November 27, 2007

FLASH: US Q3 home price drop largest ever recorded

Stupid things heard in 2004/2005/2006:

Nah, home prices never go down!

There's never been a fall in US median home prices, so pay anything anyone asks!

Trust me! I'm a REALTOR!

And here's the reality today (well, almost reality. Of course these numbers don't include the incentives and cash-back being used to clear dead inventory):


S&P Says 3rd-Quarter Housing Prices Dropped by Sharpest Rate in Index's 21-Year History

NEW YORK (AP) -- U.S. home prices fell 4.5 percent in the third quarter from a year earlier, the sharpest drop since Standard & Poor began its nationwide housing index in 1987, the research group said Tuesday.

S&P also reported that prices fell 1.7 percent from the previous quarter, the largest consecutive quarterly decline in the index's history.

50 comments:

Anonymous said...

"Trust me! I'm a REALTOR!"

What else can be said?

Trust me, honey, I'll stop if it hurts...

'Happy days are here again'....

Breadline starts on the right, Soup line on the left, step right up sheeple...

Anonymous said...

These are national numbers. They have no revelance to my underpriced 'hood.

sarcasm off

Anonymous said...

Yeah, but the Dow is up 151 right now at 11:04 EST.
Everything is A-O.K. now.
Phew! I thought we were in trouble for a minute there.
Goin' house shoppin' today with Kendra Todd, yeah! That's the ticket! My future wife. Yeah! My future wife.

Anonymous said...

I do not understand how the stock market can be UP today, at least in dollar terms, of course in real terms it is DOWN every time the dollar loses value, which it has done again today. If home prices are down by a record amount, that means people with mortgages are even more F67ked, which means the banks are even more shafted, which will mean the economy is in for a recession/depression. Stop fighting it Helicopter Ben, let the clean out happen, get the US economy back to health in 2 or so years. The republicans won't win the presidency with the muppets they have running, so a political reason for keeping the economy struggling along is moot in any case. And, they effin deserve to lose, as this crisis is completely of the GOPs making, party of fiscal responsibility, that is pure Horse Manure, and we all know it. So what if you got a tax cut, and taxes haven't gone up, the cost of EVERYTHING else going up has totally erased that $300 check you got in 2001 hasn't it now?

Anonymous said...

4.5% is the worst ever...doesn't sound all that bad really. After rising 100% in 5 years, a drop of 4.5% is peanuts. Wake me up when the drop is 30%.

brokersleaveyoubroke said...

Let's see, worst housing numbers ever recorded, consumer confidence off a cliff, Citi, the largest bank in America just had to get bailed out by some Abu Dhabi fund and the stock market responds with a rally. I think Wall Street and reality have just parted ways.

Anonymous said...

Come on guys, they're not making any more land!! It's a great time to buy!

Anonymous said...

"This is going to hurt me more than it hurts you." -Uncle Ben (Bernanke)

But seriously now, Mervyn King's famous last words were great... but I can't seem to find them now. Something like the Bank of England won't cut rates unless there is a disaster, and next day they cut the rates.

nnj said...

House prices down 1.7% from the previous quarter. Generally speaking, a $500,000 house is down around $8500 for the three month period, or $2,830 per month. If that is incentive not to buy, then I am at a loss for words. Imagine that this real estate value revert has just started.

Budvar said...

"4.5% is the worst ever...doesn't sound all that bad really. After rising 100% in 5 years, a drop of 4.5% is peanuts. Wake me up when the drop is 30%."



That 4.5% that doesn't sound much is for the quarter, that over the year becomes a drop of 18%.
You do realise that if and it's a big if, the rate of devaluation stays constant, in 2 years time every last dime of that 100% gain will be wiped out?

Charles said...

brokersleaveyoubroke said...

"...I think Wall Street and reality have just parted ways."

Just parted ways???

I think that happened around the early 80's...

Anonymous said...

Everyone, important math note, a 4.5% drop, erases a 9% gain.

Chew on that......

