Tuesday, July 25, 2006

June Existing Home Sales - Sales Down, Prices Flattening

From the National Association of Realtors:

Existing-Home Sales Flattening, Prices Cooling – NAR

Existing-home sales were down modestly in June, and home prices were up slightly from a year ago, according to the National Association of Realtors®.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – declined 1.3 percent to a seasonally adjusted annual rate1 of 6.62 million units in June from an upwardly revised level of 6.71 million May. Last month’s sales were 8.9 percent below the 7.27 million-unit pace in June 2005.

David Lereah, NAR’s chief economist, said the housing market is flattening-out. “Over the last three months home sales have held in a narrow range, easing to a level that is near our annual projection, which tells us the market is stabilizing,” he said. “At the same time, sellers have recognized that they need to be more competitive in their pricing given the rise in housing inventories. Home prices are only a little higher than a year ago.”

The national median existing-home price2 for all housing types was $231,000 in June, up 0.9 percent from June 2005 when the median was $229,000. The median is a typical market price where half of the homes sold for more and half sold for less.
...
Total housing inventory levels rose 3.8 percent at the end of June to 3.73 million existing homes available for sale, which represents a 6.8-month supply at the current sales pace. By contrast, in June 2005, there was a tight 4.4-month supply on the market.


From Marketwatch:

Existing home sales fall 1.3% to 6.62 million
Inventories at 9-year high; price gains at a 10-year low

The report shows a continued weakening in the housing market, with inventories up sharply while prices are softening.

The inventory of unsold homes rose to a record 3.725 million, a 6.8 month supply at the June sales rate, the highest since July 1997.

The median price has risen 0.9% in the past year to $231,000. It's the weakest price growth in 10 years.

Sales of existing homes are down 8.9% in the past year.

"I hope we are hitting bottom," said David Lereah, chief economist for the private real estate trade group, which is predicting sales of about 6.60 million this year.
...
Sales were flat in the West and Midwest. Sales fell 2.3% in the South and fell 3.5% in the Northeast.

Single-family sales fell 0.9% to 5.81 million from 5.86 million. Condo sales fell 5.5% to 805,000.

Median prices of single-family homes are up 1.1% in the past year, while condo prices are down 2.1%.

Sellers should expect lower prices, Lereah said, adding that he wouldn't be surprised to see single-family home prices fall nationally.



Caveat Emptor!
Grim

57 Comments:

Anonymous Anonymous said...

yikes! Lets see what NAR has to say know.

7/25/2006 09:12:00 AM  
Anonymous Anonymous said...

3 months in a row the realtor number matches the economists guess. that is very fishy, and brings into question the seasonal adjustments they use to show the headline sales number

7/25/2006 09:18:00 AM  
Anonymous gary said...

Thank God it's only a minor correction! That's what Suzanne told me because she researched it.

7/25/2006 09:25:00 AM  
Anonymous Anonymous said...

HOUSING BUST!!

RUN FOR COVER

BABABABA

Bob

7/25/2006 09:28:00 AM  
Blogger grim said...

Who would have thought that David Lereah would utter words like these..

Sellers should expect lower prices, Lereah said, adding that he wouldn't be surprised to see single-family home prices fall nationally.

7/25/2006 09:40:00 AM  
Anonymous Anonymous said...

just remember . The trend is your
friend.

7/25/2006 09:42:00 AM  
Blogger Richard said...

haha, i hope we're seeing the bottom. what an idiot. 100% run up in 5 years and you're hoping a flattening is the bottom? do you believe in the tooth fairy david?

7/25/2006 09:42:00 AM  
Blogger Richard said...

remember folks june's numbers were for contracts agreed upon apr and some may. watch the downward acceleration from july forward as inventory growth slows but still grows. we could see an 8-9 month supply in homes within 6-9 months IMO.

7/25/2006 09:44:00 AM  
Blogger chicagofinance said...

Note: consumer confidence up

The only thing holding people back is that prices are stupid.

The money is available to borrow.

Some shifting around in asking prices and buyers will dive in.

Cross off 2006 - go to the beach!

