.

  22. DeDude says:

    The data is very good at suggesting that we have stopped falling off the cliff and are leveling out to something that is stable within about +/- 10%. I doubt that the existing home sales numbers in the last 10 month were significantly different from a year earlier. Nor are we likely to see significantly increased y-o-y numbers in the next year or two. The recovery (back to the previous numbers at the top) is going to take decades for sales and at least 8-10 years for prices. If the fools screaming about federal deficits now get their way and they manage to push us into a double dip by curbing spending to early, then we will also get a second dip in housing.

  23. update says:

    This whole game is rigged. We have Obama out there taking massive bribes of epic proportions from the healthcare industry and then lying to the public about it:

    And then we have Obama looting the taxpayer for political gains and denying it:

  24. Mannwich says:

    @DeDude: Those “fools” that you speak of may end up screaming about our gov’t deficit situation in Mandarin.

  25. Transor Z says:

    Come on, Bruce! The partisan angle couldn’t be more of a red herring here and you should know that.

    The Doomsday Crisis was Paulson’s and Bernanke’s justification for immediate TARP and whether such a doomsday scenario was real has since been seriously called into question by Elizabeth Warren and others.

    That was socializing TBTF losses, picking winners & losers. We’ve been around the How We Got Here bush so many times and the bipartisan responsibility every step of the way is so clearly established that that dog just won’t hunt.

  26. Mannwich says:

    Thank you, Transor. I’ve been busy much of the weekend swatting down partisan half-truth emails (most of the spam chain emails that nobody took any time to verify whether true or not before forwarding) from family, my head is spinning this morning.

  27. leftback says:

    We will get a double dip no matter what, because the strongest market forces are deflationary and we are so far from equilibrium in the present situation. Extra stimulus would lead to an increase in interest rates – which would slow the economy. No more stimulus means that when the hot money injection runs out – the economy will slow.

  28. ersatzjulian says:

    While I agree that the numbers are suspect, I dislike your first point where you strip out the Condo numbers from the home sales. It reminds me of the situation a few years ago when analysts tried to convince the world that inflation is dead by stripping out the “volatile components.” At the time, you called them out and mocked them for reporting inflation-ex-inflation numbers. Are you not engaging in the same behaviour now by throwing out data that does not fit your world view? Sure, you provided excuses, but is it reasonable to exclude the condos number because it just happens to be a small part of the market? The other reason you offered to exclude these numbers was that they are “suspect,” but without any evidence or arguments to back that assertion, you will have to forgive me if I look at it with askance.

  29. jm says:

    Moreover, the stats as reported don’t square with what I’m seeing here in the Chicago area in the actual recordings of sales as they can be viewed in a database accessible through the Chicago Sun-Times web edition real estate section. That shows the following for “Chicago” as a city name:

    Year Recorded Sales
    2006 45042
    2007 36978
    2008 24572
    2009 8830 (as of July 28)

    As sales recorded through July 28 (recording run 1-2 months behind closings) are almost certainly more than half the years’ final total (in 2008, 12300 sales had been recorded by June 23), it seems safe to assume that 2009 sales will be far less than half those at bubble peak — perhaps only 1/3rd peak. One sees the same ratios out in the suburbs.

    But the graphs CR is generating from the “official” stats indicate that existing home sales nationally are down only to about 5/7ths peak, and even factoring in the larger drop in new home sales wouldn’t get one down to the 1/3rd the recordings show. And Chicago was not one of the worst bubble markets.

    (The Sun-Times databases appears not to count homes the banks take back as sales, but does appear to include sales of REO to end buyers.)

  30. donyocham says:

    jc’s comment regarding transferring title of homes to the government is spot on. To build upon it, if the government then turned around and posted those homes as collateral with the Chinese for their US Treasury holdings, then they’d also solve the problem of the shaky collateral the Chinese currently hold, which is the US Dollar.

  31. bubba says:

    i actually found these fox news polling numbers to be more informative:

  32. super_trooper says:

    @BR, what was your expectation from bringing the rates down 8k tax credits (for new house buyers( etc…) in an environment like this. We were facing depression, who buys a house at that point with unemployment doubling (really started to increase in fall)? I’ld say 45k yoy additional sales over June & July is ok, not great, but not as terrible as I expected back in late fall. Now tha unemployment rates are stabilizing, I can believe we’ve reach some sort of bottom. House prices won’t go up for another 3+ years.
    Compare it to house sales in Japan, Sweden or the 30s under similar conditions before you make a statement like that (ok it’s Hanson saying it)

  33. hopeImwrong says:

    Back to buy the dips and sell the rips.

