Associated Press lead: "Housing market may be worse than stats reveal". HP: "No duh. Glad we could help"

Here's the AP version of HP's thread the other day "FLASH: Lennar tells us what new homes are REALLY selling for, and it's ugly. Really ugly"

NEW YORK (AP) - Here's a scary thought about the housing market: Things may be far worse than what's already being revealed by the troubling government and industry statistics.

At issue is what goes into sales price data and what does not. When those numbers are crunched, many of the incentives that sellers are using to lure buyers - including cash rebates - aren't being included.

That suggests prices may be falling faster in many markets than is now being reported. The same goes for how the mortgage-application indexes don't account for the implosion of lenders. That could have the effect of masking a slowdown in demand, which is why the housing market could be in for rough sailing much longer than most anyone anticipates.

There certainly has been plenty of bad news, but it might not even be giving a full picture of how difficult things really are.

For instance, the Commerce Department reported last week that the median sales price of new homes fell 0.9 percent in May from a year ago, after tumbling 10.9 percent in April.

But those numbers don't include the thousands of dollars in lavish incentives like plasma televisions, pool installation and closing costs that sellers are increasingly using to woo buyers. That means a home selling for $600,000 gets reported for that price even though all those extras technically are reducing the net sale price.

Sales incentives at Lennar Corp., one of the nation's biggest builders, averaged $43,700 a home in its fiscal second quarter, up from $24,700 in the same quarter last year. And it isn't just builders piling on the incentives - it's spilling over to the existing-home and foreclosure market, too.

"In effect, they are reducing the new sales price but that is not showing up anywhere in the actual sales data," said Peter Schiff, who runs the investment firm Euro Pacific Capital Inc. in Darien, Conn.

FLASH: OC Register exposes that true subprime ARM default rate is 21.1%, NOT the 13% reported in MSM

Every day it seems another REIC lie is being being exposed. Watch the floodgates really open up now that the MSM has jumped off the REIC tank, put down the rolodex of realtors, and is (finally) doing their damn job.

Bravo to Mathew Padilla at the OC Register. Keep digging! Especially when it comes to the bigger story of Alt-A liar's loans. With 60% of applicants on those loans committing blatant mortgage fraud by overstating their income by 50% or more, that disaster will unfold soon enough. Plus the feds should review every liar's loan taken out and prosecute every one of 'em for mortgage fraud.

Subprime delinquencies higher than reported

Forget that 13% subprime delinquency number you heard about so much in the press and which some politicos and real estate folks turned on its head pointing out 87% of subprime borrowers are paying their mortgage.

I took another look at the transcript from the first-quarter conference call of IndyMac Bancorp, and caught this statement from CEO Michael Perry:

On subprime loans, one of the things that I think people aren’t aware of is that the Mortgage Bankers Association basically classifies the lender as a prime lender or a subprime lender. So for example, they classify IndyMac and Countrywide as prime lenders, and they classify New Century or whoever as a subprime lender. And all of their servicing portfolio is considered prime or subprime for the MBA. Ok? And so when you see that delinquency number in the press of 13% subprime delinquencies, it’s hugely understated. It is absolutely hugely understated. And the prime delinquencies are overstated.The subprime delinquencies are more like 18, 20, 22% delinquencies and that’s where I think you’re going to see the problems."

To see if Perry had it right, I quizzed the MBA and got this in response from Jay Brinkmann, vice president of research and economics:

"Mr. Perry is correct that we have to differentiate by the type of servicer rather than the type of loan. This may not be a major issue because our latest subprime numbers are 14.4% delinquent by at least one payment, plus another 4.5% in foreclosure, for a total of 18.9% either delinquent or in foreclosure.

For just subprime ARMs that number is 21.1%, so we agree with Mr. Perry's estimates of the current state of the market."

New homes supposedly plummet only 16.6%, real number is probably down 66.6%

Man, I sure wish we (and the market) had access to some real data, vs. the BS put out by the NAR and Commerce Department.

This new home survey is so worthless, I don't even know where to start. How they can put out a number with a straight face regarding new homes when they know damn straight (just read the homebuilder announcements) that cancellations are running 40% - 50%, yet this report just shows offers, not closed deals.

The price number is also laughable, knowing that builders are offering everything but the kitchen sink to sell dead inventory, but those discounts and incentives aren't recorded here.

At least the MSM is now talking about how laughable the data is (see below). But the headlines are still misleading at best. And today's new home report makes the NAR's report yesterday even more laughable and discredited. Americans, you're being misled, you're being lied to.

Here's your real headline, HP version:

NEW HOME SALES FALL OFF A CLIFF - DOWN 66.6%, REAL PRICES PLUNGE ANOTHER 20%. HUNDREDS OF THOUSANDS OF REIC JOBS DISAPPEAR, HOUSING CRASH OF EPIC AND HISTORIC PROPORTIONS IS UPON US

Instead, here's what the Commerce Department and MSM give us today:

New-home sales plunge 16.6% to 937,000 - Commerce Department reports biggest percentage drop in 13 years

Sales of new homes plunged 16.6% in January to a seasonally adjusted annual rate of 937,000, the Commerce Department reported Wednesday.

It was the lowest sales pace in four years, and was the biggest percentage decline in 13 years.
Sales were down 20.1% compared with January 2006.

The decline in sales was much sharper than expected. The median forecast of economists surveyed by MarketWatch was a drop to 1.08 million units, annualized. See Economic Calendar.

Home builders have piled on incentives, including offering free vacations and new cars, to sell homes and reduce inventories. Such incentives aren't subtracted from the sales price reported to the government.

Sales are reported when a contract is signed, not at the closing of the sale. Home builders have reported a large increase in cancellations in recent months. Cancellations aren't reflected in the government data, so the reported sales are probably overstated.

Update - I liked this analyst quote later today:

"Let's cut to the chase - these numbers were ugly," wrote Mike Larson, real estate analyst at Weiss Research in Jupiter., Fla. "While the month-to-month changes in new home sales figures can be volatile, the magnitude of the decline is impressive.

HousingPANIC Stupid Question of the Day

Won't everyone be surprised that those unsustainable home price gains were 100% driven by fraud, deception and speculation?

50% up, 33% down and we're right back where we started folks... Oh, what a wild ride it will be...