What Will this Week’s Housing Data Suggest?
We have 3 major Housing releases this week:
• Existing Home Sales (1/25 10:00)
• S&P Case-Shiller HPI (1/26 9:00)
• New Home Sales (1/27 10:00)
I expect the trio will show that housing remains weak, that we are not seeing much in the way of any structural improvement in the Real Estate market; but that the pace of the overall collapse has moderated. We will see if there is any evidence of a significant decline in inventory, and whether affordability is improving.
We will also hear lots of noise about how the end of the first time home buyers tax credit is distorting the numbers. Perhaps it would be more accurate to say that the tax credit itself is what distorted the numbers, and its expiration allowed the data to normalize:
“National Association of Realtors is expected to announce an 11.6% drop in December existing-home sales to a seasonally adjusted annual rate of 5.78 million, according to economists polled by Dow Jones.
The large drop is exaggerated by the initial Nov. 30 expiration of the government’s first-time home-buyer tax credit, which previously boosted sales by some 28% from August through November to an annualized rate of 6.5 million units, the most since early 2007.
The tax credit has been extended through June, but most analysts don’t expect sales growth to resume until February or March. In the meantime, further declines in existing-home sales, which make up nearly 90% of the market, are sure to raise concerns about the recovery in housing and the broader economy.” (emphasis added)
You know the early data must have been pretty awful when a group of spinmeisters like the NAR are forecasting a 12% fall. Credit the WSJ writer of the paragraph above for appropriately noting the increase caused by the tax credit, and putting today’s likely drop into better context.
But one must also remember that home sales are a very seasonal phenomena. For each of the past several Springs, we have seen overly optimistic discussions of a Housing recovery that never was. In the final analysis, what was heralded as a recovery turned out to be little more than seasonality.
This reminds investors of a different bias to be on guard against: The bullish optimism endemic among Wall Street analysts and trade groups. Oftentimes, parts of the press can get swept up in the enthusiasm. When the cheerleaders missed the imminent market collapse, it sent the happy talk underground. Recent signs of economic stabilization, however, have allowed the buds to push through the frozen soil. That bias is why I push back against what I see as human foibles in the MSM.
We all fight a losing battle against our own wetware. I try to maintain a vigil against my own biases, some times less successfully than others. When ever we get something right — a bearish market call, a warning about Housing — there is a tendency to overstay your welcome with the winning call for too long. This can potentially lead to over-confidence.
Regardless, my goal is to understand the latest data, put it into context, separate the signal from the noise. Hopefully, you find this sort of analysis useful in your own data consumption and investing.
>
Previously:
Existing Home Sales, Non Seasonally Adjusted, Explained (March 25, 2008)
http://bigpicture.typepad.com/comments/2008/03/existing-home-s.html
Revisiting Housing Seasonality & the Perennial Bottom Callers (July 28th, 2008)
http://www.ritholtz.com/blog/2008/07/revisiting-housing-seasonality-the-perennial-bottom-callers/
The Annual Existing Home Sales MSM Errata (March 24th, 2009)
http://www.ritholtz.com/blog/2009/03/annual-existing-home-sales-errata/
Understanding Seasonal Adjustments (October 24th, 2009)
http://www.ritholtz.com/blog/2009/10/understanding-seasonal-adjustments/
Source:
Figures Mask Signs of Life in Housing
KELLY EVANS
WSJ, JANUARY 25, 2010
http://online.wsj.com/article/SB20001424052748703415804575023151304859446.html
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January 25th, 2010 at 6:19 am
Oh, and Durable Goods Thursday and GDP Friday . . .
January 25th, 2010 at 8:15 am
How about the Stuyvesant/Cooper Village mega foreclosure! How can anybody tsk tsk individual homeowners for jingle mail amd dismiss this as “just a business decision. What happens next with these many thousands of units?
January 25th, 2010 at 8:27 am
“…That bias is why I push back against what I see as human foibles in the MSM…”–BR, above
BR,
“human foibles” is, either, too charitable, or, too broad a descriptor to be, readily, definable..
http://www.thefreedictionary.com/foibles
~~
from this quarter, it seems, rather, we are being, actively, lied to/intentionally misled by that, saidsame, MSM..
