I'm really getting tired of waiting this out.
I've stayed on the sidlines opting to rent instead of buying, believing that prices were going to adjust downwards.
The opposite has happened instead.
Here in Nyc demand still seems strong no downwards price movement.
Do the existing-home sales numbers include any data as to the loan-default status of the home prior to the sale? Could we see any boost to the sales due to foreclosure forced sales (ie, would an auction to a 3rd party count?) and pre-foreclosure bailout/short sales? When will we get price data for these existing home sales #'s?
bdf, I can't believe you "missed the boat". You know "they aren't making anymore land". How could you be "throwing your money away on rent" all this time and "paying your landloards mortgage". Lucky for you this is still a "buyers market". So bdf, get out there and "don't miss out".
I like this blog, but there does seem to be too much confirmation bias, in that any datum that doesn't support falling house prices gets rapidly explained away, while datum that does support falling house prices is taken as given.
Well according to the charts, demand is little changed, it's supply were the action is. I would speculate that it takes longer to add new condos in NYC than to plop down new McMansions in the exurbs. This would tend to indicate the it will take a little longer for NYC to feel the downward pressure on prices.
And while your at it bdf go get yourself a new car...sales are real low..dont want to miss the boat on that one either.
Also credit cards are nice get a few of those while your at it...live for today damit..If you play your cards right you may want to buy 2 houses..heck everyones doing it...
File this under scarcasim.
Anyone I repeat anyone who buys now is a dam fool...but then again...fool is the USA Slogan these days.
NYC is such a different animal than ANY other market that you really need to put in a class of its own. Population is growing, land is scarce, rental vacancy is below 1%, jobs are plentiful and incomes are high, trend is to live closer to where you work, its an amazing place to live, 2nd homes/pied-a-terres for retiress are in high demand here, 75% of our inventory is co-op and require strict financial guidelines, inventory on sell side is tight, buyer demand is very strong...need I say more?
NYC is seasonal and JAN - MARCH are always very active months. Summer months are generally slower with dropoff in buyer demand.
All in all, NYC is not the most speculator friendly market, yet it is a very desireable city to live in and to work in and rental/sales inventory is tight. Its not surprising that NYC lags in slowdowns and leads in recoveries.
If you are able to buy and have a stable job, sufficient salary, sufficient liquid assets and over a 3-4YR timeline to own, you should be buying regardless of whether its a perfect time in terms of a buyers or sellers market.
Dec-Jan period was pretty good, we had no doubt about that. The RE market is too big to turn down within few months. We have a long, slow road to the bottom. Could be another 2-4 years.
After market cheered the Dec-Jan numbers today, I expect the March new home sales next week to be very sobering.
The ponzy scheme can go on as long as there os 100% LTV or the new version of it: 95% LTV.
95% is still too high. (And in many cases the 5% are being receieved as a gift, or as a loan for some loan shark or some fraud that is involving a lick-back from the seller himself)
5% is better than 0% down but is not enough for making the buyer get enough "skin in the game". Home ownership is a good thing but when the interest-only and 5% down means that the buyer does not actually own any part of his home and is being mortgage to the gills the advantages of "home ownership" are washed.
There must be a return to the good old 20% down a number that shows also that the buyer is capable to save for this down payment. The 20% down is the best indicator of the buyer credit worthiness and a best proof that he will strive hard to protect his investment.
The 20% down also mean one more thing: Buyers will start thinking about the price of homes and not just the monthly payment his is the most important aspect of returning sanity to the housing market.
Please write letters to congress and to media along these line: sanity and affordability in housing will be done by correcting prices and return of the 20% down payment.
Keith, if you have a problem with the explanation what is it? I'm genuinely curious because it does make sense to me. This blog is bearish on housing, that is not going to change unless there is a substantial change in the direction of the housing data, and one month of lagged data does not a trend make. Cheers.
Anybody notice that February 2006 median sales price was revised down? Slightly, but still, why would it take a year to revise a median price down unless you want the year over year comparisons to be better to your liking?
Insert downward revision rant here. That's what one upward revision in the last 18 months?
I really wanted to point out that while the spring selling/buying season is here the tighter lending environment may show extended negotiation, escrow and closing times stretching the process into subsequent months.
Man, that's a surprise after last month's 16% decline in new home sales. I thought existing home sales lagged new home sales by a month. There goes that theory.
I do expect further weakness ahead, but these numbers were stronger than economists forecasts. What does it mean when the numbers come in ahead of the Wall St. forecasts that are supposed to be overly bullish?
I expect further weakness ahead, no doubt, but maybe they won't be as weak as some are fearing. It's hard to tell right now. No doubt there are forces acting against sales (subprime), but there are also things supporting sales.
How are used home sales tracking new home sales when you factor in the lag time of closing? Are the numbers highly corelated or not? I can tell you that in my local area the used home sales have all but dried up. Anyone who was looking does not qualify anymore.
Take a look at CR's first chart. Compare the YoY sales in the first two months of this year to the YoY sales in the second half of 2006. Interesting, no?
TWO OTHER KEY POINTS:
1. Mtg. rates are still ABSURDLY low for the risk.
2. Except for first time buyers who have no jobs, no credit history & no money, California has yet to restrict mtg. lending criteria one iota. Worse! Every day So.Cal. T.V. viewers are besieged with r.e. mtg. lending infomercials hawking one stop "easy credit", no-doc loans.
Care to guess what home sales would look like if CA had signed on to the toothless CSBS Mtg. Guidelines four months ago?
Median home price in SoCal is above $600k & median family income is in low $60k area, folks. With 20% down & including property taxes I figure monthly costs for a $600k home (before tax deduction) is about $4,000. It doesn't take a dryfly to figure out what's on the horizon out here.
I thought existing home sales lagged new home sales by a month
I think 2 months is closer to truth.
Well, see. If there's not a sharp decline in existing home sales next month I'd have to conclude that a) one or both of the reports is not accurate or b) there's not a strong correlation between new home sales and existing home sales.
OT: Can anybody shed any additional light on NEW's announcement this morning that Barclay's released it from its repurchase obligation? My interpretation is that NEW did not have the cash to repurchase so Barclay's said ok, just transfer the loans to a new servicer. So I am not sure why NEW is up 35%. I would appreciate any insights.
New Century Financial Corporation (the "Company") previously announced that it had received notices from Barclays, in which Barclays alleged that certain Events of Default had occurred, as defined in that certain Master Repurchase Agreement, dated as of March 31, 2006 (as amended to date), by and among the Company, certain of the Companys subsidiaries, Barclays and Sheffield Receivables Corporation (the "Barclays Agreement"), and purported to accelerate to March 14, 2007 the obligation of the Companys subsidiaries to repurchase all outstanding mortgage loans financed under the Barclays Agreement and to terminate the Barclays Agreement as of that same date. The Company had estimated that the aggregate repurchase obligation (the outstanding mortgage loans financed) of its subsidiaries under the Barclays Agreement was approximately $0.9 billion as of March 12, 2007.
On March 16, 2007, the parties to the Barclays Agreement entered into a letter agreement (the "Barclays Letter Agreement") pursuant to which Barclays and Sheffield Receivables Corporation agreed to release the Company and its subsidiaries from its aggregate repurchase obligation under the Barclays Agreement and the Company and its subsidiaries agreed to release their rights to outstanding mortgage loans that had been financed under the Barclays Agreement. The effectiveness of the releases in the Barclays Letter Agreement is subject to the satisfaction of certain preconditions, including that (i) the Company and its subsidiaries shall have made certain payments to Barclays, including forwarding to Barclays all amounts received by the Company and its subsidiaries after March 1, 2007 with respect to the mortgage loans under the Barclays Agreement, and (ii) the Company and its subsidiaries shall have taken certain actions to facilitate the transfer of the servicing function with respect to the mortgage loans under the Barclays Agreement to a third party appointed by Barclays. As of March 22, 2007, the Company was still in the process of satisfying these preconditions.
The Barclays Letter Agreement provides that the outstanding mortgage loans financed under the Barclays Agreement are being transferred to Barclays "as is", without any representations or warranties by the Company or its subsidiaries, and without any holdback by Barclays. The Company and its subsidiaries have agreed, however, that if they enter into a settlement or release with any of the Companys other lenders and any such release contains materially more favorable terms for the benefit of any such lender than those in the Barclays Letter Agreement, then Barclays will b
If the sales reports lag contract signing by one to two months, then the March numbers will reflect contracts signed in January and Febuary. And if March is the begining of the spring sales season, then it follows that sales (contracts) made in January and February are the begining of the spring sales season. That seems counterintuitive to me. I would think Jan and Feb would be dead months for sales closings. So the March numbers should be generally low. But that's not what the graph shows. Can anyone enlighten me?
Regionally, existing-home sales in the Northeast surged 14.2 percent to a level of 1.21 million in February, and are 3.4 percent higher than February 2006.
And I feel some pressure to assure Keith that we are not merely implacable bears incapable of recognizing good news, mired in confirmation bias.
So I won't "explain this datum away". In fact as reports go, I thought this one was fairly educational and informing --even alluding to the wealth gradient and how condos in high priced areas affect these fairly useless (for the consumer) median numbers.
Trend towards lower sales higher inventory continues to be confirmed by this report. I don't expect RE sales to fall to zero rather to revert to historical mean around 6%.
The implications of a slower turnover rate and lower appreciation is less MEW and slower economic growth within business sectors that rely upon this market such as furniture makers, paint, construction , Home depot, pottery barn etc. We have allready seen evidence in the consumer side that these business sectors are feeling the slowdown. This report is not good news for the RE food chain we can expect continued layoffs, more foreclosures and poor sales within the RE food chain.
The National Association of Realtors reported Friday that price of a median home sold last month dropped to $212,800, down by 1.3 percent from the same month in 2006. It marked a record seven straight months that the median home prime has fallen compared to the same period a year ago.
Total existing home sales are 3.6 percent below the 6.94 million-unit pace in February 2006.
The manner in which you place current data within a larger context is why I keep coming back to CR. Inventories increasing 30% Y/Y in Feb is real information as opposed to deceptive headlines like "Existing Sales Jump!" You provide an excellent service here, for which you are to be commended.
Not a good week to be a bear on the stock market, the housing market, or the economy in general. I can hear my wife nagging at me this w/e to buy already. However, this is unwinding exactly like Japan in the 90's - an almost orderly, incremental decline in volumes and prices that didn't cause much panic for the first two years, but continued with relentless small declines every year for 16 years. I think I can hold out a little longer.
Realtors(R) are going to fight tooth-and-nail (playing with data, agressive pricing, hardball selling, etc.) every step of the way. They will be especially bad until about October, when snow in the Rockies heralds winter's approach. Only at that point will sellers come to their senses and ease prices significantly.
...except in NYC, which for reasons discussed above and more, will always be a different beast.
Real estate in Manhattan will stay strong as long as the financial economy stays strong. Given that the private equity world is busy trying to cash out via ipo's, I would say that's a signal the ultimate insiders are expecting things to turn down shortly.
population density in my neck of the woods is 78/mi² and we do have cows in the streets...
to make this post on topic, housing here is going strong, lots of demand caused by the highest birth rate in the third world. We don't have insane price increases as wages here aren't much, even with two adults working, but building is pretty steady.
ac, the best leading indicator for existing home sales is the pending sales index, which tends to lead existing home sales by two months. The increase reported for February is consistent with the December's increase in pending home sales. We should expect a decline in March, as pending sales were down in January, not to mention the subprime issues that came to a boil in late February.
