Existing home sales signal rebound that is real

RobertBrusca's picture

While housing starts was a disappointing little report the report on existing home sales for February is more re-assuring.


Housing data ebb and flow; they are fraught with unexpected highs and low. In the winter I like to say that the housing reports are less sector reports than they are weather reports. So what should this one –or housing starts - be any different?

First of all it is not about the monthly number which after an upward revision to January sales shows a decline instead of an increase. It is about more broadly conceived trends. The breadth of the strength and the strength itself is impressive. Sales while still weak by historic standards are lifting strongly from their lows and doing so across all regions.

Housing is still a very crippled sector it is beset with many impediments to growth. But what makes this report most impressive is the advance in prices which tends to be more regular in their seasonality and less subject to the whim of weather. Sales trends are impressive but prices trends are more so.

Nationwide, both average and median prices rose in February. These are not seasonally adjusted so the price increase to which I refer is over 12-months. Both average and median prices last rose together in November 2010. Before then there was a series of month when the special government subsidy programs were in place to spur housing when prices took some special, but unsustained lift. Indeed, in November of 2010 the lift in average and median prices turned out to be a one-off experience, but because of more powerful trends this instance has the ring of sustainability..

This time average and median prices are being lifted by rising average and median prices in the South and in the West. In the Northeast and Midwest both average and median prices remain lower year-on-year. But for all regions the change in year-over-year housing prices improved in February from January. In the Northeast median prices shifted from a drop of 4.5% to a drop of only 1.9% Yr-over-year. In the Midwest prices fell by a bare 0.5% yr/yr after dropping yr/yr by 4.3% in January. The fact that the trend to improved pricing is nationwide is heartening.

And there has been no magic wand that has been waved over the sector. Prices are improving despite a still-hostile environment. Distress sales still made up 34% of all sales in February just a tick below the 35% level of January. Foreclosures were 20% of sales (compared to 22% last month) and short sales were 14% (compared to 13% last month). Speculators are active with investors making up 23% of sales, the same proportion as last month. All-cash sales rose to 33% from 31%. This reading is slightly above the 12-month average. In February contract failures were high at 31% while their recent average has been closer to 16%. Despite such impediments prices improved year-on--year.

Housing affordability remains very high but the joke of the series is that those loans are only for those who can qualify for them. I refer to this an a Republican monetary policy since if you are not underwater on your mortgage, still have a good job, can make your current house payments and have maintained a high credit score you can be eligible for a lower mortgage rate. In classical economic fashion the rich get richer. But those of you who are desperate for financing relief or purchase help are largely left disappointed.

Low rates have not spurred the housing sector because the low rates are not widely accessible. That is one fallacy of low rates. Rates may be low but average credit scores are even lower, turning many a prospective homebuyer into that kid at the candy store window with no money in his pocket just able to look.

But housing is improving despite all the various distortions. Much of it is led by investors. Cash sales are very important. First time buyers are at 32% of the market compared to 33% last month and an average participation of 37% over the last year.

There will be a lot of cynicism about this report but it its signals jibe with those from the job market. Something is truly stirring; and if you will not believe sales trends then believe price trends. Money on the barrelhead is a very good economic signal. One third of the buyers are parting with cold hard cash to make acquisitions. The rebound is for real.

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mbasham's picture

All housing data this week show you're wrong. That makes sense, after all you worked for the NYFRB... You're right up there with Greenspan's no bubble, and the Bernank's no housing collapse. In fact you're so wrong, you'll probably be the next Fedhead.

alexwest's picture




AN0NYM0US's picture

Red Meat


Biography  Robert Brusca
ZH Member for
6 days 10 hours

Robert Brusca Ph.D. has been an economist on Wall Street since 1977. He has been a Division Chief at the NY Fed, a Fed-watcher at a major NY commercial bank and Chief Economist at major international securities firm. He is now an independent voice on the economy global trends and the political scene, operating a consulting firm in New York City.

