Existing-home sales gained in October on a monthly basis as prices fell and cheaper homes predominated sales. Elevated inventory levels also declined.

Existing-home sales gained 10.1%, reflecting in large part an outsized seasonal adjustment. Sales were 23.5% above the 4.94 million-unit level in October 2008, when the collapse of Fannie, Lehman, AIG, Bank of America and Citigroup had paralyzed the nation.

Median existing-home price was $173,100 in October, down 7.1% from October 2008.

The biggest gains were found in the cheapest homes – especially condominiums and co-ops. Their sales surged 13.2% (seasonally adjusted) and were up an astonishing 40.8% above a year ago. Median prices for condos fell 10.4% below October 2008.

As expected, the prior month’s initial report was revised downward to annual pace of 5.54 million in September (originally reported as 5.57mm annualized). These revisions effectively eliminated the upside surprise of 220k sales last month.

EHSNSAOct2009It is noteworthy that the NAR claims the seasonally adjusted sales activity is at the highest level since February 2007 (6.55 million). CNN bought this nonsense hook line and sinker (Existing home sales at highest level since 2007) but it is not actually true without some accounting sleight of hand.

As the chart at right shows, the NSA data is quite unimpressive relative to the past few years.

Ultra low interest rates are helping sales somewhat. A 30-year, conventional, fixed-rate mortgage fell to 4.95% Last week, the 30-year rate dropped to 4.83%.

In addition to the low rates and the now extended first time homebuyers’ tax credit, a big spike in foreclosures is attracting bargain hunters. In parts of the country, some foreclosed units are selling for less than 50% of the peak 2005-06 price – especially on the low-end of the price scale. Foreclosure units have been selling briskly in California, Florida, Arizona, and Las Vegas.

Total housing inventory for sale fell 3.7% to 3.57 million existing homes, a 7.0-month supply at the current sales pace. This does not include a variety of so-called shadow inventory: REOs, rental units, vacation properties, and bank-owned strategic non-foreclosures.

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Seasonal Adjustments Continue to Skew Data:

Mark Hanson notes the ongoing skew of Seasonal Adjustments, and the continuing spin of the NAR:

1) The month of October was thought to be the end of the stimulus, so it reflects a last minute dash to get in before the tax credit sunset

2) Rates fell sharply to below 5% in Sept/Oct 2009

3) Despite this, Oct YTD sales are DOWN a whopping 716k from 2007

4) NSA sales were up 31k sales MoM to 499k in Oct — the exact same as Aug

5) NSA sales were up 86k sales from Oct 2008 – but in Oct 2008 rates were high (pre Fed QE) and there was not stimuli of any kind

6) Median and Avg prices fell again – about 1.5% MoM and 6% YoY – price drop accelerated into shoulder season as price dumping and short sales picked up

7) Year to date Oct 2008 vs Oct 2009 – 2009 sales finally passed 2008 sales by only 61k houses.

So in a nutshell, prices keep falling month after month and 2009 has produced 61k more real sales over 2008.

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EHS Nov 09
chart courtesy Barron’s Econoday

>

Source:
Existing-Home Sales Record Another Big Gain, Inventories Continue to Shrink
National Association of Realtors, November 23, 2009

http://www.realtor.org/press_room/news_releases/2009/11/record_big

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.

25 Responses to “Existing Home Sales (SA) Surge on Cheap Condos”

  1. bsneath says:

    Basically apartment conversions from back during the high fraud days now being sold with the $8,000 credit to meet down payments. I would not say this is a turn around for housing. Although it beats nothing at all!!!

  2. Mannwich says:

    The home flipping game is back here in the Twin Cities.

  3. Mike in Nola says:

    So how much will this cost in the future bail out of the FHA after this period of almost no money down loans to people with bad credit?

    Here’s a great example of how well the housing market is doing: Three tech dudes who still believe in the bubble buy a 900k property with 3% down. My guess is they will have trouble paying the property taxes much less the loan, esp. after they get laid off.
    http://www.nytimes.com/2009/11/20/business/20limits.html

    What happens to this market when the pissed off voters bounce the dems and put in some Republicans running on an anti-bailout poplulist platform? I’m ready to vote that way now, even though I’ve only voted Republican a handful of times in 59 years. Things could hardly get much worse.

  4. Mannwich says:

    @Mike: I read about that in CR on my vacation and stopped reading halfway through. Didn’t want to ruin my vacation. Ignorance was blissful.