I wonder about that too. It seems like every day there's an article in the MSM about some lender or another denying loans at the last minute, so I was expecting numbers to deteriorate further. Maybe the subprime thing hadn't completely hit the market? I guess we'll see next month or in the new homes report.
As a NYC resident, (currently a tenant after selling our building last year) I do expect property values and rent here to take a substantial downturn as the recession gets rolling and proves to be enduring. Leading to CR's "vicious cycle" scenario.
There is a tremendous quantity of development in all five boroughs, it dwarfs the expansion in the '80's. I remember numerous vacant buildings during that recession, this bubble seems much larger and of a longer duration. It is also on a global scale, as I witnessed on my recent visit to Panama and Central America.
I don't think there is anything wrong with high LTVs (95-100)as long as there is an appropriate risk premium assessed. The VA loan program has generally been a success for the last 60 years and turns a profit for the federal government. The problem is high LTV loans which adjust to payments that the borrower has no ability to afford and home prices far in excess of what incomes can support.
"Compare the YoY sales in the first two months of this year to the YoY sales in the second half of 2006."
Not sure what you're seeing there. YOY sales in Jan/Feb 2005 to 2006 look exactly like the pattern of 2006 to 2007. In fact, sales in Feb 2005 were exactly the same as Feb 2006, so today's number is actually a degredation in the downward trend. Feb was busier in all three years from Jan so it's really disingenuous for the NAR to report MOM sales increases as being anything special. Will they now also say that March increased from Feb? (duh! it always does!) This is pure spin and nothing more. YOY is the only thing that counts because of seasonality. Anyway, inventory is the critical piece and always has been and that's where the bust is. Also it's improper for the NAR to use the months of inventory metric saying it peaked in Oct. to imply that we have seen the bottom and are now headed up. They know for a fact that inventory always falls off at the end of the year. Ha! These shills will stop at nothing to paint lipstick on this pig and target a few more knife-catchers.
This was an extremely bearish report and actually is very ominous for the Spring season. And all you peeps that think the US RE bust will mirror Japan better catch a clue. Japan's RE bubble was mostly commercial not residential, things like neg-am option-arm i/o's didn't exist, and Japan had a huge savings surplus so they could grind out an RE bust for years. Today's fragile US debt-laden consumer with no savings is in poor shape to ride out an RE bust without easily folding (foreclosing). This will just be a pile-on effect and will add millions more units to an already staggering inventory surplus. Meanwhile the HB's keep building like mad. No, this isn't going to be like Japan at all.
I agree. I expect sales to rise some in March, like usual, and it will be dutifully reported as vindication that the spring selling season is on -- and the worst is behind us.
Darth: you seem to know something about the Japan RE experience but it is my understanding that the underlying problem was that the banking industry carried the book value for loans long after the bust took place. The reason was simple, they had to protect the banking system from immediate failure.
So do you expect the American financial entities to write down the value of SFH RE over the coming years or mirrow the Japanese experience and just let CPI and foot dragging cover the true losses?
I simply don't see how comparing Feb to Jan figures makes any sense without seasonal adjustments. Why not compare to last July for that matter?
Shameless way to present data, but the NAR is a sneaky operation, so it is to be expected. The MSM should be taken to the woodshed for running blindly with NAR propaganda.
ron, that's a darned good point, and we're already seeing some similar behavior on the part of banks involved in foreclosures. For example, most of the REO's that I've been tracking have come back on the MLS at fairly high prices. Even higher than local comps would dictate, and so these properties just wind up as more zombie inventory that don't go anywhere because the banks sure as heck don't want to mark a write-down. I view this as similar to your example in Japan. Entire banks became zombie banks that basically ceased to function like a normal bank but they were propped up by the BOJ and just kept operating as a useless shell. This is actually a fascinating concept and hopefully one of the big guns on here can share some insight as to why the US banks will or won't follow this path.
I have a hard time visualizing banks carrying around tons of zombie REO's, but I honestly don't know if they are strong enough, or if the Fed is stong enough to pull it off.
From the NAR The national median existing-home price for all housing types was $212,800 in February, down 1.3 percent from February 2006 when the median was $215,700
Keith wrote I like this blog, but there does seem to be too much confirmation bias, in that any datum that doesn't support falling house prices gets rapidly explained away, while datum that does support falling house prices is taken as given.
Uh, Keith, prices ARE falling. And the spin of house sales rising is proven spin by CR's first graph showing that yoy the sales have fallen. And with almost 7 months of inventory versus 5 months in Feb 06, pressure is on for more price reductions.
Keith, what kind of bias is needed to acknowledge facts?
Steve, you're full of it. If the chart was truly seasonally adjusted, then the graph would be more or less a straight line and you can see that it always spikes dramatically in the Spring selling season. Not!
FWIW (and I can't cite a source ), I remember reading in one or more places back in February that "word was out" among mortgage brokers that standards were tightening/programs ending starting March 1st and, accordingly, some may have been in a rush to close by such date, perhaps bringing some closings forward to February.
I'm not talking about the chart. I'm talking about the numbers from the NAR. The increase in February over January is based on seasonly adjusted numbers.
Actually, the average condo price in Tokyo declined by almost 40% from 1989 to 2005, though I would agree that it was commercial real estate that basically paralyzed the Japanese banking system. They also had (and still have) 100 year generational mortgages in Japan - not quite a neg/arm but still pretty bubbly. I also agree that high consumer debt levels make the US more fragile and prone to a quicker, fuglier adjustment. I really can't see Manhattan real estate being a good buy for at least a few years.
You said: Feb was busier in all three years from Jan so it's really disingenuous for the NAR to report MOM sales increases as being anything special. Will they now also say that March increased from Feb? (duh! it always does!) This is pure spin and nothing more. YOY is the only thing that counts because of seasonality.
You're implying that the NAR is only reporting an increase in February based on non-seasonally adjusted numbers. That's not true.
Total existing-home sales -- including single-family, townhomes,
condominiums and co-ops -- rose 3.9 percent to a seasonally adjusted annual
rate(1) of 6.69 million units in February from a downwardly revised level
of 6.44 million in January, but are 3.6 percent below the 6.94 million-unit pace in February 2006.
It's my understanding this is the key issue with the rating agencies and BBB MBS. If the MBS drops below "investment grade" banks are required to mark-to-market, but are otherwise allowed to carry at book value. Thus the rating agencies collude to keep the MBS investment grade and prevent the markdown of these assets (MBS are 10% or more of bank reserves).
Steve, I was only commenting on your statement. Here you don't mention the SAAR but say instead:
"Take a look at CR's first chart. Compare the YoY sales in the first two months of this year to the YoY sales in the second half of 2006. Interesting, no?"
Regardless, I think you are missing my point that the 2005/2006 trend is virtually identical to the 2006/2007 trend. If anything, the current trend is worse. It seemed like you were trying to imply that there was some kind of a trend reversal which is not supported by anything in this report. If not, I apologize.
"Compare the YoY sales in the first two months of this year to the YoY sales in the second half of 2006."
Steve I think I see your point, the rate of decrease of sales on a YoY basis seems to be slowing. Oct-Dec look like they were running 10% below 2005, whereas Jan-Feb look to be only off by a few percentage points. On the face of it this might argue that we are getting close, but still not at the bottom.
However, there are two dimensions to this data, sales rate and price. Price is still falling, and I don't know any wall street analyst who would recommend buying a stock or commodity whose price is falling on increasing sales volume. That's a quintessential "falling knife"!
Steve, you're right. I was looking at the raw numbers on the chart and, my mistake, didn't read the details of the release.
So, better than expected but perhaps due to weather and being ahead of the more recent subprime meltdown and regulatory crackdown, such as it is. My opinion is the next few months won't be as easy to cheer.
Yes, that's what I'm pointing at. And I'm not suggesting it's a good time to buy or even that housing has reached a bottom (it's a bit early to say that), but it is interesting.
I think the subprime issue is going to be a drag going forward, but I think that countering that drag could be other forces, such as continued job and income growth and lower interest rates. That's mainly what I'm taking away from the January and February.
I followed the link to UrbanDigs website . . . shocker, he's a NYC broker. At least you had the decency to include your link, you miserable, lying shill.
ABOUT URBANDIGS
An aspiring entrepreneur with a BS in Psychology from Union College, I was a former NASDAQ Equities trader (1998-2004) and founder of The HotSpot Haven turned ` with Citi-Habitats. UrbanDigs is my unbiased, real-time take on the Manhattan real estate market as well as tips to profit from it
These "annualized" home sales numbers are supposedly based on the rolling monthly totals of the past 12 months, so when the Feb.06 number is presented, the Feb.06 raw number rolls in, the Feb.05 raw number rolls off. If you look at the raw data, I don't see how the rolling total could possibly have increased? The only explanations are (1) there were revisions higher to past months that boosted the rolling total, or (2) NAR has changed their seasonal adjustment numbers. I'm guessing (2), which means they're adjusting up the slow periods, then the peak periods should look even worse going forward. Of course, they could just be fiddling with the limits of statistics to put lipstick on a pig. I wonder if Jim Cramer and David Lehreah will end up as cell mates?
These "annualized" home sales numbers are supposedly based on the rolling monthly totals of the past 12 months, so when the Feb.06 number is presented, the Feb.06 raw number rolls in, the Feb.05 raw number rolls off.
Are you sure about this? This doesn't sound right to me.
Steve, your first mistake is in putting any stock in numbers from the NAR.
Looking at these charts . . . there simply is no good news here. Not a scrap. The headlines are once again completely backward, and l;ereah goes on whistling his merry tune.
He's the fucking Pied Piper of Hamelin, luring in every last possible greater fool. There is a warm spot in hell waiting for that SOB.
Actually, I don't believe in hell, so I mean that in a figurative sense, but i would be more than happy to bring back the stocks. Lereah and his ilk deserve to be pilloried in the public square, along with Greenspan and the GOP leadership that threw gas on the fire.
I would expect the drop in YOY sales to slow from the 05-06 numbers into the 07 numbers. No reason to expect that sales would continue to drop at those rates.
This data is important only on how one intents to use it in his/her investment decisions this may be in stock market trading, buying or selling a home or starting or selling a business relating to the RE food chain.
I intend to buy real estate sometime again in the next five years, so I am looking at this data not only to watch the YOY sales trend but also understand when it does actually begin to bottom and go sideways. I would like to see it flat for a good year before entering the RE market to make sure that trend had some meat on it.
New home sales rose 3 months in a row before experiencing a steep drop. Now existing home sales have risen 3 months in a row. Hmmmm...
At least for the moment my theory is going to be that existing home sales and new home sales are correlated, but with more than a one month delay. Will revise in a month or so.
Steve, You seem to suggest that the subprime "issue" is itself a problem. That entirely misses the point. Subprime is a symptom of prices having grown seriously out of bounds as dictated by fundamentals or historic norms. That's what is getting addressed in the marketplace, albeit slowly, and we'll hear about all sorts of other symptoms and resulting market observations. These data points are converging and will tell the story as the dots get connected...
Sorry, I just read NAR's methodology. I thought they used the same methodology as the census bureau does for new home sales, which is incorrect. The NAR applies a seasonally adjusted annualization factor to each month's raw data. I just worked it out, and the seasonally adjusted annualization factor is about 2.5% different for Feb.07 than Feb.06, so I would say they're fudging their numbers within the cover of one standard deviation. Of course, seasonally annualizing a noisy monthly series is just going to produce crap anyway, but it does look to me like they're trying to bias their crap up. In the end, they're just putting lipstick on the arse end of a pig.
