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Another Sign Bottom is Behind, House Sales Contracts Rise 14%
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.
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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ATTENTION TO ALL:: Don't we need to go out and buy a place in Florida at FULL PRICE (or maybe start a bidding war) just so ILENE can wipe the egg(s) off her face ?????
I still have that deal of a lifetime on that condo in Miami...
Just let me have Angela Nolan of JPM robo sign that title for you...
Dear Tyler(s),
The quality in the Guest Posts of late has degenerated to the point where Barry Soetoro's Teleprompter staff are beginning to look credible (See: ilene's Cramer-esque Clown-Fest title interpretation of Lee Adler's article)...
Furthermore, when Commander McBragg aka the "Madhedgefundtrader" begins to look less like a pompous ass than reality dictates by comparison... we may have a problem with the Guest Post program all together.
As for ilene's privilege to continually post and comment such drivel... Some one needs her knuckles cracked by Catholic School nuns bearing hardwood rulers...
Much Love,
Problem Is
ZH is in decline. Readership is low/pathetic. The old-timers have mostly stopped posting. HOWEVER, ZH has already planted more "seeds" then they could have imagined in the beginning. In that sense, myself included, it has been a wild success. Now it seems like the original Tyler's have stepped back to watch what happens, while banking some fees for travel money. The rest of you can whine like central bankers or Walk Tall. Or so it seems to me. Peace.
I am not positive, and about the hit rush hour traffic so I don't feel like looking it up, but despite the trash articles posted from time to time, I believe ZH readership & page views are at all time highs.
I could be wrong. It took me a long time to see the view count on posts. Just seems like a few thousand is low, especially given I might be 3-4 of them...
Alexa does show a decline.
http://www.alexa.com/siteinfo/zerohedge.com
Page views, max timeline.
Why is it that people here can't handle the truth if it's the slightest bit not bearish?
Dude, STFU, and I'm being nice, trust me. You haven't shown even the slightest inclination to understand or uncover the truth, in anything you've written either in your article or in your comments.
What if truth is a woman? What then?
--Nietzsche
Try it, brainiac.
Statistics are Truth ? Geez... I didn't know. Thanks for that.
I realize this tripe is written by Lee Adler, and not Ilene, but on a different topic altogether, has anyone noticed how the headlines are schizophrenic lately, with one source citing improving levels of homes under contract, while just a business day earlier (and today, for the matter), other publications and actual data had represented just the opposite?
It's not just home sales, either.
This is one of the signs (along with share buybacks, increases in dividends, Federal Reserve Lollapalooza PR Tours) that should make the prudent take notice of how imbalanced things are.
Egregore and a ubiquitous cognitive dissonance are manifesting on a physical level from the collective subconscious. We haven't seen anything yet.
Some would say that saturn is quite pernicious these days! (although I wouldn't)
Hook line and Sphincter ( ! ) J
Lee - do you have, or can show the data on the price points of these contracts?
i think there is a huge difference between 1,000 more properties sold at 155k (median home price according to NRA) versus 1,000 properties sold at 10k. Yes, there might be more churn in the market, but it might not point to the health of the industry. It's like saying car sales went up but to find that all the additional cars sold were $500 clunkers.
I am a firm believer that the housing bottom is yet to be reached because the pricing data points to downward pressure on prices. This means the value of homes is the leading indicator of the market. I don't think volume of sales is an indicator.
Waiting for Case-Schiller. Or was that Godot?
did you mean...a bad case of schilling
Great article and so true Lee...help me out here...which one is you?
http://www.youtube.com/watch?v=E1Ejh2Uy6WM
It depends on when he's working at the club
http://lipssd.com/
...putting the hook in hook line and sphincter ( ! ) J
This article is the most absurd piece of gibberish I have read this year! I live in Florida and am in the process of buying a house right now. The only homes that are selling quickly are the sub 50k homes (I have seen homes selling for as little as 10k) and they are being snapped up primarily by two groups. Group one is the flipper guys. They pay cash for very cheap homes that can't be purchased using conventional financing due to their poor condition and flip them for a quick profit. These guys depend on speed of closing and small profit. I spoke to one of these flippers about a house and he told me his "group" was buying 30+ houses a month. The house I checked on was purchased for 35k and sold again for 45k in less than 2 weeks. This is a very risky business and God help them if they get caught with much inventory when the shtf. The second group is the landlord guys. These guys fight with the flippers over the same cheap homes, but invest a little money in fixing them up to a rentable state and collect approximately double their monthly expenses in rent. These guys will probably be better off in a sudden downturn, which we all know is coming. The only thing that will create a sustained rise in home values here in Florida anytime soon is if the "muppets" come to the realization that paper assets in general are being rapidly diluted and only assets that can't "vaporize" over night are worth investing in and holding. Of course, a genuine improvement in the employment situation could put a bottom in on housing, but I prefer to remain rooted in reality.
