Housing: 2007 Thread.

[Trianon]

Originally posted by: upsciLLion

Originally posted by: Trianon
This guy must be real smart, I hope he is doing that with his personal money(what an idiot

Look at who his main campaign contributors are: link. They're all major holders of mortgage backed securities!

Of course, no one even doubted that... corrupt SOB, I can't believe people still voted him in...

 

[WhipperSnapper]

That's all we need -- taxpayer money wasted on irresponsible mortage lending speculation. I won't be at all surprised if our tax dollars are abused to bail out the subprime lenders.

 

[dullard]

I believe that it is LegendKiller who loves this particular piece of data (Shiller's Irrational Exuberance), but now it is in roller coaster form:

Animated roller coaster of inflation adjusted housing prices.

Fun way to kill 4 minutes.

 

[LegendKiller]

CA is taking a roundhouse kick!

http://a1022.g.akamai.net/f/1022/8158/5...com/media/graphic/2007-04/29105010.gif

http://a1022.g.akamai.net/f/1022/8158/5...humbnails/graphic/2007-04/29103823.gif


Another good paper from Shiller

http://www.bepress.com/cgi/viewcontent.cgi?article=1145&context=ev

 

[StageLeft]

Just glad our house in alabama finally sold after five months and having to drop the price!

 

[dullard]

Existing home sales plummet in biggest drop in 18 years.

This ends the recent increase in existing home sales and it is the lowest point since I've recorded data. See the graph. Prices are down from this time last year, but only by 0.3%. However, this marks 8 months straight where house prices are down from year-ago levels. Prices ticked up from last month though.

 

[Slew Foot]

Sales are down and prices are up because the subprimers cant buy anymore. Thus the median price is up since subprimers usually buy cheaper homes. Doesnt mean that the price of the same home isnt falling. At least, that's my interpretation.

Take 10 homes with a median value of 500K, chop off the cheapest three and cut the prices of the others by 10%. Guess what your median is (ans. ~500k).

 

[dullard]

Looks like new home sales recovered a little bit from last month's total. However, that means new home sales are at their 2nd lowest point since I started these housing threads. The sales (new, existing, and total) seem to keep following a general linear trend downward. In one month, they erased all of the gains they had in the previous few months. I have to keep rescaling the graphs lower and lower.

With foreclosures soaring, I'm considering replacing the S&P graph with foreclosures. Does anyone know of a good source of historical and current foreclosure data to put into graph form?

 

[Trianon]

I saw the report on Bloomberg that analyst estimate about 75 bln $ loss for investors due to RE pricedrop. Can't find the link at the moment

 

[Slew Foot]

It's funny that they're now reporting home sales on a month to month basis as opposed to year to year like they normally do. Home sales are SUPPOSED to pick up from January through July or so, that's the normal market. Do you know what the March 06--> March 07 numbers are for new construction? I know the existing sales were off 11% or so.

 

[dullard]

Originally posted by: Slew Foot
It's funny that they're now reporting home sales on a month to month basis as opposed to year to year like they normally do. Home sales are SUPPOSED to pick up from January through July or so, that's the normal market. Do you know what the March 06--> March 07 numbers are for new construction? I know the existing sales were off 11% or so.

1) In the links I've been posting, they almost always compare them month to month. Then, if something interesting happened, they also posted it year to year. I'm not sure what happened to the reporting before I started these threads.

2) Most of these numbers that I post are annually adjusted to counteract the seasonal oscillations that you mention.

3) March 2006 vs March 2007 numbers:
[*]Existing home sales: 2006 6.90M, 2007 6.12M, 11% drop.
[*]New home sales: 2006 1.121M, 2007 0.858M, 23% drop.
[*]New + Existing home sales: 2006 8.021M, 6.978M, 13% drop.
[*]New home starts: 2006 1.972M, 2007 1.52M, 23% drop.
[*]Existing home price: 2006 $217,600, 2007 $217,000, 0.3% drop.
[*]New home price: 2006 $239,000, 2007 $254,000, 6.3% gain but closing costs are now usually free and there are many free items now included.

 

[Slew Foot]

Thanks, I know that 2006 was a disappointment in terms of overall sales and it looks like 2007 is going to be a disaster. Ive always ahted the "seasonally adjusted" numbers because it seems to be such a nebulous metric that's prime to manipulation and seems to be revised all the time anyway. The raw numbers from year to year should be easily available and tell a more straightforward picture. Correct me if I'm wrong but aren't existing home sales are counted at closure and new home sales are counted at sales? So the 30-40% of new homes that are cancelled before closing are never really counted?

