Existing Home Sales Slide 2.2%
We see more evidence that next leg down in Housing has begun, as sales of existing houses fell 2.2% to an annual run rate of 5.66 million sales. These transactions include tax subsidized contracts signed by April 30 and closing by May 31st. Hallucinogenic economists had actually forecast a rise to a 6.12 million rate, according to a Bloomberg survey of 74 stoners.
We haven’t looked at the usual idiotic blatherings from the National Association of Realtors in quite some time. For shits and giggles, let’s have a gander at their latest, to see if they are still maintaining their traditional high standards of alcohol consumption.
Ahhh, the Realtor crowd rarely disappoints. The Headline — “May Shows a Continued Strong Pace for Existing-Home Sales” — reveals their inability to separate facts from wishful thinking. Such is what happens when “Spin” is your religion.
Let’s ignore their usual foolishness, and go straight for the data:
• Home resales decreased by 2.2%
• Home Sales are up 19.2% from 2009
• April’s Sales (Tax incentive included) were revised to +8%.
• Seasonally adjusted annual rate of 5.66 million units
• May 2009 median existing-home prices was $179,600, up 2.7% from 2009
• Distressed home sales were 31% of all sales, vs 33% in April (33% in May 2009)
• Raw unsold inventory is 1.1% above a year ago.
• The existing supply of homes for sale is 3.89 million units, an 8.3-month supply (this does not include shadow inventory)
• April’s Sales (Tax incentive included) were revised to a + 8.0%.
• First-time buyers purchased 46% of homes in May, down from 49% in April
• Single-family median existing-home prices were higher in 16 out of 20 metropolitan statistical versus May 2009.
• Existing condominium and co-op sales fell 6.8% (SAAR of 680,000 in May.
• Condos/co-ops sales were 32.6% percent above May 2009.
• Median existing condo price was $181,300, up 3.4% from a year ago.
This was the first monthly decrease in sales after 2 consecutive increases — and right into the teeth of seasonal strength. That’s not very good.
>
Click for ginormous chart
Chart courtesy of Calculated Risk
>
Source:
May Shows a Continued Strong Pace for Existing-Home Sales
NAR, June 22, 2010
http://www.realtor.org/press_room/news_releases/2010/06/may_strong_pace
De.li.cious
Digg this!
Technorati
Reddit
Newsvine
Stumble
Facebook
June 22nd, 2010 at 11:55 am
My local area (San Fernando Valley in California) showed a 20.9% decrease in pendings during May, that’s the kind of decrease seen over the holidays. In California there was a $10,000 credit that went into effect in May so we even had that tailwind over the rest of the country, it didn’t seem to help. Pushing on a string.
June 22nd, 2010 at 11:55 am
Did anyone catch Mr.Timmy on the TARP Hearings today? When asked why homeower’s were dropping out of the modification plan, He replied that the problem was that the borrower’s signed up were brought into the program on STATED INCOME. On top of reduced sales we will continue to see more defaults. Without forced principal reduction the problem will linger.
June 22nd, 2010 at 12:42 pm
Au contraire. These are very good news. There are still markets, which are way overpriced (e.g. New York, particularly Manhattan with a median home price to median income ratio of about 11 to 13). Hopefully, the craziness to keep inflated real estate prices inflated finally comes to an end with the expiration of the tax credit, although I understand it sucks for owners who bought at overpriced levels, even more if they want or have to sell.
June 22nd, 2010 at 12:50 pm
Get ready for another leg down — not just volume –in PRICE.
June 22nd, 2010 at 12:51 pm
pretty telling- especially considering that existing home sales do not count until closed- i.e. many if not most of these sales were contracts written before the expiration of the tax incentives on April 30-
now let’s see what happens
June 22nd, 2010 at 12:53 pm
Thanks for cutting to the chase with the summary, BR. Take June end of Q window dressing out of the equation and we’d be hurting big time in the market.
June 22nd, 2010 at 12:58 pm
and I can’t tell you how many times I heard this-
“my house is on the Potomac- so it’s a lock it will keep its value- and besides the DC metro area is immune because of all the government jobs”
but alas- nether of those qualities saved the DC area-
you can’t have $100K yearly price increases and think that the market won’t smack it down to reality at some point
June 22nd, 2010 at 1:05 pm
We can only hope the next leg down is in price. But I betcha the government engineers some sort of new price-supporting mechanism. It simply can’t allow home prices to be set by the market. Of course, if market prices had ever before been so queered up governmental intrusions, it’d be hard to imagine. Maybe the agricultural market during the Great Depression, when they plowed fields of corn under and slaughtered cattle in order to juice the prices of agricultural commodities.