Anonymous said...

In any case anyone doubts the math note I posted earlier.

for example.

$100 + $100 = $200, therefore 100% gain

$200 - $100 = $100, therefore 50% loss

In percentage terms, the losses will often not sound as bad as the gains sounded good, simply because the most you can lose is 100%, but the most you can gain is infinite, well until reality kicks in :).

Anonymous said...

Correction

I am sorry, but a 4.5% loss actually erases a 5% gain, still significantly more. And to think, house prices have only just started heading south, and that is 4.5% in one quarter, holy sh@t, I am glad I am a renter :) Anyone holding real estate today, sell for whatever cash you can get today, you will only get less later.

Jambu said...

That 4.5% that doesn't sound much is for the quarter

========

Wrong. Read the article again. This time slowly. The first sentence says down 4.5% Q3 2007 compared to Q3 2006.

Jambu said...

Dow is up 200 because the insiders on Wall St know rate cuts will continue well into 2008. So the dollar loses another 10%. If they make 20% in stocks, who cares?

Anonymous said...

The forces of the housing and real estate price correction are in full force and are far from over. By the time the correction is done we will have gone back to realistic assessment valuations of years 2000 and 2001 - - before the whole speculative scam of "riches from a residence" started to occur, and took over the psyche of the business institutions and the common man hoping to live beyond his means and financial support level.

-dcandout

Metroplexual said...

Keith I trust you because you are a "Realitor"

Anonymous said...

That 4.5% that doesn't sound much is for the quarter, that over the year becomes a drop of 18%.
You do realise that if and it's a big if, the rate of devaluation stays constant, in 2 years time every last dime of that 100% gain will be wiped out?
----------------------------------
That would be correct if the 4.5% number is Q2 07 to Q3 07 but it is not. It is Q3 06 to Q3 07.

Anonymous said...

http://news.yahoo.com/s/nm/20071127/ts_nm/housing_mayors_dc_2;_ylt=Amo7RKEFFsla7aRr6efDcK8E1vAI

Anonymous said...

Buffalo, NY is the one bright spot in the Country. We've actually had some appreciation.

Anonymous said...

omg omg omg...did you watch that program House Hunters last night, in which two "genius engineers" bought a 1 bedroom apt for $750k in Portland? Wow, and the scum Realtor pressuring them with the same NAR sales pitch: "buy fast because there are very limited options in this desirable district".

Funny thing was that the homedebtor took the apt. out of the market after the offer, and then went back to the same genius engineers 4 months later to sell the same unit.

And get this, they paid $750k for a 1 bed with cheap tile counter, no double sink in bathroom, no top of line appliances, etc.

That apartment probably lost 10% by now. The TV keeps passing the Kool-Aid to the idiots.

Anonymous said...

In Chicago, in 2005 a new condo (about 1600 square feet with all new stuff) was selling for 350K o 599K. A lot of houses were selling for 500K to 1M. Oh my. I knew something was wrong when in my middle class neighborhood some homes were selling for 1M and prices were going up by 20% per year.

When people wondered where in the world these folks got the money to afford these properties let alone the very high property taxes, the answer was "oh, they are yuppies, they can afford it" and I used to laugh.

Now, prices are declining here in Chicago. Big time. Only fools would think that their 3BR, 2 full bath, 1800 square foot home is actually worth 799K.

Anonymous said...

Sure, we believe you:

LONDON (CNN) -- Countrywide Financial, the nation's largest mortgage lender, said Tuesday that big losses at Freddie Mac are unlikely to significantly dent its business.

Countrywide doesn't believe the loss at Freddie will have a "material impact on our ability to fund loans," David Bigelow, managing director of investor relations, said at an investor conference in New York hosted by Friedman, Billings, Ramsey. The conference Webcast was monitored in London.

Chelle B. said...

THE stupidist thing ever said was "there is no housing bubble".

Chelle B.
The Offended Blogger

Anonymous said...