False bottom anon.....

Caveat Emptor as they say.

chicago

7/25/2006 09:48:00 AM  
Anonymous Anonymous said...

Does anyone have any thoughts on Bridgewater? 3 bed/2.5 bath CHC bulit in the 90's with not much property are still listing in the $570-599 range which to me is absurd. A few are under contract which I am monitoring to see what they actually sell for.

7/25/2006 09:55:00 AM  
Blogger X-Underwriter said...

Sellers should expect lower prices, Lereah said, adding that he wouldn't be surprised to see single-family home prices fall nationally.

Wasn't it just a month ago that he was saying prices would go up 5% this year?
What's more important than the actual numbers this month is what's being said
Expect the bloodbath to start in Sept/Oct

7/25/2006 10:03:00 AM  
Anonymous Anonymous said...

Well, fooled again. Hum, people.

Seems Existing home sales are
20k more than expected.

The dire scenarios , not in the cards.

New record highs for existing home
sales.

Housing stocks up today, hov toa tol
Only 6.8 months of inventory.

Everything is fine,,,

However, Low balls are in play.

Do not, repeat, do not be fooled
by these #'s today.

7/25/2006 10:39:00 AM  
Anonymous Anonymous said...

This was a big blow to all the analysts who predicted a bubble about to burst this year.

Too bad.

7/25/2006 10:54:00 AM  
Anonymous Anonymous said...

LEREAH at again. The floor is collapsing and he says flattening.

HAHAHAHA

Everyone is on to his pimping.

Bababababa
Housing BUST!

Bob

7/25/2006 10:54:00 AM  
Blogger grim said...

This was a big blow to all the analysts who predicted a bubble about to burst this year

Why?

7/25/2006 11:02:00 AM  
Anonymous Anonymous said...

The price will drop, but it is not going to go back to where it was 5 years ago, there are plenty of people who managed to take advantage of the low rate, the smart one will already have low 30 year fixed rates, and those that are not so smart will be switching to fix rate when the mortgage rate goes back up. When the housing price drop, those people will be stuck, but most of them won't be selling. It is just not logicial for them to give up the low rates and lose their down payment.

7/25/2006 11:27:00 AM  
Blogger grim said...

From Forbes:

Sales of Existing Homes Fall in June

Sales of existing homes fell in June for the eighth time in the past 10 months while home prices edged up at the slowest pace in more than a decade - more signs that the housing market has slowed dramatically.

The National Association of Realtors reported Tuesday that sales of previously owned homes and condominiums dropped 1.3 percent in June to a seasonally adjusted annual rate of 6.62 million units.

The median price of a home sold last month was $231,000. That was up 0.9 percent from June 2005 and represented the smallest year-over-year price gain since May 1995.

The 1.3 percent decline, which was in line with expectations, represented the third drop in a row and the eighth in the past 10 months as the nation's once-booming housing market has shifted to a slower pace in the face of rising mortgage rates

7/25/2006 11:31:00 AM  
Blogger grim said...

Unfortunately, anonymous, prices are already falling in real terms.

If you adjust the current median price for inflation (Using CPI less shelter), you'll see that we've already begun the slide down.

http://www.bls.gov/news.release/cpi.t01.htm

CPI less shelter (All items less shelter) was up 4.8% year over year in June.

Thus, in real terms, national median home prices have fallen 3.9% over the last year.

grim

7/25/2006 11:41:00 AM  
Anonymous Anonymous said...

On the down slope median is lagging
indicator.

7/25/2006 11:50:00 AM  
Anonymous Anonymous said...

I did say that it will not drop, it will drop and that is for sure, because there are a percentage of people who bought houses as investment or bought houses that they couldn't affort using interest only mortgages. Those people are likely to lose their houses.

However, because not everyone are in their situation, there are also a percentage of people who took advantage of the low rates and got their houses, if they managed to lock in a low fix rate that they can affort, it is very unlikely for them to give that up.

There are also a percentage who put their houses on the market now because they are afraid that they will be losing the gain that they got in the last couple years. However, when it gets to the point that it is no longer profitable for them to sell their house,they will change their mind.