Will there be a bulldozer coming to a neighborhood near you?
In the meantime, Habitat for Humanity still builds houses. Apparently they are unaware that it would be more cost effective to simply buy a McMansion out of foreclosure. Of course, doing so wouldn’t make good news copy of local politicians getting sweaty pushing up walls.
June 22nd, 2010 at 1:36 pm
I’m not sure it is really a ‘next leg’. I think that, just as with calling the recession, you have to subtract out the stimulus programs and determine if the underlying business activity really increased or not. There is pretty good argument that absent the tax break, housing has continuously declined.
June 22nd, 2010 at 1:39 pm
Thanks for the post…I especially liked the summary info…
From what I have seen and heard, sales at the $1 million and above level are especially problematical.
Also of great importance, IMHO, is the extremely low level (historically) of new home sales…
June 22nd, 2010 at 1:40 pm
“Apparently they are unaware that it would be more cost effective to simply buy a McMansion out of foreclosure.”
I’ve thought that for years. So much suburban development is unsustainable for two fundamental reasons. First, it sets up a life style that is beyond the financial ability of most people who live that way to continue, particularly in the face of rising energy costs. Second, those houses may look fine if you have 2 or 3 kids in school and a working couple to support the whole thing, but someday those kids leave and people look at retiring… and then who do you sell to?
June 22nd, 2010 at 2:11 pm
It just can’t be good when Lawrence Yun says that HE is uncomfortable with the level of inventories.
June 22nd, 2010 at 2:19 pm
I agree with Wally: we are probably just looking at continued weakness since around late 2006, early 2007, absent the steroids the Feds put in this past spring. You just can’t do enough right now to keep prices up. Forced principal reductions would be the only way to get this thing righted, and I’d like to add that, if the Feds want to really take part in all of this, those principal reductions should be added to the public indebtedness, underwritten into Bonds, and then sold to Americans only. That way, we all take part in rectifying the problems we all helped create. Tax refunds to individuals and businesses would be partially repaid in US Household Debt Bonds, ensuring we all have an interest in paying our fair share. Oh, and the big banks who gave the go ahead would get yet another free pass, as they are made whole on those written down balances. And a lesson is learned for the future.
Sure, it’s tyrannical, but I’m not The President. I can say things like that if I want to.
June 22nd, 2010 at 4:06 pm
Yes, I agree that we are about to enter a second down leg in housing, including another 10-20% drop in prices. Unless they REALLY crank up the printing presses again. The economics crowd must, as usual, have been drinking the kool-aid of simple mathematical extrapolation without factoring out the termination of the tax incentives?
However,in fairness to the NAR crowd, you have critcised them in the past for ignoring the on year data in favour of the monthly trend. Now, when it suits them, they focus on the yearly trend. Typical of them and to be expected but you can’t have it both ways.
June 22nd, 2010 at 4:15 pm
first post here, long time lurker…i’m sorry but i just cannot help myself anymore. those charts from calculatedrisk should be ranked up there with being staked out over a fire ant nest covered in honey.
June 22nd, 2010 at 4:51 pm
In my local area of SW Florida, Home Sales and Prices are actually UP: http://www.heraldtribune.com/article/20100622/BREAKING/100629931/2416/NEWS?Title=Sarasota-Bradenton-home-sales-prices-up-
Seeing as the area was one of the epicenters of destruction, and led the rest of the country in the collapse, this could be a harbinger of stabilization. Rich A-holes are coming out of the woodwork to snatch up foreclosures and short sales while everyone else is bent over a barrel. They just passed a “Rocket Docket” to clear all the foreclosure cases. http://www.heraldtribune.com/article/20100622/ARTICLE/6221070/2416/NEWS?Title=-Rocket-docket-comes-to-Manatee
It is both good and disturbing at the same time-good because this type of stuff needs to occur for the healing to begin. . . disturbing seeing all the poor saps getting screwed and the fallout on people’s lives when they are brought to financial ruin. They have headlines of “Real Estate Vultures” all the time down here now, which is a very apt moniker. A disgusting image, but at the same time, a vital part of the system in cleaning up the mess and carnage.
