June 25, 2007

FLASH: Used home sales fall yet again - supposedly down 10% vs last year, dead wood inventory at 9 months, prices fall yet again

Sales down, inventory up, prices down.

Any questions?

Oh, you'll see the lazy MSM report the NAR's "down 0.3%" as their headline number. Why? Because sales in May at an annual rate vs. April's annual rate fell by that amount. When we all know the only real number to look at is May 2007 vs. May 2006. But that would be to tough for the MSM to do. It's much easier to take the NAR's spin and report it as the news.

And remember, this NAR number (to be trusted like Enron) doesn't include rampant incentives and cash-back, and is a 40% sampling of MLS sales.

Sales of previously owned homes in the U.S. fell in May to the lowest in almost four years, reinforcing concerns about a protracted housing slump.

The supply of homes for sale increased 5 percent to 4.43 million. At the current sales pace, that represented 8.9 months' worth, the highest since June 1992 and up from 8.4 months' worth at the end of the prior month.

The median price of an existing home fell 2.1 percent last month from a year ago to $223,700, the 10th consecutive month of year-over-year declines, the Realtors group said.

Housing accounts for about 23 percent of the U.S. economy, when taking into account purchases of furniture, appliances and items for new homes.


Anonymous said...

New Today! Homebuilding Business Ain’t What it Used to Be


CBS segment details the trials and tribulations of a New York homebuilder whose spec McMansions have stopped selling even with slashed prices and extras thrown in. Includes some brief statements from David Seiders, Chief Economist of the National Association of Home Builders.

Originally aired on: 6/21/2007 on CBS

Running Time: 1 minutes 39 seconds

Mark in San Diego said...

My favorite quote from YUN -

"Yun said buyers are simply waiting to step forward and make purchases. He's found that household formation has slowed dramatically since late 2006, something rarely seen outside of a recession.
"The market is underperforming when you consider positive fundamentals such as the strength of job creation, economic growth, favorable mortgage interest rates and flat home prices," Yun said.

WHAT I have been saying - we ARE in a growth recession - those "jobs" are low paying McJobs - no wonder household formation is low - two McJobs can't come together to buy a house!!!

Anonymous said...

This is all just the price to be paid for the excesses of the past few years. Last eaten, first swallowed. The last buyer at inflated prices and with the most toxic loan will be (was) the first to go and we're now just working backwards until all the instability is wrung out of the market. There will be alot of personal tragedies but that is how markets work, ultimately efficient markets remove distortions. The distortion here was artifical demand due to low rates, speculation & sub-prime loans. Market forces are removing this artifical demand. The artifical demand caused priced to be distorted toward the upside. Now that the cause of high prices are gone, price is coming down to a new lower point reflecting a normal market & not a distorted one. Houses are homes & to be held fo the long term and lived in, not a short term investment. Anyone who purchased for the former w/ stable finiancial instruments are fine, those who bought with toxic pdts and said, I'll either re-fi or sell had the wrong mindset for this sort of asset/investment and they are now paying the price. Good Luck!

keith said...

Any predictions for tomorrow's new home sales report?

Prices vs. last year will shock people

Westchester Chick said...

Wasn't it the MSM and the NAR that kept telling us there was no national bubble??? If that's the case - why are they even feeding us some big overall number - the YOY numbers should be market by market. The national number is meaningless and in my opinion so is the median. A truer market indicator would be the YOY numbers market by market median and mean.

Rordogma said...

The Yahoo news article mentioned sales in the SOUTH was a major influence in the drop. Does this mean Austin/Houston/Dallas is finally taking it like Cali/Florida?

We sure do have a lot of condos and McMansions around here...who's buying? Not me!!!

keith said...

FYI I posted this on http://lawrenceyunwatch.blogspot.com today:

First time home buyers plummet 70%. Yun actually points it out. Recession anyone? Housing crash everyone?

Big drop in new household formation in Yun's numbers today. And nice to see Yun being called "crafty". He he he.

