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Existing home sales signal rebound that is real
While housing starts was a disappointing little report the report on existing home sales for February is more re-assuring.
Why?
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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Low end of market moving well in San Diego.
More and more cash buyers, mow over 30% of my transactions.
Pardon me but I just got my latest Zillow estimate and my house has lost yet another 3%. I don't know what this author is eating or smoking but I'd like some if it would help reverse my personal reality. The latest news on the increase in mortgage rates is not good news to me.
ARM loans are going to once again screw Americans in the near future.
So prices that are down less than last year are prices that are rising? Do you work for CNBC?
No, velvet or is that Mr Hog? Did you read it?
Prices are UP UP UP Yr-over-year. Both average and median prices are UP they UP!U P . UP?!
Are you unable to grasp that up up up up up?
Please try again.
Been in the biz for 40 years. Yeah on rising prices. No on buyers dumb enough to take on the debt in this f'd up economy. Must mean the bottom is in, right?
Sold to you, my condo in New Jersey. Sounds like you'll make a killing off it. Please advise where I can send you the closing papers. I'll give you a 2% discount if you pay in gold.
NJ? I don't think that the housing recovery will EVER come there.
Did you really buy place there?
Corzineville
hilarious.
I'm rolling on the floor laughing and can barely reach the keyboard....wait until all those pennyless Americans still squatting in their soon to be foreclosed homes finally move out and THOSE properties come on the market. That glut, plus the unpleasant idea of people suddenly homeless with no rent money (much less down payment money or qualifying for another home) will REALLY propel the housing market to new heights!
Go smoke some more hopium and call me when you get real.
Just look at the report.
rad the data.
open your eyes.
its really easy.
Stop smoking that stuff and jettison your preconceptions.
worthless....
let me guess he is on team O's truth squad.
peAce
Just one question Robert. What are you smoking and where can I get some, 'cuz you are really f'd up!
Ahem...sir, Jim buybuybuy Cramer called the housing bottom June 2009. Perhaps you could pitch your green shoots on CNBS, NAR or maybe the Onion.
Green shoots at the Onion? good idea.
Yo diggy - Cramer is in the process of cheerleading the hopsuing market as I write.
Cramer is also a shill for the over indebted / leveraged NYC real estate "companies".
Cramer and Bobby Brusca - both sluts.
A real estate investor in this market would be wise to ignore monthly stats and focus instead on the long term trends that are "baked into the cake", such as:
1. Millions of shadow units that remain off the market just waiting for that slight uptick in sales;
2. Millions of bedrooms that retired and empty nest boomers stand ready to rent to student loan debt slaves who will never be able to get mortgage credit at $12 an hour; and
3. As underwater Boomers begin to retire next year with dramatically lower incomes, those who can't rent rooms will be foreced into short sales and foreclosures, creating a new wave of inventory that is not even a "shadow" right now but an inevitable tidle wave that few people see coming.
We are not even close to restoring any sort of balance between supply and demand. Demand follows jobs, incomes and household formations, ALL of which are stagnant or falling. Boomers created households at a time when two thirds of the world's population was starved of capital and simply could not compete. Today, the boomers children are competing for wages on a global scale that continues to shrink, not expand. To compete, they will need to form households similar to their counterparts in Europe and Asia --- ie., live at home with Ma and Pa until their 30's when they have saved up enough to make a significant cash payment for housing or, alternatively, Ma and Pa die and leave them a house.
Oh, and let's not forget that the best time to buy is when interest rates are at 40 year highs, not 40 year lows.
No doctrine her or theory.
Just reporting what people are doing and what it means.
When does reality smack YOU between the eyes?
You would be better off to shut the fuck up and go back to hitting your bottle...
Lost my interest at paragraph 3 with CNBC style double talk.... next.
Serious question for Tyler(s)...
Do the posters along the top pay you to post on this site?
Corn1945
rephrase the question
No
Why on earth would you post this crap then?
Judging by the 144 responses to this "crap", it has touched a nerve. But please, dear "engineer", please tells us what we are allowed to post?
is this the only criteria? the number of loathing and belittling responses? then how about posting articles by jim cramer? they would work better me thinks.
Well in Canada, the market is still strong, even at these insane prices... and they keep rising!
Just further for them to fall...
"One third of the buyers are parting with cold hard cash to make acquisitions. The rebound is for real."
That's not a rebound your seeing. It's the consolidation of more and more properties into fewer and fewer hands, the hands holding the cash. I wonder how much of that cash came from early withdrawal 401k's to get the money into hard assets, what with all the open fraud now happening in almost every area of banking and finance?
