Statistical Indicators

Existing and New Home Sales Down - Double Dip?

Posted on Wednesday, June 23, 2010

New EXISTING HOME SALES number were released Tuesday June 22 at 10 AM by NAR for May.

We expected to see a rise of about 6%. But instead saw a slight decrease. Given that this number measures closed sales, we should see at least another month of home buyer tax credit boost so this lower than expected outcome is especially not great news.

New construction sales came out today with a 33% decrease to a record low.

Both number are particularly important at this time as the reflect how housing is really doing after tax credit expiration which we know front loaded home sales/siphoned from future sales.
And May usually one of most active months.

The demand side in real estate has al but temporarily disappeared. First time buyers who were interested jumped for the tax credit. We can expect to wait another few months for new buyers to emerge. Folks who have lost their homes are side lined until they rebuild their credit and a downpayment. Mover uppers who relied on current home equity for the down payment for their new home are our of luck. So really the only folks buying are those with jobs, good credit, enough wealth to have a downpayment to spare aside from the equity that was in their home, and the need to move plus the confidence to do so.

You'll recall
April Existing Home Sales Numbers; Rose April 7.6% and 22.8% higher than April 2009. Rose 7.0% in March.

The Wild Cards are clearly still Unemployment,
No equity when sell to buy again/downpayment and defaults leading to evne more Shadow Inventory from foreclosures. Per S&P it will take 3 years to clear. There are currently $480 billion in loans over 90 days late. Risk softening prices. Inventory varies by region (103 mo NYC. 16 Mo average. 6 months is normal). Per Fed Beige Book NY Cleveland Chicago among worst.


Even with the prposed extension of the time to close under the of 3 months to Sept 30, its looking more like we'll have at least soem dip in housing. More importanly it will be a long road to feelign better as other Fed stimulus taper off in 2011 too.

HAMP worked for very few and redefaults are an real issue. According to Fitch 55 to 75% over the next 12 months. Instead Hamp gave amny Americans who the program was not meant for in the first place a horrible experience trying to reach their bank and a reason to rationalizing defaulting now. The HAFA Short sale and DIL being pushed now will work better and may be a necessary evil but it will certainly add to inventory and push prices down.

The National median home price 170K is undervalued in relation to income. Historically price to income ratio is 2.6 to 3.0. In 2005 it was 3.4. Now its 2.4. But home price to rent ratios seem make prices seem overvalued because rents have been falling. So in terms of housing, at least the price is right in a historical context now. And folks need homes, whether by renting or owning. If new starts slow down and they seem to be, inventory will eventually be absorbed but not without the usual pain of a deleveraging of this magnitude.

Over the next 5 years NAR expects home sales to rise by 2% annually (higher than projected population or job growth due to recovery of second home market). But prices to at best beat CPI inflation by 1%.

Again, the biggest Problem: 2/3 of American homes have mtg. 56 mill. 14% already delinquent or in forc. 7.8 million people. Most of those not paying never will. That’s 7.2 mill homes. Loan mod programs slowed down process. Real driver is being underwater. As many as 25%. As high as 50% in states like Florida.


OTHER INDICATORS
Pending Home Sales up for 3 months in a row as of June 2, 1010. Up 6% in April, 22.4% higher than April 2009. Follows gains of 7.1% in March and 8.3% in February. Lag time of 1 or 2 months. NE up 29.5% in April, 24.5% over last year. MW up 4.1%, 17.9% from last year. S down 0.6%, but 31.3% up from last year. W up 7.5%, 12.0% up from April 2009. Up 3 months in row tax credit. Highest since Oct. Reflects contracts not closings. Lag time 2 to 3 mo Second surge from tax cred . Buyers rushed to sign before April 30 tax credit.
Builder Confidence down 17 points in June.
RealtyTrac Foreclosure rates (including delinquencies) up 44% to record in May. Up in every states. Second consectiuve month of record highs. 1 in every 400 homes in US. Process is slower (foreclosures only down 3% from April to May) . LPS deli or in forc 7.3 mill
Inventory rose 11.5% at end of April to 4.04 million existing homes, an 8.4 month supply. Up from 8.1 months supply in March. Shadow inventory 1 to 7 million.
Home Prices; National median home price $173,400 per NAR, up 4.5% from April 2009. SF prices up 7.4% in April. 20.5% over Aprill 2009. Distressed sales accounted for 33%. 44% first time buyers in April. 44% in March. 15% investors. Down from 19% in March. 26% all cash in April. 27% in March. But other sources reported prices down 0.38% from March to April nationally and down 4.1% from April 2009. Home Prices gained 0.9% in April as of 6/8/10; Per integrated asset services follows 1.1% gain in March mom. First positive in 8 mo Down 2.8% from April 2009. Nationally prices 23.9% down from July 2007 peak MW up 1.9% S 1.8% W 1.1% NE down 0.7& 8th time in row
New Home Sales; New homes sales jumped in April 14.8% almost 2 year high. expected to fall 19% in May. Counted when contract signed so expected to be hurt by tax credit expiring/reflect sooner than existing sales. Play significant other role in economy/7% tied to new homes.
Commerce Dept New Home Sales for May released Wed June 23 10 AM.


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