Doesn't case-shiller measure resale prices on the exact same house -- meaning it would be a significantly lagging indicator?

Anonymous said...

4.5% is the worst ever...doesn't sound all that bad really. After rising 100% in 5 years, a drop of 4.5% is peanuts. Wake me up when the drop is 30%.

Keep in mind that it only takes a 50% drop in house price to eliminate a 100% gain. So a 4.5% drop in home value has eliminated more percentage wise on the downturn than was created during the upswing.

And I seriously doubt anyone will need to wake you if a 30% drop occurs. Which seems to be quite probable based on the charts and data that I have been looking at.

Anonymous said...

I believe ML will be the first to file BK disguised as a merger. Look for markets to fall tomorrow.



S&P Equity Research Downgrades Merrill Lynch (MER) to Sell
11-27-2007 03:24:33 PM
More Downgrades

S&P Equity Research Downgrades Mission West Properties (MSW) to Sell
S&P Equity Research Downgrades HouseValues (SOLD) to Strong Sell
S&P Equity Research Downgrades Morgan Stanley (MS) to Sell
S&P Equity Research Downgrades Merrill Lynch (MER) to Sell
S&P Equity Research Downgrades Smithfield Foods (SFD) to Hold

S&P Equity Research downgrades Merrill Lynch (NYSE: MER) from Hold to Sell.

S&P analyst, M. Albrecht, says, "We believe further deterioration in the mortgage securities market has put further downward pressure on the value of ABS CDOs on the balance sheet at MER. Remaining net exposure to these products at the end of Q3 was more than $21 billion, and we expect additional write-downs in the range of 25%-30% of these assets in Q4. We are reducing our Q4 and '07 EPS estimates by $3.06 to losses of $1.82 and $0.17, respectively, and lower our '08 EPS estimate by $0.98 to $7.62. We are cutting our 12-month target price by $20 to $48, 1.3X projected book value, a discount to peers."

Merrill Lynch & Co., Inc. is a holding company that provides investment, financing, insurance and related services to individuals and institutions on a global basis through its broker, dealer, banking, insurance and other financial services subsidiaries.

When I nod my head, you hit it ok! said...

That 100% gain may well have to be wiped out before there is any real movement to the housing market - movement where buyers feel comfortable enough to tread into the water again.

Anything above that is still froth from the big bubble.

Why in the name of god would you buy a house - made of sticks and stucco with a handful of shiny appliances for such an exorbitant price? You could have taken a year off from work and built yourself a much nicer house than any of those building companies and you would have saved a ton of money just buying the land and doing it yourself. More options, more satisfaction too. Ok not an option for everyone I admit but not as hard as people might think. I've built 5 homes from the ground up and restored 2 old homes from the 1800s

Why, why, why? Is it because of the "need it now" that is often part of the philosophy of making a purchase?

American style homes are not that difficult to build from scratch.

ApleAnee said...

Anonymous said...

I do not understand how the stock market can be UP today, at least in dollar terms, of course in real terms it is DOWN every time the dollar loses value, which it has done again today.

We the Little People are scared and we are taking our pittances out of the market and moving them to something we tell ourselves is safe. When the Little People withdraw the market tanks. The next day the Big People (aka Bottom Feeders) swoop into buy, and the market soars. They have stolen everything they can from each other. Now it's our turn to give it up.

Massive transfer of YOUR wealth going on.

Don't you hear that sucking sound?

Anonymous said...

Goldman Sachs, meanwhile, released a report arguing that even if the US economy stayed out of recession, house prices would fall by 7 per cent in both 2008 and 2009, for a total decline from peak to trough of 15 per cent.

It warned that “if nominal house prices fall 15 per cent at the national level, parts of California, Florida, Arizona and Nevada are likely to see price declines of around 30 per cent”.

The investment bank said that if the economy succumbed to recession, “the decline in house prices could be as large as 30 per cent”.

pwnd

Mike F said...