I think the trend would be a bit more promising if they declines weren't YOY over previous declines. The pace of declines seems to have adjusted, but certainly not the direction.
Also, as you note, the changes in lending standards will start showing up soon, and you can be sure they aren't helping the market.
Based on the anecdotal evidence around my NJ neighborhood it sure looks like inventory is rising, and I'm not seeing much in the way of "sold" signs.
For 05 and 06 March over Feb showed an increase of more than 35% in sales, If that's not the case this year watch out. If the trend breaks badly and we get only a >25% jump in sales the recession talk will begin in earnest.
don't think there is anything wrong with high LTVs (95-100)as long as there is an appropriate risk premium assessed. The VA loan program has generally been a success for the last 60 years and turns a profit for the federal government.
Robb: these loans work in a RE market that is trending up(appreciation) they don't do so well in down markets. Regarding VA and FHA loans they do not record foreclosures in the VA or FHA record keeping system. I would expect they follow similiar experiences with subprime 100%LTV in up appreciation periods and higher foreclosure rates in low to declining makets. I have posted a bit below from thehousingbubble.com site that highlighted this the other day.
The News & Observer. The city of Charlotte does not count foreclosures. Neither does Mecklenburg County, the state of North Carolina or the federal government. Even the Federal Housing Administration, which insured many of the failed loans, didnt track the concentrations.
About 8,700 homes have foreclosed in Mecklenburg County over the past four years. An Observer study found almost 30 percent of the foreclosures in 2003 and 2004 were associated with loans insured by the federal government.
The share of Americans who own homes rose to almost 69 percent last year from 65 percent in 1996. The FHA was responsible for a share of the increase. So were subprime lenders, which make loans with high interest rates to the same people traditionally served by the FHA.
But now the number of foreclosures also is pushing into record territory, driven by defaults on FHA and subprime loans, according to estimates made by the lending industry.
"Existing Home Sales figures by the NAR can and most likely have been manipulated to quell market jitters. Their methodolgy section of their site notes that the figures are based on a 30-40% capture rate of MLS transactions throughout US markets. It is also derived from a regional sampling standpoint. Simply sliding the geographic sampling around to more active markets allows for higher resale numbers. Furthermore, their site indicates that a representative sample of 160 Boards/MLSs is utilized in arriving at their final numbers. Again, this sample can easily be manipulated simply by utilizing only those Board/MLS figures that support the NARs desired outcome."
Stephen Roach: Morgan Stanley - Global Economic Forum The forecasting landscape has long been littered with carcasses of those who have been dumb enough to bet against the American consumer. From time to time, there have been unconfirmed sightings of my skeletal remains in that heap. The lesson for the bruised and battered forecaster is to pick your spots carefully in betting against the American consumer. I strongly believe this is one of those times.
As far as I can tell, he makes a bunch of claims about how the NAR could manipulate data, but doesn't provide any evidence that they are actually doing so.
It's a pretty common tactic. When the numbers support your view, they're legit. When they don't, they're cooked.
I can only work this out roughly, but NAR's seasonal annualization factor for Feb.07 appears to be based on a y-o-y declining existing home sales trend of around 2.5%. I think even an optimist would concede that's a bit, well optimistic. Lies, spin, and more lies. It's really getting to the point where you can't take any economic release at face value. But as long as you can manipulate the market, and j6p remain compliant sheep, nobody gives a toss? For now, anyway.
Anyone listen to KB Homes CC? It was certainly MUCH different than the previous ones, they shotgunned the analysts through and cut off questions early. I'll have to look at the release closer to see what they didn't want to be asked about, I guess gross orders?
I can't believe no analyst asked them what their definition of subprime is, they kept saying their subprime numbers were low (13%) but nobody asked them what their definition of subprime was (they kept saying "Ask 10 different people you get ten different answers"), so the number is meaningless. Then some guy comes on and asks them what their Alt-A numbers were... ARGH.
Steve, NAR's numbers are clearly shaded to produce show a higher degree of stabilization than the raw data would support. If you want to believe their spin, please feel free to do so. At least my bias is honestly held.
"Of course, they could just be fiddling with the limits of statistics to put lipstick on a pig."
Bingo. Revise Jan numbers down and come in with "unexpectedly" good Feb numbers. Next month, revise Feb numbers down and come in unexpectedly good in March. Rinse and repeat.
They've been doing this for almost 2 years now, no reason to stop now.
Four years of late-night cramming and stressing before exams - for the Class of '07, it may have been worth it. For the the 1.5 million college seniors set to graduate this spring, the labor market looks pretty good, according to college career offices across the country.
With recruitment on the upswing, some private schools like Milwaukee-based Marquette University have received so much interest that they have had to turn away recruiters. Larger state institutions like UCLA and Clemson University have had to extend or add an additional career fair to accommodate interested employers.
According to a recent survey, employers are expected to hire 17.4 percent more freshly minted college graduates this school year than they did in 2005-2006, according to the National Association of Colleges and Employers (NACE).
Darth and Steve: this is why the trend over time is more important then month to month. The data sources have problems considering its size and source points so watching and making decisions based on just a month to month movements can lead to some funky judgements.
Four years of late-night cramming and stressing before exams - for the Class of '07, it may have been worth it. For the the 1.5 million college seniors set to graduate this spring, the labor market looks pretty good, according to college career offices across the country.
Steve... that doesn't tell you anything about where the economy is headed. Replace 2007 with 2000 to see what I mean.
But DT has a point about the adjustments, especially when you consider the flexibility the NAR has left for itself by allowing itself to be selective about which sales markets they wish to include in their release. They can fine tune these numbers all they want.
It would be best to have a truly independent body audit their work.
Steve, I can only work it out roughly because I don't have access to their full data series or models, but they appear to be assuming y-o-y sales will only drop (roughly) 2.5% in Q1 2007 versus Q1 2006 in their annualized seasonal adjustment factor. Is that in line with the actually observed trend over the past year? Hmmm, I think not. They're making an implicit optimistic forecast and presenting it as statistically factual data. I think that's called spin. But like I said, feel free to believe whatever you want. I don't have the time to prove it to precision, but you also don't have to be a biologist to identify a steaming pile of turds.
Thanks for that JBR.
One more thing, the prices that edged down get little attention:
Regionally, existing-home sales in the Northeast surged 14.2 percent to a level of 1.21 million in February, and are 3.4 percent higher than February 2006. The median existing-home price in the Northeast was $265,900, down 1.4 percent from a year earlier.
We CR readers expect this weight of inventory to have this directional effect on prices. (Magnitude coming soon in both inventory and price drops, no?)
No need to draw excessive attention to the fact that house prices are dropping and that you, a prospective buyer/investor might want to wait. Better to obfuscate and suggest that an infringement of comparing "apples to apples" might have occurred (which it likely did, but as per JBR, not NAR).
Of course from a very primitive point of view, and everything else being equal, I suppose it would be an expected outcome to have volume increase on decreasing prices.
The impression i have from the other side of the world is that many of you dont spend any time with Realtors to know what is happening in your area.
My ohio contact said before christmas that things were as bad as they could be. 25% off asking prices in some cases. Agents were being sent on courses to learn how to sell at lower prices. Come the new year there was a ton of listings. February they were having one of their best ever office months for closings. By March they had so much business that many junior staff at quit to get better paid jobs elsewhere. Some local agents were nevertheless down in the dumps and not selling because of the bad news whereas others were delighted that the johnny come latelys were all feeling the pressure leaving them with all the buisiness. My friend thinks i am potty to be mr doom and gloom. There is a large amount of foreclosure stuff in the area. Some stuff is sitting with no offers for over 200 days. By march some realisticly priced houses are selling in one week (well one) and another sold within two weeks. They are busy.
This is what my contact said today.
"I think what I would say is that sellers are accepting that if they want to sell they have to price things more reasonably....or just stay where they are and wait it out. Homes are more affordable, yes but because there are so many to choose from right now buyers can, and are being pickier. They are demanding more for their dollar. What is interesting is this....it seems to me a lot of buyers are taking the opportunity to get a bigger home than they may have been able to afford before. So no one is getting that its a good time to buy cheap, reduce debt, etc. I wonder what will happen when they start getting those massive utilitiy bills? or when values go up and their property taxes are raised accordingly?
........ I could be wrong here but i dunno....there are still a lot of houses in the 250-400k range selling while things under 100k kinda sit a while."
If the figures just released were for December closings? then if my friends feb and march closings can be compared to elsewhere then you are ahead of the curve here.
Most people were predicting bad times to come home later in the year as more of the loans reset.
...such as continued job and income growth and lower interest rates.
Steve, put down those NAR talking points and back away slowly...
Seriously, I've heard that song and dance for years from the REIC to justify the boom when it was happening.
Outside of Wall Street, real wage growth has been an absolute joke this century. We're still basically at the bottom, interest rate wise, so expecting lower rates is wishful thinking, too.
I'm not saying they're massively wrong, but the adjustment factor isn't realistic. If you think I'm wrong then go to the data on bloomberg or some other source and work it out for yourself like I did. Or, if you prefer, you can just assume David Lereah isn't massaging his numbers and uncritically believe whatever he says.
Steve: This report also highlights two problems going forward with the SFH resale market:
Higher inventory levels
lower appreciation
these issues did not exist in july of 05 and only recently have began to attract significant attention. So its a little bias to only look at the rate of YOY sales decline as a indicator of market health.
We also have two new variables that are entering the discussion about the RE market and its viability which is:
foreclosure rates
tighter lending standards
While we have no direct measure of these and many will posture various theories as to what those affects may be we can assume they probably woun't be positive in the shortterm.
Here's just an anecdotal story from Colorado Springs, and a probably leading indicator. We had a prospective client come in our office a couple of days ago. He's the CEO of a local home builder and he's been in the business for 40 years, and he says he's never seen conditions this bad. He's not sure what's going to happen to his company and the other builders....hopefully just ride it out. Meanwhile, I keep seeing new apartments/condos/homes being built as if demand was still strong. Last month new home sales were off 40% from last year.
If you look at CR's first chart, you'll see that the non-seasonally adjusted numbers for Feb DIDN'T drop that much.
But it still DROPPED... meaning the market is still trending down and not up. How much down is a difficult question considering the noise MOM.
But the headlines were 'Sales Increased!'... a very distorting message because they are comparing a noisy estimate from last month to a noisy estimate this month and projecting activity over the whole year from that. In reality they were trumpeting that sales decreased less on an annualized basis than last month on an annualized basis. Whoopie Doo!
Misleading hardly describes it.
If they were 'honest' with their message from these numbers they'd compare a rolling average YOY... do something like average Dec-Jan-Feb last year to this year and then project a whole yearly rate of change from that... and do it on a rolling basis every month. It would smooth out the noise at the expense of missing sharp changes in direction.
If they did that I dare say (looking at the charts) they'd have to report a slowly deteriorating market over the last year or so.
And that's what we've actually seen. Its very likely that's what we will see for the next couple of years.
The part you quoted from me refers to one very specific argument regarding issues Turbo had with the seasonal adjustments. I'm not exactly sure how your post is a reply to what I wrote.
