Existing Homes Sales Fall; NAR seeks a PhD in Absurdism
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"Existing-home sales slowed in April, partly because restrictive lending practices hampered home buyers. At the same time, more areas are showing gains, and a reversal in mortgage policy means the market is better positioned for a turnaround." (emphasis added)>
Um, no.
Home sales fell for the follwoing simple and obvious reasons: 1) Prices are still too high; 2) a huge amount of supply is out there, and 3) there is a reasonable expectation on the part of buyers that prices will fall lower still.
Regardless of the data or what their own agents say, the folks at the NAR cannot help but shill for their industry -- even when it has become totally counter-productive. They are apparently quite happy with being known as the Worst. Forecasters. Ever.
How else can you explain their shameless twisting of their own data? Don't these damn fools realize that they have simply lost all credibility? I have heard more than a few Real Estate agents complain that sellers have unrealistic expectations of prices, due in large part to the ongoing and ridiculous bottom calls and turnaround forecast form the NAR.
Perhaps the absurdist commentary that accompanies each monthly release means someone at the NAR is trying for a doctorate in Absurdism, and these monthly releases are their doctoral thesis. Nothing else (short of blunt head trauma) explains the ridiculous monthly spin.
Rant over.
Let's go to the actual data:
• Purchases declined 1% percent from March to an annualized rate of 4.89 million.
• Median prices fell to $202,300 from $219,900 in April 2007, about am ~8% drop from April 2007 (2nd-biggest historical decline), but was up 1% sequentially.
• Sales were down 18% from April 2007
• Inventory of existing homes jumped to 4.55 million, up from 4.12 million in March.
• Months supply for single family homes rose to 10.7 from 9.6, the highest since July 1985
• 11.2 months' supply at current sales pace, up 10% from 10 months at the end of March (25 yr avg is 6.9 months)
• Months supply in condos/co-ops rose to 14.2 months from 12.8.
Bottom line: Rising inventory levels, ongoing price drops, falling unit sales means the bottom is nowhere in sight for the housing sector.
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Previously:
NAR and Housing Forecasts (June 2007)
http://bigpicture.typepad.com/comments/2007/06/nar_and_housing.html
Recent NAR Bottom/Turnaround calls (January 2008)
http://bigpicture.typepad.com/comments/2008/01/a-history-of-ho.html
Source:
Existing-Home Sales Ease Due to Mortgage Restrictions; Some Markets Rising
NAR, May 23, 2008
http://www.realtor.org/press_room/news_releases/2008/ehs_april08_ease
Friday, May 23, 2008 | 10:19 AM | Permalink
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» Inventory Reduction from Newshoggers.com
By Fester The first monthly report from the spring home selling season is out and it is ugly. Sales are slipping, prices are slipping and inventory is accumulating. I find it hard to look at the current environment and be [Read More]
Tracked on May 23, 2008 1:33:37 PM
Comments
Oh, I wouldn't say the bottom is nowhere in sight; after all 2013 isn't that far away...
Posted by: Pool Shark | May 23, 2008 11:03:45 AM
BR said
Home sales fell for the following simple and obvious reasons: 1) Prices are still too high; 2) a huge amount of supply is out there, and 3) there is a reasonable expectation on the part of buyers that prices will fall lower still.
reply: Don't you think the high and rising cost of living, coupled with uncertainty about where prices are heading and how much money will be left over after paying for basic necessities played a little part? [BR: yes]
If you buy a new house you buy a new heat bill, a larger electric bill, and maybe a longer and, thus, more costly commute. It's not just mortgage payments, interest rates, headline prices, and upfront costs anymore.
People are starting to fixate on the cost of living today and how to keep it manageable. Buying a new house is not typically viewed as an economy measure.
The growing commodity bubble will have to burst first and look like it will stay burst before people feel safe enough to buy a new house. Unfortunately, I think it has to grow a lot more before it pops.
Then, the uninformed will panic when the stock market falls in sympathy. This will be caused by idiots who borrowed to buy a sure thing, then had to sell assets to pay margin calls. While I am salivating at the thought of this buying opportunity, I don't think it will happen very soon.
Posted by: cinefoz | May 23, 2008 11:07:48 AM
This isn't good for the housing crisis. The US is facing a "perfect storm" of a housing crisis, credit crunch and soaring inflation.
