Another Sign Bottom is Behind, House Sales Contracts Rise 14%

ilene's picture

Another Sign Bottom is Behind, House Sales Contracts Rise 14%


Contracts for the sale of existing homes rose 15.1% month to month in February, according to data reported today by the real estate brokers lobbying organization. Sales were 14% above the level of February 2011, continuing the rebound in housing market sales.

To keep this in perspective the number remains down 37% from the peak February level reached in 2005 at the height of the housing bubble. In addition reported contract failure rates around 33% in February were well above the 9% reported in 2011. Buyers are still having trouble running the financing approval gauntlet, with the result being that the gain in final sales will be much smaller than the 14% year to year gain in contracts. These contracts will settle mostly in April. When the final sales numbers for April are reported in May, the gain should be in the 8-10% range year over year if the fallout rate is similar to the February rate.

At the same time, cash sales are running 33% of total sales. Demand from buyers who do not require or use financing is helping to stabilize prices and even push them higher in some markets. For example, median February closed sale prices of single family houses in Florida, the poster child for the bubble and collapse were up 7.2% year to year. Condo and townhouse prices rose 15.9%. Deny that, bottom deniers. Florida also saw huge increases in contract volume in February. You can't credit or blame the weather for that. It's Florida, after all. February is always nice in the state's biggest markets.

As usual, the mainstream media continue to report only the meaningless and misleading seasonally massaged data, which showed a 0.5% decline nationally month to month. I am only interested in the actual numbers. In that regard, the actual February gain of 15% compares favorably with the 11.3% gain in February 2011 and 10% gains in 2008 and 2009. In 2010, the government was running a  taxpayer hosing boondoggle that resulted in a 20% February gain, that was followed by a sales collapse when the giveaway ended in April. Except for that, the February 2012 data is the best February in 11 years and probably longer. Even during the bubble years, no February was as good. So it is hard to understand how the seasonally fudged data manages to come out as a decline. It's worthless garbage.

A benefit of the higher rate of sales and a trend of sharply falling active for-sale inventory is that the inventory to contracts ratio has fallen to 5.4, which is the lowest February level since 2006. The reduced inventories have had an impact in causing prices to firm up over the past 12 months.

Existing Houses Inventory to Sales Ratio Chart- Click to enlarge

Existing Houses Inventory to Sales Ratio Chart- Click to enlarge

A large part of that was probably due to the unusually warm weather (except in Florida and other sunbelt states). This may have stolen demand from March and April. It will be interesting to see if the numbers for those months hold up. If they do, it would be more evidence that housing has bottomed. However, even if it has, we should be under no illusion that housing will ever recover to its past bubble levels in the biggest bubble markets. But it would not be surprising to see transactions rise in value at or above the inflation rate. And some markets where inventories are tighter will see new highs.

A caveat, applying mostly to sellers, is that transaction volumes will remain low by historical standards. This is a much smaller market now and will remain smaller for years to come as full time employment barely grows from low levels.

This smaller, historically depressed market will mean that mortgage portfolios will be far slower to respond to improvement. Foreclosed and delinquent mortgages will continue to weigh heavily on a financial system that refuses to write mortgage values down to appropriate levels. Fannie and Freddie will continue to hand off billions in losses to US taxpayers year in and year out for a generation.

Meanwhile, most of the much feared shadow inventory will become increasingly non marketable as it deteriorates physically, or is concentrated in areas where virtually no market exists. For most markets in the US, shadow inventory is not a threat. It is a threat primarily to the institutions that hold it, Fannie and Freddie in particular, which means that we, US taxpayers, will be footing the bill for years to come.


