Tag Archives: home sales

Home Sales Set Record Low (Again) — Prices Decline and Inventory Sets Another Record

Existing home sales fell again to another record low in April.

The National Association of Realtors (NAR) reports that “Existing-home sales – including single-family, townhomes, condominiums and co-ops – declined 1.0 percent to a seasonally adjusted annual rate of 4.89 million units in April from an upwardly revised pace of 4.94 million in March, and are 17.5 percent below the 5.93 million-unit level in April 2007.”

The figures represent another record low since NAR has began keeping records in 1999.

The biggest decline was in sales of apartments and condominiums, which plunged 5.2 percent after two months of rising sales.

Demand for single-family homes dropped 0.5 percent in April.

NAR also reported that the national median existing-home price for all housing types was $202,300 in April, an 8.0 percent fall from April 2007 when the median price was $219,900.

Perhaps the worst news is that the inventory of homes for sale has continued to rise and is now at its highest level in more than 20 years. 

Inventory rose 10.5 percent to 4.55 million existing homes available for sale, an 11.2-month supply.  With so many homes on the market, it is likely that prices will continue to decline.  And with foreclosures continuing to flood the real estate market, it is expected that price declines will continue for at least several more months.

In addition, continued home price declines are keeping homebuyers, as well as investors, out of the market, as they expect even cheaper home prices in the near future. 

In other words, despite (and, to a large extent, because of) sharply declining prices, supply continues to rise while demand continues to fall.

Not a pretty picture for real estate.

As is usually the case, some regions fared better than others:

April sales dropped 6 percent in the Midwest and 4.4 percent in the Northeast, but rose 6.4 percent in the West (see our post on rising home sales in Orange County, California). 

Sales stayed steady in the South. 

Median prices fell across all regions.

In the West, the median price was $285,700, 16.7 percent lower than April 2007.  In the South, the median price was $170,800, down 5.1 percent from a year ago.  The median price in the Northeast was $262,000, 7.7 percent below April 2007.  The median price in the Midwest was $159,100, down 2.9 percent from April 2007.

NAR points the finger at the mortgage industry, blaming “restrictive lending practices” for the decline in sales, the lower home prices and the increasing inventory.

Always the optimist, NAR chief economist Lawrance Yun said that recent changes in lending would help homebuyers. “I would encourage buyers who were disappointed by poor mortgage options to take another look at the market because the lending changes are significant,” he said. “Also, a recent notable drop in interest rates on conforming jumbo loans will help consumers in high-cost markets like California and New York.”

We’re not holding our breath.


Home Sales and Median Prices Show No End to Real Estate Slump

Anyone thinking that the free fall in the residential real estate market was about to bottom out, needs to think again based on the dismal figures released today by the National Association of Realtors (NAR).

Once again, existing home sales fell, and once again, median home prices declined from a year ago.

The specific figures are these:

  • Sales of existing home fell by 2 percent in March to a seasonally adjusted annual rate of 4.93 million units, down 19.3 percent compared with a year ago.
  • Median home prices suffered a decline of 7.7 percent from the median price a year ago. This was the second-biggest year-over-year price decline following a record 8.4 percent drop in February.

On the other hand, there was some glimmer of light in these dark statistics:

  • While sales were down 6.5 percent in the Midwest and 3.5 percent in the South, slight increases in sales (2.2 percent) were recorded in both the Northeast and the West.
  • The median home price also showed a very slight up-tick. The median price in March was $200,700, which, although down 7.7 percent from a year ago, was still up from February’s median price of $195,600.

However, this rise in median home price was concentrated in one section of the country. The Northeast was the country’s only region to experience a rise in median prices, which were up 4.6 percent compared with a year ago.

Prices were down in all other regions of the country, dropping by 14.7 percent in the West, 7.1 percent in the South and 5.3 percent in the Midwest. 

NAR also reported home price gains in certain metro areas of country whose regions generally showed declines — Des Moines, Iowa, Austin, Texas, and Durham, North Carolina.

So what does all this mean?

Contrary to the sugar-coating given to these figures by NAR economist Lawrence Yun, we believe that the residential real estate market is still far from bottoming out — and that as more adjustable rate mortgages reset it could get even worse than it is now.


For an update on the commercial real estate market, click here.

Seasonal Boost in Southern California’s Home Sales Lowest in 20 Years — Median Home Prices Continue to Fall as Foreclosures Rise

According to DataQuick, “The onset of spring did little to thaw Southern California’s semi-frozen housing market: The seasonal boost in sales between February and March was less than half its normal level and a record low.”

The data shows that 12,808 new and resale homes and condos sold in Southern California Los Angeles, Orange, San Diego, Riverside, Ventura, and San Bernardino Counties in March. 

Although that figure was 18.8 percent higher than the 10,777 sales reported in February, it was down 41.4 percent from March 2007.

In addition, while DataQick’s statistics show an average seasonal increase of 38 percent in sales between February and March for the last 20 years, the 18.8 percent increase for March 2008 was the lowest seasonal sales boost in DataQuick’s records, which go back to 1988.

As expected, the data showed a continued increase in foreclosure resales and a decline in median sale prices.

More than one out of three Southern California homes that resold last month, nearly 38 percent, had been foreclosed on at some point in the prior year.  Last year such sales were only 8 percent of the market.  At the county level, foreclosure resales ranged from 28.8 percent in Los Angeles County to 56.4 percent in Riverside County.

The median price for a Southland home last month was $385,000, the lowest since $380,000 in April 2004. Last month’s median was down 5.6 percent from February’s $408,000, and down a record 23.8 percent from $505,000 in February 2007.

