Existing Home Sales Increase in September
Submitted by
CalculatedRisk on Fri, 10/23/2009 - 6:20am (74 comments)
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The "rain shadow" on the other side will be a sight to behold without any credit extensions or expansion...
Once again we have proven that throwing enough free money at a problem will alleviate the symptoms in the short term.
Well yah, we got the snappy DiTech ad at the bottom of the screen.
Since the tax credit had its greatest benefit with formerly-subprime or otherwise marginal buyers, it would be interesting to see home sales broken down by home price tiers for a clue to the impact of the tax credit.
Sales of existing homes are now above normal (not including the bubble), so policy has managed to create an echo bubble. Oh well ...
best to all.
Bring the price down and more people will buy.
When the tax credit expires, drop everything by at least another $8,000.
This one is kind of self-popping in November though.
I find the inventory numbers more compelling in assessment of the housing picture. Thanks CR.
I like how the credit for stealing sales from the future is given to 1st time buyers and 'investors'.
When you throw that word into any financial context in a downturn, it is there largely for moral support for those that need to be persuaded that aren't investors.
Weekend at Bernie's House Part II.
Taken out of context of the tax credit and large chunk of homes selling that are distressed one may get the sense that the housing market is rebounding. But we know better here. If this is an echo bubble, than expect an echo slump or rain shadow.
Let's pin the tale on the donkey and call this re-animator of a housing bubble, The Bernanke Bubble.
Give him full credit...
CalculatedRisk wrote:
Is this a case of the $8k credit "pulling demand forward", or something more like speculators raking up REOs for small money, banking on a recovery in 20-30 years? As I recall, River Chase in AL (a VERY nice community south of B'ham) was developed on land that the Chase family purchased for pennies during the 30's, and which lay idle until the late '70s.
CalculatedRisk wrote:
I wouldn't call it a bubble as much as 'froth'... the market is 'churning transaction' more than 're-inflating'... I know there have been some reports of 10%-15% price increases off the lows but that's what a 'churn' does... big spreads between bid-ask and until the churn slows down prices aren't likely to firm at any level.
I don't think the media has any idea just how much ownership is going to change hands this go around. A lot of property has to be exchanged from weak hands to strong [or less weak anyway]. That's a lot of churn. Must be nice to be a relitter.
As I recall, River Chase in AL (a VERY nice community south of B'ham) was developed on land that the Chase family purchased for pennies during the 30's
Some of these you can't just let idle. Property taxes will kill you.
Cinco-X wrote:
Sadly, most of this newfound Pennyland is a tax burden ala property taxes and has buildings that will need renovation or demolition plus removal. You may also need some security to ensure that the shady types don't grow weed on it and use it for notorious purposes. When you can pay for that stuff for pennies, then GD2 will be in full swing.
To be chased by the IRS for the next 20 years for either stealing 8K or the appearance of stealing 8K is just not my cup of tea.
I know several servicemen who were induced to buy homes due to the tax credit. They reasoned that even if their homes depreciated, there were enough VA programs in place to mitigate the losses that it was worth the risk. Once again, profits were privatized and losses shifted to the government.
Nuke wrote:
That approach makes more sense tho. "Remember to pay the legions first."
yagij wrote:
Fair point, but considering the degradation of the dollar over the last 80 years, you should at least substitute dimes or quarters for pennies
"Weekend at Bernie's House Part II. "
More like "Decade at Bennies"
ResistanceIsFeudal wrote:
I think a chart showing total dollar volumes might be more illuminating than the total number of sales.
I have a feeling that these days we're spending way less dollars in the aggregate on housing.
Funny how compressing the next 6 months to a year's worth of 1st time buyers into September and October, can have the effect of distorting the months of inventory down. Gee, hoodathunk it? It's actually kind of impressive how small that effect is. Guess first-time buyers are also those young folks who are having a hard time finding or keeping a job...
I wonder what the default rate on all these new homeowners using the tax credit as a downpayment and getting a no money down FHA mortgage will be? I'll take the over on 30%.
I thought the extension of the $8k credit was a done deal, but lately it seems that it may not be so.
Anyone think the tides have changed? Is it actually unlikely to be extended?
I actually told someone that was rushing to buy that they didn't need to rush because it was going to get extended and might even increase. If it doesn't, they'll probably be mad at me. Eventually they may thank me, but I doubt it.
Cinco-X wrote:
Who is going to be making quarters/hr? What fantasy land do you inhabit, and are they hiring there?!
existing median home price/30 year mortgage
august 2009 - $177,700 @ 5.19%
september 2009 - $174,900 @ 5.06%
With the 8K credit expiring and lower interest rates we still get a drop. Doesn't bode well now that we are entering a slow period for sales.
Good point. Unfortunately, some of the anecdotes posted about the people taking advantage of the FTHB tax credit suggest that we are encouraging very weak hands to buy houses that have suddenly increased by 10-15%. We all know the looming disaster with FHA loans. Just delaying the pain....