  5. bsneath says:

    @Mike: Just kicking the can down the road…

    FHA-Backed Lending Is a ‘Train Wreck,’ Toll Says

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aRsDeHu7ywas&pos=3

  6. dougc says:

    The party that gave us TARP running on and winning with an anti-bailout platform would confirm my belief that you cannot overestimate the ignorance of the American people . Glad I am retired and won’t have to deal with the long term results of that decision.

  7. bsneath says:

    Take one part slow sales month, blend in two parts of one-time tax credit demand and an extraordinarily low interest rate, mix with seasonal adjustment factors and….. Existing homes sell at a 6.1 million rate!

  8. Robert M says:

    How can you afford the Condo fee’s regardless of how inexpensive the price? It seems to me it’s more of kicking the can down the road!!!

  9. Adult Franklin411 says:

    As Mark Hanson’s points #1, #2 and #6 point out, you can’t discuss a trend in existing home sales without factoring in cost/price. Also only the RE insiders know what the “real” inventory is right now.

    And as Barry and others have been doing here for some time now, you have to look at the data to see the segment(s) of homes that are selling. Once again we’re only talking about properties in the low end.

    I’d like to see a chart that shows (Price x units sold) with total sales volume in dollars.

  10. HarryWanger says:

    Mannwich: I’ll be in the Twin Cities for a week starting next Sunday. I’ll be staying in your hood with friends who have been flipping like mad lately. They’ve got it down to a science, buy a cheap joint, small starter type, in a decent neighborhood. They have a complete system to redo these things in a matter of weeks and only look to net 30-50k per place. Amazing how well they’ve done lately.

  11. Mannwich says:

    @Wanger: I believe it and have seen it with my own eyes, having poked around the market a bit lately with a home remodeler friend of mine. He just bought a place for $95K in a nice neighborhood abotu 3 miles or so from my house. I may go in on that one, but I’m hesitant to get in now, however, as I don’t think the game will last as long this time around.

  12. [...] from Calculated Risk I, Calculated Risk II, The Big Picture (Barry Ritholtz throws cold water on the numbers), and Free [...]

  13. Floyd Norris says:

    In the 12 months through October, the National Association of Realtors reports that 4,397,000 existing single family homes were sold. That compares to 4,396,000 in the 12 months ending in October 2008.

    That gain, of 1,000 homes or 0.2 percent, is the first such increase reported since the 12 months ended in May 2006.

    1. Year-over-year 12-month sales declined for 40 consecutive months. That came in short of the record 44 months,which lasted through April 1983.

    2. The largest year-over-year slide in sales was 17.6 percent, in the 12 months through August 2008. That did not come close to the old record decline of 29.3 percent, in the 12 months through July 1982.

    3. The decline in sales from the peak 12 months to the lowest 12 months was 31.4 percent. That, too, pales next to the peak decline, in the early 1980s, when the sales totals fell by more than half.

  14. Mannwich says:

    @Floyd Norris: Was that mostly due to the high mortgage interest rates at the time in ’80′s? I was only barely a teen back in those days, but didn’t interest rates get to the low to mid teens or so back then?

  15. DeDude says:

    Mike, you realy think that some GOP’ers voted in on a populist platform would allow things to collapse?

    The one thing that is true about the ignorant spoiled brads that vote In this country, is that they want to see the economy grow – and right away – and have a free lunch with that. Heck right now they are blaming the people who saved us from falling into a depression for the current ressesion, not the idiot whose deregulation coused the whole mess in the first place. Yes, the GOP’ers may ride on some populist “let it burn” platform, but they would not be stupid enough to follow through and actually let it burn. They would simply find another way of doing a bailout, probably one that would leave a huge trainwreck 6-8 years down the road. That strategy seems to have worked wonders for them last time, in this here American idiocracy.

    You know, create unsustainable “borrow from the future” growth long enough to get reelected and then leave the crash and the mess for the other party (the bigger the mess, the better), because in less than a year they will “own” the sh*t they are cleaning up, and when they are almost done its time for a new election with fresh hollow slogans that can encite the masses. It has worked since Reagan and why change a working formula.

  16. Thor says:

    “not the idiot whose deregulation caused the whole mess in the first place”

    Which idiot would that be? Clinton? Reagan? Bush I or II?. Seems we’ve been on this path quite a while now. . .

