New Home Sales: Worst Selling Season Ever
Submitted by
CalculatedRisk on Wed, 06/25/2008 - 7:23am (53 comments)
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The Las Vegas Business Press from Nevada. Southern Nevadas commercial real estate market has softened somewhat as a result of the housing downturn and the resulting tightened credit availability for land-secured loans. There were 987 home foreclosures last month or the equivalent of 32 per day.
Another 5,117 homes were undergoing the foreclosure process in May, which is 20 percent more than 12 months ago. Meanwhile, Las Vegas building permit activity dipped 38 percent for the first five months of 2008 versus the same period last year. There was only $59 million in commercial construction through May, 80 percent less than in 2007.
Southern Nevadas office market had a 13.4 percent first-quarter office vacancy rate, 2.5 percent more than a year ago, and higher than the 2001 recession peak vacancies, Colliers International Las Vegas reports.
There is no doubt that the Las Vegas office market is struggling through the current sluggish economy, Colliers managing partner Michael Mixer said. In 2007, office employment in the Las Vegas area decreased by 4,000 jobs.
Commerical following residential, right on schedule!
Now THAT must mean some serious pent-up demand.
Opinion: Thomas Frank - WSJ.com
The days when conservatives railed against red tape and shrieked for efficiency in Washington now seem like a lifetime ago. When they finally got the opportunity to put their theory into practice, conservatives contrived instead one of the most wasteful systems ever seen.
It is time for a new Grace Commission, this one examining the sordid history of privatization in all its details. President Barack Obama should launch it on day one.
So we're experiencing the moral equivalent of a bad recession while we quibble about whether we have a recession technically speaking. That's how I read this news.
Most excellent, but not excellent enough. They need to STOP building. Maybe take a page from GM, Ford, shut down for a while.
Re: "double digit unemployment."
With our new improved service economy, and economy of scale junk food, this recession will not see double digit unemployment, but we will witness supersized layoffs of retarded financial people that were employed as a matter of nepotistic connections.
Nepotism? Shocking!
TWO AMERICAS
The weekly East Bay Business Times covers Alameda and Contra Costa Counties of California (mainly Oakland and suburbs)population approx 3,000,000. It has a regular feature listing all real estate transactions recorded in the previous week, with a separate section for what is calls "Executive Homes", ie those priced over $1,000,000. A year ago at this time there were two pages of non-executive home sales, and 1/4 page of executive home sales. In the last issue there was about the same number of $1,000,000+ homes sold, but fewer - only one column - of transactions for homes priced less than that.
Worst ever says it all.
And we thus extinguish hope. Time, now, for the national builders to face their fates and for banks and investors to do the same. A chance of a spring resurgence, denying reality, kept some of them going through the fall and winter, but they cannot live through another such year.
Hope is a good breakfast but a thin dinner.
In Chula Vista, CA all they are building and selling is homes under $417. (Condos essentially) They are getting people who don't know better to buy brand new homes that they can get a loan for. These buyers don't realize that they can get a bank owned home for the same price or less....all they do is hear "now is the time to buy", they walk into a new complex they think they can afford, and the salesperson sells them a new home with a loan they can afford.
These people may not default through some tricky loan....but they are stuck in these homes for years.
The Homebuilders essentially eating their seedcorn because they are destroying the future move-up market to make sales today.
OT:
Bank of America's Countrywide Tab Signed by Taxpayers (Bloomberg) Excerpt: Bank of America Corp.'s $3 billion takeover of Countrywide Financial Corp. will be financed by 138 million tax-paying Americans. Bank of America, led by Chief Executive Officer Kenneth Lewis, can use tax write-offs to pay for Countrywide, the country's biggest mortgage lender, said Robert Willens, a former managing director at Lehman Brothers Holdings Inc. who now runs his own accounting firm. Taxpayers may pick up about $5 billion of Countrywide's losses over 20 years, he said. Countrywide shareholders vote on the sale today.
Britain's Queen Elizabeth has stripped Zimbabwe's President Robert Mugabe of an honorary knighthood awarded in 1994, the foreign ministry said on Wednesday.
Britain strips Mugabe of knighthood
| Reuters
Now if she can just get around to Sir Ala
To clarify,
All they are selling is new overpriced condos to people who could buy a bank owned, larger, detached house, with a yard, and a three-car garage for less money.
