Tuesday, August 15, 2006

NAR 2Q 2006 Existing Home Sales

The National Association of Realtor (NAR) released their 2nd Quarter 2006 Existing Home Sales numbers. The NAR proclaimed "Metro Home Prices Transition in Second Quarter" while David Lereah announced "After a full year of double-digit gains in the national median price, the timing is right for a cooling in the rate of growth – we are presently experiencing a soft landing in the housing sector."

In their press releasee the NAR started searching for evidence of a 'soft landing' in their data

The association'’s second-quarter metro area single-family home price report, covering changes in 151 metropolitan statistical areas,* shows 37 areas with double-digit annual increases and 26 metros experiencing generally minor price declines - many of the areas with declines are showing weakness in the local labor market.

The national median existing single-family home price was $227,500 in the second quarter, up 3.7 percent from a year earlier when the median price was $219,400.
In real dollars the 3.7% nominal increase in represents basically flat median prices. Regionally, median sales prices of existing homes increased 3.6% in the Northeast, 4.1% in the South, 3.6% in the West and fell 2.0% in the Midwest.

The quarterly report on total state existing-home sales shows that the seasonally adjusted annual rate was 6.69 million units in the second quarter, down 7.0 percent from the record 7.19 million-unit level in the second quarter of 2005.

The number of sales was down in the 2Q 2006 compare to 2Q 2005:
  • Northeast: -5.2
  • South: -4.2
  • West: -14.7
  • Midwest: -4.7
Looking at the condo markets the NAR reported that condo prices were much weaker then the single family home market:
Metro area condominium and cooperative prices, covering changes in 57 markets, show the national median existing condo price was $225,800 in the second quarter, down 0.3 percent from a year earlier. Fifteen metros showed double-digit annual gains in the median condo price, and 14 areas had declines.

A full 26 of 57 condo market tracked by NAR, experienced median sales price decreases or increases of less then 3%. In over half of the condo markets tracked by the NAR, the median sales price for condo units is decreasing in real dollars. In general, the condo market is more bubblicious then then the single family housing market.

‘'Pressure On Home Prices Has Evaporated'’: NAR (The Housing Bubble Blog)

64 comments:

  1. Why would you factor in almost 4% inflation if:

    1) you insist that housing prices are not rising. Most people who sell a house use the money to buy another. Inflation would not affect those people a whit.

    2) you are almost certainly using inflation figures derived from the CPI, which is heavily affected by one hyperinflationary sector of the economy that does not affect homeowners - RENT. By all accounts, rents are rising fast and distorting the CPI.

    Please explain why you would not adjust for those facts.

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  2. Haha, more bad news for the bubbies!!!

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  3. On a quarter over quarter basis, NAR's numbers show that for SFHs in the Greater Washington Metropolitan region, prices increased by 5% from March to June. All of that 3% gain YOY was due to those 3 months.

    Not a bearish sign but it is in contrast to the monthly numbers being reported by NVAR.

    I would like to see the breakdown of home sales by price range.

    My $0.02.

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  4. Why do you put so much stock in this minute-term numbers? Who cares if all of the 3% gain is attributable to 5% gain in 3 months?

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  5. For WDC
    In 2005-Q1 = 380.6 , 2005-Q2 = 429.2
    Jump = 49K

    In 2006-Q1 = 422.5 , 2006-Q2 = 443.3
    Jump = 21K

    So, if there was spring rally(?), it was less than half of last year.

    Las Vegas down to 6% from 53% in 2004-Q3.
    Phoenix down to 12% from 55% in 2005-Q3.
    San Diego down to 1.2% from 37% in 2005-Q2.

    Toll Brothers earnings/sales cut in half.
    DR Horton says sales fell off the Richter scale in June.

    Yeah, thats a soft landing for sure.

    Can't wait for the Q3 and Q4 numbers.
    OFHEO numbers come out on Sept 1.

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  6. 1) First off, I don't know why you say "most" sellers buy another house- we have a large number of flippers, investors, and 2nd homeowners in the market right now. They are not the majority of homeowners, but they are a sizable portion. And I have no idea what percent of sellers they are. I don't believe you do, either.