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honestann's picture

Anyone who buys real-estate today is a flaming moron.  Anyone who wants to be a sitting duck for every level of government to suck them dry for years to come will buy real estate.  The fact is, real-estate prices are STILL much too high, and have NOT come down to the long-term trend line.  Further, real estate taxes are going through the roof, and will continue to go through the roof as all levels of government grab anything and everything they can... and the easiest to grab is what is nailed down where they and everyone else can see it, and tax it to death --- in real estate!  And everyone is in on the game, as everyone who has any exposure to home-owner fees will see them skyrocket like never before.  Why?  Because predators gain control of EVERYTHING that generates unearned wealth, and "home-owner fees" is near the top of the list of easy juicy pickings.

Buy real-estate today?  Only for SUCKERS.

Eireann go Brach's picture

Ilene you are a fucking moron! Signing contracts does not mean crap, as 33% of them don't close escrow each month!

ghostfaceinvestah's picture


There is some anxiety these days about the damage to Florida’s massive foreclosure backlog as a result of court budget cuts.

For example, Palm Beach County Clerk and Comptroller Sharon Bock recently said that budget cuts will slow down her ability to process new foreclosure cases, further bogging down a system already clogged by thousands of foreclosures.

But there is another factor many attorneys say is more important: inaction by banks on stalled foreclosure cases.

ghostfaceinvestah's picture

Adler, you are a moron.  So the MEDIAN price of Florida condos went up.  That is a mix issue that could be driven by many factors.  It says nothing about house prices as represented by HPI's (which, incidentally, are all still dropping in NOMINAL terms, let alone real terms).

WolfePaq's picture

Funny how no one has any idea how math works... sheeple equate a median price rise with appreciation. It is, of course, just a subset operation... of the homes/condos being sold, they are of the higher priced variety. Yes, rich Brazilians and others can buy high end units... but the sheeple workers rent 2 families or 3 generation to a unit.

The standard of living for the average American is collapsing before our eyes and yet we still stampede the malls on black friday to send what little money we do have overseas for shiny trinkets.

Scary and sad.

xela2200's picture

I live in Miami. Most of the condos in Miami are been bought on cash by Brazilians and other foreigners who are taking advantage of the dual effect of currency appreciation and drop in price. Miami is always a nice place to keep your toys if you live in Latin America.

Robslob's picture



Jeez...we might see a 2 year pick up in housing and everything is fine?


It's the structural problems not the cycle...listen to the Bernank for fuck sake!

sodbuster's picture

>according to data reported today by the real estate brokers lobbying organization.<

Oh yeah!! That gives it credibility!!!!


Seasmoke's picture

how the heck do i keep clicking on the Onion ??????

Walt D.'s picture

All those college graduates living at home and unemployed (oops, I meant not working - I forgot you need to be collecting unemployment insurance to be consided unemployed) or working and flipping burgers.

Then there are the baby boomers approacing retirement with underwater mortgages.

Sounds like a great time to buy!

May as well invest in the Stock Market while I'm at it. Pensions funds are going to have to sell stock to pay retirees - no such thing as fixed income in a zero interest rate environment.

Opportunity knocks. 


goforgin's picture

Heads up to Adler. I have been reading his critique and analysis of real estate for almost 10 years. If he says that RE is moving up, it's moving up. He sold his house in Florida in 2005; he bought a house in Quebec in 2006. The way I figure it, he is ahead of the rest of you fuckers on ZH by at least 10 years.


Kayman's picture

"he bought a house in Quebec in 2006."

Leo... is that you ?

Son of Loki's picture
Michael Olenick: 9.8 Million Shadow Inventory Says Housing Market is a Long Way From the Bottom


"...shadow inventory is large, housing prices have a good bit further to go before they hit bottom, which has dire consequences for communities, homeowners, and the broader economy"

Look around you, Lee. The FHA and VA are still handing out zero-down houses (many are actually 100% financed with additional money kicked in by other federal agencies) with poor job and asset documentation. The job market stinks. I enjoy many of your ideas but I disagree with you on this one.

exartizo's picture

two words:


shadow inventory

TSA gropee's picture

I don't get it. Some people here would have Tyler "filter" out what they would deem beneath ZH. Who the fuck is anyone here to tell Tyler what he should or shouldn't post? Don't like what you read, pass on the article. No one's forcing you to read it. It's his site, let him post what he sees fit. Tyler's done a good job so far, and IMO the stuff he's posted is for the most part quite informative and has fostered some great discourse.

