Existing Home Sales scheduled to be released at 10am; look for the usual seasonal strength, and improving but weak year over year numbers.

In light of this data, the WSJ’s Ahead of the Tape column looks at the Housing Market. Their conclusion? Do not confuse the end of the tailspin for actual strength.

“A survey conducted in June of 1,500 real-estate agents sponsored by the trade publication Inside Mortgage Finance found that 36% of all sales involve “nondistressed” properties. Of the nondistressed sales, only 31% were what the survey described as “unforced or optional.” The rest were sales by homeowners in some kind of financial or personal crisis . . .

Meanwhile, the Mortgage Bankers Association said Thursday that the number of homeowners behind on their mortgage payments hit a new high during the second quarter, with more than one in eight homeowners delinquent or in the foreclosure process.

So it is likely that sales will stay mired on the low end of the housing barbell . . .”

Two other factors the article pointed out:

1) Two-thirds of home sales are either foreclosures or banks taking a loss on the mortgage. The remaining one-third (~10% of overall sales) is what you might call “normal.”  (That 2/3rds number seems rather high even to me)

2) In July 2008, sales of existing homes hit a five-month high, and the NAR called a “sustained upturn coming.”  Once agian, their forecasting prowess was proven to be non existent . . .

>

Source:
Improving Home Sales Belie Market Reality
PAUL VIGNA
WSJ, 08/21/09

http://online.wsj.com/article/SB125081143925447971.html

Category: 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.

18 Responses to “Housing Market: Strength vs Stabilization”

  1. Anecdotal, but interesting data point:

    One of the highest-profile condominium projects in downtown Miami, the 849-unit Everglades on the Bay, has filed for Chapter 11 bankruptcy protection.

    To continue reading, go to: http://southflorida.bizjournals.com/southflorida/stories/2009/08/17/daily42.html?surround=etf&ana=e_article

  2. The Curmudgeon says:

    Anecdotes from my little corner of the universe:

    The prices for houses in my neighborhood have seemed, up until yesterday, to have held up fairly well against the ill winds sweeping the national housing market. But yesterday a house sold for $135,000–$90,000 less than the county’s appraised value. It was a short sale, i.e., a “distressed” sale, whatever the hell that means, but it sold almost immediately after the asking price was slashed $60,000. That means that every similar house on that street is now worth much less than its owners and the county thought. Any valid home appraisal by either the county or a private appraiser will have to account for this sale (of course “valid appraisal” is oft-times an oxymoron).

    The county itself, Jefferson County, Alabama (where Birmingham is mainly located), is already in dire financial straits. Watch for it to finally throw up its arms and file bankruptcy in the next little while, which will be the biggest municipal bankruptcy ever, because it owes about $5 billion dollars in bonds it can never hope to repay. The immediate cause of its present pain is an occupational tax it had been collecting that was ruled unconstitutional, but its long-term insolvency is the result of a bender of a borrowing binge it went on during the housing mania. Once these new housing values work their way through the tax assessments, the county will find itself in an even bigger hole, and there are really no solutions out there.

    For good measure, the former County Commission president and present mayor of Birmingham is under federal indictment for bribery involving the bond binge he led while he was commission president.

    Interesting times.

  3. DeDude says:

    So its pretty obvious that the current non-distressed owners are still not accepting that their houses have lost substantial value and cannot be sold for what they think it is worth. In some ways that would be a positive for housing prices and their stabilization. There will not be any supply coming from anybody who is not distressed because even if they refuse to put their house on the marked at the current price levels. Many of those who can afford it will likely rent the old house out rather than sell it.

  4. HCF says:

    From CNBC.com:
    “Existing-Home Sales Jumped Bigger-Than-Expected 7.2% in July…Fed Chairman Bernanke: Recovery Is Likely to Start Slowly”

    HCF

  5. HCF says:

    Everything coming in “better than expected.” Who-peee!

    I’m guessing some of this might slow down in the fall and when the $8k hom credit expires?