Three things:
First, bloggers or those leaving comments who cannot perform basic math calculations are not helping, even if their hearts are in the right place. Lack of math literacy is one of the main reasons the problem exists. Learn how to use a calculator, people.

Second: Have you noticed that, in good times the refrain seems to be "My house has appreciated 20%", but in bad times "The market is down."? Coping mechanisms are okay, but only until they dangerously prevent people from dealing with reality.

Third: Despite all the Heloc users being complicit in their own situations, I do reserve quite a lot of anger for the banking/mortgage industry.
The phrase "Unlock the Equity in your Home", should more honestly have replaced "Unlock" with "Reduce" or "Destroy" or even simply "Spend".

Mike F

Budvar said...

"That would be correct if the 4.5% number is Q2 07 to Q3 07 but it is not. It is Q3 06 to Q3 07."


This is semantics, anyone have the Q2 07 to Q3 07 figures? Wouldn't be at all surprised to find the numbers even worse still than 4.5%.
They've been giving out figures of monthly home price rises of 0.2% etc for the best part of the year. So if these 0.2% a month rises are to be believed up until june 07, this means from nov 06 to jun 07 prices rose about 1.5%, so with this 1.5% gain and the 4.5% loss from nov06 it would appear that prices have dropped 6% in 5mths.
If this is in fact the case, thats an annual price drop of 14.2%, and that 100% gain would be wiped out in a little over 2.5 years.

Anonymous said...

30% off, you're still waiting for 30% off are you...

http://novabubblefallout.blogspot.com/

40% off and up, same house sales in Northern Virginia (DC)

Paul E. Math said...

This CNN article says that, overall, home prices have dropped a total of 5% since the peak in summer of 2006.

http://tinyurl.com/274hta

Which is actually a lot considering it's not adjusted for inflation - you can add about another 5% to put that decline in real terms.

Average home prices declined 10% in real terms in just a year and a half? Yeah, I'd call that significant.

And one more thing, we're just getting started - in the article, Yale economist Robert Shiller predicts, quite casually "You're talking about [home-price] declines of 50 percent, in real terms. That's not out of the question."

chris g said...

I remember looking at a realtors blog in the middle of 2006, and seeing a Phoenix realtor commenting that a "bubblehead" prediction of a 10% decline from peak prices was "silly". I wonder how silly she thinks these prices are now.

Anonymous said...

Are you people brain dead? How clear can this be. Prices fell 4.5% YEAR OVER YEAR not quarter over quarter.

Come on guys this is not that hard to understand.

Karl said...

"Everyone, important math note, a 4.5% drop, erases a 9% gain."

Care to try again?

1 - 1/1.09 = 8.25% loss wipes out a 9% gain.

keith said...

Love it when a basic math lesson breaks out on HP. I think bad math skills helped cause the housing bubble - people had no idea how bad the numbers looked, since they're so bad with numbers.

Also, for the love of god folks, it's "LOSE", not "LOOSE". That's the English lesson for the day, OK?

Anonymous said...

.



"Trust me! I'm a Realtor"!


Please, I just ate!


.

Anonymous said...

-4.5% YoY
-1.7% Q2 to Q3 2007 (which is -6.6% YoY)
19 Quarters=Average 'peak to trough' per Fed study.

The latest -1.7% Q2-Q3 suggests the decline has picked up momentum. The Fed study suggests the trough would be sometime in mid-2010.

These are really bad numbers regardless of how you may wish to interpret them.

Cheers, Haggis

Princess Mononoke said...

Anonymous said...
>>Are you people brain dead? How clear can this be. Prices fell 4.5%YEAR OVER YEAR not quarter over quarter.

Come on guys this is not that hard to understand.
November 28, 2007 12:45 AM
---------------------------
I don't know if you are also aware of the fact that NAR and other housing statistics do NOT include auction sales?!?!?! Ergo, the actual figure would be much greater (steeper depreciation) than reported.

Anonymous said...

HPers, I'm going to tell you why the NAR keeps saying that the median home price is going up when we all know the prices of individual houses are going down: it's a quirk of a statistical measurement called "the median".

