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binve (< 20)

Existing Home Sales... "Uh Oh" Edition

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February 26, 2010 – Comments (13)

Another good and thought provoking chart from Jake.

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Existing Home Sales... "Uh Oh" Edition - READ FULL ARTICLE
by Jake at econompicdata.blogspot.com

What happens when you begin to take away the stimulus (i.e. housing subsidies)? Sales once again fall even with reduced price levels.

13 Comments – Post Your Own

#1) On February 26, 2010 at 11:45 AM, russiangambit (29.27) wrote:

It is probably a combination of a very cold winter and of pulling the demand forward before the November (or so we thought at the time) tax credit expiration. Even ultr-low mortgage rates weren't able to do anything. This is a bad sign when people don't buy houses even with 4% mortgage rates.

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#2) On February 26, 2010 at 11:47 AM, binve (< 20) wrote:

Yes indeed man. Very bad sign :(

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#3) On February 26, 2010 at 12:06 PM, davejh23 (< 20) wrote:

It will be interesting to see new home sales numbers for February and March.  They could jump, but after that it will be too late to take advantage of the tax credit...except for spec home purchases...I guess there are plenty of those.  Either way, I don't think new home sales for 2010 will be anywhere near the NAR's estimate of 500K+.

I do think existing sales will jump over the next few months, but then we'll probably see sales tank through the Summer and into next Fall/Winter.  If interest rates climb to even 6%, I think existing sales will fall well below 5M for the year...even if they stay close to 5%, I wouldn't be suprised to see sales even below 4M.  Depending on interest rate moves and how banks handle their foreclosures going forward, I think prices could still fall FAR more than recent estimates I've read.

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#4) On February 26, 2010 at 12:16 PM, binve (< 20) wrote:

Either way, I don't think new home sales for 2010 will be anywhere near the NAR's estimate of 500K+.

I totally agree.

I do think existing sales will jump over the next few months, but then we'll probably see sales tank through the Summer and into next Fall/Winter.  If interest rates climb to even 6%, I think existing sales will fall well below 5M for the year...even if they stay close to 5%, I wouldn't be suprised to see sales even below 4M.  Depending on interest rate moves and how banks handle their foreclosures going forward, I think prices could still fall FAR more than recent estimates I've read

Yep, I am right on board man. Thanks!

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#5) On February 26, 2010 at 12:43 PM, floridabuilder2 (99.29) wrote:

First of all do not look at existing home sales as an indicator, I don't have time to go into the reasoning here.  However, it is a worthless indicator for your purposes which is housing. 

Focus only on new home sales that is the true indicator of demand.  Again, if I had time I would walk you through the logic, but trust me on this.  Also, when the publics state that there sales weren't that bad and that the new home sales data is flawed or they disagree with it, they are morons or lying.  The real reason that the publics can still sell homes is because every private is getting cut off by the banks and only the best privates and the publics with long term debt can build today.  The publics are seeing sales strength due to other builders dropping like flies.  They are gaining market share in a shrinking market.

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#6) On February 26, 2010 at 12:58 PM, binve (< 20) wrote:

floridabuilder2 ,

Hey FB! Fair enough man. I will accept your argument on the grounds of superior experience :)

Also, when the publics state that there sales weren't that bad and that the new home sales data is flawed or they disagree with it, they are morons or lying. The real reason that the publics can still sell homes is because every private is getting cut off by the banks and only the best privates and the publics with long term debt can build today.  The publics are seeing sales strength due to other builders dropping like flies.  They are gaining market share in a shrinking market.

Ah yes, I do recall you making this point before in some of your posts. That does make sense.

Thanks for the comment and the clarification!..

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#7) On February 26, 2010 at 1:13 PM, Tastylunch (29.24) wrote:

binve 

Is anyone surprised by this? I'll feel better about housing when I see employment actually meaningfully improve. So far it seems like each new "recovery" comes with a longer and longer lag  in employment growth and less and less jobs created.