Lastly, It's been said that opinions are like assholes, and that everyone has one. It would appear that some who post here have a greater percentage than others. I mean that it is one thing to tear apart or destroy one's article or post with facts displayed in a reasoned argument within the framework of civil discourse, and quite another to resort to attacking the author through ad hominem and grade school colorful metaphors.

I give the example of Lee Adler. While I don't agree with all his assertions or arguments, he does command my respect by showing his strength of character by not responding in kind to those who have responded to his posts with cheap kindergarten rants.


Corn1945's picture

I don't have an issue with bearish or bullish posters. However, as a whole the "contributors" section is of significantly lower quality than the main site. That's the issue I have. I have an issue with Pheonix Capital Management also and they are very bearish. 

exartizo's picture

I suggest that at least part of the problem here is that this author is being perceived as "inflammatory". That is, just saying things with very little basis in fact as a means of attracting attention or inciting others to question her motives. 

Saying something like "Deny that, bottom deniers" might as well have been throwing down a "red flag" in the face of many ZH'ers in all fairness TSA.

You really hate to have to question the motives of others. This post by Ms. Ilene cannot escape that sense.

tempo's picture

OH S____, M/M pending home sales down .5% in February, the warmest in memory.

Lee Adler- The Wall Street Examiner's picture

This brings back the fond memories of the vicious attacks launched at me on Seeking Alfalfa back in March and April of 2011 when I told the readers there that it was time to short all bank stocks. You guys throwing crap at me are pikers compared to those yahoos. 

If you want to harass me please visit and dish all you want. No registration necessary. 12 years of bearish web publishing has taught me a lot about handling the unwashed masses. 

That will be all for me here for now. At least until Ilene does another Ctrl C Ctrl V




barliman's picture


I've been scrlling down giving you green checks for showingup and discussing your article.

Personally, I prefer conntributors that engage in a dialogue about their post.

With regard to your premise, I think your charting is leading you astray. I know a fellow who has been buying REO's, having them fixed up and putting them on the market as rental property. In a normal recession, he would not have this opportunity. He may make a lot of money ... over time. What he is doing is burning through capital at a pretty dramatic rate. There are a lot of potential "landmines" in the RE market at this time. I am more concerned that he will end up discovering it only takes a couple of houses that go boom to find yourself overextended.

He's not alone in this activity. MY view is this is one of the those once-in-a-lifetime scenarios with regard to housing but I still see too many once in a lifetime risks to view this as tapdancing througha minefield and hoping for the best.



GrinandBearit's picture

Don't forget about the posters who didn't agree with your uber-left wing, Obama-zombied cock sucking.  Must ban them.. must BAN THEM!

FreeNewEnergy's picture

Dude, I can assure you that I'll never take another word you write seriously. Your pompous attitude toward the unwashed masses makes you nothing but a one percenter wannbe. I rate street hookers way above you on the moral compass scale.

OK, so now I can vomit?

Marc_W's picture

The "Doomer Boomers" are a strong clique on this site.  They are aging; watching their friends and relatives keel over. So they are stuck in this negative world view, part projection and part sublimation.  Their "Doomer" outlook is driven largely from a desire to scorch the Earth and leave nothing behind for future generations.  After all, if they can't live forever then why should anyone else be alive to enjoy life?  So they preach this Doomsday nonsense all over the web.  They say society is collapsing, they say all governments will fall, they say the skies will rain fire and brimstone.


But life will go on, without them.


Boomers, you are not special, you are the same decaying organic matter as everything else.  And one day soon, you are going to die.

Kayman's picture


When I think of you paying taxes forever,  for all the cotton candy your parents' generation ate, then I get happy feet.