June 22nd, 2010 at 5:05 pm
Call Me Ahab said-
‘and I can’t tell you how many times I heard this-
“my house is on the Potomac- so it’s a lock it will keep its value- and besides the DC metro area is immune because of all the government jobs”
but alas- nether of those qualities saved the DC area-
you can’t have $100K yearly price increases and think that the market won’t smack it down to reality at some point’
I totaly agree CMA. Locally here in San Diego (a place that EVERYONE wants to live, so say RE agents) the market has been hammered and this includes the top end especially.
Here is todays snapshot of the top 4 areas in the county as for “whats on the market”. This includes: REO, traditional sale and short sales. This does not include the ridiculous number of new condos downtown in the luxury high rises or the backlogged inventory which have not been released. Oh and by the way, I dont know of any of the Cities in the county working anywhere near a decent balance sheet. Staticially, cash buyers as of the past few weeks have slowed down significantly! Sounds like they are gonna stay on the sidelines until after the summer.
Totals: SFH and Condos
Downtown 623
La Jolla 476
Fallbrook 394
Carlsbad South 352
http://www.sdlookup.com/Browse_Real_Estate-San_Diego_County?srtcol=5&srtdir=1
June 22nd, 2010 at 5:23 pm
“Get ready for another leg down — not just volume –in PRICE.”–BR, above
if they weren’t peddling Counterfeit Money, beside the Fact that most(based as a % of Tot. Assets, at least) are Insolvent, I’d say: “Take that to the Bank ~!”
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Central+Bank+Federal+Reserve+Fraud
June 22nd, 2010 at 5:50 pm
High end homes are cooked. What’s selling are mid and lower priced homes. Vacation homes still have a lot further to fall. Inventory at beach resorts is at an all time high with prices having come down 30% but inventory is still not moving. This means (law of supply and demand) that the prices aren’t low enough yet. Stubborn owners are still holding on for their prices, but more and more inventory is coming on the market. This bubble grew for many years, and I think it has years to go in the drop.
June 22nd, 2010 at 6:09 pm
[...] “We see more evidence that the next leg down in housing has begun,” Barry Ritholtz writes at The Big [...]
June 22nd, 2010 at 6:46 pm
[...] noted earlier today, Housing data was weak, falling 2.2% from [...]
June 22nd, 2010 at 7:09 pm
I’m confused. I respect and agree with the “glass is half full” general opinion here (absent Cognos) but were there not expectations that the first time homeowner (and, in fact, any home buyer) credit would “pull forward” purchases and that in the month or months when this wanes we’d see a depressed volume. After all, we saw that too with the auto purchase subsidy.
Now, when we in fact see a dip, we herald it as the start of the second leg down? Given the expected impact of the end of the incentive, how can we draw this conclusion?
There are TONS of things wrong with the housing market. I just do not know if this indicates these problems have come home to roost. I’m still short ITB though.
June 22nd, 2010 at 7:45 pm
@Ritholz stated
“Get ready for another leg down — not just volume –in PRICE.”
I think this may more true in some markets than others. The true ‘sub-prime’ neighbourhoods, (i.e., the working poor) were hit the hardest initially. A decent contrast is markets in the Phoenix area. Mesa is poorer, prices have already tanked as much as 60+% and are back to 2000 levels. I suspect the prices are at or near the bottom already. There is not a lot of room to move much lower, many are already valued at less than it would cost to replace if they burned down. http://www.trulia.com/real_estate/Mesa-Arizona/market-trends/
Fountain Hills however is considerably more affluent. Looking at the trends there you see more room to fall. They are only at 2005 prices as an average. http://www.trulia.com/real_estate/Fountain_Hills-Arizona/market-trends/
June 22nd, 2010 at 7:47 pm
The coming QUEENSville Housing Horror is likely to be applicable to a lot of counties throughout the US (except Detroit):
http://www.businessinsider.com/a-housing-price-collapse-in-queens-ny-is-almost-certain-2010-6
June 22nd, 2010 at 10:35 pm
Louis said: “Without forced principal reduction the problem will linger.”
I cannot agree more. Principal reduction is all we have left… PRINCIPLES hit the zero lower bound in 2008.
June 22nd, 2010 at 11:54 pm
Who’d have thunk building 25 years worth of homes in 5 years would cause such a quandary?