    Second, another comparison where real prices are relevant is for buyers. If real prices are falling, and the buyer has stable or increasing real income, it may make sense to wait longer to buy.

    2) please show me where rents are hyperinflationary in the CPI. Yes, the CPI overweights rents. But I do not believe that even CPI rents are "hyperinflationary" right now. Prove it.

    A Redskins fan

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  7. Anon 10:46,

    Please read http://www.bea.gov/bea/about/FESAC_Paper_Housing.pdf

    It explains how housing costs are incorporated into the CPI.

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  8. So, you admit that, assuming those things are true (which they are), it is not legitimate to adjust these numbers down by 4%.

    Yeah, yeah. I know, your rent only went up 55 dollars this year.

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  9. "I know, your rent only went up 55 dollars this year."

    Mine has'nt gone up in 4yrs.

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  10. Anonymous said:
    Why would you factor in almost 4% inflation...

    I think it's becoming abundantly clear that more than a few home purchasers (at least 30%+ by official counts and likely much higher) bought a home as an "investment".

    Now, per official NAR statistics, this "investment" has produced approximately a zero return vs. inflation for the one year period ending June 30, 2006. This is a comparison of median homes y-o-y, and given the overwhelming (but admittedly anectdotal) evidence, it is likely that actual home prices on a like for like basis are much lower than flat on an inflation adjusted basis.

    So why is it relevant to show inflation adjusted returns? Because home prices are set at the margin, and now that 1) at least 30% of last years home buyers realize that their "investment" didn't give them an inflation beating return, and 2) those pesky rental fundamentals don't allow them a positive carry on their purchase, well, they might, just might be looking to sell.

    The doubter out there can say what they will about how a little softness is no cause for alarm, but before you speak, try to remember that you were likely the same person who was saying last year that home prices will NEVER dip down. And now they have in the midwest and even DC/NoVa, by even the admittedly flawed NAR measures.

    Just cuz it hasn't happened yet everywhere on a larger scale doesn't mean it won't. The housing market is like a tanker; it turns slowly, but once it has momentum, it goes in one direction for a long-time. And guess which direction it is currently headed?

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  11. I went to the BLS website and used this series:

    Series ID : CUSR0000SAH

    Which is one of the housing series.

    It does NOT look hyperinflationary in ANY way to me. This argument that rents are hyperinflationary is a bad joke IMO.

    A Redskins fan

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  12. After inflation adjustment.
    Consider insurance, interest, property taxes, maintenance and closing costs.
    Those who bought a year ago, have already lost money.

    Good Investment!!!

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  13. Shile I definitely think housing prices are on the decline, i think the use of "real" returns to justify the bubble bursting is a stretch. I think its just an easy way to exaggerate the decline. The Lehman Aggregate Bond Index is down -.81% for the one year period ending 6/30/06, and the Lehman US TIPS Index is down -1.65% for the same time period. You don't see everyone proclaiming that bonds are down 4% in real dollars.

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  14. You don't see everyone proclaiming that bonds are down 4% in real dollars.

    But you should.

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  15. "Why do you put so much stock in this minute-term numbers? Who cares if all of the 3% gain is attributable to 5% gain in 3 months?"

    Do the math. If the early period was 5%, but the total period was 3%, what does that tell you?

    By definition, prices had to _decline_ over the remainder of the period. In other words, what's being trumpeted as a "soft landing", in fact merely contains the last remnants of the earlier boom period. Statistics are wonderful for that manipulation.

    See a decline? Just widen your interval to include numbers pre-decline!

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  16. And staying on the topic of inflation.

    The numbers and the methodology have been manipulated so much by the govt.
    to yield a lower net inflation rate.

    The Consumer Price Index

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  17. The HMI fell 7 points from 39 to 32 in Aug.

    HMI Falls Again

    Not a good day for housing heads.

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  18. By all accounts, rents are rising fast

    Whatever you're smoking, I want some.

    Yeah, yeah. I know, your rent only went up 55 dollars this year.