Can't fool me. Contracts are made to be broken. haha
http://www.zerohedge.com/news/quadruple-dip-housing-relapses-march-turni...
For those of us who are only following the housing market for entertainment, it is fine to ridicule this article. But for those who may be near term buyers, or sellers of real estate, there are some good data and analysis that could be of great use. The final three paragraphs are well reasoned.
Best part about Real Estate is the Real part.
Last year I snagged 2 foreclosures for around $.22 on the dollar ( 2005 prices) , I use a reputable management company and have them rented out with a 13% net positive cash flow on investment after their fees , etc.
I do nothing - direct deposit to my account.
Waiting for some more fire-sale foreclosures to repeat.
Sure beats the recent 20% butt f'n I took courtesy of TVIX over a 2 hour period.
I bear no ill will towards the Stock Market , problem is it's not really a market.
harrym - lovely. i'm very happy for you. i'm glad you found renters that have jobs and pay their bills.
because - i'm telling you from long experience of my parents, in good times.
if bernake forbid, they should lose their jobs - it is going to be hell to get rid of them and you if you do,
you are going to have hell of repairs and clean up to look after. wish you the best.
being 'landlord' is a tough way to go, especially in bad times. but - i've plenty of friend going to find out the hard way.
Maybe some confusion - I paid 22% of what the owners paid in 2005
If you want to run smack on how good an investor you are, better not to mention you were stupid enough to own TVIX.
Good point regarding TVIX - I got screwed along with a million other assholes.
But I figure if you're a reader of this site and have been bearishly investing , you have your own horror stories.
LOL- like 2005 prices were valid?
Try 1990.
Good luck on keeping that 13% margin a year from now.
"do nothing" investing- ALWAYS a winner!
Real Estate really isn't an investment, so you're even.
Maybe some confusion - I paid 22% of what previous owner paid in 2005 - which makes around 1994 price
LOL - Do you rent or own?
If you rent , your landlord appreciates your business.
Harry I have a friend who is doing the same. He refuses to see MERS as a problem, that is no way to tell if the deed is really yours. How did you deal with the issue?
Got to agree with ya on this one +1.
I am seeing prices continue to drop. Pre 2005 prices and still won't sell. And if that's the case, HarryM got took on the price he paid.
None of the markets are valid anymore. That is the point of the coming collapse that it is being propped by by fiat money. Eventually they all fail because there is no trust, no market - all manipulated by government intervention and horrid paper products from the banks.
ilene
stump dumb .. we have many years to go before housing goes up..
your rose colored eye glasses are way to smart even for an Armstrong who says many more years of down
True - There will be deals for a few more years - may even drop some more , but if you buy at the right price you make rental income ( see above)
If/when the day comes when there is a significant increase in home-value and the rental-income doesn't make sense , then sell em.
In the meantime - people need a place to live.
Yes, and when the shit hits the fan people will be bailing out of their rental properties and moving in with friends and family who are finding it hard to pay their damn heating and electric bills on top of property taxes and other expenses. The supply of rental properties will explode, rental prices will fall, you will be sitting on a house that nobody wants to move into unless you drop your rates considerably. Then you can have fun maintaining that property and dealing with all the deadbeats who start to tear your shit apart and refuse to leave when they stop paying rent. Now granted, if you happen to rent in a neighborhood that with weather the depression better than other areas, and your property will be attractive to people who have decent jobs then perhaps you will luck out. I'm not saying you made a bad call, but you very well could regret it depending on the circumstances.