rsnoble's picture

Ok so the rebound is for real.  It's disconnected from the state of the economy. Investors are buying because rent really has not gone down. It has nothing to do with people finding higher than minimum wage jobs. It still cost $1000 a month to rent an average white trash ghetto house in my neighborhood. I still suspect the main difference will be the amount of people living in one unit. Soon the US will see Cambodia like conditions where an entire family of 4 can ride a Moped and 2 of them can hold 100lbs over their heads in one time. THERE IS NO FUCKING RECOVERY.

skepticCarl's picture

On balance, those investors who can afford, and are paying all cash for houses, have that kind of money because they are not dumb asses.  They are the smart money.  They know that there is a huge inventory overhang, lousy employment prospects, and negative demographics.  But they also know value, and the replacement cost of a house, and the amount of rent they can obtain, today.

The reactionary group-think of the ZH gloomers is an indicator that the author is on to something real.

Imminent Crucible's picture

The reactionary group-think of the ZH gloomers is shared by some guy named Robert Shiller, who thinks a housing recovery is still years away.

engineertheeconomy's picture

Reactionary group-think?


We're wrong because we react?

We're wrong because we think?

We're wrong because even though we are an extremely diverse group from all over  the entire world, we're technically speaking still a group?

Where do these idiots come from?

mendolover's picture

I'm not in until I can get a median priced home for 250 ounces of the shiny stuff!

RobertBrusca's picture


What a bunch of cynical and jaded readers. And so smart with such cogent comments, too!

Just try and consider the facts boys and girls. Check your bias at the door and look at the facts the trends and open your mind to R E A L I T Y.

It's out there.

engineertheeconomy's picture

Who's "out there" Robert? You have to be out of your mind. Have you filled up with gas lately? It takes three quarters of a paycheck. How are regular everyday folks going to take out a loan to buy a house with whats left? Even if all the fucking jobs hadn't been shipped overseas, america is going to hit a brick wall at ninety miles per hour without it's seatbelt on

AN0NYM0US's picture

boys and girls


Robert, you are either a ZH focus group plant or a ZH dog chew


but enough of that - what was your role at the NY Fed

piceridu's picture

Have you seen the CoreLogic release entitled: "Negative Equity Back to Q3 2009 Housing Market Trough Level" I suggest you read it; released on March 1...yeah things are rosy.


dataanalytics's picture

I believe that there are approximately 26% +/- of mortgage holders
"underwater" now. And get this, according to an unnamed 'leading
broker' dealer at Amherst Securities, he states that- “some 9.5 million homes are still at risk of default.”

The drop in median prices from the increased inventories of distressed assets is only going to give cause to more defaults and strategic defaults. Which will drag the housing market downward even further.

What is it that these dolts don't get? We are witnessing a truly broad-based delusional mind-set from financiers and the governments.
It is amazing in a sense, what has happened during the great recession, with regards to psychosis and irrational human behavior.


riphowardkatz's picture

In addition to cynical and jaded I would add irrational. You can see by the tone of the comments they are using emotions rather than facts and logic. 

That is par for the course when it comes to real estate.

Sad thing is they will miss the boat and I have mentioned many times end up losing the tax advantage, the potential income, and  the ability to short the dollar on one of the only assets you can borrow 100k+ of depreciating dollars to buy one of the only assets  that appreciates during times of inflation. Their loss not yours. 

Fred Hayek's picture

Your article does not seem to include any statistics on the number of sales. Given the nearly cheerleading tone of the article, should we infer that their absence means they were not good?

rsnoble's picture

cnbc snuck one in on us.

Seasmoke's picture

do you and your wife own a house ?

Kayman's picture


Don't come to Fight Club with bullshit about how tough your manipulated "facts" are. You got a bloody nose and you deserved it.

If printing and borrowing can carry on without end, then we can eliminate taxes, too.  Hell, even I would like to believe in Santa Claus, but come payday, I have to cover a payroll and Obama and Bernanke never have.

Now go back to your Mommy and stay the fuck out of Fight Club.

