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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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Clown is posting NAR data above...
Go Lawrence Yun...
and I refer to the Adler piece, not Ilene.
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.
I thought there was talk of making these shadow inverntory become rentals. That will wipe out a few of those multifamily builds if the shadow inventory takes up space of new builds. I think most folks would rather rent a home from the govt with no neighbors just through the walls and ceilings. I am sure any govt (fannie, freddie)eviction process will be held up by congress looking for votes.
Rent free rentals will soon replace squatters living mortgage free. What is the difference in attitude and effect? None that I can see.
Hurry up... buy NOW before you're priced out of the housing market forever!
The NAR's data is cherry picked and manipulated. Who in the hell would believe anything they say?
David Lereah:
"Now is a great time to buy OR sell a home."
Prices are nowhere near the last major low in 1997-2000 in southern cal. Many of the sales are cash purchases of bank owned properties especially those at the courtroom steps by the wonderful speculator/predators who then evict the homeowner, fix up the place and quickly flip it to the next unsuspecting mark while pocketing some serious dinero. Unfortunately, most often the new buyer has overpaid and quickly finds himself underwater or in the case of a job loss becomes the next foreclosure patsy. All of this results in great numbers for existing home sales: buyers beware!!!
Transfers from banks to the government or cities to banks still require a sale contract right? There's your increase right there.
48% of sales are distressed properties. All cash 33%.
None of these sales can count as being part of the housing market. Speculation is not a market, it is a bet and one that can easily go sour. People are making the same mistakes of the last decade all over again. Forcing prices up, buying multiple properties they never intend to live in, all because of pure greed using the proceeds of Bernanke cash.
See I use this thing called a newspaper that lists the property transfers every week. In high end markets there are 3-5 sales per week, one of those being a foreclosure transfer. In lower end markets you might have 10-15 transfers. more than half are listed like: Sheriff of County X sold to National Assoc Fannie Mae or Bank X sold to National Assoc Fannie Mae. Others are listed like: National Assoc Fannie Mae sold to Person X $12,000.
When you get down to it only 20% of the homes are actually bought and sold by actual people selling a place of residence to someone else looking for a home to actually live in.
Since you're so smart and so confident of the housing recovery Mr. Adler. I'll give you a great deal. You can buy my home for $130k cash, it is appraised for $135k. With the Wall Street way of thinking that means within 5 years you will be sitting on a home worth $250k.
COME ON TAKE THE DEAL. IT'S AN EASY $120k PROFIT JUST FOR YOU!!!!
The data is for realtor sales, not sales "from banks to government," (God only knows what that means) not bulk sales. Sales that were listed in the MLS, exposed to the market for a reasonable time, and sold to individual buyers at the best offer. Some do represent short sales and bank sales. They were listed, and exposed to the market. They are part of the market.
Not to mention what is going to happen to all these speculators buying homes today with rates pegged at subsidized historical lows? My guess is a lot of these cap rates are not what they seem....
The seasonal adjustment that is important here is the actual weather that was experienced. Of course sales are up, millions of people avoided hibernation altogether this February. My bet is with Rosenberg that demand has been pulled forward. We shall see.
Joke of the day ,is it..???
The writer doesn't quite understand that in any chart, there are ups and downs on the way to the BOTTOM.
http://www.economicaldepression.blogspot.com
Oh for sure. 48 years of charting, and 30 years in real estate and financial services including 25 as a professional analyst, and I never learned that.
My record of calling tops and bottoms is pretty damned good, pratly because I don't give a crap what the popular consensus is. So fade my work at your own risk. But trust me. I have seen and studied it all quite intensely. All kinds of markets, all kinds of manias and crashes, all kinds of human behavior.
The odds that I am wrong here are small. Not zero, but pretty small. Take the information and do what you want with it. I'm looking for that one special, thoughtful, open minded, clear headed person who's interested. That's all. The 99% who disagree are certainly entitled to that, whether they've reached the conclusion thoughtfully or through sheer preconceived notions. I've done the homework, have looked at the facts as far as they can be determeined, and have the experience and the integrity to reach and report unbiased, well supported analyses.
Lee Adler
http://wallstreetexaminer.com
Article earlier today @ ZeroHedge:
Quadruple Dip: Housing Relapses As "March Is Turning Out To Be The Weakest Month Since Last October Re: Buyer interest"
Cognitive Dissonance anyone?
No more real estate bubble so that isn't going to help.
The 'fraud first' approach of lenders, originators, servicers, aggregators, Ginormous Banks, Fan-Fred, hedge funds and shadow banking is under the microscope so that won't help.