7/25/2006 11:51:00 AM  
Anonymous Anonymous said...

The SFH sales went up in NE by 9.8%

7/25/2006 11:59:00 AM  
Anonymous Anonymous said...

Realtors: Home sales now a 'buyer's market'
Sales fell for third straight month in June; nearly flat prices make double-digit gains seem like a distant memory.

http://money.cnn.com/2006/07/25/news/economy/homesales/index.htm

*Don't buy into this ploy.
Its just an act of desperation to motivate buyers. Don't be tricked.

SAS

7/25/2006 12:01:00 PM  
Anonymous Anonymous said...

This was a big blow to all the analysts who predicted a bubble about to burst this year.

I think they were correct, this is what a bubble burst in housing looks like. It's not the stock market or metals trading with dramatic day to day changes, with people dropping their price in panic all at once. It's a slow and painful feedback loop, and starts with a flattening or small drops in real terms. Check out past bubbles;
80's Housing Bubble

JAY

7/25/2006 12:03:00 PM  
Anonymous Anonymous said...

Existing-home sales in the Northeast declined 9.8 percent below a year ago. The median price in the Northeast was $298,000, up 7.2 percent from June 2005.”

NE has highest price % up eventhough sales down by 9.8%...that means fewer homes being bought at higher prices than last year. It may also mean that only high end (> 1M) homes are sold thus making up the price difference but loosing on sales.

7/25/2006 12:06:00 PM  
Blogger grim said...

The SFH sales went up in NE by 9.8%

Are you sure you are getting your data from the right place?

NAR EHS Data

Northeast Sales (Unadjusted)
EHS down 7.8% YOY
SFH down 5.3.YOY
Condo/Coop down 14.3% YOY

grim

7/25/2006 12:09:00 PM  
Anonymous Anonymous said...

In the coming months, the selling prices will be set by those who NEED to sell, not by those that withdraw because they can't get their price. Those sales will be the new comparables.

JAY

7/25/2006 12:22:00 PM  
Anonymous UnRealtor said...

That added graph is inspiring.

7/25/2006 12:24:00 PM  
Blogger patient homebuyer said...

UPS sees signs economy "moderating"United Parcel Service Inc. on Tuesday posted weaker-than-expected profit, citing rising fuel and benefit costs, and warned that third-quarter results would miss expectations, sending shares down nearly 15 percent as the company indicated the U.S. economy is slowing

7/25/2006 12:29:00 PM  
Blogger Richard said...

nice chart grim. from a pure investment perspective investing in a house has been a real winner if you got in a couple of years ago assuming your carrying costs were below appreciation. since prices are sticky on the way down you have time to unwind your positions in an orderly fashion. this is why i don't expect to see panic selling. i expect flat to mid/high single digit decreases in prices in nominal terms for 2-3 years before we flatten out so incomes can catch up.

7/25/2006 12:34:00 PM  
Blogger Richard said...

here's a news headline from reuters.

"Consumer confidence, home sales beat forecasts"

gotta love the spin no?

7/25/2006 12:39:00 PM  
Blogger njresident286 said...

This is going to put a quick stop to the refinance market. Hence easy money drying up, less consumer spending, more defaults, lower prices and possibly an economic recession

7/25/2006 12:52:00 PM  
Blogger grim said...

Absolutely, this is going to make it incredibly difficult for someone who used a teaser i/o (neg-am) to refinance. Without bringing cash to the table that is.

What happens when the appraisal industry stops playing along? What happens when appraisers refuse to 'hit the number'?

grim

7/25/2006 12:57:00 PM  
Blogger RentinginNJ said...

those that are not so smart will be switching to fix rate when the mortgage rate goes back up. When the housing price drop, those people will be stuck, but most of them won't be selling.

Here’s the problem. Many people stretched themselves to the limit to get into an adjustable rate mortgage. As rates rise, they won’t be able to afford their new payment and won’t be able to afford moving into a fixed rate either. Selling, or foreclosure, may be their only options.