Another anecdote:
Lockheed Martin has said that they need to hire 55% of the US engineering grads to meet their needs in the next 5 years. A solid technical graduate can start in the 50s in Omaha.
These are certainly interesting times. I'm making more than I ever thought that I would. Especially coming out of the dot.bust. The country is facing the deflation of two asset bubbles in the same decade.
While I think that it is safe to extrapolate past housing busts to the current situation in housing, I think it is unsafe to extrapolate the housing bust to the overall economy. Remember when folks were projecting a repeat of the 70s with the 2003 run-up in gas prices? It did not happen because gas is a smaller part of the economy now.
What the housing bust may do is slow the economy and inflation. Especially if it causes average rents to moderate or even reverse a little. This frees the Fed to reduce interest rates.
I'm not exactly sure how your post is a reply to what I wrote.
It is a reply to your defense of the NAR spin. NAR takes their own evidence of further decline albeit possibly less rapid (depending on whether the current signal is noise or actual market deceleration) and then trumpets it as a 3% increase.
There is nothing you can say about that message except that it is misleading if not false.
What the housing bust may do is slow the economy and inflation. Especially if it causes average rents to moderate or even reverse a little. This frees the Fed to reduce interest rates.
The Fed is NOT going to reduce interest rates just cause inflation stays slow (which according to their last release WASN'T low enough). They will only cut if & when the economy slows.
They aim for 'neutral rate' where there is neither excess inflation nor economic slowing and that's where they will sit. And once they find that spot they'll sit there until forced to move.
Robert - Lockheed was paying that kind of money two plus years ago for new hires. One of my daughter's friends hired on as a ME and got almost $60K two years ago.
Defense will stay active for quite awhile longer too... but I'm not sure that bodes well for the country's economy in the long haul. Somewhat like pouring money down a rat hole... a necessary rat hole at times considering the 'bad guys' but a rat hole nonetheless.
By the way, everything is just posted about is included in the press release, so you'll have to forgive me if I'm finding it difficult to believe they're hiding anything with the numbers.
And before you focus in on the Lereah quotes, please note that at no point did I mention or support them in this thread. That's spin, but that's not what we're discussing. We're talking about the numbers. So which numbers in the press release are wrong and why.
Tell me which of the data reported by the NAR are inaccurate.... everything you just posted about is included in the press release
Ya sure... but what was the MSM headline reported everywhere.
'3.9% Increase in home sales compared to last month'... all else in fine print.
It is possible to be 'accurate' and provide it in a format that is 'misleading' all at the same time...
That is the art behind marketing... it is also the art behind propaganda. NAR understands this. The way it was presented was not an accident or an oversight.
I'm not even implying the media is intentionally in on the distortion - I don't think they are cleaver enough to catch it.
The chart CR posted with monthly sales for the two previous years and the last two months CLEARLY shows a softening market YOY... with sufficient noise MOM so as not to know if the market is worsening more rapidly or more slowly.
But the data NAR offers us, if CR accurately charted it & I believe he did, shows a trend still heading down & there is really not much else that can be said.
The month-to-month number always leads the headlines, even when the pace decreases and the numbers are higher year over year. Here is a press release from November 2005:
Sales of existing homes eased in October with a moderate decline in both single-family and condo sales, according to the National Association of Realtors®.
Total existing-home sales - including single-family, townhomes, condominiums and co-ops - were at a seasonally adjusted annual rate1 of 7.09 million units in October, down 2.7 percent from September's pace of 7.29 million. Sales were 3.7 percent above the 6.84 million-unit level in October 2004.
Basically this is the exact opposite of the situation we see today.
So it sounds like you think the NAR and the media is engaged in some sort of nefarious plot to mask the weakness in the housing market. I'll concur that the NAR would love to (and have tried to) hide the weakness, but the fact that the headline number is the month-to-month pace change isn't evidence of that, since that's how it's always reported.
Ask yourself this: Were you equally upset at the media for understating the October 2005 numbers by focusing on the month-to-month pace decrease rather than the YoY increase?
Actually Steve I'm not so sure that was always true - granted the case you point to shows that for that month - but I recall a whole lot of months where the lead story was YOY price appreciation... especially in 2004 & 2005 where there were some pretty staggering increases... remember CRs posts on Orange Cty 'paying' citizens $70K a year to own a home?
And I do NOT believe the media is in on the misinformation... I said that clearly above... they are clueless and will print the focus (or spin) from the press conference & PR release.
NAR is another story... I believe they are intentionally spinning, massively so and in my estimation stupidly.
I think if you look at CRs chart... it doesn't show me a 'crash'... rather a gradual prolonged decline. So spin it as more 'soft landing'.
In reality I'm not convinced we aren't going to have a soft landing - it depends on what unfolds over the 12-18 months.
But when I see the stuff NAR says... like this from the release...
"Some of the rise in home sales may be from mild weather that
brought out shoppers in December, but fundamentals have improved in the
housing market and buyers see a window now with historically-low mortgage
interest rates and competitive pricing by sellers," he said. "Even so,
winter storms last month discouraged shopping, and buyers were chilled with
the third coldest February on record. These unusual weather patterns mean
home sales that close in March may decline before rebounding later this
spring."
And then compare with CRs chart... makes me discount everything Lereah & NAR say.
sk yourself this: Were you equally upset at the media for understating the October 2005 numbers by focusing on the month-to-month pace decrease rather than the YoY increase?
Actually I was - I didn't believe sales were slowing or prices declining at all. My eyes and ears were telling me it just wasn't so.
Don't get me wrong - I believed we were in a bubble & it would end badly - but I though the reports of 'moderation' back then laughable. As laughable as saying the market was becoming 'sustainable'.
The charts - both price & sales activity - are far more powerful than any of our words.
Especially when followed by reports of YOY price appreciation back then.
Steve figures that NAR's customary habit is to post sales volume in the headline and therefore they have no bias since they are conforming to this practice...and I wonder if Steve really believes this is a weighty argument... or just a weak moment for Steve. Don't make me side with that radical dotcommunist, Steve!
I'll concur that the NAR would love to (and have tried to) hide the weakness, but the fact that the headline number is the month-to-month pace change isn't evidence of that, since that's how it's always reported.
"I wouldnt trust any data coming out of NAR (Southern Cal - San Diego). Local MLS data is unreliable. Specifically, list price to sales price ratios and average market times. The MLS uses most recent list price to determine list to sales price ratios. Orginal list price is not used. MLS reports average list to sales price ratio of 95-96%. Actual original list price to final sales price ratios are actually closer to 87-89% in areas I have audited. Also, average days on market are grossly understated because the MLS is allowing agents to list properties for multiple seperate periods. Hence, only the final list period is used in their averages. This is true in every area I have sampled. I sent numerous complaints on specific incidents. Not only does the data remained unchanged, I wasnt given the courtesy of a response.
The MLS also does not require data on sales concessions although sales concessions are prevalent. The failure to disclose and adjust the level of sales concessions on the market creates an over-statement of prices and values."
Steve, I need to share this intimate feeling with you:
we (ordinary intelligent readers) just recognize the NAR as a professional body, --professional enough to put the best light on its business without being blatantly dishonest or excessive about it...which they note draws unnecessary attention (Lereah). They have a competent public relations department...not like some (and I don't mean just dotcommunist ok).
NAR pretends to be objective.
We pretend to see them as objective reporters.
You pretend to report NAR's unrequited loves and we pretend to believe your emotional summations.
Believe me, I take no pleasure in even given the appearance of defending the NAR. Consider my posts not so much a defense on the NAR, but a critique on sloppy thinking. Specifically, about how you never hear anyone complain about the data from the NAR as long as the numbers are terrible. But the second a report comes that, well, that isn't even all that positive, but just not completely bearish, we've got the posters insisting the numbers are fixed or their methodology is faulty.
If you go back to the post on the February jobs report, I called people on doing the same thing there. It just happened to be the NAR report today.
I'm sorry if I get so worked up. I wish I didn't, but it bugs the hell out of me to see people believing in the validity of something as long as it tells them what they want to hear.
And I don't pretend to be immune from that either. We all have our biases, so if you see me doing it, please feel free to call me on it.
It did not happen because gas is a smaller part of the economy now.
Another case of "lies, damned lies and statistics". Gas may directly employ fewer people, but everything -- and I repeat EVERYTHING -- depends upon it. The only reason the recent gas runup didn't hurt as much as it could have was that gas money was running out of one pocket slower than equity money was pouring into the other.
Robert,
I know Lockheed Martin is doing well. As a matter of fact, most defense contractors are doing very good. Most of my neighbors work for military contractors. However, that narrow sector growth is not necessarily a reflection of consumer demand from a growing economy since nearly all their revenue comes from government spending....taxpayer money....
Unfortunately, if it weren't for the Iraq war and the GWOT these companies would not be as profitable. If peace should break out....that would definitely put a crimp in profits.
NAR is full of hooey, Bernanke is afraid to call the economy what it is, but who the hell cares. The day trading approach real estate is siller than with stocks. Buy value to hold. Manhattan, no question, if you have a reason to buy in NYC then do it.
First!
always wanted to do that...
"patienece is a virtue"
I'm really getting tired of waiting this out.
I've stayed on the sidlines opting to rent instead of buying, believing that prices were going to adjust downwards.
The opposite has happened instead.
Here in Nyc demand still seems strong no downwards price movement.
Do the existing-home sales numbers include any data as to the loan-default status of the home prior to the sale? Could we see any boost to the sales due to foreclosure forced sales (ie, would an auction to a 3rd party count?) and pre-foreclosure bailout/short sales? When will we get price data for these existing home sales #'s?
bdf, I can't believe you "missed the boat". You know "they aren't making anymore land". How could you be "throwing your money away on rent" all this time and "paying your landloards mortgage". Lucky for you this is still a "buyers market". So bdf, get out there and "don't miss out".
December had mild weather. January and February had bad weather in many parts of the country. Look for weak sales in the next report.
I like this blog, but there does seem to be too much confirmation bias, in that any datum that doesn't support falling house prices gets rapidly explained away, while datum that does support falling house prices is taken as given.
here is a very good anti-spin story from the economist / cover story
The trouble with the housing market
immobilienblasen: The trouble with the housing market / anti spin from the economist
have a nice weekend
Well according to the charts, demand is little changed, it's supply were the action is. I would speculate that it takes longer to add new condos in NYC than to plop down new McMansions in the exurbs. This would tend to indicate the it will take a little longer for NYC to feel the downward pressure on prices.
Anthony Fleming
And while your at it bdf go get yourself a new car...sales are real low..dont want to miss the boat on that one either.
Also credit cards are nice get a few of those while your at it...live for today damit..If you play your cards right you may want to buy 2 houses..heck everyones doing it...
File this under scarcasim.
Anyone I repeat anyone who buys now is a dam fool...but then again...fool is the USA Slogan these days.
NYC is such a different animal than ANY other market that you really need to put in a class of its own. Population is growing, land is scarce, rental vacancy is below 1%, jobs are plentiful and incomes are high, trend is to live closer to where you work, its an amazing place to live, 2nd homes/pied-a-terres for retiress are in high demand here, 75% of our inventory is co-op and require strict financial guidelines, inventory on sell side is tight, buyer demand is very strong...need I say more?
NYC is seasonal and JAN - MARCH are always very active months. Summer months are generally slower with dropoff in buyer demand.