  34. Vilgrad says:

    All of our problems have been caused by the Fed. It must die for the American people to be free again.

  35. mcHAPPY says:


    45K additional sales with an $8000 credit is ok when most sales are happening at the low end of the market?

    Unemployment rates are stabilizing when workers are mysteriously disappearing fron the equation?

    More comments like this and I’m going to add to my shorts.

  36. [...] Barry Ritholtz, The Big Picture, 2009-08-24 “No, no. That’s not the one you want. You want [...]

  37. Steve Barry says:


    “All of our problems have been caused by the Fed. It must die for the American people to be free again.”

    it must make your blood boil when Bernanke says he saved the world.

  38. Bruce N Tennessee says:


    “I have to disagree w/ Bruce of Tn
    The massive intervention has prevented the housing market from going down faster. It was not designed to stimulate sales. The stimulation of sales was done w/ the tax credit. Are you against that?”

    …Robert…yes, I am against that…if it means you are still trying to put people in houses that they still can’t afford…yes. I would hope you would be too. And my point was not that, but that Harry Reid, the senate majority leader, almost certainly because he’s one of those banging the drum the loudest for this massive debt creation by the government, is now trailing an unknown GOP candidate by more than double digits. Go back and read what I said.

    Robert. I am a fiscal conservative. I don’t think this massive creation of debt will work long term. No matter which party, or both parties do it, it doesn’t matter. You may get some short term relief. Long term, debt has to be repudiated, not embraced.

    Thanks for your points, though…

  39. I think the last graphic is misleading.

    It compares Total US Sales with Total US Foreclosure Activity.

    You get triple counting for NOD/LIS , NTS/NFS and Trustee sale/Sherriff Sale for one property.

    The proper thing to do would be to pick a stage (the most conservative would be the finale sale stage) and compare just that stage to sales. Otherwise you get this overdramatic graphic.

  40. markmti says:

    EffectiveDemand is correct however, the market and public sentiment key off reported figures. RealtyTrac reports the aggregate so it makes for a good headline comparison. A true comp would be adding up Notices-of-Default and REO together. Even though an NOD becomes an REO at some point, foreclosures are so backlogged due to moratoriums and modification initiatives that they have become distinct supply channels.

  41. Vilgrad says:


    He has set the stage for the final collapse of the USD. Did you see the chart from Jim Grant last week that Barry posted? The stimulus we’ve applied is 12 times as large as during the Great Depression.

  42. markmti
    ” A true comp would be adding up Notices-of-Default and REO together.”

    Then you’d still have double counting of some properties. You need to only take any one stage. NOD will be the most aggressive, REO would be the most conservative comparison. I’d only take REO.

  43. Bruce N Tennessee says:

    Well, I see how you could be confused…Barry deleted the Harry Reid comment…

    Point of my post is: Whichever party is trying to prevent us from deleveraging…whether you blame Bush, Clinton, Obama…doesn’t matter…taxpayers are tired of it. And those of us who have been around for awhile just don’t believe it will work. Period. Debt much be repudiated. The sooner we do this, the sooner we get back to the normal USA…

  44. super_trooper says:

    “super_trooper:45K additional sales with an $8000 credit is ok when most sales are happening at the low end of the market?”
    Congratulations, you can read. Seriously, what did you expect back in October/November (pull out that piece of paper you wrote down the number on)? Most road signs were pointing towards a depression. With Wamu/countrywide collapsing, Fannie and Freddy insolvent, dollar potentially collapsing…. from that perspective, a subsidized increase in sales is ok.
    By the way what % of the population is eligible and in the position to take advantage of the 8k credit?
    I am, never owned a house, but I won’t do it.

  45. Art Cashin says:

    Deconstructing The Housing Report – As noted above, the shorts and under-invested absolutely panicked at the housing data. And, why not! The headlines had a bullish tone to say the least. The jump in sales was the fourth monthly gain in a row. The month over month spike was said to be the best since records began back in 1999.

    But looking at the full table of data, the picture was not quite the unalloyed victory the headlines heralded. Sales rose 7.2% but inventories rose 7.3%. That meant the jump in sales did not decrease the backlog by even one day. The backlog remains at 9.4 months of supply. A great deal appeared to come from first time buyers hoping to tap into the government’s $8000 tax credit before it expires on November 30th. A lot of last year’s foreclosures were thought to come from failed first time buyers.
    Speaking of foreclosures, many of the new purchases were of foreclosed, distressed homes. And, the single family sales were not your picket fence type. The biggest jump was in “condos”. Gossip says a chunky part of the condos may have been foreclosures.