One day you will learn- governments ALWAYS lie to you, Bernanke is not your friend, and there is no free lunch. 

Boomers don't need to take advice and cheap shots from kids that are still pooping yellow.

Marc_W's picture

I rent right now.  If I bought a comparable property in my same exact neighborhood with a 15 year fixed rate mortgage, and only 5 percent down, my monthly mortgage would be about $400 cheaper than my current monthly rent.  That's about a 30% reduction in my monthly outlay for housing.  Tell me again how that isn't a good move if I were planning to stay in the area for 10+ years?


Buying a primary residence to live in for 10+ years isn't a bad move today.  Interest rates are low and inflation is high.  Rents are high and going higher.  That is, assuming you think you can maintain a stable income over the next decade (you probably can't).



J 457's picture

Marc- don't forget about tax advantage.  If you can really own for 30% less than renting you'd be foolish not to buy. All pricing is driven by local/regional fundamentals, so make sure wherever you're buying has good long-term employment base.  

narnia's picture

i'm sure a lot of people in Japan thought the same thing in 1993.  What happened to their home values the next 17 years?

Marc_W's picture

Japanese mostly tear down dwellings after 30 years and replace them.  They are one of the few cultures that understands homes should always decline in value.


Although we're starting to get it in America, what with them tearing down half of Detroit to make room for fields and deer.

cranky-old-geezer's picture



Show all the (manipulated) stats you want.  As long as employment is down and incomes are down, housing will drop too. 

AN0NYM0US's picture

ilene, another great contribution

not sure if you are familiar with some shortcuts but instead of using the tool bar menu to copy and paste I find it much faster to simply

hit ctrl-c

followed by


Dexter Morgan's picture

I live in Phoenix, Arizona, and my experience here is the real estate market is in total disarray.  There are 3 people I know including myself who are willing to buy a primary residence with cash and the banks selling the short sales are not interested in our cash.  WTF?  I went to an auction and the room is filled with professionals buying homes for big companies for what I assume is the rental market.  Out of 40 people in the room I did not make one person in the room a private buyer besides me and my friend/real estate agent.

So in Phoenix you have:

1. Short sale market listed on MLS

2.  Auctions, filled with big players.  I researched and house histories and found that there are MANY houses being sold at auction that were never listed for sale on the MLS.  I find that fascinating, don't you?  There are hundreds of houses listed for sale this way every week and many don't get an opening bid.  So then what?

3.  Retail, normal buyers and sellers.  I would guess this at about 20%, also.

Conclusion, this is one screwed up market when banks are not interested in cash offers at the listed price on MLS.  Or is that what someone would call a "recovering" market?  33% cash deals and virtually all new mortgages are guaranteed by the goverhment.  There would be almost  no or zero mortgages originated without government backing.  Now that is an addiction.

holdingontomypants's picture

Dexter, I also live in the Phoenix area in the City of Maricopa in Pinal county about 30 miles south of you.

My Mother has been trying to buy a home here for my disabled brother for six months and she has been having similar difficulties. Her problem is that she is locked out from making an offer on bank owned homes such as fannie mae/freddy mac for 10-15 days before they open up for offers on anybody considered an investor. Since she already owns her own home she is considered an investor. All kinds of weird rules and it is not as simple as people think just because you are a cash buyer doesn't mean you can buy it.

As for your comment on auction homes not on MLS they generally won't be there because Arizona law requires all foreclosures to be sold at auction. They would only show up on MLS if the bank was the only bidder or the highest bidder and becomes the owner as a result. Then they will hire a realtor and list it on MLS to sell.

Most of the homes where I live are all foreclosures, very few non-foreclosure homes are available.  



Dexter Morgan's picture

Very interesting, thanks for the info.  Good luck with the search.  I am guessing a lot of the hold ups are due to government involvement with everybody having to meet gov standards since they are guaranteeing all the loans.  The "free market" is nothing but a distant memory, IMHO.

chunga's picture

Same weasels that got all fat blowing up the bubble are on the inside. These inside deals are not "arms-length" one bit.