With the existing shadow housing inventory, housing has nowhere to go but down and everyone I know is waiting on the sidelines until prices are in-line with incomes (or better). And it's not going to be years and years before the maintenance/repair cost and property taxes of millions of houses starts to really pile up for the banks, pushing real asset values down at the same time. It's the banks who are under time pressures here because houses live in the real world and decay rapidly if unattended for any length of time.
Cash buyers may be able to absorb some of this inventory, But I can't fathom how someone could interpret this data as evidence of a housing recovery.
Even the properties that are being financed are being purchased with FHA subsidies at 4% financing. So let me get this straight;
I can buy an existing house way cheaper than I can build it, so in a way the price of the house is subsidized.
I cannot get bank financing, so the FedGov will guarantee the loan, so in a way my credit worthiness is subsidized.
I do not have the money to purchase the property so the bank will loan it to me at 4%, which is about 5-6% BELOW inflation, so in a way my interest rate is subsidized.
And this clown thinks this buying spree shows true economic growth??? How did this ass-hat get on ZH?
"How did this ass-hat get on ZH?"
for balance. You have to have an occasional piece of shit article. Even the mainstream media occasionally publishes a good and honest piece.
Bingo, geekgirl. I bought four houses in the last two years with money I took out of my 401k. And yeah, I paid the tax bite to get my money out of Wall Street's hands. I rent two of them to students and two to families. Both the families lost their underwater homes via default. Half the students are Anglo-Americans [in debt up to their eyeballs] and half are Chinese-Americans [all in school on the parent's dime and debt-free]. My rentals reflect much of story of modern America. Not a happy tale.
Good for you to get your money out of the hands of the thieves and into something of real value. Still, it's sad to see what's happening to so many people.
I've seen two 3/4 million $ sales in the area I live in this year. Of the two one was nearly a mill. Last year one @ 650K. There are 1-2 houses on the market now. One keeps changing its mind. All would go for over 600K.
The three in the last two years were bought as residences. In one case a couple, another two adopted boys with two fathers and a nanny. The last has several kids - so no investment buyers here. None were cash. Two are lived in by people who commute 50-100 miles to work. One is the local CEO of a large industry. All are thrilled.
I do smell something and it might be coffee... and that's not bad... if you have a job that pays you the big bucks then life is good. If you are J6P then this ad does not apply to U.
P.S. Robert: you may be all that but Must.Use.Decent.Writing. Read before publishing. Get.U.Further @ ZH.
This truly is what I like about zero hedge: anyone can post here. It makes for reading some really interesting comments after a posting like this one. I wonder will Brusca attempt posting here again? Will he decide that he needs to man up and put some strong analysis together and post again? Or will he just run off with his tail between his legs never to be heard from again?
we can find this kind of rubbish anywhere in the MSM. i'd prefer if zerohedge remained sterile.
One vote for tail between legs..
If you want to believe this article, I've got a great invesment idea. Just wire me all your money and you can expect a return on your investment, eventually. Foolproof for me.
The majority of home sales are being bought by cash speculators expecting massive returns on their investment when the housing market "recovers". It is nothing but a return to 2004-2007 behavior. Speculators are betting that home prices will once again follow equities to the statosphere. What could go wrong?
There isn't a single middle class worker in the country that could afford to purchase a median priced home for cash, without winning the lottery first.
Two homes did sell in my neighborhood. One was a forclosed wreck bought for $50k. The other was a Fannie special bought by a speculator for $20k cash. The guy dropped $50k into renovations and hasn't had a single interested buyer show up at three straight open houses. He wants $125k for a home that is maybe worth $90k. He told me a buyer should feel lucky to get the house for $125k because by 2015 it should be worth $200k easy.
I want what he's smoking.
Bobby Brusca - How much did all those NYC real estate investors (caught very long) pay you to "trial ballon" this obviously hopium article on ZH.
Is ZH becoming the trial balloon venue for Obama's re-election campaign?
no. no political affiliation.
Not an O man.
Sorry
Bad bark
Wrong tree.
just looking at data without preconceptions.
How about YOU?
Hate O enough to deny reality?
I don't often comment, but Mr Brusca, you are full of shit.
did i just click on The Onion ?
Prices rising - what this commical Ph.D is smoking???
Care to check the Case-Shiller HPI or Corelogic HPI?
How about the 16% U6 unemployment, 10 mm shadow inventory, 1 mm divorces per year, 20 mm more boomers than Xgeners - to just mention few tiny technical details...
Keep smoking - I like how it works. Good entertainment value.
I think this is an attempt at satire. The give away was the "barrelhead". I could be mistaken though.
yeah, where's the ZH CEO-million-dollar-bailout-bonus avatar dude-- when you need him...
I was also considering that Brusca might be MDB. +1 sof hannibal
Author person, you forgot to give a link to your short-sale/bad title/reo listings.
RobertBrusca is gay and faggot.
not that there's anything wrong with that