Shadow inventory on banks' books is increasing so more 'product' is entering the market than leaving.
Real wages are declining so that can't help even if mtge rates are low.
Terms to describe the commercial real estate market (particularly retail) are 'bloodbath', 'horror show', 'armageddon' and 'going to get much, much worse' suggest no help from that quarter. CRE is the core for the residential neighborhoods that cannot thrive w/ dead cores.
Gas is over $4 per gallon so suburbs are on life-support (and a new round of defaults is on the way).
Small towns across the country are being 'Walmart-ized' and losing their central business districts ... that won't help either.
Japan, China, EU and the Brits are all sliding into recession: where is the outside money going to come from? Who will buy MBS?
Maybe I'm missing something here but I don't see anything that looks like a good real estate market here. I have real estate to sell and there are no speculative buyers in this market, period. They can't get loans, they can't turn over properties unless their 'upper level' at severe discounts -- and mine is a wealthy area. There is simply nothing to take the risk away from RE ... instead it is deepening.
Increase in multi-fam rentals in lower income Hispanic or Section 8 housing, multi-fam 'loft' condos in certain trendy no-car cities such as San Fran I can go along with. Bottom feeders and second-tier flippers buying in Fla suburbs ... they are all going to die.
Lee,
I'm usually just a lurker here, but your responses have compelled me to log in today. If you are so confident in your analysis, why haven't you put your money where your mouth is? (you said earlier you have no RE investments) People w/o jobs do not buy houses or pay rent regularly. OTOH, I think it is possible that over the next 5 yrs. the decline in RE will be less than the currency debasement over that period. Therefore, I AM looking at cheap rentals & farmland so that I can lose less over that period.
Food, water, land , guns , PM's, cash
Diversification Bitchez!!!
Lee, my problem is that the inventory:sales ratio, by itself is pretty meaningless.
There is arm waving about shadow inventory not impacting the inventory -- but I don't see you evidence there. There is no mention of folks who feel trapped in their current house, who would like to sell, but won't because the market has moved against them. There is no data or projection about what happens if there is another BIG crack in the financial sector and its ramification to the greater economic cycle.
So, no matter what your charting experience, without addressing those data points, the article is a 'one trick pony' with a 'trust me' attached. Sorry, this isn't the kind of analysis which is going to quell skepticsm on such a 'hot topic'. Perhaps you can flesh-out your hypothesis a bit more. I, for one, have been looking at RE investments, haven't been as comforted as you EXCEPT in some really down-troddened markets, where i don't care if the bottom is another 20% away -- the properties in these places (certain sections of FLA) are a deal for the bold
Lee the odds of you being wrong are 100%. You failed to mention the DOLLAR sliding into oblivion, seniors selling their homes all at once to EAT, oil hitting $150 and above, inflation and interest rates EVENTUALLY rising..
your record will be just that..broken, busted.. and 100% WRONG.
US citizenism typical of US citizenses. You make me laugh.
Oh wow I just laughed so hard. An awful day turned around in two sentences and one avatar.
Yes, AnAnonymouses is using the subrime tactics of sarcasm and satire to provide a strong counterforce to brobbing up US citizenism.
When you point at US citizens, it is not someone erse's faurt. Harsh rearity check, maybe.
Made me raugh.
Hello China-bot, how did the chip replacement go?
This is China-bot-troll. Real China-bot spitting on sidewalk after eating neighbor's dog for dinner. That's real Chinese citizenism!
Good Lord man! This isn't Minyanville.
Just another guy pimping his website on someone else's traffic.
Lee, The last time I trusted a guy who said "trust me" was Jimmy Carter, and how did that work out?
Gotta admit, pretty lame, commenting on your own article. quite the unprofessional move, but, hey, you're a professional analyst, done your homework, blah, blah, blah.
I'll call the bottom. The day I leave the foreclosed home I've been living in for 32 months, rent free. From my pedestrian perspective, that's at least a year from now and maybe never.
Bottom callers are just bottom feeders in suits. G'Day.
I was commenting on a comment. Why is that bad? Am I so big and important that it's beneath me to respond to "critiques?"
Today happens to be a day when I feel like responding to people's contrary opinions. Why shouldn't I do that? Isn't that what Zerohedge is about? Speaking freely? I happen to do a hell of a lot of research in this area and I happen to have reasoned opinions that I want to share with a wider audience. This little piece that I wrote today represents about 5% of my housing analysis and less than 1% of the total body of work that I do on the Fed, liquidity, and the markets. Once in a while I give serious investors a little peak at what I'm looking at. Are there any serious investors here? I do believe so, but they are reading, not posting angry, semi-coherent, biased, nonsense.