Higher home sales, higher gas prices, soaring tech stocks....
Its 2006 all over again.
chicago dude
I don't know if the voice of the HUD secretary is really the voice of the administration.
Yes, they will be mad at you, and they won't even thank you when their purchase price is 30k less because of it, because they will attribute that to their own savyiness as buyers rather than your correct prediction of the market forces as a whole.
C4C benefitted car dealers as they got rid of old new inventory, and also local sales tax receipts and the hoi ploy. If a reasonably priced new vehicle was selected, the public essentially received almost 1/3rd off the sales price.
Section $8k for homes is a whole different kettle of fish, as it's just a cents-off coupon when you consider what sort of financial impact it has on a $200k home, in comparison.
Part of the reduction in inventory is due to people not placing a house on the market unless there is some real need to sell. Many people are just staying put in the house they have, very few move up buyers in the market.
People who do need to move, and still have some equity will list the home for sale. Then when it doesn't sell they will try to rent the house. If they can't cover enough of the mortgage with a renter, they try a mod. When the mod isn't granted they stop making payments.
It is going to be a very long time until the real estate market gets back to anything that resembles normal buying and selling.
Iceman:
Free money frees great, doesn't it? This crap will go on until 1) the dollar comes under serious attack (more so than now) 2) a bond auction fails. Since the Fed has ruled out the latter, I would bet on the former.
Serious question: I know a lot of commenters here know a good deal about real estate, so how much of the NAR's data do you believe?
Juvenal Delinquent wrote:
It was a sucker coupon for most of us - for others [unfortunately] it was their down payment... that story will be revisited.
Frankly, all I see is weirdness.
One client is buying from bank for about 60k, yes it's a mess inside,
but nothing that can't be fixed for 20-30k. Tax assessor has assessments
in townhouse community at 120k, and there have been houses that
have sold for that amount.
Her problem? The hoa won't approve her until the Bank pays ALL the
past due assessments, which it isn't legally required to do, until after
it took title, before, it's 1% of the mtg balance or some months.
All I see is weirdness everywhere.
josap: that makes sense, thanks. I think there will be an extension of the credit and perhaps even expansion to include ALL primary residence home buyers and increased to 15K. Its gained some momentum on the hill.
house prices are rebounding in the UK and its never been commonly thought to date to be a bad idea to buy property...only once we see that idea regularly on the front page of newspapers will we know the bubble is over....current buyers are knife catchers IMHO..must be similar bottom feeding in the US, fed by tax breaks
*Serious question: I know a lot of commenters here know a good deal about real estate, so how much of the NAR's data do you believe? *
I believe everything up to the point where they open their mouth and start talking.
the two words that apply to housing inventory that don't get counted:
shadow inventory
The games being played at virtually all levels have kept that number rising while the cute numbers that the NAR release are declining.
All I need to know.
Ciao
MS
Would it not make more sense for the first chart to be Per Capita existing home sales ?
yagij wrote:
I own some very remote land in the high desert near Joshua Tree -- heard a story of a neighbor, who hadn't seen his land in a few years, getting a phone call from another land owner. Went something like: "Bob? You know your land in the desert? There's someone living in the shack up there -- I think they may be cooking meth." Pause. Then the reply -- "Damn it, I don't even have a shack up there." -- "Well, ya do now."
NAR's hard numbers are real. The spin is a joke.
You also need to see the differance in pending, sold, etc. Days on market and reduced pricing while on the market are also key numbers to look at.
So, look at the hard data but don't bother to read their take on what the numbers mean.
Personally, I hope they extend the tax credit. If we are going run this country into the ground, might as well throttle up and get it over with.
Duh..........the tax credit, foreclosure and short sales account for all of it......throw enough sh** on the porch, and someone will track it in the house.........
Even if it's extended: A lot of the demand got pulled forward from people that didn't count on an extension.
It would be like the C4C: It's extension was not nearly as effective at boosting sales as the initial phase.
from the WSJ. Hoocoodanode.
A new study [by the Richmond Fed] shows that mortgage defaults are higher in states where banks can’t pursue a defaulted borrowers’ assets in court, suggesting that such non-recourse states may have greater numbers of borrowers who default “strategically” by dumping homes that are worth far less than what they owe even though they might be able to afford their current mortgage payments.
Report Sheds Light on Why Homeowners Walk Away - Developments - WSJ
,rad w10949,
How's the financial shape of Fleet Street doing, compared to the state of fish wraps over here on the mainland?
NAR's inventory #'s are not real.....take a look in your own neighborhood...I know in mine that none of the empty homes are included in those numbers. In one case a house has been "sold" three times and no one has ever moved in.
It ain't rocket science....
Ciao
MS
woah! that was quite a jump.
Nuke wrote:
.......that's why we have Obama. It's a shame, but he'll strengthen the divisiveness of stereotyping for generations to come just for being in the wrong place at the wrong time. The more I read the more I think he's being used.