Cole Younger's picture

Hell, from my own experience...you just about can't give a home away...I know, I have a condo in PS that I have reduced to below market value and it still sits..and before you ask, all the upgrades were done (tile, paint, carpet, fixtures, etc..) the complex is nice (golf, tennis, pool, etc) and the location is ideal. Bottom line... nothing is selling...I have it listed 10K below market value (comps) and I was offered 15K below that...I laughed....Countered with full price....I doubt they will except it...I just hope they go away instead of insulting my intelligence and pissing me off....

RobertBrusca's picture

NO. If you really reduced it below 'market value' it would sell. You have reduced it to what is a low price to you compared to what you once thought it was worth - or paid for it.

I am not making fun of you. This is is painful experience.
But the notion of 'market value' if not very well used in this context.

You have my sympathies.

Fred Hayek's picture

Accidental double post out of despair at the author's arguments.

Fred Hayek's picture

Does the dolt who wrote this actually believe that there's an improving job market helping out the housiing market? I see no explanation for such a belief other than his being ignorant or a corrupted shill. It's tiresome to read such transparent trash. At least work it up to translucent if you can't get your b.s. all the way to opaque. I understand that opposing opinions should be considered as well. This just wasn't very good.

Kasperfx's picture

Humpty Dumpty sat on a wall,Humpty Dumpty had a great fall. all the king's horses and all the king's men could put humpty dumty together again.

lenitivelea's picture

dafuq did I just read?

lenitivelea's picture

sorry, double post. 

bugs_'s picture

nice to see a positive piece thanks for sticking your neck out robert! LOL

bkrolik's picture

The author states that percentage of first-time buyers is down to 32% from last year average (!) 37%. In the next paragraph he says "its signals jibe with those from the job market".  Does it mean first-time buyers are not connected to job market? Or cash buyers are connected? The analysis is at least inconsistend, and at worst flawed.

RobertBrusca's picture

why does the health of the market depend on first time home buyers? What rattle around in your head in the place of brains?



Fred Hayek's picture

Why is it a significant signal one way or the other? You're the one who raised the issue. And while you're at it, please explain why you believe that there's an improving job market? Remember, this isn't ABC news or CNN where the risible BLS report proclamations are gospel. People here have read or listened to John Williams of Shadow Stats and any number of other writers online who've taken apart the last few BLS reports featuring adjustments to the numbers that were a full order of magnitude greater than the claimed improvement.

BeetleBailey's picture

"One third of the buyers are parting with cold hard cash to make acquisitions. The rebound is for real."

Two of my clients just sold their homes - both for cash.

One got more than she thought - but not much more. The other got much less.

Telling; the one that got more sold her home for less than 80k - the other got 45% less than the height of the real estate madness, and basically bailed out.

Otherwise - crickets chirping all over the place. Banks? Tight as a snare drum. Credit has to be impeccable. Otherwise - forget it.

Recovery? Where? Fudged government numbers maybe - but who in their right mind believes their crap?

riphowardkatz's picture

I like it. Not one person has any facts to counter the authors. Just lots of negativity and name calling. 

All you negative nellies will be paying 1 months rent for what would have been 4 mortgage payments and wondering why your real net worth has plummeted. Keep on yacking it won't get you anywhere except broke.

Good article glad you write it. I concur and am seeing the same things you are. In fact in Arizona the cash buyers represent an even bigger percentage. I think I will trust somone that can come up with 100k+ more than jokers posting comments here. Gracias. 

Kayman's picture


I fail to see where you can conclude any "trend" is happening. It is statistically irrelevant.

Kayman's picture


Hey Mr. Smarty Pants.  Why don't don't you buy some dirt in Nogales, since you're an expert on Arizona real estate.

There are a lot more people trying to get out than in.

jcaz's picture

...And where are YOUR numbers, Rip?  

I thought so.   Too busy drinking the Kool-Aid, clearly.

Doesn't take a rocket scientist to figure this out- tight credit,  no mortgage lending.


RIP, Rip.