As for the people who locked in their low rate, sure, most can stay put and probably ride out a downturn. RE bubble bursts are typically characterized by a highly illiquid market. We are seeing this now as buyers and sellers are in a standoff. Those who “stay put”, however, aren’t the ones responsible for setting home prices. Prices are set at the margin, and in this case, will be set by desperate seller and buyers who smell blood.

7/25/2006 12:59:00 PM  
Blogger X-Underwriter said...

Grim said...
What happens when the appraisal industry stops playing along? What happens when appraisers refuse to 'hit the number'?

Bottom line...if the comps don't exist, the appraiser won't be able to make the number. If he says the property is worth $500,000 and the similar comps all sold for $400,000, the lenders won't buy it. Going forward, I'm sure the lenders are telling the underwriters to use caution. A year ago, there were a zillion comps to chose from, all of which supported the unrealistic prices. Appraisers could b.s. some numbers. As sales decrease, they will be fewer and farther in between

7/25/2006 01:08:00 PM  
Anonymous Anonymous said...

What we have here is a very orderly
downturn or slowing in the housing
markets.

No panic, just orderly.

7/25/2006 01:15:00 PM  
Blogger chicagofinance said...

UnRealtor said...
That added graph is inspiring.
7/25/2006 01:24:32 PM

grim has it right about negative real returns in housing

however, i wont be inspired until the same nominal price graph has a negative percentage at the origin and the graph tracks below zero

THERE'S NO WAY TO SPIN THAT ONE!

7/25/2006 01:19:00 PM  
Blogger skep-tic said...

does the speed of the decline really make a difference? the MAGNITUDE is what's importnant.

I doubt many homeowners will be reassured if their purchase loses half its value over 5 yrs instead of 2

7/25/2006 01:20:00 PM  
Blogger chicagofinance said...

Anonymous said...
What we have here is a very orderly
downturn or slowing in the housing
markets.
No panic, just orderly.
7/25/2006 02:15:38 PM

True.

However, there is nothing about which to panic. Look at the weakness!!!

Imagine when a real negative shock is injected?!

7/25/2006 01:21:00 PM  
Blogger chicagofinance said...

By the way, Wall Street/Hedge Funds are on fire from an earnings perspective. Possibly in position to top even 2005 at this juncture.

The only industry making more money right now is energy.

Bear this in mind into your forward view.

7/25/2006 01:24:00 PM  
Anonymous Anonymous said...

Exactly, if you look at the chart posted by Jay, you are going to see a very similar pattern this time around, the housing price will drop, but it is not going to drop to where it was before the surge happened, the same way that the price didn’t fall by to the 1982 level after the bubble popped at 1988, and the market will take years to find its bottom, meanwhile the mortgage rate is not going to stay at today’s level( which is still considered pretty low if you compare to rates we have seen in the past). For us buyers, unless we are able to save up enough to put down a hugh down payment, I don't think we will be getting much of a deal. Once we buy, we will be stuck too, just like those who bought in the last 2 years, because it is going to take years for the market to find its bottom and recover, so there is really not much to cheer about.

7/25/2006 01:27:00 PM  
Anonymous Anonymous said...

Hahahaha

"Orderly" "Normal"

BS!!!!!!!

This thing is unwinding fast. Just getting the Industry to admit to anything negative is a sign opf how bad things really are.

From what i am hearing things are BAD!

If you are a buyer with strong finances and 20% down payment YOU ARE IN THE DRIVER SEAT. YOU WILL DICTATE THE TERMS OF ANY HOUSING TRANSACTION FOR THE FORESEEABLE FUTURE.
MAKE SURE YOU GET BIG CONCESSIONS FROM THESE GRUBBING MAIPULATORS.

HOUSING BUST!

Bob

7/25/2006 01:46:00 PM  
Anonymous Anonymous said...

BIG CONCESSIONS DOES NOT = 5-10% REDUCTIONS FROM DREAM PRICES OR SOME KIND OF $1000 GAS CARD OR A PLASMA TV.

IT MEANS REAL PRICES CUTS OF 25-35% OFF 2005 PEAK PRICES.

