Just called a local realtor in Riverside/San Diego, California area and was told that sales are up because peole are buying due to the interest rate pressing upward--could the rising interest rate cause another "market" for realtors to sell?
CR, I think you are dead on in noting that the official NAR forecast is no longer within spitting distance of the actual outlook. Pendings should be interesting.
This housing depression will be the worst since the great depression in the 1930s. I have been saying for months that the panic will start in the fall, and I think that is still the best estimate.
OT This weekend there was a plane carrying a massive sign for Pulte Homes 10% off, and $10,000 bonus sale over the I-10 and 202 freeways in Phoenix, Arizona. The heat is killing the locals right now and nobody is going to go looking at houses when it is 112. I have lived in phoenix for 11 years but when the temp. goes over 110 it feels like your skin is burning.
Did you happen to see that article on Itulip about there being 2.8 Billion worth of forecloures in California in May 2007. That is a 700% increase over Sept. 2006, and it looks like it will get much worse over the next 18 months. The article also had a link to a website called ForecloureRadar.com.
My family has lived in California since 1845, so I keep a very close eye on that market.
Last year right before/after the fed went to 5.25 there was a burst of sales while everyone with locks rushed to buy before the rates went up. I think we will see a similiar smaller burst of sales in the June numbers because of the rate rise (it wasnt nearly so telegraphed so its affect will be muted). But those people with locks have a "use it or lose it" decision.
This housing depression will be the worst since the great depression in the 1930s. I have been saying for months that the panic will start in the fall, and I think that is still the best estimate.
I think there's currently a great deal of fear. The rate of inventory increases I've seen in many areas in the past 3 months is strongly suggestive of a "stampede for the exits" in my estimation.
Jas- (thought I'd continue your discussion of demand and household size over here) I have been pondering... If two people who are both willing and interested in buying a house but could not afford to buy at the current price is there demand for two houses or one. I think there is demand for one (the one they live in) and latent demand for the second. If prices slowly decline one of the individuals will opt to buy when prices hit a level where mortgage payments are deemed reasonable. If prices were to plummet then people might hold back from buying if they thought it would be worth less tomorrow then today. But as the recent headlines suggest Out of touch with realty reality - Jun. 21, 2007 people don't seem to completely understand whether prices are declining or not. Now granted this is all based on prices actually declining because if not there is a instant stalemate. However having said that I think the cycle I just described is a dampening one and will draw people out of their parents or apartment homes incrementally with the gradual declines.
Clearly this does not jive with your model. Where did I go astray?
Does anyone know where I can find truck rental/moving statistics? Just interested where people are migrating to this year, even if they aren't buying homes. I did find some stuff on the census site, but would love to know about anything else that might be more timely. Thanks
Traveling thru Palmdale/Lancaster (SO cal desert) yesterday I listened to a local radio station and Beazer Homes has a promotion-$100,000 off the price AND $50,000 in free upgrades!
It used to be "they dont make it anymore" now it's "just desert"
Asking a realtor (including NAR) if now is a good time to buy a house is like asking a used car salesman if now is a good time to buy a used car. Any doubt what the answer will be?
Is it partially due to McMansion Mania? Those things have plenty of room so that it's either easy to rent out rooms -or- perhaps groups of people are pooling their money to buy a McMansion? I recall looking at an older large house built in the 20's a while back and thinking that perhaps my wife and I could take the basement while another couple could live upstairs and we would still have a bedroom that could be rented out.
More interest in "Intentional Community" - I'm finding that in a lot of circles that I'm in, people are talking about "Intentional community". The idea is sort a backlash against the isolation of modern American society (the "Bowling Alone" syndrome). Basically, you get several singles and/or married couples to buy a large house and live in community. Most meals are shared. Child care becomes shared. Sometimes cars are even shared. It not only builds a sense of community, it also allows for cheaper living. I know that this has become a very popular idea in the church I attend and there are several community houses now where there are six to eight people living. (OK, I live in Portland, OR - could you tell?
I lived in Italy for a while. There it is quite common for children to live with their parents until they are well into their 30's. Getting married at 35 or older tends to be the norm. This is partially due to high realestate costs. I wonder if we're headed in the same direction?
ac, sales in '82 were under 2 million. At that rate, there would be about 2 years 2 months of inventory.
If sales fell to the '82 level as a percent of Owner Occupied Units (Sales were 3.7%), and current inventory is 5.9% of OOUs, gives about 1 year 8 months of inventory.
I doubt sales would fall anywhere near that far - but those are the numbers.