I heard that on average a new home comes with 30K in incentives now, though interestingly enough in Sacramento, home builders are canning incentives and just dropping the price. Might be interesting to see if this takes hold in the rest of country soon.

 

[rhatsaruck]

Some interesting commentary over at Calculated Risk blog.

 

[Slew Foot]

Originally posted by: rhatsaruck
Some interesting commentary over at Calculated Risk blog.

You know whats kind of funny? Whenever a homebuilder or mortgage lender reports a huge drop in sales or profits, their stock goes up.

 

[Slew Foot]

Edit: DP

 

[dullard]

Not much on the housing sector yet this month, but quarterly price data just came out. Seems like all regions had price declines this quarter. Sure, a local neighborhood or town may have gone up in price, but if you look at averages, they are going down all over the country.

 

[LegendKiller]

Originally posted by: dullard
Not much on the housing sector yet this month, but quarterly price data just came out. Seems like all regions had price declines this quarter. Sure, a local neighborhood or town may have gone up in price, but if you look at averages, they are going down all over the country.

Even though Sub-prime RMBS spreads have come in 200+bp in the last month or so, from a widening of 400+bp 2-3 months ago, it's still more difficult to sell sub-prime RMBS bonds in the securitization market.

one thing that some people are starting to comment on is the deferrment of the burst. Since late stage delinquencies are being handed deferments, or forgiveness of late payments, it's just pushing out the terms of the contracts, not changing affordability. Even when terms do change they won't be enough to matter much, and they also reduce the risk-spread on the contract, meaning that the bank isn't getting paid enough for the risk it's taking.

Another thing is that many people keep looking at 30-yr fixed prime mortgages and saying the benchmark hasn't moved much, giving people an opportunity to refi. The problem with that you are using a prime benchmark for subprime customers. Subprime risk spreads have widened quite a bit. So even if a sub obligor wanted to refi, the rate won't help all that much. There is no rate arbitrage available.

As subprime keeps going down the tubes it'll bleed further into the overall market, probably pushing some lower-tier prime borrowers into bad territories.

Prices are now down almost 7% YOY, that's a huge drop. Add in inflation and prices are down almost 11% YOY. I think we are about 1/3rd to 1/5th of the way through the correction.

 

[dullard]

Originally posted by: LegendKiller
Prices are now down almost 7% YOY, that's a huge drop. Add in inflation and prices are down almost 11% YOY. I think we are about 1/3rd to 1/5th of the way through the correction.

I don't know much about the rest of your post, so I can't comment. But could you explain your logic for this last part please? Is that 7% number for a certain segment of the housing market or a specific average of numbers?

The way I see it, the average unadjusted existing house price was $217,600 in Mar 2006 and $217,000 in Mar 2007. My source. That is a 0.3% drop YOY and nowhere near 7%. So, could you explain the discrepancy with your numbers? Also, for inflation, the April CPI numbers came out today (but haven't been updated on the official website yet). Using March numbers until then, they are 205.35 and 199.8 for Mar 2007 and Mar 2006 respectively. That is a 2.8% inflation rate - not the 4% you used.

I would probably agree that it appears we are only part way through the housing decline. Things were level for a few months, started ticking up, but last month was miserable on almost all measures. This next week's worth of data will confirm if last month was a blip or a start of a new downward trend.

 

[Slew Foot]

Anecdotal note: the house I almost purchased for 445K in Sacramento in May 2005, is currently on the market for 350K. Been on the market for 8 months now with incremental price drops, ouch.

 

[Slew Foot]

"New homes, though, continue to show double-digit annual declines of 22.3 percent in Sacramento County and 12.5 percent in Yolo County."

From the Sacramento Bee, this might be the first time Ive seen a number that was actually close to being correct.

 

[rhatsaruck]

Nice article at on the S&P/Case-Shiller Index and the CME housing futures.

Takeaway: the futures market expects median housing prices to continue to fall into 2008. The Feb 08 futures contract is currently holding at $210K for a drop of $9.9K from the current CSI median price of $219.9.

I'm trying to get a feel for how far prices have to fall to get the housing inventory levels back to "normal", whatever that is.

The current Realtor report states that the March 2007 housing inventory is at a 7.3 month level. That's 7.4% higher than the month earlier and 30.4% higher than a year ago. Does anyone know what constitutes a "normal" housing inventory level measured in months? I see that at year end 2004 Realtor.org reported a 4.3 month supply of inventory. That means current levels are more than 90% above the 2004 year-end level.

Edit: I wrote:

The Feb 08 futures contract is currently holding at $210K for a drop of $9.9K from the current CSI median price of $219.9.

My bad. The Case-Shiller Index is not dollar valued - it is a pure index with January 2000 having a value of 100.0. Thus the drop I mentioned reflects an expected 9.9% YoY drop in median selling price. That seems like a fairly significant drop given recent trends.