"..So it is hard to understand how the seasonally fudged data manages to come out as a decline..."
take a few statistics courses....i am sick and tired hearing all of the whining about seasonal adjustments vs raw data....dig into the adjustment algorithm in order to critique.....no doubt that the adjustment algorithm no longer applies and is in need of updating, but the math behind adjustments is legitimate (if you can call statistics legitimate :-o)
http://www.youtube.com/watch?v=oc-P8oDuS0Q
Come On Ilene!
Roflmao gotta love the entertainment interlude this writer provides. Great for laughs until you realize the writer is using numbers from an organization that was caught inflating the numbers a couple of months back. Must be an election year!
First of all Ilene,
"real estate brokers lobbying organization" or the useless as an ashtray on a motorbike nar...ANY data from the nar is unreliable and immediately discredited, period. Secondly, the 'Pending' sales metric is garbage- seeing as 30% or more of the so-called contracts get torn up. So one third of the supposed contracts are rendered negligible. There is NO bottom, there is NO housing recovery as of yet.
Your data is based on what has proven to be the most unreliable and incorrect information in the industry.
When in-house analysis is what you are basing your assertions on, you might want to verify it against non-biased third-party research and analysis. Otherwise, it's nothing more than a shill campaign...
I look at data from a variety of sources. This data is not inconsistent with other sources in terms of direction. What data sources are you looking at that disprove this?
And why are you so angry? Overstayed the top or fear you've missed the bottom?
Please specify your affiliation with, or investments in, the real estate industry.
None and none. Go back and read my criticisms over the years.
I was a bear at the top and all the way down until last year when the data began to show signs of turning. You can scoff all you want. While the overall levels of the Realtor data have been way off, the direction of their data has been generally consistent with what's been going on, and correlates well with other data sources.
This market has gone down for 5 years. The people who are arguing that the bottom can't possibly be in are probably the same people arguing that we're going to have or are having raging inflation. If that's true, then housing will go along for the ride, will it not? If you're in the deflation camp, then you may have a leg to stand on.
I'm still waiting to see some facts contradicting the points I made in the article. instead of just derisive braying, pissing, and moaning. And the article wasn't half as bullish as all you critics who didn't read it are assuming. I'm just not impressed with your thoughtless criticisms that indicate only a deep state of denial and hostility. Try reading the article before jumping to conclusions.
thank g... - i mean bernake that we dropped rates to .25 so the banks can lend at historical lows. if that doesn't help sales?
hope you enjoy a benefit of it, because you still have money and pay taxes. i can't buy into to it, because i know where long term we are headed
and i'm not a trader. trade away
have blast - FDIC real estate for sale. last time i looked 6 months ago - they had hundreds in michigan for sale under 20k. now only one.
http://www2.fdic.gov/drrore/
So Lee have you possibly factored in the cost of living such as utilities, gas, food and other associated living costs which even now people have to choose between. The cost of everyday living never goes down, only up, and people on food stamps do not buy houses. You can only be right if growth in well paying jobs and consumption without rapid decline in resources occurs, if not than you're talking a book to burn in the fire.
Lee
Do you allow for the possibility of an oscillating bottom for a number of years yet ? The traditional housing foundation of family formation, rising employment and middle class incomes, with government continuing largess seems a little thin... no.... ?
"missed the bottom"?
BUWAHAHAHAHHAHH!!!!!!!!!!!!!!!
Are the clouds pretty in your world?
This is humor right?
Priced in Au, my house is at 38% of its peak and still dropping like spent uranium in a vacuum. Go try this on the dumbasses on CNBC.
Is the author talking about sales contracts? Meaning, not associated with a mortgate or deed of trust, meaning no lending involved? NAR contradicts his statements, but he claims their data supports his conclusions?
People are buying more condos? People are getting deals on places where occupancy rates are so low the finances of the condo association don't allow for the payment for the building or maintenance? Are these sales only where there is a 95% occupancy rate? Who else would be dumb enough to buy into something that the whole thing fails when the economy loses jobs for another 10% of their tenants?
Is the author kidding or misleading?
http://www.realtor.org/wps/wcm/connect/dfd330004a9ed8ccb858be4b38c59df1/PHS1202.pdf?MOD=AJPERES&CACHEID=dfd330004a9ed8ccb858be4b38c59df1
Let me be the first to call you "asshat" unless somebody below your NAR link spamming already did. I've been busy.
Asshat.
You REALLY need to stop drinking that koolaide dude.