    Our good friend and fellow former altar boy, Vince Farrell, broke some of those numbers down. First time buyers were 30% of sales and foreclosures were 31% of sales. Vince suggests there may be an additional “invisible” inventory of one million homes awaiting price stability. Also, foreclosures may be accelerating. Maybe we should put the champagne back on ice.

  46. Btw, supply is going down in California:

    The stimulus is working in many places, the places where it is not they are pushing on a string. They should liquidate in the markets where the stimulus is working to clear up the problem sooner rather than later and work on other solutions in the markets where stimulus isn’t working. They need to stop interferring with forelcosures in CA so that the issue doesn’t hang around the next 20 years.

  47. cvienne says:


    Thanks for breaking that down.

    What’s amazing to me is that while they use the data (such as Friday) to bid up equities across the board, on days when you see stories like the guy living by himself as the only occupant in the condo complex in Fort Myers, well… Nothing happens…OR, the PPT lies in wait at 3:30 PM…

  48. zacharysmith says:

    I think it’s important to be careful not to get too focused on discussing real estate as one national market…local markets vary tremendously in their relative health and current status. The metro areas with high rates of foreclosures are clearly in the minority and distorting the national

  49. [...] “But for this extraordinary government intervention, Housing would actually be much much worse.”  (Big Picture) [...]

  50. leftback says:

    ….and even as they discussed the data, the US dollar began a little rally, rising imperceptibly at first…

  51. Transor Z says:


    I don’t think the RE discussion is for the benefit of homebuyers or sellers here. A lot of the subtext is the fate of billions/trillions worth of MBS (both residential and commercial) still on the books of a lot of financial institutions. There is also aggregate impact on consumer spending, extensions of credit, etc.

    See blog title.

  52. markmti says:

    Supply in CA is down about 60% due to foreclosure moratoriums, mortgage mod inititiaves and epidemic negative equity making it so homeowners cant sell.

    What you will see with respect to the way the demand has been through the house price bands is a massive house price compression from the low-mid to upper tiers upon the lower tiers where the true demand is. Without exotic financing, people can only buy so much house. Now, in CA there are very few houses in the median income’s range. Investors won’t bust out of their rental cap return price ranges.

    This will impact sales going forward as we exit the summer selling season. They may have to significantly increase foreclosures on purpose in order to fulfill demand. The problem is without the historical price gains seen from supply/demand imbalances such as this, the mark to market losses from foreclosures in CA remain staggering.

    We are in a stalemate. If the homebuilders could figure out how to build a <$250k that can compete with foreclosure resales built a few years ago, they could clean up.

    National Existing House Sales Price Bands & y-o-y Change

    $0 – $100,000 Up 38.8%
    100,000 – $250,000 Up 8.7%
    $250,000 – $500,000 Down 6.2%
    $500,000 – $750,000 Down 8.9%
    $750,000 – $1,000,000 Down 10.6%
    $1,000,000 – $2,000,000 Down 23.3%
    $2,000,000 + Down 32.4%

  53. Transor Z says:

    ZH just posted this cool link at the NY Fed charting credit delinquencies across the US.

  54. Andy T says:

    So, Art Cashin does troll these threads. I KNEW IT!

  55. EricTyson says:

    Winston Munn Says:

    “The metro areas with high rates of foreclosure also happen to have the greatest populations. It would be disingenuous to report national figures ex-population centers, would it not?”

    Of course it would – that’s not what I was suggesting – I’m suggesting you have to look area by area.

    Also, the first part of your statement above is incorrect – there are metro areas of varying sizes with high rates of foreclosure.

  56. DeDude says:

    Mannwich; The speaking Mandarin thing is an ecco of the “speaking Japanese” talking point from the 80’ies, and wastly overrated. Fact is that in the big picture the 1-2 trillion that the Chinese own of “US” is minimal compared to the size of US assets, and even compared to the size of our annual productivity (over 14 trillion every year).

  57. Transor Z says:

    Let’s do a thought experiment, RE/NAR people.

    Let’s pretend that this Thursday there are suddenly only 100,000 new unemployment claims. These represent purely frictionally unemployed persons because we also learn that the Green Economy has green shootedly hired 3 million people in just a week. IOW, unemployment is down to pre-recession levels of ~5%.

    “Wow!” you say. “That’s great.”

    Then I tell you that the mass hirings were achieved at the cost of median income declining 15% from 2008 and billions of dollars in tax credits to employers for expanding their workforces.