Here's Diana Olick's report:

Existing home sales in May were essentially flat, down just 0.3% from April and down 10.3% from a year ago. Prices also continue to drop for the tenth straight month, down 2.1% and inventories continue to rise, now to an 8.9-month supply. A pretty bland housing report all in all, except for a strange new number slipped into the middle of the report by that crafty NAR Senior Economist, Lawrence Yun. This mention, to me at least, is the real nugget that the 94 talking heads we’ll see on TV today will inevitably miss.

Household Formation. What’s that? It’s first time homebuyers. Whether it’s young professionals, new families, or new investors, none of these people, well, a lot less than usual, are jumping into the market. Household formation is down 70% (!) in the first quarter of this year from last year. On an annualized basis, it’s less than 500,000, which Yun calls, “rare.” You only see that in a real economic recession.

And here's what Yun said:

Lawrence Yun, NAR senior economist, said the market softness is understandable. “I think psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers,” he said. “Household formation has slowed dramatically since late 2006, implying that many people are doubling-up – they’re adding roommates or moving in with parents.

And here's a website people are using until the housing crash is over


George W. Groovy said...

You know what these numbers tell me? People have no sense of humor.

burn baby burn said...

Psychological nothing it is the fundamntals stupid!

Shakster said...

I must be wrong on my estimation of the supply numbers then. 6million by Sept 07 or Oct,and even the MSM is reporting 4.4million.At this rate we'll have 8million.The MSM shell game of hiding the numbers is falling behind.They plug one leak then another pops open.They say prices are steady,but sales slow.They say sales are steady,but the inventory jumps.

David in JAX said...

keith said...
Any predictions for tomorrow's new home sales report?

Prices vs. last year will shock people

Will they be shocked? Or will the MSM focus on the MOM and neglect the YOY numbers?

I think we will see a huge YOY decline with a small MOM decline. The stock market will rally and the MSM will hail the end of the housing slump.

Black Swan said...

Black Swan

An event or occurrence that deviates beyond what is normally expected
of a situation and that would be extremely difficult to predict. This
term was popularized by Nassim Nicholas Taleb, a finance professor and
former Wall Street trader.

Investopedia Says: Black swan events are typically random and
unexpected. For example, the previously successful hedge fund Long
Term Capital Management (LTCM) was driven into the ground as a result
of the ripple effect caused by the Russian government's debt default.
The Russian government's default represents a black swan event because
none of LTCM's computer models could have predicted this event and its
subsequent effects.

Anonymous said...

I'm in Las Vegas this week. Got here Friday night and can't remember the last time it was this busy. I'm here for business about 5 or 6 times a year and it' simply amazing how busy it is. Even more amazing given it's summer time, when it's the slow season.

I thought maybe Sat. night was due to the fight. Last night walking about it was wall to wall people everywhere as well and this morning same thing.

Las Vegas and toursim in general is a good proxy for the economy. When people are hurting they don't go on vacation. No sign of any recession based on my observations.

Not saying house prices won't fall any more. However so far it doesn't look like it's affecting people.

debt is wealth said...

The stock market's up again - too bad the homedebtors have no money to invest since it's all going into feeding the depreciating asset. Talk about putting all your eggs in one basket.

keith said...

May home sales being flat vs. April would be like December retail sales being flat vs. November

Get it now?

Anonymous said...

BOSTON (Dow Jones) -- A report on existing-home sales Monday did little to quell fears that the housing market still has plenty of unsold homes on the market to work though before slumping home-builder stocks can stage a recovery.

The inventory of existing homes on the market rose to its highest level relative to sales in 15 years, according to the National Association of Realtors. Inventories rose 5% in May to about a nine-month supply, the largest since the closing phases of the last housing downturn.

Although Monday's data were on the existing-home market, rising resale inventories are seen as having a negative impact on builders of new houses as well.