All in all, NYC is not the most speculator friendly market, yet it is a very desireable city to live in and to work in and rental/sales inventory is tight. Its not surprising that NYC lags in slowdowns and leads in recoveries.
If you are able to buy and have a stable job, sufficient salary, sufficient liquid assets and over a 3-4YR timeline to own, you should be buying regardless of whether its a perfect time in terms of a buyers or sellers market.
last!
Dec-Jan period was pretty good, we had no doubt about that. The RE market is too big to turn down within few months. We have a long, slow road to the bottom. Could be another 2-4 years.
After market cheered the Dec-Jan numbers today, I expect the March new home sales next week to be very sobering.
The ponzy scheme can go on as long as there os 100% LTV or the new version of it: 95% LTV.
95% is still too high. (And in many cases the 5% are being receieved as a gift, or as a loan for some loan shark or some fraud that is involving a lick-back from the seller himself)
5% is better than 0% down but is not enough for making the buyer get enough "skin in the game". Home ownership is a good thing but when the interest-only and 5% down means that the buyer does not actually own any part of his home and is being mortgage to the gills the advantages of "home ownership" are washed.
There must be a return to the good old 20% down a number that shows also that the buyer is capable to save for this down payment. The 20% down is the best indicator of the buyer credit worthiness and a best proof that he will strive hard to protect his investment.
The 20% down also mean one more thing: Buyers will start thinking about the price of homes and not just the monthly payment his is the most important aspect of returning sanity to the housing market.
Please write letters to congress and to media along these line: sanity and affordability in housing will be done by correcting prices and return of the 20% down payment.
Keith, if you have a problem with the explanation what is it? I'm genuinely curious because it does make sense to me. This blog is bearish on housing, that is not going to change unless there is a substantial change in the direction of the housing data, and one month of lagged data does not a trend make. Cheers.
Forget NYC, it's very, very tight market. Very few decent streets and even less decent homes on those streets.
Comparing to NYC San Francisco is just a huge wide space with plenty of cheap land
Huh Iran captured a British vessle 15 British sailors in Iranian custody..and on the eve of the UN meeting on sat....False flag alert!
beep! beep ! beep!
bpf,
It will be a buyer marekt for years don't worry.
Anybody notice that February 2006 median sales price was revised down? Slightly, but still, why would it take a year to revise a median price down unless you want the year over year comparisons to be better to your liking?
Insert downward revision rant here. That's what one upward revision in the last 18 months?
I really wanted to point out that while the spring selling/buying season is here the tighter lending environment may show extended negotiation, escrow and closing times stretching the process into subsequent months.
Man, that's a surprise after last month's 16% decline in new home sales. I thought existing home sales lagged new home sales by a month. There goes that theory.
Plus those payroll numbers.
Soft landing city.
Mark,
I do expect further weakness ahead, but these numbers were stronger than economists forecasts. What does it mean when the numbers come in ahead of the Wall St. forecasts that are supposed to be overly bullish?
I expect further weakness ahead, no doubt, but maybe they won't be as weak as some are fearing. It's hard to tell right now. No doubt there are forces acting against sales (subprime), but there are also things supporting sales.
How are used home sales tracking new home sales when you factor in the lag time of closing? Are the numbers highly corelated or not? I can tell you that in my local area the used home sales have all but dried up. Anyone who was looking does not qualify anymore.
excellent RE article this AM.
The Street Light
Take a look at CR's first chart. Compare the YoY sales in the first two months of this year to the YoY sales in the second half of 2006. Interesting, no?
Population density in Manhattan - 66,940.1/mi²
Population density in San Francisco - 15,834/sq mi
Ratio NYC/SF = 4.2 ! Comparing to Manhattan, San Francisco is just a suburban area. I almost expect to see cows on the streets
Senate banking committee goes after regulators - Mar. 22, 2007
a little too late
I thought existing home sales lagged new home sales by a month
I think 2 months is closer to truth
TWO OTHER KEY POINTS:
1. Mtg. rates are still ABSURDLY low for the risk.
2. Except for first time buyers who have no jobs, no credit history & no money, California has yet to restrict mtg. lending criteria one iota. Worse! Every day So.Cal. T.V. viewers are besieged with r.e. mtg. lending infomercials hawking one stop "easy credit", no-doc loans.
Care to guess what home sales would look like if CA had signed on to the toothless CSBS Mtg. Guidelines four months ago?
Median home price in SoCal is above $600k & median family income is in low $60k area, folks. With 20% down & including property taxes I figure monthly costs for a $600k home (before tax deduction) is about $4,000. It doesn't take a dryfly to figure out what's on the horizon out here.
I thought existing home sales lagged new home sales by a month
I think 2 months is closer to truth.
Well, see. If there's not a sharp decline in existing home sales next month I'd have to conclude that a) one or both of the reports is not accurate or b) there's not a strong correlation between new home sales and existing home sales.
OT: Can anybody shed any additional light on NEW's announcement this morning that Barclay's released it from its repurchase obligation? My interpretation is that NEW did not have the cash to repurchase so Barclay's said ok, just transfer the loans to a new servicer. So I am not sure why NEW is up 35%. I would appreciate any insights.
New Century Financial Corporation (the "Company") previously announced that it had received notices from Barclays, in which Barclays alleged that certain Events of Default had occurred, as defined in that certain Master Repurchase Agreement, dated as of March 31, 2006 (as amended to date), by and among the Company, certain of the Companys subsidiaries, Barclays and Sheffield Receivables Corporation (the "Barclays Agreement"), and purported to accelerate to March 14, 2007 the obligation of the Companys subsidiaries to repurchase all outstanding mortgage loans financed under the Barclays Agreement and to terminate the Barclays Agreement as of that same date. The Company had estimated that the aggregate repurchase obligation (the outstanding mortgage loans financed) of its subsidiaries under the Barclays Agreement was approximately $0.9 billion as of March 12, 2007.
On March 16, 2007, the parties to the Barclays Agreement entered into a letter agreement (the "Barclays Letter Agreement") pursuant to which Barclays and Sheffield Receivables Corporation agreed to release the Company and its subsidiaries from its aggregate repurchase obligation under the Barclays Agreement and the Company and its subsidiaries agreed to release their rights to outstanding mortgage loans that had been financed under the Barclays Agreement. The effectiveness of the releases in the Barclays Letter Agreement is subject to the satisfaction of certain preconditions, including that (i) the Company and its subsidiaries shall have made certain payments to Barclays, including forwarding to Barclays all amounts received by the Company and its subsidiaries after March 1, 2007 with respect to the mortgage loans under the Barclays Agreement, and (ii) the Company and its subsidiaries shall have taken certain actions to facilitate the transfer of the servicing function with respect to the mortgage loans under the Barclays Agreement to a third party appointed by Barclays. As of March 22, 2007, the Company was still in the process of satisfying these preconditions.
The Barclays Letter Agreement provides that the outstanding mortgage loans financed under the Barclays Agreement are being transferred to Barclays "as is", without any representations or warranties by the Company or its subsidiaries, and without any holdback by Barclays. The Company and its subsidiaries have agreed, however, that if they enter into a settlement or release with any of the Companys other lenders and any such release contains materially more favorable terms for the benefit of any such lender than those in the Barclays Letter Agreement, then Barclays will b
If the sales reports lag contract signing by one to two months, then the March numbers will reflect contracts signed in January and Febuary. And if March is the begining of the spring sales season, then it follows that sales (contracts) made in January and February are the begining of the spring sales season. That seems counterintuitive to me. I would think Jan and Feb would be dead months for sales closings. So the March numbers should be generally low. But that's not what the graph shows. Can anyone enlighten me?
From the linked article:
Regionally, existing-home sales in the Northeast surged 14.2 percent to a level of 1.21 million in February, and are 3.4 percent higher than February 2006.
And I feel some pressure to assure Keith that we are not merely implacable bears incapable of recognizing good news, mired in confirmation bias.
So I won't "explain this datum away". In fact as reports go, I thought this one was fairly educational and informing --even alluding to the wealth gradient and how condos in high priced areas affect these fairly useless (for the consumer) median numbers.
What theroxy said (in addition to "last").
Trend towards lower sales higher inventory continues to be confirmed by this report. I don't expect RE sales to fall to zero rather to revert to historical mean around 6%.
The implications of a slower turnover rate and lower appreciation is less MEW and slower economic growth within business sectors that rely upon this market such as furniture makers, paint, construction , Home depot, pottery barn etc. We have allready seen evidence in the consumer side that these business sectors are feeling the slowdown. This report is not good news for the RE food chain we can expect continued layoffs, more foreclosures and poor sales within the RE food chain.
The National Association of Realtors reported Friday that price of a median home sold last month dropped to $212,800, down by 1.3 percent from the same month in 2006. It marked a record seven straight months that the median home prime has fallen compared to the same period a year ago.
Total existing home sales are 3.6 percent below the 6.94 million-unit pace in February 2006.
The manner in which you place current data within a larger context is why I keep coming back to CR. Inventories increasing 30% Y/Y in Feb is real information as opposed to deceptive headlines like "Existing Sales Jump!" You provide an excellent service here, for which you are to be commended.
Not a good week to be a bear on the stock market, the housing market, or the economy in general. I can hear my wife nagging at me this w/e to buy already. However, this is unwinding exactly like Japan in the 90's - an almost orderly, incremental decline in volumes and prices that didn't cause much panic for the first two years, but continued with relentless small declines every year for 16 years. I think I can hold out a little longer.
Don't you think subprime already impacted closings in February? Lenders have until funding a loan to pull out.
Realtors(R) are going to fight tooth-and-nail (playing with data, agressive pricing, hardball selling, etc.) every step of the way. They will be especially bad until about October, when snow in the Rockies heralds winter's approach. Only at that point will sellers come to their senses and ease prices significantly.
...except in NYC, which for reasons discussed above and more, will always be a different beast.
Real estate in Manhattan will stay strong as long as the financial economy stays strong. Given that the private equity world is busy trying to cash out via ipo's, I would say that's a signal the ultimate insiders are expecting things to turn down shortly.
CR: great way to present the data. Thank you.
There is always the possibilty that numbers are fudged.
theroxylandr
population density in my neck of the woods is 78/mi² and we do have cows in the streets...
to make this post on topic, housing here is going strong, lots of demand caused by the highest birth rate in the third world. We don't have insane price increases as wages here aren't much, even with two adults working, but building is pretty steady.
ac, the best leading indicator for existing home sales is the pending sales index, which tends to lead existing home sales by two months. The increase reported for February is consistent with the December's increase in pending home sales. We should expect a decline in March, as pending sales were down in January, not to mention the subprime issues that came to a boil in late February.
Sippn:
I wonder about that too. It seems like every day there's an article in the MSM about some lender or another denying loans at the last minute, so I was expecting numbers to deteriorate further. Maybe the subprime thing hadn't completely hit the market? I guess we'll see next month or in the new homes report.
As a NYC resident, (currently a tenant after selling our building last year) I do expect property values and rent here to take a substantial downturn as the recession gets rolling and proves to be enduring. Leading to CR's "vicious cycle" scenario.
There is a tremendous quantity of development in all five boroughs, it dwarfs the expansion in the '80's. I remember numerous vacant buildings during that recession, this bubble seems much larger and of a longer duration. It is also on a global scale, as I witnessed on my recent visit to Panama and Central America.
