October 11, 2007

The NAR's dirty little secret: The median price is hiding the ugly truth that real home prices are crashing

The wipeout of the subprime and Alt-A mortgage markets took millions of potential homedebtors out of the market, decimating homes in the bottom and mid price tiers, while sales volume tumbled. And this has inflated the median (half above, half below) US selling price. For visual example, 1 1 1 2 3 became 1 2 3. Old median: 1. New median: 2.

So while the NAR reports that median prices have dropped in the single digits, the reality is that "mark to market" home prices are down. WAY down. Just look at the $200,000 off homebuilder firesales. Just look at the 30% off condo auctions. Just look at the massive incentives being added on to move dead inventory (while going unreported in the price data). Just listen to the stories. Real home prices have crashed, and are crashing.
And the NAR simply doesn't want you to know. Here's just a few article snippets on this issue.

Texas: But unlike many markets where sales have fallen, the majority of areas in Central Texas are still seeing higher median prices. Experts said part of the rise may be related to a steep slowdown in sales of entry-level homes and a higher concentration of sales at the upper end.

California: But rising median prices this year have been driven largely by the fact that far fewer homes than normal are selling in the lower-priced parts of the county. With many of the cheaper homes taken out of the pool of transactions being measured, the median price gets pushed artificially higher.

US: Median prices had been artificially pushed up for months because the subprime credit crunch impacted buyers of inexpensive homes more than those of expensive homes, thus shifting the buying mix towards pricier properties.

25 comments:

Frank@Scottsdale-Sucks.com said...

Yep, that's one of the oldest tricks in the book, report accurate numbers on a meaningless statistic ... like saying it depends on what the meaning of the word is is ....

This is especially true in CA. Here in Newport Beach the cash sale of a $10 million+ home once a month drives the reported median WAY up and hides the fact that the sub-million communities have for-sale signs on 50% of the houses.

Anonymous said...

The trouble with Jumbo loans will now start taking the median price figure down

It's coming

Anonymous said...

Thanks Keith, but the masses don't do maths.... they just buy on emotion.

DB said...

The median price rise is the last refuge of these scoundrels.

Sixpercenter said...

Crisp house foreclosed on

http://www.turnto23.com/news/14293805/detail.html

Anonymous said...

This is especially true in CA. Here in Newport Beach the cash sale of a $10 million+ home once a month drives the reported median WAY up and hides the fact that the sub-million communities have for-sale signs on 50% of the houses.

Um - no. This would drive the AVERAGE way higher - the median would barely change. This is why the median is used - so one WAY out of place data point does not skew the average. Of course, per Kieth's logic - the median data can also be skewed also (but not for a sale of 1 house).

Marky Mark

Agent #777 said...

We paid 300 for ours - they just sold the last four...(how much?)...they just sold the last ones - ONE HUNDRED FORTY FIVE THOUSAND! It's not right...it's NOT RIGHT!

30% off? Are you are forgetting the SW Florida townhouse auction that you posted a link to the clip with the comment above? (may be slightly paraphrased) That was 51% off.

russdog said...

This median price trick has been picked up on others blogs too. You're not alone in coming to this revelation.

Seen it before (Yawn). But it really should be said more often. this point needs to be made to stop people from having their lives ruined by realtors looking for a commission.

Anonymous said...

BAKERSFIELD, Calif. -- The home of David Crisp of Crisp & Cole is set to go up for auction.

Recent sale and tax

Sold 03/31/2006:
$1,705,000*

The balance owing is $1,846,897.12 and the lender is Sun Trust Mortgage.

HOW CAN HE OWE MORE? Than he bought it for?

borkafatty said...

Hmm interesting read Keith

Got Plastic?

http://www.baltimoresun.com/
business/bal-bz.hancock10oct10001523,0,987590.column

Anonymous said...

Stock Sales by Chief of Lender Questioned

Published: October 11, 2007

The Securities and Exchange Commission has been asked to investigate stock sales made by Angelo R. Mozilo, chief executive of the mortgage lender Countrywide Financial, in the months before its shares plummeted amid the deepening mortgage crisis.

Bloomberg News
Angelo R. Mozilo of Countrywide Financial has made changes to his stock plan that allow him to sell more of his shares.
Related
Letter from Richard H. Moore, North Carolina Treasurer

In an Oct. 8 letter to the S.E.C. chairman, Christopher Cox, the state treasurer of North Carolina, Richard H. Moore, questioned changes Mr. Mozilo made to his arranged stock selling program, adjustments that allowed him to increase significantly his sales of Countrywide shares.

After starting a plan in October 2006, Mr. Mozilo twice raised the number of shares that could be sold: once in December 2006, when Countrywide stock was $40.50, and again in February, when it hit a high of $45.03. He has had gains of $132 million since starting the October 2006 plan and expects to sell his remaining shares by the end of the week, a move that will generate millions more.

pwnd

Happy Homedebtor said...