"Higher inventory levels will likely further decrease buyer urgency and persuade more buyers to wait on the sidelines," wrote Banc of America Securities analyst Daniel Oppenheim in a report to clients Monday.

"Home builders will need to cut prices again when existing-home prices fall to maintain sales volume," he said, illustrating the competition builders face from falling resale prices. Also, some home-builder executives say customers are having difficulty selling their existing homes to move up to a new and more expensive house.


gekko said...

"Las Vegas and toursim in general is a good proxy for the economy. When people are hurting they don't go on vacation. No sign of any recession based on my observations."

while i agree, people hurting dont vacate. however, las vegas is the ONE place i would not sample. it's probably wall-to-wall homedebtors putting their heloc's on black, if they win, they stay in the home, if they lose, foreclose

Anonymous said...

gekko said...
"Las Vegas and toursim in general is a good proxy for the economy. When people are hurting they don't go on vacation. No sign of any recession based on my observations."

while i agree, people hurting dont vacate. however, las vegas is the ONE place i would not sample. it's probably wall-to-wall homedebtors putting their heloc's on black, if they win, they stay in the home, if they lose, foreclose

June 25, 2007 5:17 PM

That is a ridiculous statement. But if you must:

YOY change in total passengers at:

ATL: 4.77% increase
LAX: 1.7% increase
O'Hare: 5.5% increase
PHX: 1.7% increase

This is not a sign of a recession folks.

The Thinker said...

Vegas also attracts a fair amount of foreign nationals on vacation. To the rest of the developed world, vacationing in the US is looking better and better as our currency continues to loose strength against the Euro and Pound.

Anonymous said...

I was up in Washington DC and every where was busy and people spending money. I did have one housing conversation with a local and they are renting looking to buy, yes that's right buy. I drove from Norfolk to DC and the hwy was filled to the Max. It doesnt seem to be slowing down in this area.

Mark in San Diego said...

"Never bet against the American consumer" Paul Volker. . .housing prices will continue to drop, but not the American consumer - they are like crack junkies - will spend everything, borrow to the max, and spend Grandma's Social Security on a trip to Vegas. . .I have seen it all - spend a day at a debt counselling office sometime. . .remember another great saying "Americans are the first people to drive to the poorhouse in a car" . . .Will Rogers, 1932.

gjt said...

Anecdotal from CO: Two houses near me for sale, one a FSBO. The bank foreclosed on the FSBO last Friday only a week after the renters moved out. Now it sits vacant with no signs indicating it's for sale. I guess in the banking world that makes some kind of sense.

The other house "almost" sold, but the offer was contingent on the sale of the buyer's house, and that fell through. The family has to move at the end of June, but they can't lower their asking price without losing money. Rock and hard place time.

area 51 said...

But the NAR has a ready-made answer to the latest report:


From msnmoney:
The Realtors' statement not surprisingly urged those thinking of a home purchase to act before the market starts to turn around.

"Buyers who've been on the sidelines may want to take a closer look at current conditions in their area," said Pat Combs, a Grand Rapids, Mich., Realtor and the president of the group in its report. "If they wait for sales to rise, their choices and negotiating position won't be as good as they are now."

Anonymous said...

>> Te family has to move at the end of June, but they can't lower their asking price without losing money.

You mean "won't". Ah, but they will, because they "have" to.

keith said...

here's HP'er seth jayson at fool today backing up this HP thread (come on seth - give us a hat-tip!)

With apologies to Homer Simpson's Jack Nicholson impression, "No free money and no quick flip makes homeowners ... something, something ..."

"Drop prices?" Don't mind if they do.

Data released today by the National Association of Realtors (NAR) shows that home prices are plummeting just as sales are flagging. In other words, it's exactly as some of us bubble-bursters have been predicting for a while. Too much supply and not enough demand moves the needle firmly in the opposite direction of what the majority of (delusional) Americans seem to think. Houses are worth less now than they were. Fewer are selling. This goes hand in hand, and I don't think we've seen anything yet.