I don't think there is anything wrong with high LTVs (95-100)as long as there is an appropriate risk premium assessed. The VA loan program has generally been a success for the last 60 years and turns a profit for the federal government. The problem is high LTV loans which adjust to payments that the borrower has no ability to afford and home prices far in excess of what incomes can support.
"Compare the YoY sales in the first two months of this year to the YoY sales in the second half of 2006."
Not sure what you're seeing there. YOY sales in Jan/Feb 2005 to 2006 look exactly like the pattern of 2006 to 2007. In fact, sales in Feb 2005 were exactly the same as Feb 2006, so today's number is actually a degredation in the downward trend. Feb was busier in all three years from Jan so it's really disingenuous for the NAR to report MOM sales increases as being anything special. Will they now also say that March increased from Feb? (duh! it always does!) This is pure spin and nothing more. YOY is the only thing that counts because of seasonality. Anyway, inventory is the critical piece and always has been and that's where the bust is. Also it's improper for the NAR to use the months of inventory metric saying it peaked in Oct. to imply that we have seen the bottom and are now headed up. They know for a fact that inventory always falls off at the end of the year. Ha! These shills will stop at nothing to paint lipstick on this pig and target a few more knife-catchers.
This was an extremely bearish report and actually is very ominous for the Spring season. And all you peeps that think the US RE bust will mirror Japan better catch a clue. Japan's RE bubble was mostly commercial not residential, things like neg-am option-arm i/o's didn't exist, and Japan had a huge savings surplus so they could grind out an RE bust for years. Today's fragile US debt-laden consumer with no savings is in poor shape to ride out an RE bust without easily folding (foreclosing). This will just be a pile-on effect and will add millions more units to an already staggering inventory surplus. Meanwhile the HB's keep building like mad. No, this isn't going to be like Japan at all.
I agree. I expect sales to rise some in March, like usual, and it will be dutifully reported as vindication that the spring selling season is on -- and the worst is behind us.
Darth: you seem to know something about the Japan RE experience but it is my understanding that the underlying problem was that the banking industry carried the book value for loans long after the bust took place. The reason was simple, they had to protect the banking system from immediate failure.
So do you expect the American financial entities to write down the value of SFH RE over the coming years or mirrow the Japanese experience and just let CPI and foot dragging cover the true losses?
I simply don't see how comparing Feb to Jan figures makes any sense without seasonal adjustments. Why not compare to last July for that matter?
Shameless way to present data, but the NAR is a sneaky operation, so it is to be expected. The MSM should be taken to the woodshed for running blindly with NAR propaganda.
Will they now also say that March increased from Feb? (duh! it always does!)
The increase in February is in the seasonally adjusted annual rate.
barely,
They're not. The increase from February over January is in the SAAR. Don't listen to Darth Toll.
ron, that's a darned good point, and we're already seeing some similar behavior on the part of banks involved in foreclosures. For example, most of the REO's that I've been tracking have come back on the MLS at fairly high prices. Even higher than local comps would dictate, and so these properties just wind up as more zombie inventory that don't go anywhere because the banks sure as heck don't want to mark a write-down. I view this as similar to your example in Japan. Entire banks became zombie banks that basically ceased to function like a normal bank but they were propped up by the BOJ and just kept operating as a useless shell. This is actually a fascinating concept and hopefully one of the big guns on here can share some insight as to why the US banks will or won't follow this path.
I have a hard time visualizing banks carrying around tons of zombie REO's, but I honestly don't know if they are strong enough, or if the Fed is stong enough to pull it off.
From the NAR
The national median existing-home price for all housing types was $212,800 in February, down 1.3 percent from February 2006 when the median was $215,700
Keith wrote
I like this blog, but there does seem to be too much confirmation bias, in that any datum that doesn't support falling house prices gets rapidly explained away, while datum that does support falling house prices is taken as given.
Uh, Keith, prices ARE falling. And the spin of house sales rising is proven spin by CR's first graph showing that yoy the sales have fallen. And with almost 7 months of inventory versus 5 months in Feb 06, pressure is on for more price reductions.
Keith, what kind of bias is needed to acknowledge facts?
Answer: A bias for truth, and that is all.
Steve, you're full of it. If the chart was truly seasonally adjusted, then the graph would be more or less a straight line and you can see that it always spikes dramatically in the Spring selling season. Not!
FWIW (and I can't cite a source
), I remember reading in one or more places back in February that "word was out" among mortgage brokers that standards were tightening/programs ending starting March 1st and, accordingly, some may have been in a rush to close by such date, perhaps bringing some closings forward to February.
Darth Toll,
I'm not talking about the chart. I'm talking about the numbers from the NAR. The increase in February over January is based on seasonly adjusted numbers.
Actually, the average condo price in Tokyo declined by almost 40% from 1989 to 2005, though I would agree that it was commercial real estate that basically paralyzed the Japanese banking system. They also had (and still have) 100 year generational mortgages in Japan - not quite a neg/arm but still pretty bubbly. I also agree that high consumer debt levels make the US more fragile and prone to a quicker, fuglier adjustment. I really can't see Manhattan real estate being a good buy for at least a few years.
Darth Toll,
You said:
Feb was busier in all three years from Jan so it's really disingenuous for the NAR to report MOM sales increases as being anything special. Will they now also say that March increased from Feb? (duh! it always does!) This is pure spin and nothing more. YOY is the only thing that counts because of seasonality.
You're implying that the NAR is only reporting an increase in February based on non-seasonally adjusted numbers. That's not true.
From the NAR Press Release:
Total existing-home sales -- including single-family, townhomes,
condominiums and co-ops -- rose 3.9 percent to a seasonally adjusted annual
rate(1) of 6.69 million units in February from a downwardly revised level
of 6.44 million in January, but are 3.6 percent below the 6.94 million-unit pace in February 2006.
Re: Ron's point on "carrying at book value."
It's my understanding this is the key issue with the rating agencies and BBB MBS. If the MBS drops below "investment grade" banks are required to mark-to-market, but are otherwise allowed to carry at book value. Thus the rating agencies collude to keep the MBS investment grade and prevent the markdown of these assets (MBS are 10% or more of bank reserves).
Steve, I was only commenting on your statement. Here you don't mention the SAAR but say instead:
"Take a look at CR's first chart. Compare the YoY sales in the first two months of this year to the YoY sales in the second half of 2006. Interesting, no?"
Regardless, I think you are missing my point that the 2005/2006 trend is virtually identical to the 2006/2007 trend. If anything, the current trend is worse. It seemed like you were trying to imply that there was some kind of a trend reversal which is not supported by anything in this report. If not, I apologize.
"Compare the YoY sales in the first two months of this year to the YoY sales in the second half of 2006."
Steve I think I see your point, the rate of decrease of sales on a YoY basis seems to be slowing. Oct-Dec look like they were running 10% below 2005, whereas Jan-Feb look to be only off by a few percentage points. On the face of it this might argue that we are getting close, but still not at the bottom.
However, there are two dimensions to this data, sales rate and price. Price is still falling, and I don't know any wall street analyst who would recommend buying a stock or commodity whose price is falling on increasing sales volume. That's a quintessential "falling knife"!
Steve, you're right. I was looking at the raw numbers on the chart and, my mistake, didn't read the details of the release.
So, better than expected but perhaps due to weather and being ahead of the more recent subprime meltdown and regulatory crackdown, such as it is. My opinion is the next few months won't be as easy to cheer.
Anonymous,
Yes, that's what I'm pointing at. And I'm not suggesting it's a good time to buy or even that housing has reached a bottom (it's a bit early to say that), but it is interesting.
I think the subprime issue is going to be a drag going forward, but I think that countering that drag could be other forces, such as continued job and income growth and lower interest rates. That's mainly what I'm taking away from the January and February.
For shame!
I followed the link to UrbanDigs website . . . shocker, he's a NYC broker. At least you had the decency to include your link, you miserable, lying shill.
ABOUT URBANDIGS
An aspiring entrepreneur with a BS in Psychology from Union College, I was a former NASDAQ Equities trader (1998-2004) and founder of The HotSpot Haven turned ` with Citi-Habitats. UrbanDigs is my unbiased, real-time take on the Manhattan real estate market as well as tips to profit from it
These "annualized" home sales numbers are supposedly based on the rolling monthly totals of the past 12 months, so when the Feb.06 number is presented, the Feb.06 raw number rolls in, the Feb.05 raw number rolls off. If you look at the raw data, I don't see how the rolling total could possibly have increased? The only explanations are (1) there were revisions higher to past months that boosted the rolling total, or (2) NAR has changed their seasonal adjustment numbers. I'm guessing (2), which means they're adjusting up the slow periods, then the peak periods should look even worse going forward. Of course, they could just be fiddling with the limits of statistics to put lipstick on a pig. I wonder if Jim Cramer and David Lehreah will end up as cell mates?
Sorry, that should be Feb.07 and Feb.06 I was refering to.
Anonymous,
This will help show what I was looking at a little better:
October YoY: -11.5%
November YoY: -10.7%
December YoY: -7.9%
January YoY: -4.3%
February YoY: -3.6%
This trend is promising, but I suspect the subprime issue could put a stop to this.
These "annualized" home sales numbers are supposedly based on the rolling monthly totals of the past 12 months, so when the Feb.06 number is presented, the Feb.06 raw number rolls in, the Feb.05 raw number rolls off.
Are you sure about this? This doesn't sound right to me.
Steve, your first mistake is in putting any stock in numbers from the NAR.
Looking at these charts . . . there simply is no good news here. Not a scrap. The headlines are once again completely backward, and l;ereah goes on whistling his merry tune.
He's the fucking Pied Piper of Hamelin, luring in every last possible greater fool. There is a warm spot in hell waiting for that SOB.
Actually, I don't believe in hell, so I mean that in a figurative sense, but i would be more than happy to bring back the stocks. Lereah and his ilk deserve to be pilloried in the public square, along with Greenspan and the GOP leadership that threw gas on the fire.
The cutting of the warehouse lines is not reflected in these stats. I am expecting a different picture next month.
I would expect the drop in YOY sales to slow from the 05-06 numbers into the 07 numbers. No reason to expect that sales would continue to drop at those rates.
This data is important only on how one intents to use it in his/her investment decisions this may be in stock market trading, buying or selling a home or starting or selling a business relating to the RE food chain.
I intend to buy real estate sometime again in the next five years, so I am looking at this data not only to watch the YOY sales trend but also understand when it does actually begin to bottom and go sideways. I would like to see it flat for a good year before entering the RE market to make sure that trend had some meat on it.
Look at the graphis in this USA Today article:
Existing home sales rise in February; prices firm a bit - USATODAY.com
New home sales rose 3 months in a row before experiencing a steep drop. Now existing home sales have risen 3 months in a row. Hmmmm...
At least for the moment my theory is going to be that existing home sales and new home sales are correlated, but with more than a one month delay. Will revise in a month or so.
Steve, You seem to suggest that the subprime "issue" is itself a problem. That entirely misses the point. Subprime is a symptom of prices having grown seriously out of bounds as dictated by fundamentals or historic norms. That's what is getting addressed in the marketplace, albeit slowly, and we'll hear about all sorts of other symptoms and resulting market observations. These data points are converging and will tell the story as the dots get connected...
Sorry, I just read NAR's methodology. I thought they used the same methodology as the census bureau does for new home sales, which is incorrect. The NAR applies a seasonally adjusted annualization factor to each month's raw data. I just worked it out, and the seasonally adjusted annualization factor is about 2.5% different for Feb.07 than Feb.06, so I would say they're fudging their numbers within the cover of one standard deviation. Of course, seasonally annualizing a noisy monthly series is just going to produce crap anyway, but it does look to me like they're trying to bias their crap up. In the end, they're just putting lipstick on the arse end of a pig.