Agressive policy concept to remedy said fiasco:
Anyone who wants citizenship who is waiting in line for it, or thinking about it, or given up on it…. buy a home and its yours. Welcome to America.
Chinese industrialist wanna fixer-upper in Malibu? buy a home – Welcome to America.
Indian Doctor want to come to the US? buy a home
Russian Arms dealer? approved
Mexican drug lord? welcome to Phoenix as US citizen
Owe back taxes? amnesty baby.
Saudi oil nephew/prince/ playboy/ sheik/ bored 30-something? Need a yacht with that oceanfront condo in Miami?
Come on, sure the plan has some warts, but there’s gotta be 5 million immigrants out there somewhere with the $$ and we could use the tax base. Offer em dual citizenship. It’ll be the next great wave of legal immigration. I’m sure the wave of Italian, Irish, German, and Jews in the 1920′s and 30′s weren’t all choir boys.
I’m sure there’s even some family’s of working stiffs illegals that could afford a home and would pony up and buy instead of renting if mortgage companies could deal with ‘em. I mean they gave mortgages to people without jobs and assets, citizenship shouldn’t be as issue.
We need some new dollars to get this thing crackin…
Think of it as a blue light special for citizenship. (you know, like always, if you can afford it) – What’s more American than that?
We have to replace
Give me your tired, your poor, Your huddled masses yearning to breathe free
with
Give me your spoiled, your rich, Your smartly dressed crowd, yearning for an ocean view and Viking appliances
June 23rd, 2010 at 3:49 am
End of comment thread so I’ll just say.
Perfect post Barry.
Like the new wonky mix on the posts. Readers are down to level where I’m in the shallow end of the gene pool, just where I like it.
Last couple of weeks: Good stuff, good trash talkin. Still I’ll be pissed if the first batch of TBP TV doesn’t have a shoot in front of a beehive (Don’t stand in front of the hive entrance).
Keep it fun.
Get the assets under management over a cool billion.
Then have some fun buying the Ms. BP a toy car (don’t worry you’ll hit 2b before that ferrari hybrid is out)
Thanks for the ride.
June 23rd, 2010 at 3:50 am
Rescission Says:
June 22nd, 2010 at 5:50 pm
High end homes are cooked. What’s selling are mid and lower priced homes.
What is selling is homes below the Jumbo limit that GSE will buy the note one.
Done.
Next.
June 23rd, 2010 at 4:00 am
Casual Onlooker Says:
There is not a lot of room to move much lower, many are already valued at less than it would cost to replace if they burned down.
People outside the trades don’t understand the difference between “replace” and “build”. It’s cheap to replace. Tap fees, curb and gutter ec… are the problem with building entry level housing in a city (Hence the burbs and ex-burbs). We couldn’t build them fast enough to keep up with the CDO software for a few years. So that the old “price to replace” means nothing to anyone but ol’ Greenspan.
Sorry I’m a suck up I had to get a greenie dig in.
June 23rd, 2010 at 4:05 am
What is selling is homes below the Jumbo limit that GSE will buy the note on.
This correction brought to you by:
HADES: Belgian-Style Ale
Breat Divide Brewing Co
http://www.greatdivide.com/
Try the YETI and Scotish Ale.
June 23rd, 2010 at 7:21 am
To Adeptec (and BR): Alternative to principal write-down.
There are a couple govt. programs (FHLBB and Block Grant) which give down payment assistance with no payback if the person occupies the home for a certain number of years. The same model has been used for Block Grant storefront renovation “loans.” In the FHLBB case they put their lien as a covenant in the deed. In other cases they file a 2nd mortgage. In both cases there is no payment involved but a clawback if the home is sold before reaching X years (usually 5.)
I do not understand why the mortgage industry, rather than completely foregoing principal in the write-down process, does not just file a silent 2nd on the property for the amount “foregiven.” Then, if the property sells 15 years from now during which the property value has (hopefully) appreciated there is at least a ghost of a chance to get the money back and in the meantime the borrower gets the relief he/she needs.
June 23rd, 2010 at 11:57 am
However,in fairness to the NAR crowd, you have critcised them in the past for ignoring the on year data in favour of the monthly trend. Now, when it suits them, they focus on the yearly trend. Typical of them and to be expected but you can’t have it both ways.
Noted Barry
June 29th, 2010 at 7:17 am
[...] buyers purchased 46% of existing home sales in May, down from 49% in [...]