I agree with gambit on the pull forward, just ask car dealerships about cash for clunkers...

People Mistake Ford's strength for sector strength when actually they are doing the same of what FB described in the builder business...

not the the end of the world but won't be fun fun in the sun for good while.

floridabuilder2

that makes sense to me. I keep running into local business stories of private builders getting toasted. Many are pretty scandalous. One builder was offering 40 year warranties than abruptly shut down on a dime.

SB's are getting choked to death by the banks. No entreprenuer's I'm friends with around here can get financing whatsoever. One condo builder even offered to put 50% down and got turned down.

oddly enough a lot of former privatebuilder employees seem to have gone into accounting (I know because they pitch their services to me!)

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#8) On February 26, 2010 at 1:33 PM, binve (< 20) wrote:

Tastylunch ,

Is anyone surprised by this?

No :) But it is always nice to see reality reflected in the number (cough, GDP, cough) :)

I'll feel better about housing when I see employment actually meaningfully improve. So far it seems like each new "recovery" comes with a longer and longer lag  in employment growth and less and less jobs created.

Amen to that.

I agree with gambit on the pull forward, just ask car dealerships about cash for clunkers... People Mistake Ford's strength for sector strength when actually they are doing the same of what FB described in the builder business...

I agree 100%. We have """"economic growth"""" because of an inventory rebuild cycle.

And the housing growth and increased auto sales? A product of the Tax Credit and Cash for Clunkers.

In essence, that is an artficial inventory rebuild signal (I am saying you can think of it that way).

Unsustainable? You betcha. Thanks for the comment!..

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#9) On February 26, 2010 at 2:22 PM, davejh23 (< 20) wrote:

Binve,

Do you have any data on what percentage of all new mortgages have been supported by the Fed over the last year through their purchases of MBS?  Is there much private demand out there?  I've seen several "experts" predicting that rates won't rise significantly when the Fed stops their purchases.  I'd find that very hard to believe if the Fed is currently buying a significant portion of all Fannie/Freddie MBS...unless demand really falls through the floor...then rates wouldn't necessarily jump...

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#10) On February 26, 2010 at 2:44 PM, eldemonio (97.19) wrote:

Just spitballing here - How many existing homeowners are super psyched to put their house up for sale knowing that they will take it in the shorts? 

The drop might be due in part to people not wanting to buy - but don't forget about the fact that many people don't want to sell either.

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#11) On February 26, 2010 at 3:16 PM, binve (< 20) wrote:

davejh23 ,

Hey dave, No I don't. The Fed purchased 1.25 trillion in MBSs but I don't know how much of that translated into new demand / underwriting.

I've seen several "experts" predicting that rates won't rise significantly when the Fed stops their purchases.  I'd find that very hard to believe if the Fed is currently buying a significant portion of all Fannie/Freddie MBS

I find that hard to believe also.

eldemonio,

Hey man! I totally agree. New homeowners / refis are only a portion of the puzzle. Most are stuck, either unable to afford payments or unable to afford to sell (coming up with cash at closing for being underwater). :(..

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#12) On February 26, 2010 at 4:45 PM, floridabuilder2 (99.29) wrote:

davejh23,

send me an email and a submarket in the US that I cover (basically the smile states of CA, AZ, FL, TX, GA..........  I will tell you which entities are writing the loans.  If they resell, I don't have that data but I can tell you who is writing the loans in any area of the country and how many people are cash buyers.  I have access to virtually 99% of the mortgage data in the smile states, this issue is that I can only analyze by submarket or county.  Again just send me an email or if you are too lazy then any other fool can send me an email on the subject and I will blog about it.

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#13) On February 26, 2010 at 4:46 PM, floridabuilder2 (99.29) wrote:

also bineve if you remind me via email I can talk about existing vs. new...  i just don't have my planner with me and will forget I even posted here.

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