Steve,
I think the trend would be a bit more promising if they declines weren't YOY over previous declines. The pace of declines seems to have adjusted, but certainly not the direction.
Also, as you note, the changes in lending standards will start showing up soon, and you can be sure they aren't helping the market.
Based on the anecdotal evidence around my NJ neighborhood it sure looks like inventory is rising, and I'm not seeing much in the way of "sold" signs.
For 05 and 06 March over Feb showed an increase of more than 35% in sales, If that's not the case this year watch out. If the trend breaks badly and we get only a >25% jump in sales the recession talk will begin in earnest.
don't think there is anything wrong with high LTVs (95-100)as long as there is an appropriate risk premium assessed. The VA loan program has generally been a success for the last 60 years and turns a profit for the federal government.
Robb: these loans work in a RE market that is trending up(appreciation) they don't do so well in down markets. Regarding VA and FHA loans they do not record foreclosures in the VA or FHA record keeping system. I would expect they follow similiar experiences with subprime 100%LTV in up appreciation periods and higher foreclosure rates in low to declining makets. I have posted a bit below from thehousingbubble.com site that highlighted this the other day.
The News & Observer. The city of Charlotte does not count foreclosures. Neither does Mecklenburg County, the state of North Carolina or the federal government. Even the Federal Housing Administration, which insured many of the failed loans, didnt track the concentrations.
About 8,700 homes have foreclosed in Mecklenburg County over the past four years. An Observer study found almost 30 percent of the foreclosures in 2003 and 2004 were associated with loans insured by the federal government.
The share of Americans who own homes rose to almost 69 percent last year from 65 percent in 1996. The FHA was responsible for a share of the increase. So were subprime lenders, which make loans with high interest rates to the same people traditionally served by the FHA.
But now the number of foreclosures also is pushing into record territory, driven by defaults on FHA and subprime loans, according to estimates made by the lending industry.
What do you make of this guys thoughts...
The Baby Blog » Blog Archive » Aggressive Mortgage Brokers
Excerpt:
"Existing Home Sales figures by the NAR can and most likely have been manipulated to quell market jitters. Their methodolgy section of their site notes that the figures are based on a 30-40% capture rate of MLS transactions throughout US markets. It is also derived from a regional sampling standpoint. Simply sliding the geographic sampling around to more active markets allows for higher resale numbers. Furthermore, their site indicates that a representative sample of 160 Boards/MLSs is utilized in arriving at their final numbers. Again, this sample can easily be manipulated simply by utilizing only those Board/MLS figures that support the NARs desired outcome."
Stephen Roach:
Morgan Stanley - Global Economic Forum
The forecasting landscape has long been littered with carcasses of those who have been dumb enough to bet against the American consumer. From time to time, there have been unconfirmed sightings of my skeletal remains in that heap. The lesson for the bruised and battered forecaster is to pick your spots carefully in betting against the American consumer. I strongly believe this is one of those times.
JBR,
As far as I can tell, he makes a bunch of claims about how the NAR could manipulate data, but doesn't provide any evidence that they are actually doing so.
It's a pretty common tactic. When the numbers support your view, they're legit. When they don't, they're cooked.
I can only work this out roughly, but NAR's seasonal annualization factor for Feb.07 appears to be based on a y-o-y declining existing home sales trend of around 2.5%. I think even an optimist would concede that's a bit, well optimistic. Lies, spin, and more lies. It's really getting to the point where you can't take any economic release at face value. But as long as you can manipulate the market, and j6p remain compliant sheep, nobody gives a toss? For now, anyway.
Anyone listen to KB Homes CC? It was certainly MUCH different than the previous ones, they shotgunned the analysts through and cut off questions early. I'll have to look at the release closer to see what they didn't want to be asked about, I guess gross orders?
I can't believe no analyst asked them what their definition of subprime is, they kept saying their subprime numbers were low (13%) but nobody asked them what their definition of subprime was (they kept saying "Ask 10 different people you get ten different answers"), so the number is meaningless. Then some guy comes on and asks them what their Alt-A numbers were... ARGH.
Steve, NAR's numbers are clearly shaded to produce show a higher degree of stabilization than the raw data would support. If you want to believe their spin, please feel free to do so. At least my bias is honestly held.
Turbo,
That's interesting. In the span of six minutes you went from:
I can only work this out roughly, but NAR's seasonal annualization factor for Feb.07 appears to be
to this:
NAR's numbers are clearly shaded to produce show a higher degree of stabilization than the raw data would support.
May I ask what evidence you uncovered in that six minutes that allowed you to conclude that the numbers are "clearly shaded"?
"Of course, they could just be fiddling with the limits of statistics to put lipstick on a pig."
Bingo. Revise Jan numbers down and come in with "unexpectedly" good Feb numbers. Next month, revise Feb numbers down and come in unexpectedly good in March. Rinse and repeat.
They've been doing this for almost 2 years now, no reason to stop now.
And in other economic news:
Class of 2007: You're hired!
Four years of late-night cramming and stressing before exams - for the Class of '07, it may have been worth it. For the the 1.5 million college seniors set to graduate this spring, the labor market looks pretty good, according to college career offices across the country.
With recruitment on the upswing, some private schools like Milwaukee-based Marquette University have received so much interest that they have had to turn away recruiters. Larger state institutions like UCLA and Clemson University have had to extend or add an additional career fair to accommodate interested employers.
According to a recent survey, employers are expected to hire 17.4 percent more freshly minted college graduates this school year than they did in 2005-2006, according to the National Association of Colleges and Employers (NACE).
Darth and Steve: this is why the trend over time is more important then month to month. The data sources have problems considering its size and source points so watching and making decisions based on just a month to month movements can lead to some funky judgements.
ron,
I agree completely.
Class of 2007: You're hired!
Four years of late-night cramming and stressing before exams - for the Class of '07, it may have been worth it. For the the 1.5 million college seniors set to graduate this spring, the labor market looks pretty good, according to college career offices across the country.
Steve... that doesn't tell you anything about where the economy is headed. Replace 2007 with 2000 to see what I mean.
But DT has a point about the adjustments, especially when you consider the flexibility the NAR has left for itself by allowing itself to be selective about which sales markets they wish to include in their release. They can fine tune these numbers all they want.
It would be best to have a truly independent body audit their work.
Steve, I can only work it out roughly because I don't have access to their full data series or models, but they appear to be assuming y-o-y sales will only drop (roughly) 2.5% in Q1 2007 versus Q1 2006 in their annualized seasonal adjustment factor. Is that in line with the actually observed trend over the past year? Hmmm, I think not. They're making an implicit optimistic forecast and presenting it as statistically factual data. I think that's called spin. But like I said, feel free to believe whatever you want. I don't have the time to prove it to precision, but you also don't have to be a biologist to identify a steaming pile of turds.
Turbo,
If you look at CR's first chart, you'll see that the non-seasonally adjusted numbers for Feb DIDN'T drop that much.
The seasonally adjusted number for February 07 is very much in line with the 2005 and 2006 numbers for the same month.
Wow, sales rose 3.9 percent from the slowest month of the year. Time to break out the bubbly on that one.
We're saved!
Thanks for that JBR.
One more thing, the prices that edged down get little attention:
Regionally, existing-home sales in the Northeast surged 14.2 percent to a level of 1.21 million in February, and are 3.4 percent higher than February 2006. The median existing-home price in the Northeast was $265,900, down 1.4 percent from a year earlier.
We CR readers expect this weight of inventory to have this directional effect on prices. (Magnitude coming soon in both inventory and price drops, no?)
No need to draw excessive attention to the fact that house prices are dropping and that you, a prospective buyer/investor might want to wait. Better to obfuscate and suggest that an infringement of comparing "apples to apples" might have occurred (which it likely did, but as per JBR, not NAR).
Of course from a very primitive point of view, and everything else being equal, I suppose it would be an expected outcome to have volume increase on decreasing prices.
Comparing to Manhattan, San Francisco is just a suburban area. I almost expect to see cows on the streets
Not on the streets. We treat them better than that:
http://commons.wikimedia.org/wiki/Image:Cow_Palace_(front).jpg
The impression i have from the other side of the world is that many of you dont spend any time with Realtors to know what is happening in your area.
My ohio contact said before christmas that things were as bad as they could be. 25% off asking prices in some cases. Agents were being sent on courses to learn how to sell at lower prices. Come the new year there was a ton of listings. February they were having one of their best ever office months for closings. By March they had so much business that many junior staff at quit to get better paid jobs elsewhere. Some local agents were nevertheless down in the dumps and not selling because of the bad news whereas others were delighted that the johnny come latelys were all feeling the pressure leaving them with all the buisiness. My friend thinks i am potty to be mr doom and gloom. There is a large amount of foreclosure stuff in the area. Some stuff is sitting with no offers for over 200 days. By march some realisticly priced houses are selling in one week (well one) and another sold within two weeks. They are busy.
This is what my contact said today.
"I think what I would say is that sellers are accepting that if they want to sell they have to price things more reasonably....or just stay where they are and wait it out. Homes are more affordable, yes but because there are so many to choose from right now buyers can, and are being pickier. They are demanding more for their dollar. What is interesting is this....it seems to me a lot of buyers are taking the opportunity to get a bigger home than they may have been able to afford before. So no one is getting that its a good time to buy cheap, reduce debt, etc. I wonder what will happen when they start getting those massive utilitiy bills? or when values go up and their property taxes are raised accordingly?
........ I could be wrong here but i dunno....there are still a lot of houses in the 250-400k range selling while things under 100k kinda sit a while."
If the figures just released were for December closings? then if my friends feb and march closings can be compared to elsewhere then you are ahead of the curve here.
Most people were predicting bad times to come home later in the year as more of the loans reset.
...such as continued job and income growth and lower interest rates.
Steve, put down those NAR talking points and back away slowly...
Seriously, I've heard that song and dance for years from the REIC to justify the boom when it was happening.
Outside of Wall Street, real wage growth has been an absolute joke this century. We're still basically at the bottom, interest rate wise, so expecting lower rates is wishful thinking, too.
tj & the bear,
I'm not expecting lower interest rates. I'm comparing 2007 interest rates with 2006.
Do you not agree that they are presently lower than the second half of 2006?
Let me help you with that one.
I'm not saying they're massively wrong, but the adjustment factor isn't realistic. If you think I'm wrong then go to the data on bloomberg or some other source and work it out for yourself like I did. Or, if you prefer, you can just assume David Lereah isn't massaging his numbers and uncritically believe whatever he says.
Steve: This report also highlights two problems going forward with the SFH resale market:
Higher inventory levels
lower appreciation
these issues did not exist in july of 05 and only recently have began to attract significant attention. So its a little bias to only look at the rate of YOY sales decline as a indicator of market health.
We also have two new variables that are entering the discussion about the RE market and its viability which is:
While we have no direct measure of these and many will posture various theories as to what those affects may be we can assume they probably woun't be positive in the shortterm.
Here's just an anecdotal story from Colorado Springs, and a probably leading indicator. We had a prospective client come in our office a couple of days ago. He's the CEO of a local home builder and he's been in the business for 40 years, and he says he's never seen conditions this bad. He's not sure what's going to happen to his company and the other builders....hopefully just ride it out. Meanwhile, I keep seeing new apartments/condos/homes being built as if demand was still strong. Last month new home sales were off 40% from last year.