Posted by: speculator | May 23, 2008 11:09:26 AM
The good folks at the NAR can't help themselves; their sunny, don't-let-facts-get-in-the-way optimism is how they're wired as people. Small-business owners have to have that general outlook to succeed; pessimists don't generally become very successful in business. The problem is that natural optimists like this find it hard to turn off the internal bubble machine and look at things with a cold, hard, practical eye, and that can lead to catastrophically dumb decisions, regardless whether it's real estate, cars, or spouses.
Posted by: bluestatedon | May 23, 2008 11:15:48 AM
The realm of "commentators" and "analysts" in the MSM are full of the Lawrence Yuns of this world.
Posted by: Stuart | May 23, 2008 11:18:20 AM
Speculator,
It's not inflation. It's perceived inflation which caused everyone to invest in commodities. The inflation is not real.
It's deflation. Look at gold.
Posted by: John Borchers | May 23, 2008 11:18:30 AM
Just want to add that we did have inflation unproperly measured for many years. That's why we have this problem now.
Posted by: John Borchers | May 23, 2008 11:24:56 AM
If the Plunge Protection Team gets its money to buy stocks and futures from the Fed but the Fed has it all loaned out for housing what happens to the stock market?
Posted by: John Borchers | May 23, 2008 11:27:03 AM
"If you buy a new house you buy a new heat bill, a larger electric bill, and maybe a longer and, thus, more costly commute. It's not just mortgage payments, interest rates, headline prices, and upfront costs anymore."
Exactly Cinefoz!!!
If and when people(a whole generation or two)
"Fully Realize" that buying a house is a liability, not an asset, we can move one step toward a bottom in housing.
Further steps will require changing economic
views on leverage, debt, moral hazard, "headline" inflation, etc.....
Posted by: MarkTX | May 23, 2008 11:27:27 AM
Barry, I think I have a little defense for the NAR.
Based on the indicators I used to successfully call the housing bust back in Jan 2006, here is my observations:
1) The year-over-year inventory increment is coming down at a slower rate. In many major metropolitans, actually inventory are stabilizing.
2) The sales are not dropping as steep as it used to be. Recalled in previous months we would have sales down like -20% ~ -30% year-over-year. Now it is only -18% y-o-y.
Therefore, FINALLY, the trends are showing some good signs since 2 years!!
However, there were studies published saying there are still large phantom inventory of REO by bank that have not been listed out there, simply because banks and lenders are way too busy right now.
So there are 2 major future concerns:
1) Phantom inventory
2) Recession Intensified with mass job losses.
Posted by: Sean | May 23, 2008 11:31:20 AM
John,
'It's deflation. Look at gold.'
I'm not that I understand your point, could you please elaborate?
Posted by: blin | May 23, 2008 11:31:52 AM
Gold has only gone down since the peak at $1000 blin.
If people were worried about inflation they would buy gold. They aren't buying it.
Posted by: John Borchers | May 23, 2008 11:33:44 AM
The inventory numbers seem vastly understated to me. Does the NAR include properties that have not had N.O.D.'s filed?? My guess is that they are under-reported in the same vein as our inflation data....
Any idea's?? Posted at CR as well.
speculator- no one is going to read your blog if you keep making statements without any real opinion's or analysis. Posting the same thing here and over at CR doesn't help you either.
Ciao
MS
Posted by: michael schumacher | May 23, 2008 11:39:00 AM
There are alot of official interests who do not want bullion higher, alot. Gold is more political than oil..but another time.
Besides the NAR as candidate for shill of the decade, we have these guys. I'd rather have Shills. These guys need jail time in a big way.
"Credit Rating Agencies Reportedly Switched Analysts At Clients' Request
(RTTNews) - Two days after its stock took a nosedive following a report that a computer error may have mistakenly rated some securities AAA, Moody's Corp (MCO: News, Chart, Quote ) credit rating unit Moody's Investors Service is again facing intense scrutiny. The Wall Street Journal reported Friday that the credit rating agency at times allowed banks to determine which analysts covered their deals, switching analysts at the bank's request.
The Journal, citing people familiar with the matter, reported that an investment bank requested a switch in analysts after the one assigned to them raised questions about their deals. That analyst was a member of a group that assigned ratings to collateralized debt obligations, the newspaper said.
In a separate instance, Moody's moved another mortgage analyst to the firm's surveillance unit, which assumes a post-operative job to monitor ratings already issued. The switch occurred following complaints from an investment banker that the analyst was "too fussy," the Journal said, citing a person familiar with the situation."
Posted by: Stuart | May 23, 2008 11:41:25 AM
Housing - We are bouncing along the bottom. no more, no less
I spent this morning covering so taking a break next 2 weeks.
That is unless things set up again!