What's funny is you're all collectively leaving out information/stats you harp on.

Condos are almost always cheaper than SFHs in/around an area.

Condos are the most common firesales in most bubble markets.

So if you bought a condo - which is always a gamble because they're just glorified apartments - then yeah, you're seeing double-digit decimation of the value of your asset.

If you own a SFH, you're seeing much smaller - if any - depreciation by comparison, for the most part. (Obviously some areas are slammed no matter what, but we're not going to list all of the thousands of areas broken up by zipcode, county, city, etc and then sub-divide down to the type of housing/lot size/etc)

When you compile averages and numbers on a mass scale, the truth is always hidden in the details which are not presented. You'll never see "Median price of condos with less than 2 bedrooms down 25%, while SFH with at least 1/5th of an acre 4 brs and granite countertops only down 2%, while townhouses within 7.8 minutes driving distance of downtown DC that are over 1734 sq ft and have at least 3 brs are up 4.9%" - Just "median prices are up/down X%".

stuckinthecity said...

44% of the population knows that all stats can be doctored.

k.w. - southern ca. said...

Houses are WAY overvalued across the entire country ... we're *just beginning* to see values drop steeper ... it has a long way to go.

Anonymous said...

If you own a SFH, you're seeing much smaller - if any - depreciation by comparison, for the most part.



ya ya ya keep telling yourself that.

Anonymous said...

Keith, the word decimate means a decrease of 10%. Most people use the word incorrectly, when trying to explain a precipitous drop.

In the interest of preserving the accuracy that is seen every day here on this site (but not in the MSM), you might have used the words "precipitous drop" instead of "decimate"

For instance, the history books say that in 1845, when the Texans defeated the Mexicans at San Janquinto, they "decimated" the prizoners taken, meaning they killed exactly 10% of the prizoners (which was payback for what the Mexican Army did to the "Texacans" earlier in the war...) The historical texts are accurate in saying "decimate", but today's reader would read this as meaning 40 to 50% of the Mexican prizoners were shot...

Mammoth said...

Snippet from the news article Bork pointed to:

“And now that they can't borrow against homes so easily, consumers are borrowing more against plastic - even to meet higher, adjustable mortgage obligations that they can't handle from their income.

This can end only one way. The only question is how bad it will be.”
---------------------
Using credit cards to pay for the mortgage, which just adjusted to a higher rate? This will indeed end in a really, really bad way.
-Mammoth

Anonymous said...

Ahhh I see. When average goes up, prices are falling in HP land. When median goes prices are falling in HP land.

It's quite convenient. No matter what happens you have convinced yourselves prices are falling.

But then again most of you slobs also think ron paul will be the next president.

Boom2Bust.com said...

Even CNBC understands the NAR's "dirty little secret." Here's what Diana Olick, their real estate reporter, had to say back in August:

Here’s what I think you don’t see in the Realtors’ numbers: what kind of houses folks are purchasing. With all the trouble in the subprime mortgage market, guess what? Subprime borrowers aren’t buying houses, and those were the lower-priced houses. So what’s left? Rich folks — and that therefore skews the number of homes being sold to the higher price range (remember, they only get the price stat when a home is actually sold).

Anonymous said...

happy homey once again makes good sense. not that any of the renters would ever admit it.

Anonymous said...

to anon re crisp and cole:

He owes more because he HELO'ed $$ out before the foreclosure. That's his MO. Buy property, get fake appraisal, then borrow against the "equity"

Still looking for my comment on the proper use of the word "decimate" - decimate means a reduction of 10%....

Anonymous said...

QWEEFIE why do you even give a shit what happens? You left and moved to the socialist utopia of Europe. None of your concern what happens to housing, the dollar or who wins the presidency. Enjoy the tea, crumbets and warm beer, we'll worry about American issues here.

Cheeri-o

cobra2411 said...

They're having the same people that give us the CPI information do the housing price information.

In a nut shell their theory states: If the numbers don't add up, change the math...

Or as Mark Twain once said: Get your facts first, then you can do with them as you please...

Frank@Scottsdale-Sucks.com said...

If you own a SFH, you're seeing much smaller - if any - depreciation by comparison, for the most part.

Happy homedebtor, where do you live that there is no bubble? The SFH I rent has dropped over 40% from the peak and has that much more to go with the mortgage debacle.

The other day you said all renters live in dumpy 1-br apartments, and now you say that only condos depreciate?

"DOPE"

Anonymous said...

In an Oct. 8 letter to the S.E.C. chairman, Christopher Cox, the state treasurer of North Carolina, Richard H. Moore, questioned changes Mr. Mozilo made to his arranged stock selling program, adjustments that allowed him to increase significantly his sales of Countrywide shares.
_______________________________

+++++So Mozila made CHANGES, did he? Then, praise be, he may indeed be going to jail. Legally, your "distributions" come into question by TPTB (the SEC) when you change them like this mid-stream....