    “Ouch!” you say, because numbers linked to other numbers make your brain hurt. Which is why you’re in sales instead of finance/accounting.

  58. call me ahab says:

    “The massive intervention has prevented the housing market from going down faster. It was not designed to stimulate sales. The stimulation of sales was done w/ the tax credit. Are you against that?”

    yes- so what real estate company do you work for?

  59. Marlon T says:

    I apologize if anyone already mentioned this, but I was struck by how the previous years’ dips during July has gradually gone away. The only idea I had for why real estate might dip in July is summer vacationing, and the fact that the July dip has gone away may indicate that vacationing is down, and thus that sales have been borrowed from later months.

  60. rex says:

    Barry: I think it’s a mistake to rely too much on the non-seasonally adjusted sales numbers, as Mark does. You can shoot yourself in the foot if you do.

    He makes a big deal out of NSA single-family sales FALLING by 5,000 in July.

    But that’s actually a pretty good number. NSA sales almost always peak in June, so they almost always fall in July. People buy in June so they can be settled 8in by the time school starts.

    For instance, here’s the history of unadjusted single-family sales:

    2000 June 485,000, July 437,000 (-48k)
    2001 June 498,000, July 471,000 (-27k)
    2002 June 482,000, July 478,000 (-4k)
    2003 June 534,000, July 553,000 (+19k)
    2004 June 642,000, July 592,000 (-50k)
    2005 June 662,000, July 595,000 (-67k)
    2006 June 618,000, July 521,000 (-97k)
    2007 June 531,000, July 487,000 (-44k)
    2008 June 445,000, July 436,000 (-9k)
    2009 June 465,000, July 460,000 (-5k)

    i think you’re right to focus your analysis what’s behind these sales gains (distressed sales, foreclosures and government subsidies must have an impact), and it’s smart to look at the big increase in inventories in July. There does seem to be a vast shadow inventory out there that could keep prices down for a long time.

    I just think it’s wrong to say the numbers themselves were awful.

    I don’t think anyone is arguing that housing is strong, but some people argue that it’s getting better. Even you and Mark agree that sales in June and July were up 44,000 compared with last year. Is 44,000 a positive number?

    OK you say, but what would the numbers be WITHOUT the government’s help? The truthful answer is we don’t know, except the market would be crap.

    You’re the guy who always rants about “inflation ex-inflation, but you want to analyze “housing ex-subsidies”?

    You can’t just back out the things you don’t like. The market we have is a market with vast government support.

    And you can bet that that support isn’t going away any time soon.

  61. call me ahab says:

    but rex- why does it have vast government support- why is it the USG’s job to entice buyers- isn’t that the sellers job?

    the USG should not be involved in subsidizing housing- home interest deductions should be phased out- talk about a huge giveaway- why should the government be involved in manipulating people’s housing choices- whether it be to rent or own?

    and credit to buy homes- puhlease- its lobbies and special interests at their worst- and here’s why-

    without the credits the home prices would have fallen more in price- there is your incentive for the 1st time home buyer- even lower prices-

    a clearing price will always appear- but now- uncle dumbass has slopped it up again to support home values-

    everyone always looking to Washington for their special give away- welfare for rich lobbies and the industries they represent

  62. [...] rise in home sales doesn’t compare to the overwhelming amount of shadow inventory being hidden from public view by the [...]

  63. markmti says:

    Rex — that 44k was caused artificially by temporary stimulus. In previous years you list none of the stimulus was in effect and prices were much higher. Taxpayers have spent a lot of money and taken a lot of risk with respect to mortgage mod initiatives, foreclosure moratoriums, QE etc for a puny 44k houses. All of the stimuli has prevented an outright collapse but has not fixed the house ‘market’ by any means. The chart below says it all…tell the guy trying to sell a house over $250k the housing market has bottomed.

    The fact is that investments are being made and the stock market sucking in retirement funds again based upon the false notion that housing has bottomed and it will spill over into consumer spending. Based upon the data this is not happening. The stock market — especially the retail investor — can’t handle the housing pundits being wrong — AGAIN.

    If stocks revisit their lows based upon expectations today being completely out of touch it won’t stop at 666.