If you look at CR's first chart, you'll see that the non-seasonally adjusted numbers for Feb DIDN'T drop that much.
But it still DROPPED... meaning the market is still trending down and not up. How much down is a difficult question considering the noise MOM.
But the headlines were 'Sales Increased!'... a very distorting message because they are comparing a noisy estimate from last month to a noisy estimate this month and projecting activity over the whole year from that. In reality they were trumpeting that sales decreased less on an annualized basis than last month on an annualized basis. Whoopie Doo!
Misleading hardly describes it.
If they were 'honest' with their message from these numbers they'd compare a rolling average YOY... do something like average Dec-Jan-Feb last year to this year and then project a whole yearly rate of change from that... and do it on a rolling basis every month. It would smooth out the noise at the expense of missing sharp changes in direction.
If they did that I dare say (looking at the charts) they'd have to report a slowly deteriorating market over the last year or so.
And that's what we've actually seen. Its very likely that's what we will see for the next couple of years.
dryfly,
The part you quoted from me refers to one very specific argument regarding issues Turbo had with the seasonal adjustments. I'm not exactly sure how your post is a reply to what I wrote.
We just closed a refi here in Omaha. The loan officer was there, his thoiughts:
Prices are flat to slowly increasing in all but one area in Council Bluffs.
New sale activity is back to 2001-2002 level. 2004 was the blowout year.
A lot of inventory is still out there. Builders are holding prices and offering incentives.
Foreclosures have not picked up yet. He is getting a lot of business from people facing nasty resets.
Another anecdote:
Lockheed Martin has said that they need to hire 55% of the US engineering grads to meet their needs in the next 5 years. A solid technical graduate can start in the 50s in Omaha.
These are certainly interesting times. I'm making more than I ever thought that I would. Especially coming out of the dot.bust. The country is facing the deflation of two asset bubbles in the same decade.
While I think that it is safe to extrapolate past housing busts to the current situation in housing, I think it is unsafe to extrapolate the housing bust to the overall economy. Remember when folks were projecting a repeat of the 70s with the 2003 run-up in gas prices? It did not happen because gas is a smaller part of the economy now.
What the housing bust may do is slow the economy and inflation. Especially if it causes average rents to moderate or even reverse a little. This frees the Fed to reduce interest rates.
I'm not exactly sure how your post is a reply to what I wrote.
It is a reply to your defense of the NAR spin. NAR takes their own evidence of further decline albeit possibly less rapid (depending on whether the current signal is noise or actual market deceleration) and then trumpets it as a 3% increase.
There is nothing you can say about that message except that it is misleading if not false.
What the housing bust may do is slow the economy and inflation. Especially if it causes average rents to moderate or even reverse a little. This frees the Fed to reduce interest rates.
The Fed is NOT going to reduce interest rates just cause inflation stays slow (which according to their last release WASN'T low enough). They will only cut if & when the economy slows.
They aim for 'neutral rate' where there is neither excess inflation nor economic slowing and that's where they will sit. And once they find that spot they'll sit there until forced to move.
Robert - Lockheed was paying that kind of money two plus years ago for new hires. One of my daughter's friends hired on as a ME and got almost $60K two years ago.
Defense will stay active for quite awhile longer too... but I'm not sure that bodes well for the country's economy in the long haul. Somewhat like pouring money down a rat hole... a necessary rat hole at times considering the 'bad guys' but a rat hole nonetheless.
Are you readers convinced yet that Steve is not the genius he thinks he is?
[How's that, Tanta?...I didn't call him an idiot shill!]
Seriously, he sounds like he's auditioning for a CNBC gig.
dryfly,
Tell me which of the data reported by the NAR are inaccurate. Here is the press release.
By the way, everything is just posted about is included in the press release, so you'll have to forgive me if I'm finding it difficult to believe they're hiding anything with the numbers.
And before you focus in on the Lereah quotes, please note that at no point did I mention or support them in this thread. That's spin, but that's not what we're discussing. We're talking about the numbers. So which numbers in the press release are wrong and why.
By the way, everything is just posted about is included in the press release,
Sorry, should read: everything you just posted about is included in the press release
Tell me which of the data reported by the NAR are inaccurate.... everything you just posted about is included in the press release
Ya sure... but what was the MSM headline reported everywhere.
'3.9% Increase in home sales compared to last month'... all else in fine print.
It is possible to be 'accurate' and provide it in a format that is 'misleading' all at the same time...
That is the art behind marketing... it is also the art behind propaganda. NAR understands this. The way it was presented was not an accident or an oversight.
I'm not even implying the media is intentionally in on the distortion - I don't think they are cleaver enough to catch it.
The chart CR posted with monthly sales for the two previous years and the last two months CLEARLY shows a softening market YOY... with sufficient noise MOM so as not to know if the market is worsening more rapidly or more slowly.
But the data NAR offers us, if CR accurately charted it & I believe he did, shows a trend still heading down & there is really not much else that can be said.
dryfly,
The month-to-month number always leads the headlines, even when the pace decreases and the numbers are higher year over year. Here is a press release from November 2005:
October Existing-Home Sales Show Markets Cooling
Sales of existing homes eased in October with a moderate decline in both single-family and condo sales, according to the National Association of Realtors®.
Total existing-home sales - including single-family, townhomes, condominiums and co-ops - were at a seasonally adjusted annual rate1 of 7.09 million units in October, down 2.7 percent from September's pace of 7.29 million. Sales were 3.7 percent above the 6.84 million-unit level in October 2004.
Basically this is the exact opposite of the situation we see today.
So it sounds like you think the NAR and the media is engaged in some sort of nefarious plot to mask the weakness in the housing market. I'll concur that the NAR would love to (and have tried to) hide the weakness, but the fact that the headline number is the month-to-month pace change isn't evidence of that, since that's how it's always reported.
Ask yourself this: Were you equally upset at the media for understating the October 2005 numbers by focusing on the month-to-month pace decrease rather than the YoY increase?
Actually Steve I'm not so sure that was always true - granted the case you point to shows that for that month - but I recall a whole lot of months where the lead story was YOY price appreciation... especially in 2004 & 2005 where there were some pretty staggering increases... remember CRs posts on Orange Cty 'paying' citizens $70K a year to own a home?
And I do NOT believe the media is in on the misinformation... I said that clearly above... they are clueless and will print the focus (or spin) from the press conference & PR release.
NAR is another story... I believe they are intentionally spinning, massively so and in my estimation stupidly.
I think if you look at CRs chart... it doesn't show me a 'crash'... rather a gradual prolonged decline. So spin it as more 'soft landing'.
In reality I'm not convinced we aren't going to have a soft landing - it depends on what unfolds over the 12-18 months.
But when I see the stuff NAR says... like this from the release...
"Some of the rise in home sales may be from mild weather that
brought out shoppers in December, but fundamentals have improved in the
housing market and buyers see a window now with historically-low mortgage
interest rates and competitive pricing by sellers," he said. "Even so,
winter storms last month discouraged shopping, and buyers were chilled with
the third coldest February on record. These unusual weather patterns mean
home sales that close in March may decline before rebounding later this
spring."
And then compare with CRs chart... makes me discount everything Lereah & NAR say.
sk yourself this: Were you equally upset at the media for understating the October 2005 numbers by focusing on the month-to-month pace decrease rather than the YoY increase?
Actually I was - I didn't believe sales were slowing or prices declining at all. My eyes and ears were telling me it just wasn't so.
Don't get me wrong - I believed we were in a bubble & it would end badly - but I though the reports of 'moderation' back then laughable. As laughable as saying the market was becoming 'sustainable'.
The charts - both price & sales activity - are far more powerful than any of our words.
Especially when followed by reports of YOY price appreciation back then.
Steve figures that NAR's customary habit is to post sales volume in the headline and therefore they have no bias since they are conforming to this practice...and I wonder if Steve really believes this is a weighty argument... or just a weak moment for Steve. Don't make me side with that radical dotcommunist, Steve!
calmo,
I think this sums up my feelings pretty well:
I'll concur that the NAR would love to (and have tried to) hide the weakness, but the fact that the headline number is the month-to-month pace change isn't evidence of that, since that's how it's always reported.
More info from the blog above, a reply to the data manipulation post...
The Baby Blog » Blog Archive » Aggressive Mortgage Brokers
"I wouldnt trust any data coming out of NAR (Southern Cal - San Diego). Local MLS data is unreliable. Specifically, list price to sales price ratios and average market times. The MLS uses most recent list price to determine list to sales price ratios. Orginal list price is not used. MLS reports average list to sales price ratio of 95-96%. Actual original list price to final sales price ratios are actually closer to 87-89% in areas I have audited. Also, average days on market are grossly understated because the MLS is allowing agents to list properties for multiple seperate periods. Hence, only the final list period is used in their averages. This is true in every area I have sampled. I sent numerous complaints on specific incidents. Not only does the data remained unchanged, I wasnt given the courtesy of a response.
The MLS also does not require data on sales concessions although sales concessions are prevalent. The failure to disclose and adjust the level of sales concessions on the market creates an over-statement of prices and values."
Thanks for that JBR.
Steve, I need to share this intimate feeling with you:
we (ordinary intelligent readers) just recognize the NAR as a professional body, --professional enough to put the best light on its business without being blatantly dishonest or excessive about it...which they note draws unnecessary attention (Lereah). They have a competent public relations department...not like some (and I don't mean just dotcommunist ok).
NAR pretends to be objective.
We pretend to see them as objective reporters.
You pretend to report NAR's unrequited loves and we pretend to believe your emotional summations.
calmo,
Believe me, I take no pleasure in even given the appearance of defending the NAR. Consider my posts not so much a defense on the NAR, but a critique on sloppy thinking. Specifically, about how you never hear anyone complain about the data from the NAR as long as the numbers are terrible. But the second a report comes that, well, that isn't even all that positive, but just not completely bearish, we've got the posters insisting the numbers are fixed or their methodology is faulty.
calmo,
If you go back to the post on the February jobs report, I called people on doing the same thing there. It just happened to be the NAR report today.
I'm sorry if I get so worked up. I wish I didn't, but it bugs the hell out of me to see people believing in the validity of something as long as it tells them what they want to hear.
And I don't pretend to be immune from that either. We all have our biases, so if you see me doing it, please feel free to call me on it.
It did not happen because gas is a smaller part of the economy now.
Another case of "lies, damned lies and statistics". Gas may directly employ fewer people, but everything -- and I repeat EVERYTHING -- depends upon it. The only reason the recent gas runup didn't hurt as much as it could have was that gas money was running out of one pocket slower than equity money was pouring into the other.
Robert,
I know Lockheed Martin is doing well. As a matter of fact, most defense contractors are doing very good. Most of my neighbors work for military contractors. However, that narrow sector growth is not necessarily a reflection of consumer demand from a growing economy since nearly all their revenue comes from government spending....taxpayer money....
Unfortunately, if it weren't for the Iraq war and the GWOT these companies would not be as profitable. If peace should break out....that would definitely put a crimp in profits.
NAR is full of hooey, Bernanke is afraid to call the economy what it is, but who the hell cares. The day trading approach real estate is siller than with stocks. Buy value to hold. Manhattan, no question, if you have a reason to buy in NYC then do it.