  17. bsneath says:

    Just for drill, look at the CR graph on existing home sales and assume 50,000 of October sales were brought forward from November. Then imagine what next month’s seasonally adjusted annualized sales rate could potentially look like. Not saying it is going to happen, but it could.

    http://3.bp.blogspot.com/_pMscxxELHEg/SwqvG-tbU0I/AAAAAAAAG3E/YJJn27bt1Jk/s1600/EHSNSAOct2009.jpg

  18. bsneath says:

    I suspect most everyone has already seen the “China’s Empty City” video, but just in case not, it is on PK’s site. (I’ve had trouble in the past getting the video to play) Very nice looking city btw. Also, I understand the crime rate is practically nil :>}

    http://paul.kedrosky.com/

  19. KentWillard says:

    NAR data has been dubious at times. But I wouldn’t call seasonal adjustment an “accounting sleight of hand”. It isn’t accounting, and SA is a standard way to represent information, particularly when the NSA graph shows that there is clearly seasonality in home sales (in an expected way). Home sales increased significantly (though not to the boom days) due to the tax incentive, low interest rates, and because demand increases when prices fall (and they’ve fallen a lot). As demand increases, prices are falling less (or even increasing), though admittedly some of this is because of relatively fewer foreclosures due to moratoriums and modifications. Is this sustainable – I don’t know. Is this even good – I’m not sure. But it isn’t an accounting sleight of hand.

    ~~~

    BR: Normally, it isn’t sleight of hand. However, the way the NAR employs it is done to mislead;

    See this:
    http://www.ritholtz.com/blog/2009/10/understanding-seasonal-adjustments/

    and this:
    http://www.ritholtz.com/blog/2009/10/existing-home-sales-fall-in-september-09/

    and this:
    http://www.ritholtz.com/blog/2008/03/existing-home-sales-non-seasonally-adjusted-explained/

  20. Adult Franklin411 says:

    @Floyd Norris:
    There was no corresponding loss in price due to a housing bubble during the early ’80s recession so the data you put forward tell, at best, an incomplete story.

    So 4 million units sold in Period 1 and 4.002 units sold in Period 2?

    Wow. BFD. Here’s why: Let’s talk used cars instead of houses. During Period 1 U is 5%. The median used car is a 2004 Saturn, say, for $8,500.

    During Period 2, U is 10% and fucking Saturn is out of business. The median car sold is a fucking 1973 Ford Pinto sold at a police auction for $50. Oh, and there’s a half smoked 35 year old blunt in the ashtray. Bonus. Add $4 to value.

  21. DeDude says:

    “Which idiot would that be? Clinton? Reagan? Bush I or II?. Seems we’ve been on this path quite a while now”

    GOP idiots in general for their naïve (lets be kind and just think of it simple stupidity) beliefs that if you just leave it all to the free marked things will be fine and dandy. There may be a few “blue dog” concervative democrats that can be blamed for ignoring reality and previous experience, and jumping on that same stupid train (or refusing to step out in front of it), but the ideological drive over the cliff is GOP.

  22. call me ahab says:

    yeah- what Dedude said-

    Democrats are cool- they got it together- if we just stick w/ them- no problems- ever- and Obama- pulease- what more could you ask for- he wants health care for everyone- wow!!!

    Democrats- Fuck Yeah

  23. DeDude says:

    You got it ahab, democrats weigh a lot less on the fuck up scale. To put people who don’t believe in government in charge of government, is like a church taking an atheist as their pastor.

  24. Adult Franklin411 says:

    The NAR data is available at http://www.realtor.org/research/research/ehsdata

    Here’s how I read the spreadsheet data:

    2006: 6.4 million units sold at avg price of $268,200
    2007: 5.6 million units sold at avg price of $266,000
    2008: 4.9 million units sold at avg price of $242,700
    2009 (in progress): Assume annual sales of ~4.9 million units at avg price of $217,290

    Multiplying units sold by average price you get:

    2006: $1.7 trillion
    2007: $1.5 trillion
    2008: $1.19 trillion
    2009: $ 1.07 trillion

    Viewed in this light we’re still in an “improving second derivative” stage looking at a $120 billion loss YoY from 2008-09 instead of the $300 billion YoY hit from 2007-08.

    Assuming another -10% loss in average home price in 2010 to $195,560, we will need to see 5.5 million existing home sales next year to improve upon 2009 and officially say things are looking up.

  25. [...] Set to run out at the end of this month, Congress renewed it earlier and expanded the policy. Not everyone, however, is impressed with the numbers coming out of the NAR.  [NPR via AP, The Big [...]