    National Existing House Sales Price Bands & y-o-y Change

    $0 – $100,000 Up 38.8%
    100,000 – $250,000 Up 8.7%
    $250,000 – $500,000 Down 6.2%
    $500,000 – $750,000 Down 8.9%
    $750,000 – $1,000,000 Down 10.6%
    $1,000,000 – $2,000,000 Down 23.3%
    $2,000,000 + Down 32.4%

  64. jc says:

    Cure rates, astounding numbers! The cure rate for all categories has fallen off a cliff.Prime is barely better than subprime and Alta As are the worst! Asd time goes by and everyone slips underwater they are giving up. Jobs don’t help!

    Homeowners who fall behind on their mortgage payments have become much less likely to catch up again, a new study showed.

    The report from Fitch Ratings Ltd., a credit rating firm, focuses on a plunge in the “cure rate” for mortgages that were packaged into securities for sale to investors. The study excludes loans that are guaranteed by government-backed agencies as well as those that were never bundled into securities. The cure rate is the percentage of delinquent loans that return to current payment status each month.

    Fitch found that the cure rate for prime loans dropped to 6.6% as of July from an average of 45% for the years 2000 through 2006. For Alt-A loans — a category between prime and subprime that typically involves borrowers who don’t fully document their income or assets — the cure rate has fallen to 4.3% from 30.2%. For subprime, the rate has declined to 5.3% from 19.4%.

    “The cure rates have really collapsed,” said Roelof Slump, a managing director at Fitch.

    excerpt from WSJ

  65. Transor Z says:

    2008 June 445,000, July 436,000 (-9k)
    2009 June 465,000, July 460,000 (-5k)

    Say 436,000 units sold in July 2008 @ $250,000. That’s $109 billion in gross sales.

    One year later, 460,000 units sold at, say, an average of -15% from July 2008 price, say $212,500. That’s $97.75 billion in gross sales — for +24,000 units sold.

    Did you get that last italicized part? That means lower gross on more volume. Cuz that’s how we roll in math skillz class, yo.

    Perhaps from the myopic viewpoint of brokers collecting commissions on units changing hands, that’s an average drop of “only” $1300 per unit. ($250,000 @ 3.5% = $8750 commission; $212,500 @3.5% = $7437 commission) . Honestly, I don’t know WTF the RE/NAR types are thinking. I suspect that, as long as units are moving, they’re getting paid and could give a crap about such irrelevant matters as how and whether future buyers are going to have 10% or 20% to put down. Maybe if folks buy houses priced 10% to 20% less than their current homes (provided they can actually sell their current houses first).

    Times are now hard for brokers who came to believe that slapping a sign on the side of a property and waiting for the phone calls to start pouring in was how you found a ready, willing and able buyer.

    Welcome to Days on Zillow: 367.

    Anyone remember way back in the days before borrowing from 1000 years into the future made billions seem trivial, when it used to be a big deal to talk about losses in the tens of billions in a single sector of the economy?

  66. Transor Z says:

    Maybe if folks buy houses priced 10% to 20% less than their current homes (provided they can actually sell their current houses first).

    Sorry, this probably looks strange — supposed to be a joke since so many people have very little equity in their current houses.

  67. [...] Hotel losses mount, hurting city’s coffers [SF Gate]· Existing Home Sales far worse than advertised [TOS]· Twitter and Facebook: HQ interior porn [Valleywag]· San Jose: one of the 10 best cities [...]

  68. You can even use their own stats against them. According to their own stats, the only growth in home sales is at the very bottom, which probably has a significant foreclosure/short sale component.

  69. markmti says:

    Transor Z — that is the biggest prob with real estate especially in the bubble states…very few can sell and rebuy because they are either underwater outright or close enough where they can’t sell, pay a Realtor and get the down out of it. That leaves first time homeowners and investors

  70. Transor Z says:


    Right on. The bubble created the absurd perception that RRE is a liquid asset, practically cash. I exaggerate only a little. Now, between credit tightening, loss of household net worth, unemployment, consumer deleveraging, and an overshoot sentiment change with aversion to RRE as an investment … The NAR spin is unreal, and probably targeting retail investors and PPIP speculators to come back into the water.

  71. [...] Did you like this? Please If so, please addthis_pub = ”;bookmark it, to everyone you know, and subscribe to the blog RSS feed. [...]

  72. [...] don’t need to read Barry Ritholtz to know that the rebound in the housing market is not a true rebound at [...]

  73. [...] Existing Home Sales Far Worse Than Advertised by Barry Ritholtz – “While the very worst of housing trouble may be behind us, we are still looking at falling prices and increasing foreclosures. The Housing getting worse more slowly camp is ignoring the massive Federal subsidies required to get worse more slowly.” [...]

  74. [...] * The Big Picture (Blog) – Existing Home Sales Far Worse Than Advertised [...]