REAL BUYERS, (20% DOWN PAYMENT TYPES THAT VALUE THEIR HARD EARNED MONEY) ARE IN THE DRIVER SEAT NOW.

DEMAND DEMAND DEMAND MUCH LOWER PRICES IN ANY TRANSACTION.

BABABABABA

HOUSING BUST!

Bob

7/25/2006 01:49:00 PM  
Blogger RentinginNJ said...

Exactly, if you look at the chart posted by Jay, you are going to see a very similar pattern this time around, the housing price will drop, but it is not going to drop to where it was before the surge happened

The one key difference to note is interest rates. At the peak of the chart, a median house cost about $325k in 1988 (inflation adjusted). By 1998, adjusted for inflation, the median home price dropped to about $250k. A drop in real terms of about 23%,

However, interest rates in 1988 averaged 10.33%, but dropped to 6.95% by 1998. Assuming 100% financing, the monthly mortgage payment on a median home purchased in 1998 was 44% less tan a median home purchased in 1988.

This time around rates started very low so falling rates won’t be there to soften the landing as is did last time. Price reductions will need to come fully from the home price side of the equation.

7/25/2006 01:57:00 PM  
Anonymous Anonymous said...

anybody got any money to spend?

Yes. I didn't blow it all on an overpriced crackerbox.

7/25/2006 01:59:00 PM  
Blogger BergenBuyer said...

All,

What would you do if you were renting, living at parents or with someone else or already sold your house and looking to buy a new house.

Would you buy or rent?
Buy now if you could get a lowball offer of 10-20% off 2005 price comps?
Rent until you could get 30% or more off 2005 comps?

What if you still own now, prices are still relatively high, do you have the guts to sell now at 10-15% off 2005 comps because you're so confident prices will drop to 40% in 2 years,s o you'll take your slightly depleted paper gains and rent until you think the bottom has hit?

How are those 50% lowball offers going? I saw 6 houses last night and will be making offers by Friday.

7/25/2006 02:09:00 PM  
Blogger grim said...

anons,

While I don't mind counterpoint here, I don't appreciate insult.

Nonproductive or argumentative comments will be deleted.

Please register for an account and use it so we know who you are. I'll be less likely to delete nonsense comments if you are a registered user. Boo-yah Bob is an exception to this, since he is a historic fixture around here.

grim

7/25/2006 02:20:00 PM  
Anonymous Anonymous said...

This site is all one sided.

And loaded with people who just
want to rail against Housing.

And it's because they got no Money.

And the question remains,,
anybody from this site buy anything.?

7/25/2006 02:26:00 PM  
Blogger grim said...

Your argument doesn't hold much weight, simply because you don't need to have money to buy a home anymore.

There is an entire industry devoted to developing mortgage "innovations" that allow people with low incomes and little to no downpayment to buy homes. Heck, you don't even need to document your income anymore, you can simply "state" it.

grim

7/25/2006 02:40:00 PM  
Anonymous Anonymous said...

"And the question remains,,
anybody from this site buy anything.?"

I'm going to buy myself a spanking new car with the money that I save from buying later on.

Six months to Housing Hell!

7/25/2006 02:50:00 PM  
Anonymous Anonymous said...

Anon 3:26:

Yes, I own--bought in '98. Took on less mortgage than I could afford. Am ready to purchase (with cash, possibly coupled with a small loan) a modest vacation home when sellers get real. All indicators are lining up as they did in the late '80s to suggest serious price reductions--except that energy prices are much higher, and there's greater uncertainty where they'll go. So the only thing propping up prices is, well, prices, and not a demand-weighted demand/supply imbalance, or some other external stimulus. Not exactly the foundation for a stable market...

This is not a sour grapes site. Not by a longshot. In a perverse sort of way, I want to understand what my home is really worth, not what I think I could get for it if I swing for the fences. Housing, in relation to many buyers' real (as opposed to 'creative') means to pay for it is SERIOUSLY inflated. If housing and home-ownership is the bulwark of the U.S. economy, then pricing a growing number of Americans out of this economic sector is a trend destined to end calamitously. And those who got in, but outlay more than, say, 35% of their gross income, are hardly in a position to participate in the consumer economy, at least not without taking a few ill-advised risks. ("What's in YOUR wallet?")