    I'm the $55 guy, except that my rent has only gone up $55 total over the last four years.

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  19. Builders stocks had a huge day, though, thnks to the low inflation numbers. (Of course, that huge day is relative compared to their steep drop over the last year, but still worth noting.)

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  20. I think an important question is what do you consider a "soft" versus "hard" landing to describe the whole market? For example, I'd say these numbers about DC are not a hard landing.

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  21. I find the 3 month interval interesting because it's as granular as you can get with NAR's numbers to look at trends.

    I also find it interesting that after 2 quarters of declines, there is a 7% swing in the rate of growth in SFH prices - from -2% to +5%. In only 3 months. During the 3 months where every RE article was talking about the weakness in the Spring rally.

    I would like to know the breakdown of the number of homes sold at various price levels to know why that change occurred.

    Did the sales volume numbers stay proportional across the spectrum, indicating broad growth across all homes?

    Did the low end simply drop off as all prices crept up? Again, this would suggest even, healthy, growth across all homes.

    Did the middle drop out leaving sales at the high and low end to grow? To me, this would be an indication of weakness in the growth of numbers. I.e. high priced homes bringing up the average as sales suffer in the middle.

    My $0.02.

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  22. "HMI Falls Again"

    There is a difference between the business sector of homebuilders and the private sector of home owners. It is erroneous to say or imply that people who own and live in houses are in for trouble because Toll Brothers Inc. and its ilk have low earnings projections.

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  23. Anonymous said...
    "HMI Falls Again"

    "There is a difference between the business sector of homebuilders and the private sector of home owners. It is erroneous to say or imply that people who own and live in houses are in for trouble because Toll Brothers Inc. and its ilk have low earnings projections."

    Is it really news to you that the bubbleheads are basing their most important financial decision on faulty math and faulty logic? These are the same people who have been holding off buying now for 10 years waiting for a bubble!

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  24. "HMI Falls Again"

    It means that the property values of home owners are going to decline.

    It means the demand and price of homes produced by home builders is going to decline.

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  25. wow that really is a substantial 'spring rally' in the DC SFH market. (Nominal) prices go up by 4.9% in that quarter along.

    If prices increased at the same 4.9% rate per quarter for the next 3 quarters, that would be a 21.3% annual increase.

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  26. "faulty math and faulty logic"

    Yep. when these same measures were making home owners rich, they were
    sound and showed that they were investment genius.

    Now the same measures are working against them, so they are faulty.

    Dont worry, even if the rest of the housing market tanks, your house will not fall in value because it is so damn special.

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  27. "If prices increased at the same 4.9% rate per quarter for the next 3 quarters, that would be a 21.3% annual increase."

    That is for 2006 Spring Rally.

    In 2005-Q1 = 380.6 , 2005-Q2 = 429.2
    2005 Spring Rally = 49K = 13%

    So if you annualize it, it would become 52%.

    But in reality, the appreciation was mere 3.28%.

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  28. "It means the demand and price of homes produced by home builders is going to decline."

    Yep, New home supply is going to drop off dramatically. And of course that means everyone who owns a SFH in DC proper or the close in suburbs is going to be SCREWED. (sarcasm off)

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  29. So Farmer Ned's cow pasture just north of Frederick, Maryland will not be plowed under and blanketed with poorly built, overpriced homes. This is a bad thing?

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  30. Anonymous said...
    "So Farmer Ned's cow pasture just north of Frederick, Maryland will not be plowed under and blanketed with poorly built, overpriced homes. This is a bad thing?"

    And where are all the new houses for the bubbleheads going to be built? I guess they'll just have to pay more in their bidding wars for our existing houses! I just love the fact that the builders are building less! It makes my house even more special (and scarce) then it already is! I hope you bubbleheads are socking away even more of your rent savings because the price you're going to pay for my house just went up! ... At about the same time your rent went up!

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  31. There are already too many houses in the US. Per Census Bureau, out of the 125 milion, 16 million are sitting vacant.

    Eash of those 125 million is special, and the vacant 16 million of them are "extra" special.