J 457's picture

Chunga.  That's spot on.  The same ones that created the mess are now buying back in with loose FED induced taxpayer money. 

Meremortal's picture

I'm mostly retired from real estate but people are calling like crazy and I'm selling stuff right and left in Colorado without even trying. The avaible inventory has dropped a lot in the Denver area. There are many submarkets in the USA so I'm sure things are different in other places. I'm also buying another income property outside of Denver. I'm paying 1/3 what the last buyer paid 7 years ago. I already have 2 good people who want to rent it. And yes, I'm paying cash, screw the banks.

This is my second real estate depression. Depressions are the best time to make money. That's why I was able to retire early. Now I just take the gravy deals since it's hard to turn down easy money and I get to blow it on whatever pleases me.

Yes, I've got plenty of guns, ammo, farmland, mineral rights and gold too.

What a country!


Corn1945's picture


It's really time to do something about the quality of the guest posters. There are plenty of people who write intelligent commentary yet you seem to have missed every single one of them.

I bet you can pull people off the comment section to do better.

It's not so much about the content, rather the tone and commentators themselves. Lee has taken to the comments section to insult his own readership.

There has to be better people available. At this point, you are well-known and shouldn't have trouble finding someone.

I know you said these people don't pay you, but there are moments when I don't believe it. The quality of the quest posters diverges wildly from the main site. I'm not sure how that's possible without some palms getting greased.

Corn1945's picture

I'm going to respond to my own comment and add that in addition to the contributors section, the general quality of the comments has always been poor and is getting worse. 

The quality of the comments section continues to decline. This is true for the contributors section and the main section. 

Quaderratic Probing's picture

Photographs of the TITANIC are on the rise too.... you just need a submarine to take them

Quantum Nucleonics's picture

The author of this drivel is a complete moron.  The data in the article, presented as a positive, is actually, obviously negative.  Contracts are up 15%, ok, got it.  But cancelled contracts are up from 9% to 33%, ok.  So lets run the numbers.  Let's say prior period contracts equal 100, so current period contracts equal 115.  Still with me?  9% of the 100 contracts from last period cancelled, so 91 contracts were completed.  But, only 67% of the 115 contracts in the current period will get completed, that's 77 contracts.  Hmm, so the data shows existing home sales crashing 15% (91-77/91), and that's an indication that the housing market has bottomed???  Combined with recent data showing PRICES continuing to fall, and the conclusion should be clear, the housing market has further to fall.

Lee Adler- The Wall Street Examiner's picture

Your math is correct, but that doesn't make me a moron. It meant that I left some things out in the interest of brevity. In January, closed sales were 64% of contracts from 2 months prior. So real estate agents reported a fall through rate that was slightly less than that, but close enough. They don't know until some weeks after the fact whether their deals are cratering or not. 

In February, closed sales were 90% of contracts from December. In the prior 12 months, closing rates ranged from 113% to 64%. Some deals do come back together. And most buyers don't simply curl up and die. They keep trying. That data was the basis for my guesstimate that April closed sales would be up about 8-10%. It wasn't a calculation, just an off the cuff guess. As appraisers see evidence of contract prices firming in some markets, they will stop applying the negative time adjustments that end up killing deals. These failure rates will come down. 

Calling me a moron says everything about the kind of person you are, not much about me. Could I have written more? Yes. Would it have made a difference to you? No. Your mind is apparently already made up. 


Eireann go Brach's picture

Lee, what about the 33% of contracts that are NOT closing escrow now each month? Which has now been reported for the 4th month in a row! As recently reported by the most horriblly trained, used car sales, self absorbed and pathetic organization in America called NAR!

Once rates spike, these buyers will leave in droves as the only reason they are signing contracts is because rates are sub 4%!

bkrolik's picture

To Mr. Adler from the denyer.