To really understand this you need to understand what happens to median price in increasing markets and in decreasing markets. I'll address both of these; first, the increasing market.

There are two components that go into the median housing price: 1) the price of individual houses and 2) the number of housing units sold.

In a rising market when the number of housing units sold increases year after year, the median price of the current year is a meaningful measure from the price of the prior year.

For example: in year 1, 100 houses are sold; the lowest is sold for $1 and the next lowest for $2 and so on up to $100. The median house price then for the market is $50 (the half-way point between $1 and $100). In year 2, 150 houses are sold. Again, going from a low of $1 to a high of $150, with each house costing $1 more than the next. The median house price in year 2 is $75.

So in this example of a rising housing market with both volume and prices increasing, the median price incrases by 50%. (You could also have an example where the volume stays the same y-o-y and the individual prices go up, also resulting in an increase in the median price).

Ok, now for the situation of a declining market, where both the volume and price of individual houses decline (this is the market we're currently in). You will see how this type of market can still result in a RISING median price. Seems silly, right? But it's true. Again, it's a quirk of statistics.

Pay attention:

In year 1, 100 houses are sold from $1 to $100, with each one costing $1 more than the next. The median price in year 1 is $50.

In year 2, the market declines and some houses can't be sold so they are taken off the market. The majority of these houses are at the low end. Let's say for sake of illustration that the houses that were sold last year from $1 to $20 can't be sold and are taken off the market...thus, they are taken out of the calculation of the "median price". Each of the remaining houses sells for $1 less than they did last year. So the 80 houses left sell from $19 to $99. So, there has been an actual DECLINE in the price of individual houses. Now remember, the way the median is calculated is by finding the half way point of a data set. In this case the halfway point is $59! That's almost 20% more than the $50 dollar median price from the year before (which for the sake of argument was an increase from the previous year).

So you see, in a decling market of both volume and individual house prices you can still get a RISING median price!!!

This is EXACTLY what is happening today. This is what the NAR is publishing. The are correct in the statistic, but the statistic does not mean anything at all in this scenario.

So when you see that median prices are going up, the reality is that the individual prices are actually going down. It's only because of a statistical measurement called "the median". It doesn't mean a thing in a falling market.

I hope this sheds some light on what's going on. The NAR is telling the truth, but it's not the whole truth and nothing but the truth! And that's the way they want to keep it!! The Bastards.

Porkchop Sandwiches said...

You forgot "Suzanne researched this."

Anonymous said...

In any case, 4.5% yoy is still a LOT.

Princess Mononoke said...

Anonymous said...
>>The NAR is telling the truth, but it's not the whole truth and nothing but the truth!
November 28, 2007 5:56 AM

That is called "spin" and "rhetoric" ......

Princess Mononoke said...

I have to add this old adage ....

"A sow's ear dressed up to look like a silk purse, is STILL a sow's ear"

Anonymous said...

Princess Mononoke said...
Anonymous said...
>>Are you people brain dead? How clear can this be. Prices fell 4.5%YEAR OVER YEAR not quarter over quarter.

Come on guys this is not that hard to understand.
November 28, 2007 12:45 AM
---------------------------
I don't know if you are also aware of the fact that NAR and other housing statistics do NOT include auction sales?!?!?! Ergo, the actual figure would be much greater (steeper depreciation) than reported.

November 28, 2007 5:07 AM


=========

Princess Moonbat:

4.5% is from case schiller not from NAR.

Princess Mononoke said...

Anonymous said...
>>Princess Moonbat:
4.5% is from case schiller not from NAR.
November 28, 2007 4:15 PM

Oh geez, are you PMS'g or something??? What I said before about homes sold at auctions not included in the figures still applies. Please get real!

Princess Mononoke said...

What a coincidence... I just went into CNBC Realty Check and Diana Olick has just posted an article on this exact subject!

"Realtor numbers: Spinning beyond belief"

http://www.cnbc.com/id/22009801