From the story:
If they don't account for unemployment and DTI's, the study is worthless.
I also think they will extend the FTHB credit and allow all buyers to use the credit.
This is the only way they can offer zero down home loans. Once they realize that the mid range properties aren't moving and forclosures are moving up the food chain, they will increase the creidt to $15,000.00.
FHA is offering 100% plus for fix up properties, 3-2-1 buydowns for lower income. They have taken the place of the subprime lender market. As we already know how that works out, I expect about 30% of these properties to forclouse within 1 to 4 years.
All J6P wants to know is "How much down and how much a month?"
Basel Too wrote:
Next the WSJ will learn of a lawyer in Florida who will hound them night and day explaining that the threat of a deficiency judgment is so lame that even those states with recourse have none - not really. Wait 'till that meme gets out there WSJ...
Are you in Chicago? Are you going for the "http://www.showdowninchicago.org/index.html" Oct 25-27?
I was taken in by his ability to talk in complete sentences, whilst making a lot of sense and promising change, but that was version 2.008.
It's not all that clear to me that Obama will support extending the FTHB tax credit:
White House studying housing tax credit
| Reuters
It's up to Congress of course (since I don't think he'd veto it if it passed), but without support from the administration it may not pass at all.
The Onion, of course, speaks truth where no others dare:
More Americans Falling For 'Get Rich Slowly Over A Lifetime Of Hard Work' Schemes
OMAHA, NE—A report released Monday by the Omaha-based public-interest group Aurora indicates that increasing numbers of Americans are being defrauded by schemes that offer financial reward for a lifetime of hard work. "People don't realize that long-term savings and loyalty to one company don't pan out," said Sylvia Girouard, the study's author. Girouard added that steady employment which claims to offer long-term financial gain in the form of a pension plan is nothing more than an elaborate Ponzi scheme.
' Hope the HOA (condo board) has D & O insurance. Here in IL the board of an association can't stop a sale except for exercising the right of first refusal, I think.
"I expect about 30% of these properties to forclouse within 1 to 4 years."
Just another recycle of foreclosures at the ignorant public expense.
DCRogers - your link no workie.
Black Star Ranch wrote:
I can't believe he is not smart enought to realize he's being used. So that leaves an excess of hubris that prevents him from seeing that he's being used. You can forgive the former, not so much the later.
Nuke wrote:
so, this will go on for a long time. government
. enjoy it while it lasts!
Happy BFF Everyone.
The BFF Poll is open at the "Toys" link.
Those inventory numbers are gonna be revised up again, would like to see the median prices as there may have been a bit of end of season capitulation.
Was visiting my parents in NJ and houses used to be very seasonal, then around 2005 a few signs started going up out of season. This year they've been up before the season started and are staying up after, especially in high end areas from Essex Fells to Bernardsville.
yagij wrote:
The Chinese don't consider their country a fantasy land. They consider it the center of the world. Zhoung Guo = Center (Middle) Kingdom
Thx, linky fixed
If distressed sales (short sales, REO) in September are estimated at 29% of the market, should I reduce the NSA figure by 29%? Are all distressed sales back to the bank?
For a true YOY comparison, then, would I need to remove an estimated percentage of distressed sales from 2008 September figures?
in a war with crony capitalism truth is the first casualty
i dont trust NARs numbers
i dont trust the dow
i dont trust the gold prices on the nymex
the price of oil was plainly manipulated during the commodities bubble
the UE numbers touted, emphasize insured workers and gloss over million who are UE
the value of the dollar is manipulated and toasted right before our eyes
i miss ffdic
maybe soon we shall have a poster here with the handle FFEDRESRV
and questions?
Hope the HOA (condo board) has D & O insurance
Deny & Omit Insurance
TALL TALES BEING TOLD BY THE NAR AND LARRY YUN:
A closer look at the data, however, shows that not seasonally adjusted monthly sales for September shows a MUCH DIFFERENT STORY. Sales actually dropped 5.2% vs. August and were up 7.8% vs. last year. The median price dropped 8.5 vs. September 2008
The Golden Truth: Existing Home Sales: "Nothing Is But What Is Not" (to quote Shakespeare)
Well, blow me down! Giving away $8,000 and FHA with 1% down caused a spike in existing home sales. Whoda thunkit?
BTW, that 60 trillion dollar derivatives sword is still dangling over our heads.
"BTW, that 60 trillion dollar derivatives sword is still dangling over our heads."
It would be difficult for me to lose over $100 on my present derivative position. I'm essentially flat right now, and have almost no position, but I do have offsetting fungible positions. The notional value of that position is about $1 million dollars. When the positions expire or are offset their value goes to zero. Traders leave offsetting positions open because many of them will be offset by trades in the near future, and we therefore can save one commission by not offseting them earlier. But the value of the offsetting open positions can appear to be gigantic.
Since there is no risk in these positions, the margin can be very low or zero.