I haven't yet seen one thing that I wrote challenged with a fact--just derision. I'm not moved to change my opinion or take a second look at my analysis based on derision. Show me facts, and I will give them honest and thorough consideration.
Furthermore, I never said to "trust me." I said that I did my homework, and that I have the experience and integrity to call it as I see it based on careful analysis and years of experience. I also said that people are free to disagree. That's a long way from saying, "Trust me."
I'm sorry that you bought your house at the wrong time. I am truly sorry that you are having hardship as a result. I know what it is to struggle. I don't wish it on anyone. Your story is heartbreaking, but it is not market data. We know that there are many in your shoes. That does not, in iteself, preclude the bottom being in.
I live in one of the biggest bubble/collapsed markets in America. Palm Beach County, FL. Sold my house in June 2005. Have watched as the market began to rebound furiously over the last year. This market was a bellwether in the bubble, leading the national top by a year, and it looks to me to be a bellwether at the bottom. It's not the only market that's rebounding either.
Let's hear the truth from some people who live in some of those rebounding areas, instead of this useless end of the world crap from all the geniuses fighting this bull move in stocks all the way up since last August. Denial is not a useful tactic when trying to preserve and grow capital.
The bottom is in so long as the shadow inventory is kept on an IV drip by the banks as it is currently. Home affordability is good, but the job market unfortunately remains tepid to poor for most decent wage jobs. The choice was made by TPTB to go this route and following through (not flooding the market again all at once) at this stage is pivotal, else another wave will certainly come and we could potentially wind up double dipping. The banks are in charge of the game right now by providing the restrictor plate that faclitates the inventory drip. I would have preferred a little more purge to allow strong hands to move in, but the time for that decision has past.
Construction in prime areas is relatively decent, by that I mean new houses are being built at a modest clip, and raw land is even being developed. I cannot comment really on how well new sales are going as I am not involved in that end of the game, but I think they are moving to some degree if they are in good school district areas.
Development consulting work seems to have just turned the corner, but the job market remains pretty bad to non-existent in these fields. Lots of guys out of work altogether or underemployed. Competitive undercutting of fees due to excess capacity leads to an overall reluctance to spend on overhead of any kind and a self reinforcing spiral of needing to constantly provide more for less to beat out the next guy. The ball does seem to just be getting rolling though, and I think stability in the financial markets over the last 6 months or so has definitely played a positive role in that. I fear the coming inflation if people get back to work in a big way as the cost of 'needs' continues to skyrocket even at this level of unemployment.
Whats your call on MERS and destroyed deeds... that ws never a market player in the past
OK, dude, in your last comment, you say:
...and then, in the comment in which you explain that you were commenting to a comment, you say (check the very middle of the quote, emphasis mine:
So, how am I supposed to have any respect for you? Especially when you ask:
You don't know? I don't think I should tell you, but I'd say you better be ready to fight. We have rules around here that apparently you're not aware of.
So, figure it out. In the meantime, you self-laudatory praise is lost on yours truly. As for facts, you're using statistics, whereas my condition and that of another commenter here and many others are indeed, facts.
Also, you make the assumption that I "bought at the wrong time" where in fact, nothing could be further than the truth. The home I occupy is part of an inheritance. I am getting the feeling you're not as smart as you think you are and assume you have a failing business and will do anything to save it, like pushing your street cred on message boards. Slimy, I think.
Now do you understand why making assumptions is a dangerous business?
Besides, why argue. The market will prove you right or wrong in a few months, a condition upon which I am willing to wait.
Well I can tell you first hand that the $400K plus houses in Lincoln NE are hot hot hot.
I missed an odd ball home last month that was at a 400K discount off of building cost frack, unfortunately $525K was a bit of a stretch.
For 3 years builders here were unable to even sell a lot. Now the sheeple thinks intrest rates will begin rising... so they are rushing in. Dammit
Let me point out some of the headwinds to housing:
Demographics: The baby boom generation is entering their downsizing phase, and will be selling their homes
Clouded title: MERS has created a legal morass that could explode
Immigration: Federal policy has tightened on immigration
Interest Rates: Mortgage rates have nowhere to go but up
Household formation: With high youth unemployment and student loan rates, young graduates are living in their parent's basement
Increasing costs: The costs of a home: repair, taxes, insurance, etc are increasing.