 I was just going to write about contracts closure rates, but the other denyer was first at it. Ok....

Mr. Adler, I need to aknowledge that this recearch piece is much more coherent and logical than the previous one. It gives us hope that we will finally see good research on housing from you.

Obviously, contract closure rate is not something that should have been ommited from the analysis - 30% is not a small and insignificant number. Besides this, you did mention seasonality factor, which is valid even comparing feb to feb - the temperature (on average, through the country) was noticeably higher this year. Also, to see some analysis of distressed cash buyers would be really nice. I do not believe they are the indicator of housing bottom - whatever they buy is being added to the shadow inventory as their intention is either to flip (obvious case) or to rent, which puts downward pressure on rents and removes genuine buyers. And then, in the end that invesment will have to be sold anyway. Thus, Mr. Adler conclusion regarding shadow inventory is somewhat premature. And his comment about excess inventory to decay is weird.

The data on Florida is interesting. if indeed they have 15% increase in condo prices y/y, then it is another mini-bubble forming. My congratulations to the flippers and sellers (until it lasts).



lotsoffun's picture

the bottom line is this.  sales are up in florida.  in good areas the sales are up because boomers are downsizing and buying smaller places in warmer climates.  in bad areas - people are buying cash at very cheap to be slum lords.  good luck to the slum lords.  you think somebody didn't pay a mortgage for 3 years on a huge place (or property tax or water bills or ... except to buy ipad) will pay rent?  it is STILL going to take forever to get them out.  bust.

and they leave with all the copper and steel.

good luck to the boomers think they are getting in cheap to warm climate.  watch what the neighbors that didn't pay mortgage for 3 years and won't pay rent for 3 years do when their snaps run out.

i want it cheap, and i want it NOW!  best of luck to all speculators!  it's the BOTTOM!  buy!!!



eatthebanksters's picture

Ilene, I don't understand your logic.  Just because we are experiencing an uptick in sales from a very depressed level does not mean the housing market has bottomed out.  If there is a surge in supply, prices should drop more.  If interest rates rise, prices should drop more.  Even though demand for credit is down, there are more cashbuyers than ever before, so this can be a misleading indicator. When you look at the current shadow inventory and the number of homes in default, without even taking into account properties in distress but not reported through public notice and thus not measureable, it is hard to imagine a scenario where the supply will begin to diminish any time soon.  As a matter of fact, it is hard to imagine the supply NOT increasing.  I believe we are far from the bottom and the weather has very little to do with it.


lotsoffun's picture

of the 'contributors' here - phoenix captial - totally worthless.  george washington means well - but he's just like the nyc village voice trying to scoop everybody.  too sensational for his own good.  blinded by his own morals.   ilene  - 'she' (i assume she is a she, but one shouldn't make those assumptions these days) also means well.  but all she really does is post lee adler - and she doesn't appear to be the brightest chisel in the shed.

and in the meaning well is more important than objectivity.  and i mean that well.


spooz's picture

Ritholtz can be a bit of a cheerleader sometimes, but he doesn't see a bottom here either:

"You guys keep on bottom calling — you’ll get it right eventually!"

He is looking at equities with a more skeptical eye lately, too.  

"We’re watching the market internals and technicals closely, casting a wary glance on housing and global PMIs and hanging onto the jobs trend as pretty much the only major positive at the moment."

Reese Bobby's picture

I want to buy a fully occupied office building with no money down that will clear me $10-20 mm per year after-tax.  How do I do this ilene?  You seem to have this real estate stuff down cold.

The Alarmist's picture

The only 'bottom' I discern here is the author.

Kasperfx's picture


Just wait until the TAX and REPAIR man cometh.

if theirs so much upside in a  small "sub 80k" segment of RE why are you guys telling everyone? if i know on a limited number or opportunities in any market I would keep my mouth shut  buy buy as meny i could myself..