Earlier I estimated that "months of supply" would reach 9.5 this Summer. We are already to 8.9 months, so it looks like I'll be close.
Not a real good trend for homesales on that chart- could you add in the AM "doomsday" 5 million mark?
I am beginning to think it might be more accurate than almost anybody else's guess from the beginning of the year;-} After all the spring sales are pretty slack- yet the reo's don't seem to reflect any serious discounts. I checked Wells Fargo's site today, and they show houses with weeds in the front yard and market prices...this is going to take longer than anybody thinks and will show the bottom only when the average American thinks houses are perpetual alligators destined to be owned by slumlords.
Dawn McClaren of ASU was on NPR this morning here in Phoenix talking about how fewer undocumented immigrants are being arrested at the Border in spite of more enforcement, and the implications of slackening demand for bottom level employment in the greater economy...you know what that means starting with the r word!
Bear Stearns May Put Up Less to Rescue Hedge Fund, People Say
According to these two unnamed "people," supposedly "with knowledge of the situation," who "aren't authorized to comment for the firm," BS doesn't have to put up as much because its lenders are successfully liquidating their collateral. Also, these same two "people" are also quoted as saying that "The second pool, Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund, now owes about $1 billion, the people said." The official spokesman for BS refused to comment.
Boy, this vindicates Tanta's skepticism about journalists. First, who are these two "people?" I assume they must be from BS or its advisors. BS should only have one spokesman in this situation - that's one of the first rules in crisis management. Second, if I were BS' lawyer I would be reading everyone concerned the riot act about the securities laws right now. It's just totally irresponsible for anyone connected with BS to be flinging numbers around like this without attribution. And it's irresponsible for the Bloomberg reporter to publish those numbers without better attribution.
Official Bear spokespeople are not going to be saying much in this situation for legal reasons. The reporter obviously has sources in Bear and is talking to them on background. One hopes the reporter is a good judge of both character and able to see through spin.
If one used your rules (only official quoted sources) we would have even less idea of what is happening.
Also I note from the chart that the UP and DOWN slopes are more or less symmetric. I think we can use 2000-2005 data to very closely predict the next 3 years. Looks like 2010 could be a nice firm bottom.
"Also look at inventory as a percent of owner occupied units; an all time record of 5.9%! Imagine if sales fell back to the median level for the last 35 years; the months of supply would be ONE YEAR."
That does not at all seem unlikely. As rates go up and ARMs reset, sales will continue to trend downwards and inventory will continue to increase. As you said, both the numerator and denomination move the wrong way - they are after all connected. Given the excesses in the American housing market last couple of years, I would be surprised if we do NOT see a record high for the months of supply figure.
I understand your point. As a consumer of financial information, I want as much information as quickly as possible - assuming of course that the information I'm being given is accurate. God knows the markets are eager for good information here. Realistically, how confident can the reporters or we be that they information they are being fed in this manner is accurate? I seem to recall that the BS CFO was unwilling to provide similar information on the record in the conference call last week.
However, allowing BS anonymously and selectively to leak potentially market-moving information" to favored reporters is not consistent with the securities laws. The SEC ain't going to like it. At a minimum, I think BS has a serious Reg FD problem, if they were the source of this story.
I'm curious since both demand and supply are seasonally adjusted when calculating "months of supply" how well they map to to actuals. Would it be straightforward to do a "actual months of supply" calculation by taking the inventory at the end of a given month, then counting how many subsequent months of actual sales it took to reach that amount? I'd be interesting in seeing how well this tracks with the adjusted numbers, particularly around moments of substantial change in rates of growth.
Isn't it jumping to conclusions to assume BS employees are talking to reporters?
I mean BS is liquidating a bunch of assets...that means there are a bunch of people in the marketplace who have at least some idea of what's for sale.
The reporters could be quoting almost anyone....
Just called a local realtor in Riverside/San Diego, California area and was told that sales are up because peole are buying due to the interest rate pressing upward--could the rising interest rate cause another "market" for realtors to sell?
RP, salespeople will push whatever they can. Did I ever mention my dad was a RE broker (before he become a builder)?
Interest rates falling? Time to buy since rates are so good. Interest rates rising? Time to buy before they go higher.
A local broker used to have a clock in his office window. Each hour was marked "Time to Buy" - so it was ALWAYS time to buy!
Best Wishes.
Excellent post. We have not seen any real pain yet. Months supply should easily cross 12 in the future.
Chart request...
Do you think you could add the SAAR of sales*12 to Chart 1.