January 25th, 2010 at 8:34 am
Always appreciate your blogging. A sane voice; paying attention to what matters. Would hate to live without you ;)
January 25th, 2010 at 8:34 am
2nd paragraph – Weak, not week.
Still perplexed on how futures show a strong open and this fantasy bull remains in tact given all of the lovely data floating about? Rational thought in irrational times…
January 25th, 2010 at 8:40 am
Good catch — the headline must have thrown me off. ; )
I’ll fix above
January 25th, 2010 at 8:41 am
A big problem is that reliable inventory numbers are so hard to get. See, e.g., the Dr. Housing Bubble blog where he wound up pulling numbers from several sources to come up with a scary total.
http://www.doctorhousingbubble.com/foreclosure-box-the-most-comprehensive-shadow-inventory-housing-analysis-for-los-angeles-county-examining-269-zip-codes-and-finding-100000-shadow-properties-while-public-views-1900/
January 25th, 2010 at 9:04 am
On a local note, you can see things deteriorating in the higher priced areas of Houston. In zip 77025, where we are looking for a rental, there are over 200 homes on the market at an average asking price of about $450k. Seven new listings this past week and two sales in the past 6 weeks. Generally, the asking prices have been over $200/sq ft, many well in excess of that in the $250 range. Interesting that the last sale was for $175/sq. ft. and I’m sure that the $200 mark will be breached generally as those some of the many McMansions go into foreclosure and bring less than that figure.
An interesting metric is rental prices, which are also cracking. We can rent an allegedly $400k house for less than $1800 per month. That would barely cover a note at 5% to which you would have to add taxes and insurance which are another $4-500/mo.
January 25th, 2010 at 10:09 am
I’d like to find out what rental rates look like in some of the “mid-priced” neighborhoods in the Los Angeles area. Any ideas where I might find that information?
The idea of buying, borrowing for, and maintaining a home in the future just gives me the heebie jeebies.
January 25th, 2010 at 10:52 am
Mike in H-town,
good of you to be 2x-checking the scene–before you decide on playing a role..
w/that, as you note, many of those ‘Rents’ don’t “float the Note (P+I+T+I)”–you may care to understand what happens to the “Renter”, in light of a Foreclosure/Tax Sale..
as per usual, Jurisdiction will tell the Tale..
January 25th, 2010 at 12:00 pm
OT Barry, you’ve got to see this if you haven’t already. The latest super bowl playoff commercial hit
http://www.youtube.com/watch?v=hsvAj6qfmFQ&feature=player_embedded
There is lots of social allegory in it too:
The clown is that raving lunatic you see on the streets. The kids are the people that think he’s going to hurt them. The mother is the authorities in charge. The daughter is wondering what all the fuss is about since she knows the guy.
The lunatic is raving for reasons other than what the public can see but that is irrelevant at this point. Just call homeland security and get me out of here
So the next time you see some raving lunatic running down the street, it probably isn’t your fault
January 25th, 2010 at 12:01 pm
HtCMSI – saw the 30sec scary clown spot – is it legal to produce that if not from the S-Wmart office? Like maybe a trial ballon using YouTube to forward to management? I think there is a switch “not-public”.
imo turning this titanic economy is about the same as turning the publics salt
its hip to be bad .. and to get noticed in msm
fyi – traded in my 3 Xmas cards over the weekend for a 18.5″ HDDtv/monitor flat screen with QAM tuner
thru my feet outta bed this morn and questioned if I want/need to put it into service – since the media is fingernails on a blackboard lately – but I said this “that 19, my 32, & edit station screens are the 3 I’d want in my Goldilocks Apollo Land Based Space Vehicle if I built one” (you know – escape the multitude of land based problems) not to big not to small just right
January 25th, 2010 at 3:03 pm
[...] real estate market; but that the pace of the overall collapse has moderated,” Barry Ritholtz writes at The Big [...]