 

[dullard]

Sales of new homes has risen dramatically in April (see link in OP). That is a good sign. But, there are troubling signs as well in that data. Being up 16% isn't much when you just fell 40% in a bit over a year. Also, new home prices plunged 11% in a month and 11% since last year. And that doesn't even include covering closing costs and free upgrades.

Hopefully for builders, sales can stay higher. But time will tell.

 

[Slew Foot]

Just like I told you guys, the builders will price the market lower. They'll sell what they can as long as they make a profit, the flippers and the people who cant keep up with their loans are getting screwed.

Interesting to see the resale numbers tomorrow, my guess is that new builders are leaching sales from resellers.

Edit: FYI compared to April 2006, new home sales were down 11%. Also March 2007 numbers were revised lower. The new home sales number is also based on contracts signed, not homes closed, might be interesting to see how many of these actually make it to closing with tougher lending standards in place.

Edit 2: Margin of error +/- 13%? Yeesh, I suppose it'll give them room to downwardly revise those numbers a bunch next month when no one spaying attention.

 

[IronWing]

Home ownership adjusted for % equity 1949-2003

This graph (which I posted once before way back) shows the official home ownership rate, the equity ownership rate, and the home ownership rate adjusted for equity ownership, plus rate of owner occupied homes owned free and clear for 1985-2003. All sorts of factors affect the rates so declining rates aren't always bad (could mean new folks entering market for example) but it does show that the reported rate of home ownership for the US needs to be taken with a grain of salt.

Note: Linear interpolation used in adjusted rate graph where data not available.

 

[PingSpike]

Originally posted by: Slew Foot
Interesting to see the resale numbers tomorrow, my guess is that new builders are leaching sales from resellers.

Looks like that may be the case.

Home sales, prices slump
Weakness in battered real estate market intensifies in April as latest reading worse than estimates.
May 25 2007: 10:16 AM EDT


NEW YORK (CNNMoney.com) -- Sales of existing homes fell in April, according to a trade group report that showed greater than expected weakness in the already the battered real estate market.

The annual pace of existing home sales fell 2.6 percent to 5.99 million in April, according to the National Association of Realtors, down from a revised 6.15 million pace in March. Economists surveyed by Briefing.com had forecast the pace of sales would be little changed at 6.13 million.


Weak home sales led to further declines in home prices in an April reading.

The slower sales pace and an increase in inventory of homes on the market means that there is now an 8.4 month supply of homes for sale nationwide, up from a 7.4 month supply in March.

That glut of homes on the market continues to slam home values. The median price of a home sold in the month was $220,900, down 0.8 percent from the $222,600 price for a typical home sale a year earlier. It marked the ninth straight month that prices showed a decline from a year earlier, a relatively rare condition in the market before the current housing slump.

The report follows Thursday's reading from the Census Bureau that showed a sharp increase in the sales of new homes, sparked by the a nearly 11 percent plunge in median price compared to a year earlier. It was the sharpest drop in that key price measure since 1970.

The downturn in new home sales and home building has hammered results at the nation's largest builders, which are reporting losses, lowered earnings guidance, coupled with rising cancellation rates from buyers and charges for walking away from options they have on some land.

Thursday, luxury home builder Toll Brothers (Charts, Fortune 500) became the latest to report a sharp drop in earnings. It had already warned it expected to miss its earlier guidance on 2007 earnings.

Pulte Homes (Charts, Fortune 500), the No. 4 U.S. homebuilder, posted a loss late last month. No. 2 homebuilder D.R. Horton (Charts, Fortune 500) reported a 37 percent drop in the number of new homes sold in the latest quarter, citing weakness in prices and saying the typical start to the spring home buying season hasn't begun.

No. 3 Centex (Charts, Fortune 500) and New Jersey-based Hovnanian Enterprises (Charts, Fortune 500) both also reported losses in the most recent quarter.

No. 5 builder KB Home (Charts, Fortune 500) returned to an operating profit in its most recent quarter after an earlier loss, but its CEO warned in April that he expects the housing slump to get worse.

We're shopping around now. Prices are still pretty high in Vermont, but the list/sell ratio is better, market times are longer, and some sellers are doing stuff like paying closing costs. This is a sharp contrast to two years ago, when you had to offer above asking price that day just to get a house. Even though prices have only stagnated, not really dropped much I'm glad we'll be able to take our time. I couldn't buy something in that 2005 market, I need more time to make a purchase that big.

Only thing that sucks is the interest rates are going up now, as we now make to much money to qualify for low interest rate first time buyer programs our state offers.