But back to this month's bad news. The chuckleheads in the mainstream media will probably report the numbers sequentially, following the lead that's taken by the NAR, hoping to put lipstick on the pig. Don't be fooled by the likes of the AP, which reports the sales volume comparison from month to month. The real story is in the annual comparisons, and things there are ugly.

Let's compare. Home sales "essentially unchanged" is what the six-percenters at the NAR would like to see reported, but from May 2006 to May 2007, sales dropped an impressive 10.3%.


Anonymous said...

How much longer before we read about seller's coming out and saying "My RE Agent is a complete idiot"? Most selling agents are getting kicked to the curb on a regular basis, both honest & dishonest. The dishonest one's are getting tossed because by going along with sellers' unrealistic expectations they cannot find the GFs of years gone by. Instead they are being confronted with crickets and the occasional bottom feeder ultra lowball. Unrealistic sellers do not like a lack of results either, thus putting the placating Seller agent in a bind until s/he is canned due to lack of performance.

Honest RE agents (yes there are some) are just not getting any work, they are refusing listings where sellers will not accept lowering the price. The few honest agents that get listings are from people who absolutely, positively MUST sell NOW and they have an eqity cushion. Those agents are also taking CUTS in commission to soften the blow. IN addition to the cut, the split is generous on the buying agent side. Agents are getting volume work from builders and banks (due to REOs!!).

Smart agents are working exclusively for buyers and/or going for volume from banks.

Good Luck!!

RJ said...

Tourism in Vegas is not a measure of recession. Recession is defined as two consecutive quarters of decline in GDP. Real GDP has in fact been in decline for some time, but the government numbers hide the fact because they understate inflation by rougly 70%. The fact that people continue to slap down their credit cards to blow off steam in Vegas is the problem, not evidence that there is no problem. We are in an inflationary recession and are using up our remaining credit to maintain our lifestyles.

Also, it's true that housing markets vary, some up, some down. But what people simply don't get is that asset appreciation is the issue. If housing prices stop appreciating at a double digit rate, credit based on equity will dry up along with the $1 trillion in spending it generated.

Anonymous said...

In the spirit of BMW, Lexus, Acura etc please refer to "used" homes as "pre-owned" homes. That way, just like BMW, Lexus, Acura etc, we can charge an extra 15% markup.

- Your local Certified Pre-Owned Home Sepcialist (tm)

Anonymous said...

Yes some people at work who think I am an idiot for saying real estate will fall really let me have it today with the .3% drop. One of the Drs said where is your bust. Well Colorado Springs has 56% more houses for sale than May 2005. His answer there are more houses in town to sale. I guess I slept while Colorado Springs grew 56% IN THE LAST 2 YEARS

debt is wealth said...

Even if home prices stay flat for the next 5 years, foreclosures will skyrocket due to ARMs resetting. Fewer people will be able to liberate their equity with flat housing prices. That $400,000 crackshack in Watts doesn't seem so cool now that you can't brag about it going up 25% in a year. That $800,000 McMansion in Sacramento doesn't look so good now that it can't be used as a piggybank anymore.

Anonymous said...

Anon said:"Las Vegas and toursim in general is a good proxy for the economy. When people are hurting they don't go on vacation. No sign of any recession based on my observations".

LauraV. said: Gambling skyrockets during recessions. Tons of mortgages are going to reset, people are desperate and looking for ways to make money. Even the founder of Quick Loan Funding would go to Vegas when he couldn't meet his payroll. True story.

There's no time for R&R in Vegas when the bills have to be paid.

Anonymous said...

You people are idiots if you think robust tourism is a sign of a recession.

Anonymous said...

Once again the MSM revised the prior month down so the current month doesn't look as bad as is it. This is getting so disgusting!!!

Buyers unite!!! Make these spin misters eat it big!!! Better home prices are coming.

This is the best chance for buyers to make a difference for our children coming out of college to be able to afford a reasonably priced home with a mortgage they will be able to pay back.