Have a great weekend everyone.
Posted by: Vermont Trader | May 23, 2008 12:02:02 PM
Oh, had to share this..
Governor Rendell to Allow Half Gallon Pricing at Some Gas Stations
Last update: 5/23/2008 12:11:00 PMHARRISBURG, Pa., May 23, 2008 /PRNewswire via COMTEX/ -- Gas Stations Must Request Temporary License from Department of Agriculture HARRISBURG, Pa., May 23 /PRNewswire-USNewswire/ --
With gas prices exceeding $4 per gallon in some areas, older fuel pumps may display half gallon prices in coming weeks, said Governor Edward G. Rendell today.
The total cost of gas will remain the same.
Posted by: Vermont Trader | May 23, 2008 12:18:09 PM
VT-
saw half-box sizes of almost all cereals on my trip to the market yesterday. People are so easily fooled.
have a great holiday..
Ciao
MS
Posted by: michael schumacher | May 23, 2008 12:40:22 PM
Here are my points
1) Average US families are in debt
2) Saving Rate below 0%
3) gas/food and all other necessities are going up in price which cut into the money we spend on housing.
4) there is no wage inflation so far (this is important, it is not like in 70s, thanks globalization for equalizing the global wage and living standard)
5) house price is still not affordable even with the sharp drop.
6) all the crazy loans almost disappeared overnight, people can not buy a house even they want to be irresponsible.
7) mass psychology tells you buying a house may not be a good investment anymore, although they still have hope which means we are not hitting the bottom.
8) as your guys said inventory is still too high
I just do not see how those situations can turn around soon.
Posted by: pigcatcher | May 23, 2008 12:43:53 PM
@Sean -
So the good news is that things are not getting worse as fast as they used to be? That's a hoot.
Posted by: Liv | May 23, 2008 12:46:47 PM
Personally, I have been looking to buy a house for 2 years. I haven't yet and the commodity bubble, perceived inflation, or bills associated with a new house have nothing to do with it.
House prices are still too high, jumbo mortgages are still too high, sellers are still too deluded, but it's changing.
I just moved from a nice street in NJ that had 3 houses for sale at the same time. This competition brought the selling price of the highest listed house from 680K to 610K (and they are still not sure they sold it).
Now I am on another nice street in NJ with 3 houses in a row for sale. I am interested again to see what they list and where they sell. This type of competition will eventually get these houses to the point where they represent value to a person like myself.
Posted by: Mephisto | May 23, 2008 12:54:51 PM
re: Gold
IMO gold has not gone parabolic is fairly simple.....FCB's sell gold as a way to offset it's "printing presses"...when you get big down days in it it's usually correlated (in the next week or so by it's disclosure) by one of the FCB's selling it's stockpiles so it does not ruin it's currency in the process.
The other thing about gold is that the Fed values it's reserves of gold at something like $50/per troy ounce (I read this and cannot find where I did-Anyone else read this!)......think about the scenario that could unfold when they start selling that. IMO that is where the next round of funding for these bailouts will come from. If you low ball it's valuation and then sell it at ,say $900/per troy, you've got quite a bit of capital that was'nt accounted for in it's static valuation of $50.
people who have blindly bought gold will wake up one morning and go "Oh F!@#".....
Ciao
MS
Posted by: michael schumacher | May 23, 2008 12:57:39 PM
bluestatedon,
"The good folks at the NAR can't help themselves; their sunny, don't-let-facts-get-in-the-way optimism is how they're wired as people."
So were the Stepford Wives.
.
Posted by: VJ | May 23, 2008 1:10:02 PM
well on the bright side, in five years when home prices have finally stopped falling and the NAR gives up being peachy, we can all shout 'contrary indicator' and jump back into real estate.
Posted by: jhunt | May 23, 2008 1:15:17 PM
MS,
Gold valued at $42.22/oz according to note 1 of this fed release . They have a bit over $11 billion showing on their balance sheet . If sold for (eg) 20x that, it would bring in ~$220 billion.
I don't know if they lease or otherwise encumber any of it though.
Posted by: Estragon | May 23, 2008 1:30:13 PM
"well on the bright side, in five years when home prices have finally stopped falling and the NAR gives up being peachy, we can all shout 'contrary indicator' and jump back into real estate."
Yeah, five years is about right.
But don't worry, you won't miss the bottom; it will be nice and round, and accompanied by cries of: "Real estate is a horrible investment, don't buy it, you'll lose your shirt!"
Posted by: Pool Shark | May 23, 2008 1:31:23 PM