Agree with many of your points, particularly the demographics point.
Add in that middle aged students and parents of recent high school grads have been piling on the student debt - - - they are less mortgage borrowing worthy than ever. There are NOT a lot of people sitting around on piles of down payment or full out purchase a home cash.
That said, I live in the SF Bay Area. Buying in the South Bay and Penninsula is frothy with the Silicon Valley and SF So of Market tech and social media IPOs. Prices aren't sky-rocketing but homes are moving swiftly. Newer the better in the under $1 million market. Further north in SF, Berkeley, Oakland, Marin Danville and burbs many more multi million dollar properties are coming on market than in past few years - with more whisper properties behind them. Offered with lower and lower prices, they aren't moving. Too much supply for demand in area. Where there was over saturated building in the North Bay and further East Bay in past decade - those are still wallowing.
"this useless end of the world crap from all the geniuses fighting this bull move in stocks "
Yesterday's truisms, " Don't fight the Fed" and "Houses only go up". Well we know the last one isn't true and the Fed is only as good as the country it is bleeding dry.
Your hope of growing capital in the overbloated housing market is contrary to your hope of preserving capital.
P.S. I refuse to enter into a statistical/charting contest. History is descriptive but not necessarily causitive.
You do a lot of research and say its the bottom. Everyone else, the thousands that read this site live in it every day and watch it destroying their families and businesses. You say the acid has eaten through the bone already because you "researched" it. Everyone else is gripping their arm, screaming and watching their flesh smoke. Get out into the daylight, dude.
38 months here, Free- my bank just called, wants to know "what I want to do"- I won't hear from them again for another six months;
Gee, Mr Banker- lose that chain of title?
Charting since the age of 4, Lee? Quite productive......
When my over-priced pig finally hits the market years from now, Lee- tell me what that will do to your charts?
Uhhhhh.........
Charts my ass... It's demand, and access to credit- if those are weak, prices fall.
13, actually.
Palm Beach County is about to be flooded with more bad title foreclosures.
These reo cash buyers better be named insureds on title policies from Lloyd's of London...lol.
STOP iT- YOU'RE KILLING ME!!!!!!!!!!!!!!!
Oddly, that's the same age I started jacking it- coincidence?
Oh yes.. Now has NEVER been a better time to buy... Go ahead... Take the plunge while the rest of us sit on the side and wait for the next leg down.
You can look at any chart you want, but it doesnt take a genius to see that we are in a structural decline as well as a aging population that want to "cash out" their current home and downsize. Housing prices will get a hell of allot cheaper before this is over, and I for one am perfectly fine waiting until that happens...
So, a short-term increase in sales contracts is definitive proof that the housing bottom is behind us?
Do you also have a bridge in Brooklyn that you'd like to sell me on the cheap?
No...
But I got a deal of a lifetime for you on a condo in Miami...
with neighborhood watch
And when mortgage rates increase from their current freakish lows, home prices and sales will just take off like a rocket, eh?
Sorry ilene; you got suckered on this one...
Are you sure it's a bottom or just a temporary shelf before the next plunge (presuming contracts mean anything when buyers are too poor to put any earnest money down)?
I think Ilene is trying to tell us that the baby boomers have all already sold their big houses and have downsized. I can feel the wind at our backs already.
Oh, National Association of Realters. Nothing like truth and veracity from a reliable source.
My financial advisor said something wise: "Would you buy a plunging stock?"
Then ask your self, "Would you buy a house when prices are dropping?"
Plus, most Americans move/sell thier houses in 5 years so you take a 8% loss right there on realtor fees, commissions, etc. Do you think house prices will rise at least 8% in the next five years?
He said as long as the FHA and VA are handing out near zero-dwon loans, stay away. These will drop in price and the neighborhood will turn to a slum since the owner has no "pride of ownership" and will not take care of the property.
is this an early april fools post? a bottom behind us? that may be anatomical truth, but economic untruth.....the housing market has at least another 30 percent to fall..........how will housing react when our great leaders decide to raise taxes after elections, when they cut away at programs (of which 50 percent of households receive govt help), when students (the future of first home buyers) start defaulting on more of their loans.....there is absolutely NO WAY WE ARE ANYWHERE NEAR A HOUSING BOTTOM....
We love the Useful Idiot Lawrence Yun...
For comedic value...
The National Association of Realtors...?!?!?!? Bawahahahahahahahaaahahah....!!!!!
Uh yeah, deny this.......
http://lewrockwell.com/slavo/slavo81.1.html