Don't worry, the senate is passing a bill guaranteeing free ponies for everyone:
My Way
Winston,
Nah - no pony for thee or me - just the lenders!
Let me put on my permabull hat for a moment (the tinfoil one is getting itchy) and ask whether we've ever had a "silent spring" that didn't mark the bottom? Looking at CR's data, that seems to be the case.
Surely the bottom-callers will seize on that fact. Not that I'm calling a bottom here, but if you go by the chart, that seems to be a safe statement.
energyecon,
Alas, that is the way of the world.
People calling the bottom in housing have to clarify.
If this is the bottom is sales it's ONLY because it's definately NOT the bottom in prices.
Which matters more?
"Surely the bottom-callers will seize on that fact. Not that I'm calling a bottom here, but if you go by the chart, that seems to be a safe statement."
Picking bottoms gives you stinky fingers.
TED currently pinging 1.0, CP 30 day spreads recently went as low as the mid .60's now running .82...
Went back to check the NSA inventory of new homes for sale in May for all prior years and found that this year is well above any other year. This year it represents 9.4 months of supply. The next highest May inventory level is in 1980 at 7.9 months, followed by 1981 with 7.2 months and then 1982 with 7.1 months inventory.
The other striking feature about your first graph is that the number of sales during this recent boom is so much higher than other peaks (nearly 50% more). I know there are not 50% more households than in the early 80s. My sense is that as the year goes on the number of monthly NSA sales over the next year or two will continue to plummet.
The current 10.9 months of SA inventory will look small as compared to what we will see over the next 20 months or so.
In other news, nobody can talk seriously about deleveraging so long as as this mess continues.
It seems to me that the housing downturn ain't over until the new home sale figure touches the 400K mark.
Average Joe said:
People calling the bottom in housing have to clarify. If this is the bottom is sales it's ONLY because it's definately NOT the bottom in prices. Which matters more?
Good point, Joe. Although I wouldn't expect that level of analysis from NAR.
Small Banks Face a Looming Hit
From Builders' Interest-Reserve Loans
Small Banks Face a Looming Hit From Builders' Interest-Reserve Loans - WSJ.com
It's good to be the manufacturing region of the country. Remember when Illinois, Indiana, Michigan and Kentucky were among the highest default states, even though they'd enver bubbled? Sales in the Midwest have been rising since November. I'd guess that's partly because land prices didn't get really ridiculous, so there is less of all kinds of trouble in the real estate and mortgage markets in the Midwest. Also partly because the Midwest didn't wait for the bubble to burst to have bad housing news.
With our new improved service economy, and economy of scale junk food, this recession will not see double digit unemployment, but we will witness supersized layoffs of retarded financial people that were employed as a matter of nepotistic connections.
As long as we have a rapidly growing financial sector to buffer against declines in sectors related to the real economy, double digit employment just isn't going to happen.
HOW CAN WE BE NEAR A BOTTOM 1 IN 13 HOUSES IN THE COUNTRY WILL END UP IN DEFAULT . MY GUESS IS 175 OIL BY 08/ 08 /08 AND HOUSEING WILL BOTTOM IN JULY 2010 MAYBE . WHEN OIL TANKS EVERYTHING WILL FOLLOW IT'S PATH
ac-
I heard an "expert" (radio) say that we really need to get the Yen back up to 110......where it belongs!!!
Laughed so hard I almost crashed...
Ciao
MS
HOW CAN WE BE NEAR A BOTTOM 1 IN 13 HOUSES IN THE COUNTRY WILL END UP IN DEFAULT.
If by default you mean "bailed out by taxpayers", then yes.
Any bets on what happens at 11:15.
I say .25 bps raise - surprise move!
Yeah right, no raise and some bs statement about how they are concerned about inflation, blah, blah,...
OT:
Anyone interested in a review of the DVD: America: Freedom to Fascism
I have posted it on B Ritholz's blog..can be found in the comments section at this link:
The Big Picture
About the 11th or 12th comment down.
FWIW
Ciao
MS
WTF is the senate and the rest of our government doing?
They are basically stealing our money in plain view.
I guess they think we will sit back and take it.
Its just robbery in plain daylight.