    My rent has'nt increased in 4 years.

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  32. The builders are building a bit less than last year - they are still building way more supply than can be absorbed.

    Seriously, I can't imagine why we're bothering to discuss landings anyway - a housing market doesn't land in mere months. It's funny that all the housing heads ssay that bubbleheads use faulty logic but the "booming for 10 years, sure to land quickly and softly in a few months!" is logic that works for them...

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  33. "
    My rent has'nt increased in 4 years."

    None of us would live in your neighborhood. Give it up.

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  34. "None of us would live in your neighborhood. Give it up."

    I was never worried about you moving into my neighborhood.

    You have to keep over paying for the POS
    you bought, wherever you bought it.
    Stay there.

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  35. And where are all the new houses for the bubbleheads going to be built? I guess they'll just have to pay more in their bidding wars for our existing houses!
    ????

    69% of Americans now own their own house (historically, this has been 50% to 55% pre the current boom).
    ~40% of Americans own *two* homes.
    26 of Americans are too close to the poverty line to have access to the credit markets and are thus currently excluded from the housing market.

    69%+26% leaves only 5% of the market "locked out."

    Traditionally, you have ~20% to 25% of the population on the sidelines willing to buy on the dips.

    Not this time.
    Any downturn and you only have a quarter of the buyers needed to sop up excess inventory.

    And don't forget, we have the largest overhang of completed homes (with a CO) ever! And the builders are still building. They are only slowing *future* construction.

    Maybe I'll have to move to where homes are reasonable. Ok. Neat thing is... I move other jobs with me. :)

    As to homes being built, they are slowing down due to the fact that builders will be losing money if they tried to make anymore! Sheesh... no way to twist that into a buy now speech.

    As I posted earlier, look at the "U-haul index" for your area. Its been shown to be a reliable indicator of job migration. Is your area positive in job growth? Are you sure? I hope you're not seeing jobs migrate away at the middle-class lever where I live. Businesses are quietly transfering work to cheaper locals. It doesn't matter if its DC, LA, or Miami. If a company cannot hire at wages to promote growth profitably... They will grow where they can grow profitably.

    Priced out? Nope. Where I want to buy has dropped 15% in two months. I'm not talking the mean. I'm talking about the going prices for the types of homes I'm interested in. I'll ignore the new McMansions. :)

    Taunt all you want...
    There are *not* enough credit worth "bubblesitters" to prop up this market for more than 3 or 4 months tops. So if *all* of us bought, we could save 2006.

    But 2007 and 2008 would only be that much uglier.

    I know way to many people who will lose their homes in the next two years. :( Like it or not Cinderella, its midnight. You can scream about how your date couldn't possibly have been a mouse... but the ball is over. Or do you know something Warren Buffet doesn't?

    Neil

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  36. neil said,

    "There are *not* enough credit worth "bubblesitters" to prop up this market for more than 3 or 4 months tops. So if *all* of us bought, we could save 2006."

    Good point, but it's worse than this. Many of the so-called credit-worthy" homebuyers really aren't credit worthy -- to wit, the number of zero-interest ARMs taken out in order to "get into" homes that these buyers just couldn't afford.

    Millions of current homeowners won't be in another year or two.

    But your basic premise is correct: there just isn't the level demand required to keep housing prices where they currently are.

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  61. Anonymous said...
    "
    My rent has'nt increased in 4 years."

    I'm a landlord and it sounds like you've been overcharged for at least 3 if not 4 of those years. I usually adjust for inflation yearly, but it sounds like your landlord took his cut for inflation up front!

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  62. Oh Lord, won't you find me a GS-15?/That Nigerian ambassador said he don't got no cheese/Hoped to find an SES, take a stranded asset off m'hands/So Lord, won't you find me a GS-15?

    Thank you. I'll be here all week. Try the lasagna.

    Jerkstore

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  63. "I usually adjust for inflation yearly, but it sounds like your landlord took his cut for inflation up front!"


    Yeah Right!

    You must be a neo-landlord who buys at a premium and then rents out at a discount.

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