It would help illustrate the numerator and the denominator relationship you touched on.
CR, I think you are dead on in noting that the official NAR forecast is no longer within spitting distance of the actual outlook. Pendings should be interesting.
Not me.
To avoid identity confusion with the newly arrived SoCal RP, I will no longer post as RP. I will now be known as....wait for it....KnotRP.
Nice plain vanilla charts, CR.
Watching 10Yr Treasuries head back down...not a good sign, I think.
This housing depression will be the worst since the great depression in the 1930s. I have been saying for months that the panic will start in the fall, and I think that is still the best estimate.
OT This weekend there was a plane carrying a massive sign for Pulte Homes 10% off, and $10,000 bonus sale over the I-10 and 202 freeways in Phoenix, Arizona. The heat is killing the locals right now and nobody is going to go looking at houses when it is 112. I have lived in phoenix for 11 years but when the temp. goes over 110 it feels like your skin is burning.
Tanta and Calculated Risk
Did you happen to see that article on Itulip about there being 2.8 Billion worth of forecloures in California in May 2007. That is a 700% increase over Sept. 2006, and it looks like it will get much worse over the next 18 months. The article also had a link to a website called ForecloureRadar.com.
My family has lived in California since 1845, so I keep a very close eye on that market.
Last year right before/after the fed went to 5.25 there was a burst of sales while everyone with locks rushed to buy before the rates went up. I think we will see a similiar smaller burst of sales in the June numbers because of the rate rise (it wasnt nearly so telegraphed so its affect will be muted). But those people with locks have a "use it or lose it" decision.
BrooklynInDaHouse, sure.
MaxedOutMama, NAR's forecast was wrong the minutue it was issued.
OTOH, I think Berson did a good job (5.975 million forecast), but I expect sales to fall even further.
Best to all.
This housing depression will be the worst since the great depression in the 1930s. I have been saying for months that the panic will start in the fall, and I think that is still the best estimate.
I think there's currently a great deal of fear. The rate of inventory increases I've seen in many areas in the past 3 months is strongly suggestive of a "stampede for the exits" in my estimation.
If sales fell to 1991 levels would we see about 16 months of inventory?
Jas- (thought I'd continue your discussion of demand and household size over here) I have been pondering... If two people who are both willing and interested in buying a house but could not afford to buy at the current price is there demand for two houses or one. I think there is demand for one (the one they live in) and latent demand for the second. If prices slowly decline one of the individuals will opt to buy when prices hit a level where mortgage payments are deemed reasonable. If prices were to plummet then people might hold back from buying if they thought it would be worth less tomorrow then today. But as the recent headlines suggest Out of touch with realty reality - Jun. 21, 2007 people don't seem to completely understand whether prices are declining or not. Now granted this is all based on prices actually declining because if not there is a instant stalemate. However having said that I think the cycle I just described is a dampening one and will draw people out of their parents or apartment homes incrementally with the gradual declines.
Clearly this does not jive with your model. Where did I go astray?
......
Maybe OT/Maybe not:
Does anyone know where I can find truck rental/moving statistics? Just interested where people are migrating to this year, even if they aren't buying homes. I did find some stuff on the census site, but would love to know about anything else that might be more timely. Thanks
Well, this has been exciting afternoon for the markets. And the name Bear Stearns was mentioned a time or two.
Traveling thru Palmdale/Lancaster (SO cal desert) yesterday I listened to a local radio station and Beazer Homes has a promotion-$100,000 off the price AND $50,000 in free upgrades!
It used to be "they dont make it anymore" now it's "just desert"
Asking a realtor (including NAR) if now is a good time to buy a house is like asking a used car salesman if now is a good time to buy a used car. Any doubt what the answer will be?
Some thoughts about low household formation:
ac, sales in '82 were under 2 million. At that rate, there would be about 2 years 2 months of inventory.
If sales fell to the '82 level as a percent of Owner Occupied Units (Sales were 3.7%), and current inventory is 5.9% of OOUs, gives about 1 year 8 months of inventory.
I doubt sales would fall anywhere near that far - but those are the numbers.
Earlier I estimated that "months of supply" would reach 9.5 this Summer. We are already to 8.9 months, so it looks like I'll be close.
Best Wishes.
Not a real good trend for homesales on that chart- could you add in the AM "doomsday" 5 million mark?