Significantly, the psychology of the current real estate market is creating its own downward drag on prices, as potential sellers are waiting for the market to hit bottom and potential buyers are waiting for prices to fall further. 

DataQuick president Marshall Prentice explained: “We continue to believe a lot of people who could be buying or selling right now are opting to sit tight until they sense we’ve hit bottom. Often what we’re left with, especially in inland areas, are sales driven by foreclosure or the threat of it.”

Here’s what we know:

Those who can hold on to their property are holding.

Those who can buy are waiting.

Like scene before the climax in an old Hollywood Western, the California real estate stand-off continues…

Or as Commander Bart Mancuso says in The Hunt for Red October: “The hard part about playing ‘chicken’ is knowing when to flinch.”

Mixed Signs in the Tea Leaves: Residential Sales Up, Median Prices Down, Lower Home Supply, and Commercial Real Estate Stronger than Feared

Every day we read the tea leaves (in the form of news and the financial reports) looking for indications of where the real estate market is heading.

Our conclusion for today: mixed signals.

We are sceptical about the report today from the National Association of Realtors (NAR) of a 2.9 percent rise in exisiting home sales in Febuary 2008 over last month.

NAR’s chief economist Lawrence Yun sees the data as “encouraging” and a sign that the housing market is “stabilizing.”

Yun said: “We’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing. Buyers taking advantage of higher loan limits for both FHA and conventional mortgages will unleash some pent-up demand. As inventories are drawn down, prices in many markets should go positive later this year.”

We’d like to believe it, but we note that NAR and its affiliates have a terrible track record in forecasting the real estate market and have often been forced to revise their figures to be less optimistic than originally stated.

For example, the California Association of Realtors now projects that 332,100 homes will sell this year, revised downward by over 2,000 sales from it’s prediction in October and that the median price of a single-family house in the state will drop 9% this year, as opposed to a 6% drop they expected in October.

We note, too, that the 2.9 percent growth in existing home sales claimed by NAR pales in comparison to the 23.8 percent drop since February 2007.

In addition, even accepting NAR’s report as indicating a positive blip on the radar, median home price figures remain gloomy overall, even according to NAR. NAR’s report today acknowledged that “The national median existing-home price for all housing types was $195,900 in February, down 8.2 percent from a year earlier when the median was $213,500.” And in California, the median single-family house price is expected to drop to $505,100 this year, compared to a 2007 median house price of $558,100.

Orange County Register columnist Jon Lansner quoted a report finding that home supply in Orange County was at an 11 month low.  According to the report, at the current pace of home buying it would take 7.5 months for buyers to take all of the current listings off the market.  It was at 6.09 months a year ago.

A more reliable report of good news comes from CBRE Torto Wheaton Research (TWR) regarding commercial real estate, stating that future commercial mortgage defaults and losses could be overestimated threefold.

According to the TWR report, “While prices have been slow to change in the commercial real estate equity market, the commercial real estate debt markets have been driven by increasing spreads, and decreased availability of mortgage capital.” In recent weeks, prices of the CMBX — a set of derivatives that provide insurance against default — and prices in the commercial mortgage-backed securities (CMBS) market are “out of line with what any likely future income stream of the underlying mortgages would suggest.”

The National Real Estate Investor observes that the TWR report shows that “Despite an expected incremental rise in vacancies across all major property types over the next few years, vacancies are still expected to remain lower than 2002/2003 peak levels, and the 2008/2009 period is projected to see rents to continue moving upward into positive territory. Currently, according to the report, CMBS and CMBX markets have priced in losses tied to doomsday estimates, more in line with 1992, at which point commercial banks lost 160 basis points.”

“One of the big differentiators between today’s ailing economy and that of 1992, is that there is currently an equilibrium with supply and demand in commercial real estate, which should weather the storm even as the economy is running out of steam. And, one of the biggest feared financial stressors — the collapse of a major investment bank — might still not bump the economy too far off its tracks.”

“As all eyes are trained on the JP Morgan buyout of Bear Stearns, which includes some $16 billion in CMBS, that is not likely to be the event that finally sets the price of CMBS. Dumping the bonds onto the market would likely make little sense given the Fed’s pledge to take in hand $30 billion of the ailing investment bank’s most illiquid assets, including both residential and mortgage-backed securities.”

We have some confidence in the TWR report and believe that overall the financial indicators for commercial real estate are much stronger than that for residential real estate.

One caveat is that if, as TWR asserts, the danger in the commercial real estate is mostly psychology of panic, another collapse of a major financial institution may make mass hysteria inevitable. Should another major credit institution do a Bear Stearns, the reprecussions could overwhelm the commercial real estate market as well as the residential market.

Regarding the drop in home supply reported by Jon Lansner, we take it with a grain of salt.  The numbers are small, and the report was confined to a small and perhaps non-representative area of the country.  We also don’t believe that over-supply of homes is a major culprit in the residential real estate crisis, and therefore don’t think that a slight decrease in the current supply will have much effect on prices.

We are not convinced by the NAR report that the residential real estate market is close to stabilizing. We think that NAR’s anouncement of stabilization in the residential real estate market is, at very best, premature, and more of the wishful projecting that has destroyed NAR’s credibility.  

The best that can be hoped for right now in the residential real estate market is volatility.

We hope too that NAR’s new chief economist, Lawrence Yun, who has worked at NAR as an analyst and forecaster since 2000, can somehow recover for NAR the credibility it lost when his predecessor and former boss David Lereah predicted an endless residential real estate boom and refused to face the facts even long after the bubble burst.

We will continue to read the tea leaves…


For an update on commercial real estate, click here.