    HCF

  6. DeDude says:

    Curmodgeon; Where I live the “distressed” sales does not count in the assessment of value for tax purposes. So I purchased a piece of land on auction in November last year and got a new assessment two month ago. They claimed that the land was worth more than twice as much as I had payed. Nothing could be done because my actual purchase price had nothing to do with actual value. Well at least it suggests that I got a god deal ;-)

  7. Mannwich says:

    @HCF: Therefore that tax credit will never go away. In fact, it will likely be expanded.

  8. leftback says:

    XLF made new highs for the year today, the FXE peaked and then backed off. It’s op ex week and once those calls are ITM they will be sold, so this could all be over by lunchtime. Might be a decent time to short the XLF at last.

    The crude oil bubble seems to be replicating last year’s irrationality. Keep your eyes on the dollar.

  9. jc says:

    2/3 of home transcations are some form of distress, how healthy is that?

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aAZt4mO0Fzzg

  10. The Curmudgeon says:

    @DeDude:

    Well, there’s the problem with appraisals. An appraisal is supposed to reflect what a willing buyer would pay a willing seller. “Willing” meaning neither party held a gun to the other’s head, and they aren’t related such that it is an arm’s length transaction. “Willing” has nothing to do with whatever some circumstance extraneous to the contract compels the buyer or seller to do.

    Alabama law makes no exceptions for distressed sales. I’m sure the tax assessors will try to ignore them, but I’m also sure the homeowners won’t let them, and if the case is prosecuted all the way through, unless Alabama changes its law, the homeowners will win at having their assessments lowered.

    In short, Jefferson County is doomed. Alabama, particularly the areas surrounding Birmingham, recently became something of a car manufacturing hub. I wonder if Birmingham will go the way of Detroit.

  11. Mike in Nola says:

    Rosie’s note this morning makes this observation:

    As for those who believe that the housing market is stabilizing should have a read of the article Improving Home Sales Belie Market Reality on the front page of the Money & Investing section of the WSJ. The reality is that sales and pricing are currently being distorted by the wave of all-cash deals by investors who are looking to rent out foreclosed units and this wave of competing supply for the apartment market is dragging down rents — a critical driver of the inflation rate — for the first time in 17 years.

  12. Mike in Nola says:

    Oops, had meant to add my 2 cents to the above.

    What he says seems to be borne out by what I hear on Houston talk radio, I mean other than the wingnuts. As I have a couple of times noted, the are radio shows on almost every day, maybe every day, telling you how you, too, can become a landlord by buying up these bargains. Doesn’t matter if you have little or no capital and less than sterling credit. Apparently capital is being supplied by private lenders. Once this little bubble in the oatmeal pops as the schmucks find the rents don’t cover the payments to the loan sharks, it will settle back.

  13. HCF says:

    @ Mannwich:
    >Therefore that tax credit will never go away. In fact, it will likely be expanded.

    Sadly, I agree with you 100%. The powers that be will blow bubbles ad infinitum until everything collapses…

    HCF

  14. leftback says:

    Mikey: Buy now or be priced out for ever.. LOL.

    Options expiration today, Labor Day now just two weeks away folks… remember those first cool breezes of September, how they tend to bring a touch of sanity and reality to our idle summer fantasies?

  15. call me ahab says:

    Shiller may be right re another housing bubble- at least that is what the USG looks like it is trying its best to do-

    wouldn’t doubt the tax credit being extended to all buyers-

    people are such dupes- falling for the same stupid idiot traps over and over and over-

    how many times to they have to get smacked down before they realize that by the time they figure it is a sure bet- that is when the smart money starts leaving

  16. Thor says:

    JC – 31% is not 2/3 of homes. It’s 1/3

  17. Mannwich says:

    @ahab: I would LOVE another housing bubble. Will just sit back and watch it rise, then sell, and take off with our equity to Costa Rica for a while. But alas, I don’t think they can blow another housing bubble this soon. Too many current homeowners like me know the jig is up and would be willing to sell into it at the slightest hint of one……

  18. DeDude says:

    Mannwich; I agree that would quickly become the little bubble that couldn’t. No doubt that the shadow inventory will put a fairly tight lid on things.