That, in short, is why this is not a site "loaded with people who just want to rail against Housing." But, hey, maybe I'm wrong.

Jamey

7/25/2006 02:53:00 PM  
Anonymous UnRealtor said...

Buying a house today at bubble prices makes zero financial sense. I can live essentially rent-free via the interest income from money not spent on a bubble-priced house.

What pushes me to buy is the need for more space, the desire to have my own yard, etc.

No rush, though, given today's crazy prices, and the fact that prices are falling each month.

We'll see what 2007 holds.

7/25/2006 03:13:00 PM  
Anonymous Anonymous said...

This site is all one sided.

And loaded with people who just
want to rail against Housing.

And it's because they got no Money.

And the question remains,,
anybody from this site buy anything.?


It's true, it's very one sided. It's called the realistic side, arrived at by careful consideration, debate, and analysis of all available data and viewpoints.

And many here do have actual money instead of mountains of debt. I now rent, but have bought and sold 5 houses in the past 20 yrs, and I have close to $2M in the bank. But there's no way I would buy currently. What about you?

7/25/2006 08:07:00 PM  
Anonymous Anonymous said...

Anon's statement is so one-sided himself.

This site is loaded with people who have cash, thus are interested to buy, but have a cautious mind about what is going to unfold in this overpriced housing market, and decided to wait.

Otherwise, why would they care?

KC

7/25/2006 09:44:00 PM  
Blogger gravitymatters said...

"The price will drop, but it is not going to go back to where it was 5 years ago, there are plenty of people who managed to take advantage of the low rate, the smart one will already have low 30 year fixed rate"
-----------------------------------

You just described why the market is coming to a screeching halt.
With many homeowners "locked-in" on a low fixed rate.... a much smaller pool of trade up buyers now exists.

Considering rising taxes, energy & just about everything else.... many WILL stay put.

What will push prices down is the sellers who NEED to sell.

Remember... people don't have to buy... especially when it's cheaper to rent or their already locked-into something (as described above).

Simple economic law of supply & demand.

Although I too think prices going back to the 2000 levels is unrealistic (mainly due to monetary inflation).... Condos & Co-ops "MAY" come pretty darn close IMO.

7/25/2006 09:44:00 PM  
Blogger njresident286 said...

One thing no one really talks about. This whole housing market is built on cheap money and people trading up. So if you sell your house for 400k profit only to buy a house for 800k, you still ower 400k on a mortgage. Regardless of rates or whatever, you are still on the hole that much money.

Now think of this. Eventually that needs to get paid off. And I am sure the boomers who trade up will eventually want to retire. I keep reading about the boomers have been so bad saving for retirment. What is goign to happen when they want to retire, but can;t because they have a 5000 square foot house to pay for, heat and cool? I think there are MANY factors that will each play a part in this market going down.

7/25/2006 10:50:00 PM  
Blogger Richard said...

it's starting to get interesting in this condo complex near me. 3 identical units on the market. peak price in july '05 was $450k. currently priced at $429.9k, $409.9k and $409k. the $409k unit just trumped the others and dropped to $392k. they've literally just set the new asking price for this type of unit. the other 2 sellers counting all their profit have just lost $38k and $18k on paper so far. hope you weren't relying on that unrealized gain.

now back in dec one unit was languishing on the market and some 'smart kid' stepped in and bought at $395k. people were thinking wow what a steal even though it needs some work. lol! time in this market is your best friend if you're a buyer.

as people on this site have said before, those that sell set the prices.

7/26/2006 02:55:00 AM  
Anonymous Anonymous said...

njresident286-

I think you just identified the "elephant in the room" no one is talking about. We are in for a very interesting time starting in 2008.

This will not only affect RE, but all types of investments, medical costs, etc.

If I could convince my wife, I'd like to wait about 3 years to see what happens once a new president is in office and the boomer phenomenon hits the RE market.

JM

7/26/2006 08:15:00 AM  

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