Lereah’s headline on today’s National Association of Realtors (NAR) press release was "Existing Home Sales Improve in January." All the Bloomberg pundits this morning were celebrating a 3.5% increase in existing home sales. According to my version of Excel though, January’s sales number of 6.46 million is LESS than last January’s 6.75 million. The 3.5% increase was month-over-month. The seasonal nature of real estate means that year-over-year numbers are always the more significant: Year-over-year sales were down 4.3%.
Somehow in the euphoria of reporting that month-over-month increase, the pundits didn’t mention the median price drop. Median price for January was $210,600-down 3.1% from last Jauary’s $217,400. You would think with Lereah’s recent passion for month-over-month comparisons he would have included the fact that the MOM decline of $11,400 was the largest since the start of the boom- but it must have slipped his mind.
Then there’s that inventory. Last month Lereah stated that "a tightening inventory of homes on the market is supporting prices." That "tightening inventory" is up 2.9% month-over-month and 23% year-over-year. I suppose you could say Lereah was right in that a tightening inventory "would" support prices. However, it is my expectation that inventory will grow as the season progresses from already historically high levels- putting continued downward pressure on prices. Even with sales increasing through spring [which would be my expectation- increasing sales this time of year is typical] it will be insufficient to put a dent in this massive inventory.
NAR President Pat Vredevoogd Combs stated in the press release that, "The market is trending up from its low last fall, and that is important in restoring confidence to buyers who’ve been on the sidelines." Inventory is still below last fall’s levels, but that must be what she is referring to, as nothing else appears to be trending up. While sales may tick up this spring on a month-to-month basis, expect a lot of buyers to keep their toes back behind those sidelines. This market is not even close to stabilizing.
I believe the Spring inventory spike is going to be significant and up until now we have not heard much about it, buyers are not the only guys on the side lines, a lot of sellers are there too at the moment. One common thread when reading housing articles that deal with sellers sorrow I keep seeing the same thing over and over again. “The Sun will come out tomorrow, tomorrow being Spring.” Realtors not wanting clients to lower their price have been telling their clients to wait things out until Spring when things always pickup (Pickup as in a Seasonal thing not a rebound). It’s a good line after all it is the official NAR propaganda line in hopes of triggering a bull market, they believe if they can continue to hold the price line where it’s at. This will back fire because it does not address the inherent problems with the Housing Market. Also as much of us already know the statistics that count inventory have significant flaws one being they have no way to keep track of the number of houses pulled from the market that did not sell. Most of those will be back for Spring. “Beware the Ides of March”, that’s when I predict most of these Sellers on the sidelines will return to the market and they will all return at the same time. It would be great if someone could compile a number for this, I would guess if you where to count up all the houses that left the market since October that did not sell it would give you a good guess as to the upper bounds of this factor.
Roger-
In LV and Phoenix, we’ve seen close to 3 sellers leave the market (Expired, cancelled or temporarily-off-market)for every sale. Undoubtedly some of those folks have given up and are going to sit tight for the long haul, but I expect most of them to be back in the spring.
The other consideration is how many of those folks who decided to sit tight have backed out of their new home purchase? (Either resale or new) That will affect pending sales for existing homes, as well as new home sales. (New home sales report is due out tomorrow). The NAHB makes no adjustments to their sales numbers for all these cancellations, but homebuilders are anxious to unload the additional inventory that is generated.
It’s all going to put continued downward pressure on prices.
I for one buy all the hype that the “sun will come out in the spring”.
What all those articles fail to mention, however, is that we are at the beginning of a 5-7 year Winter.
MikeC-
I was watching the news and Lereah was on. He said, “Prices are coming down, and that is bringing buyers back to the market. By and large, this report is saying that this price correction that has occurred for 6 consecutive months is bringing buyers back to the market place.”
Maybe the buyers are here for the ice skating party. Heaven knows there’s plenty of ice for them to skate on!
Add the Fourth Estate to my list of institutions who need to strap on a pair.
And now, for news without spin, be sure to read what Housing Wire reported today on the numbers.
You’ll note that we reported what actually took place, sans the NAR spin.
Most economists don’t care for month-to-month comparisons, even “seasonally adjusted.” It’s like comparing an apple to an orange.
An apple to apple? That would be year-over-year comparisons, and by nearly every measure (prices, sales volume, regional data, SFR, condos), the numbers don’t look all that great. And they’re not going to be great in Feb either, something Lereah is trying to prep the market for.
Methinks the NAR is putting lipstick on a pig here. And I’m not a housing bear for the long term, either — but the numbers just don’t bear out what I’m seeing in the rhetoric at this point.
It would help if I gave the link, wouldn’t it?
http://www.housingwire.com/2007/02/27/nar-home-sales-volume-median-price-drop/
housingguy -
Thanks for the reminder. Your article is on the sidebar now. I actually have a link to it in the comments under today’s DoomWatch post.
I also took note of Lereah noting how bad the weather was in February. He must be saving that 28-days thing for the Feb report itself. Of course we should get a nice artificial boost for March.
Just a few weeks ago the NAR President explained that people should look beyond the short-term (YOY and shorter) data and focus on the 5YO5Y data.
Now, with one moderately good month, we should all suddenly start looking at MOM?
Too funny.
These clowns need to pick a story and stick with it.
While, the “Nat Home Sales YOY % Increase” chart is telling in the continued drop in sales (2/07 lower than 2/06 and 2/05), what is also interesting is the last four months trend of negative sales moving up from –13.6 into the – 4.3 range. This suggests some stabilizing albeit at 2004 levels.
Balancedview-
Just remember that we have TWICE the resale inventory that we did in 2004, and a lot of builder inventory as well.
That leaves us with a lot more really motivated sellers than we had in 2004. Even if sales maintain those levels, we still should experience downward pressure on prices.
NVMike-
But they have a consistent story- “It’s ALWAYS a good time to buy!” In that case, what difference does DATA make anyway?
The New Home Sales Report was just released. Sales are down 20.1% YOY- I should have the details up in an hour or so.