I heard an "expert" (radio) say that we really need to get the Yen back up to 110......where it belongs!!!
Laughed so hard I almost crashed...
I suspect he's saying that for the sake of the manufacturing industry.
I wonder if he's even heard of the Yen carry trade.
In the end the Bank of Japan is a gaping loophole around any tight monetary policy the central banks may try to implement.
1) Borrow Yen at 0.5%
2) Convert to target currency
3) Profit!
based on the "tough talk" re: inflation over the last week or so it wouldn't surprise me if they lowered one more time.....and then said.
"we're REALLY worried about inflation"
and then cut by .5
Ciao
MS
BTW, any comments on the plunge in mortgage applications? Seems significant to me.
Maybe as fixed mortgage rates have gone rocketing back upwards in recent weeks people are just completely giving up on houses.
In this neck of the woods I have to believe that is the reality. since the only thing you can use is Jumbo's-SO.Cal..we all know where those are now.
BTW both of your comments re: earlier post is what made me laugh as neither was mentioned by the "expert"....
Just that it had to return to 110..
Ciao
MS
ac, are not the days of BOJ low interest rates numbered given the striking price increases that the Japanese are now experiencing?
Noodles and gas are getting expensive in Japan, I read.
Any bets on what happens at 11:15.
I say .25 bps raise - surprise move!
Yeah right, no raise and some bs statement about how they are concerned about inflation, blah, blah,...
The action in the markets right now is very interesting. I can't figure out whether people are gearing into positions to drive shorts out and take their position or if there are hopes and dreams of a renewed upward movement.
If the 10-year keeps going up 1 bp for every 10 points the DOW goes up that just ain't very realistic.
ac, are not the days of BOJ low interest rates numbered given the striking price increases that the Japanese are now experiencing?
Noodles and gas are getting expensive in Japan, I read.
Can Japan actually handle higher interest rates if their public debt is 180% of their GDP (3x the debt the US has)?
Sometimes I wonder if the Yen will be the first fiat currency to collapse.
Sometimes I wonder if the Yen will be the first fiat currency to collapse.
ac | 06.25.08 - 12:44 pm | #
If not yen, us$.
What is holding it up is some sort of economic miracle...
I had never thought about that, the yen failing (tunnel vision on my part: I focus on making money on the failure of the dollar and falling of the S&P 500). Makes sense, with that debt load.
It is going to be a very interesting next 10-20 years.
That I have to believe is driven by the events that will start on 8-8-08.....
Watch out below......They are where we were at in the late 70's however with the "policies" they have enacted it's going to play out MUCH faster than it has here. Also remember that no one (person,institution,country) buys an "investment" to hold forever.......unless of course you are a US-based I-Bank and that was not by design......
Ciao
MS
So if rates go down to 13% everthing will be fine, right? Oh wait...
In 1982, sales picked up late in the year as interest rates declined sharply (30 year fixed rates fell from 17% to about 13% at the end of the year).
so all we need to do is drop rates from their absurdly high level to something more accomodative. Maybe drop 4% points down to minus 2%?
The only reason you're not seeing double digit unemployment is because they aren't even counting all the unemployed teens and twenty somethings.
I have two of them hanging out at my house this summer. Oh, and I'm not working either. Good thing hubby does well.
I bet if housing was affordable, they'd sell more houses.
Okay, now I'll go punish myself for thinking "Unpatriotic" thoughts with regard to affordable housing.
"Unaffordable housing is good for Amerika!"
CAPS LOCK IS CRUISE CONTROL FOR AWESOME
I'd be shocked if the Fed raised today; they're more frightened by a cratering economy than they are by oil-driven price increases. They'll stand pat, and the market will happily respond with gusto late today.
I agree with "TWO AMERICAS" comment. Here in Boston where I watch Brookline, Newton, South End very closely and have for several years, this selling season is stronger than last (to my chagrin) -- higher prices, lower inventory, slightly fewer sales.
We are talking about a relatively small amount of supply, the biotech industry is going strong, and close-in homes reduce gas costs for some. But fundamentally I think this is about the well-off doing better in this downturn. At least at the consulting firm I work at, business remains very strong. Lots of cost reduction, etc. We'll see going forward....
The Bend Oregon real estate market is not doing any better.