I am beginning to think it might be more accurate than almost anybody else's guess from the beginning of the year;-} After all the spring sales are pretty slack- yet the reo's don't seem to reflect any serious discounts. I checked Wells Fargo's site today, and they show houses with weeds in the front yard and market prices...this is going to take longer than anybody thinks and will show the bottom only when the average American thinks houses are perpetual alligators destined to be owned by slumlords.
Dawn McClaren of ASU was on NPR this morning here in Phoenix talking about how fewer undocumented immigrants are being arrested at the Border in spite of more enforcement, and the implications of slackening demand for bottom level employment in the greater economy...you know what that means starting with the r word!
Two to three more years...
Someday this war's gonna end...
CR,
Any estimate of what the peak "months of supply" will be for this downturn?
TIA
"He estimated that the second fund, the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund, owes about $7 billion to its financiers. "
from $138M now it is $7B on a fund that had $6.6B in assets ... ?????
Business & Financial News, Breaking US & International News | Reuters.com
JoeMortgage, here is the recent Allied press release (from January): For second consecutive year, Texas, North Carolina and the Southeast ranked most “magnetic” in the U.S.; Residents depart from California and Michigan
Unkown Unknown, there are still many unknowns to estimate the peak Months of Supply yet. I'm just trying to get this year right!
Best WIshes.
Yal, from Bloomberg a few minutes ago:
Bear Stearns May Put Up Less to Rescue Hedge Fund, People Say
According to these two unnamed "people," supposedly "with knowledge of the situation," who "aren't authorized to comment for the firm," BS doesn't have to put up as much because its lenders are successfully liquidating their collateral. Also, these same two "people" are also quoted as saying that "The second pool, Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund, now owes about $1 billion, the people said." The official spokesman for BS refused to comment.
Boy, this vindicates Tanta's skepticism about journalists. First, who are these two "people?" I assume they must be from BS or its advisors. BS should only have one spokesman in this situation - that's one of the first rules in crisis management. Second, if I were BS' lawyer I would be reading everyone concerned the riot act about the securities laws right now. It's just totally irresponsible for anyone connected with BS to be flinging numbers around like this without attribution. And it's irresponsible for the Bloomberg reporter to publish those numbers without better attribution.
Phil-
Official Bear spokespeople are not going to be saying much in this situation for legal reasons. The reporter obviously has sources in Bear and is talking to them on background. One hopes the reporter is a good judge of both character and able to see through spin.
If one used your rules (only official quoted sources) we would have even less idea of what is happening.
On this last chart it took 4 years from top to bottom.
Also I note from the chart that the UP and DOWN slopes are more or less symmetric. I think we can use 2000-2005 data to very closely predict the next 3 years. Looks like 2010 could be a nice firm bottom.
"Also look at inventory as a percent of owner occupied units; an all time record of 5.9%! Imagine if sales fell back to the median level for the last 35 years; the months of supply would be ONE YEAR."
That does not at all seem unlikely. As rates go up and ARMs reset, sales will continue to trend downwards and inventory will continue to increase. As you said, both the numerator and denomination move the wrong way - they are after all connected. Given the excesses in the American housing market last couple of years, I would be surprised if we do NOT see a record high for the months of supply figure.
We ain't seen nothin' yet...
rcryan -
I understand your point. As a consumer of financial information, I want as much information as quickly as possible - assuming of course that the information I'm being given is accurate. God knows the markets are eager for good information here. Realistically, how confident can the reporters or we be that they information they are being fed in this manner is accurate? I seem to recall that the BS CFO was unwilling to provide similar information on the record in the conference call last week.
However, allowing BS anonymously and selectively to leak potentially market-moving information" to favored reporters is not consistent with the securities laws. The SEC ain't going to like it. At a minimum, I think BS has a serious Reg FD problem, if they were the source of this story.
Bofiz:
My daughter lives in a similar arrangement in Ann Arbor where people buy condo's with the same attributes you mentioned. It is called "Cohousing".f
I'm curious since both demand and supply are seasonally adjusted when calculating "months of supply" how well they map to to actuals. Would it be straightforward to do a "actual months of supply" calculation by taking the inventory at the end of a given month, then counting how many subsequent months of actual sales it took to reach that amount? I'd be interesting in seeing how well this tracks with the adjusted numbers, particularly around moments of substantial change in rates of growth.
from $138M now it is $7B on a fund that had $6.6B in assets ... ?????
BS must have a Neg Am No Doc mortgage.
Isn't it jumping to conclusions to assume BS employees are talking to reporters?
I mean BS is liquidating a bunch of assets...that means there are a bunch of people in the marketplace who have at least some idea of what's for sale.
The reporters could be quoting almost anyone....