Try doing some basic financial research before wandering onto this board-  the kids table is over to the left......

riphowardkatz's picture



I have done lots of research. Of course it depends on the market but things are looking up in the markets that fell first. This is how recoveries happen. Is it the very bottom? Who knows impossible to tell. If you think you will know when the exact bottom is best of luck to you.

Lots of noise with little facts. Some markets and states have been clearing foreclosures faster than others. It is simply not true that no one can get a mortgage lots of people still can.  Friend just qualified with decent credit making 70k for a 300k home. 

This does not even take into consideration land banks that are buying properties and demolishing them (Have you see what happened to the used car market after cash for clunkers?)

Rents are starting to exceed mortgages in many places.

There is 2x the amount of the dollars and lots more on the way. What are people with cash going to do? Buy tangible assets. Trust me that not everyone is a gold buyer and lots of people that buy gold will want the tax benefits and potential income from real estate.

Speaking of gold real estate is getting to the point of being the cheapest it has even been in gold terms.

Again when you are paying 1 months rent that would have been a mortgage payment I will be thinking of you and wondering if you have figured out yet that housing was a pretty good deal right now.

ken4aub's picture

I disagree. Cash buyers are buying only in the >100k market. We(i just pd 90k cash in Vegas)are merely clearing the debris from around the drain so the 150k-350k homes can settle to the bottom. Moreover, most who are paying cash are either using or living on portions of retirement savings, which does not bode well for recovery of any flavor.

riphowardkatz's picture

Retirement savings that are quickly depreciating further inudcing retirees to get into something tangible with income producing capabilties.

This doesn't take into account all the cash that is sitting outside the US and the strengthening canadian currency. Lots of canadians buying, tons of retirrees buying, Fannie and Freddie making sure that more and more people can qualify, Ben encouraging land banks, Ben working his buns off to lower mortgage rates (think Gross is betting he will be able to do it)

Again is it the exact bottom, cant tell but values are getting good. And you don't have believe me you can listen to a guy like Marc Faber who agrees.

ken4aub's picture

You make a good case, especially with the Canadians/Retirees.....I'm just saying the bump will be short-lived.

When I was out looking in Vegas recently, I was asked to quickly finish my assesment of the property I was contemplating buying and move my car to make way for the 2 bus loads of Canadian clients which were pulling onto the property. Seems the "TOUR BUSSES" are becoming the thing.......at least for the >100k market.

Mr Lennon Hendrix's picture

Prices falling less YoY is not indicative of a bottom.  Nice try.

The fundamentals still have a long way to go to find improvement.  While the currency, the dollar and all fiat, continues to be debased across the globe, unemployment stays insanely high as the muppets cash out there 401ks to pay their kids tuition, and to pay grandma's food bills, as $600 from SS just ain't what it used to be. 

No, there will no recovery in the housing market until the tens of millions of houses come off of the shadow inventory.  Only then will price find equilibrium.  Until then, there will be bounces off of the mountain on the way downhill.

RobertBrusca's picture

Prices are UP Yr over Yr. and UP in two of four regions and falling by less in the other two regions and UP for both median and average prices.

I'd say its better than a try its a SUCCESS! (no K in success).

Di you actually read it or is your attention span that short? or are you so hide-bound in your pessimism that you can't real the real trends?

just wondering.

Fred Hayek's picture

If inflation is 8% (roughly, according to John Williams at Shadow Stats) and housing prices in one region are up as much as half that, is that a success? Or is that just a little bit less failure than in other regions?

Fred Hayek's picture

Maybe there's a bias in the numbers for the banks holding massive shadow inventories having finally moved on some of the higher end of the squatter properties they hold.

riphowardkatz's picture

Lots of markets have been clearing the "massive" shadow inventories. Just saying "shadow inventories" without really knowing what you are talking about doesn't make you knowledgeable, its called parroting.

Fred Hayek's picture

I have a pretty good idea and the guy who runs Doctorhousingbubble, and other folks, have suggested that banks have started increasingly going after the high end dead weight.