JPMorgan Chase economist Michael Feroli said that existing home sales were "No worse than expectations". If you want to be positive, that’s about as good as it gets. According to Reuters this morning:
WASHINGTON, May 23 (Reuters) - The pace of existing home sales in the United States fell 1 percent in April to a 4.89 million-unit annual rate, the National Association of Realtors said in a report on Friday that was slightly better than expectations.
But inventories of unsold homes rose measurably, surging 10.5 percent to 4.55 million units at the end of April. At the current sales pace that would put the supply of homes at 11.2 months’ worth, the highest since the association began tracking single family and condo properties together in 1999.
For single family homes, at the current sales pace there were 10.7 months’ worth, the biggest supply since June 1985 when it stood at 11.4 months.
As Feroli stated- no worse than expected.
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Translated: “Things are getting worse just as we expected”.
Day-o, Daaaayyy-o!, come Mr. Talleyman and tally me my losses, daylight come and I don’t wanna really know, Day, day is a day, is a day-o!
speedy(dreadlock rasta)nogales,
Day-o, Daaayy-o. We all might start singing daylight come and I wanna go home. With no home to go to.
The las vegas review journal today quoted Tim Sullivan, pres. Sullivan group r.e. advisers “We are not in a recession. This is as much about psychology as anything. We see a lot of activity right now, we see an increase in sales. These things are not in a recession.” He went on to state that there are rays of hope. Low interest rates, PERSONAL Savings are up(is that true?), and the reset mindset is building among home and land owners.
Day-o, Daaayyy-o
It’s easy for personal savings to go up when folks aren’t paying the mortgage. That accounts for a real influx of cash.
“No worse than expectations.” Sometimes I don’t know if these folks are being serious or not. For once, I’d like some plain speaking. Something like “Yep, this sucks, just like we knew it was gonna suck. It’s gonna suck for a while, but it won’t last forever. Get used to it for now.”
What’s up with inventory levels in the Phoenix area? Back in the Fall when it started breaking records, many of us expected the inventory to shoot up even more come this year as people “jumped back in for the Spring market.” But that didn’t really seem to happen. Any theories?
Hello All-
I was looking on the internet to try and get a clear idea of what the housing market is expected to be like in the Phoenix area over the next 2 years or so, and I came across this excellent blog. I will be spending a lot of time here trying to educate myself. It seems like there is a lot of straight talk and common sense here.
I was wondering if I could get some opinions and/or advice on my particular situation, and maybe get some general predictions as to where the market is headed over the next 1-2 years in Phoenix from the blog’s author and from some of the wise commenters here.
My situation is this… I have been in the trades for about 10 years now- most of it in apartment maintenance and re-models, and also have done work and gone to school for air-conditioning/ mechanical. I have buit up a pretty substantial skill-set and can pretty much fix/ install/upgrade or replace most things you would find in a typical home. Appliances, plumbing, AC’s, water heaters, electrical, drywall, tile, counters, cabinets etc. would all fall into my general skill-set.
Basically, I have been breaking my back making a lot of money for other people for a long time, and I was keen to try my hand at house-flipping to make a little more money for myself for a change. I watch these TV shows where the bored housewife with too much time and money on her hands makes a 50K profit even after she contracts out most of the work to somebody else, and she barely gets her own hands dirty. I am frustrated watching this, because I could do 90+% of the work that goes into flipping a house all by myself- usually with much better workmanship and quality than the jokers I see working for the contractors on these shows.
So anyways, I have finally got all of the negatives on my credit report fixed/paid and/or totally-removed, and I was planning on spending the next year or so building up some good credit in anticipation of buying my first house to flip in mid-2009.
After coming across this blog, and reading some of it, I have reached a few conclusions…. ( please forgive me if they seem obvious or infantile- I know hammers and nails, not sub-primes and indexes )
1.) It’s just as well that it will be about a year before I am ready to buy my first house, because it seems- on the face of things- to be a lousy time to be flipping, as the added value of improvements-made would be likely to be offset by the loss-of value based on the falling market itself.
2.) Prices of existing homes seem to still be in free-fall, and are likely to continue to do so for some time despite what this Yun fellow says.
I realize that the days of wine and honey are over when you could buy a house and sell it for a tidy profit a month later without even doing any improvements are over. I accept that, and am not expecting that. But I DID hope that it would be possible to turn a profit by adding INTRINSIC value to a home by virtue of making actual improvements. My conscern is that it might not be possible at this time because of the precipitous drop in prices, and so I am wondering when is the right time to get in the game?
It seems like I should be waiting until the market is at- or at least near- it’s bottom, and until prices are at least stable ( if not rising ), and inventories come back into equilibrium with demand, that I should sit back and watch. Would you agree with that assessment?
There was a link to this article on drudge today that quoted William Cheney, cheif economist for John Hancock, as basically saying that the unrealistically high prices are holding back the market now, and that the sooner they come back to a level where prices approach normality again, the better, because that’s when transactions will start up again.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aTl43DELoLKI
So, I guess my questions are…
How much more will housing prices drop?- especially in my area ( Phoenix )?
How long will it take us to get there? 1 year? 2 years?
Once prices do get back to reality, can we expect a big upsurge in transactions? Is there pent-up demand that is just biding it’s time now?
Are these inventory gluts basically being caused now by unrealistic prices?
Should I wait to start flipping until housing prices start rising, or just until they appear to be stabilizing and hitting bottom?
Is flipping adviseable under any circumstances in the current market? How about in what the market is likely to be a year from now?
How would an overall economic recession affect the outlook for home prices?
It would appear that a recession is looking less likely than it once did. Do you agree with that assessment?
How would the outcome of the 2008 elections affect home prices and the outlook for an overall economic recession?
Looking at both scenarios- recession / no-recession- what would be your guess as to a median home price that represents the final bottom to the housing market before it stabilizes and starts to work it’s way back up?
Have we averted catastrophe and more-or less contained the fallout from the sub-prime situation with timely government intervention, or are the nightmare scenarios still likely/possible? A while back, I was hearing about another great depression based on a “perfect storm” of factors including defaults by mortgage re-insurers, lack of access to credit by would-be home-buyers due to lender restrictions, mass credit-card default, recession, energy prices, the sub-prime melt-down, the rapidly devaluing currency etc. etc. etc. Are we a year or two from being out-of-the-woods on home prices, or is there no bottom in sight because of the outlook for the overall economy?
Thanks so much for any guidance or advice that readers of this blog could supply as pertains to my desire to rennovate and re-sell existing homes in the near future.
Sorry if some of my questions seem silly, but I would rather take a little ridicule from those who are in-the-know on these matters than remain ignorant and make bad decisions as a consequence…
PS-
I am given semi-humorus pause by the fact that the ant-spam word I am required to type to submit this comment is “badidea”. Is that an omen of some kind? I hope not.
“What’s up with inventory levels …many of us expected the inventory to shoot up even more come this year as people ‘jumped back in for the Spring market.’”
The message on the streets of greater Phoenix is: houses are worth much less and bank-owned houses are difficult to compete against in terms of price. So, many people are simply not bothering to list their houses.
If your house is worth $200K and you owe $300K, even listing the house would be futile unless you were willing and able to pay the difference. I suspect that many high credit score, reasonably well-off folks are going to walk away as they learn the truth.
Despite its deficiencies, Zillow may play an important role in this process as people re-check the site as some sold REOs adjust the comps downward. Zillow is a few months behind, but the price declines are still noticeable.
Tyharris, you have many questions, but I want to make sure that you get a least a partial response. This site is an excellent resource for you. I would also recommend the Arizona/Nevada threads at Ben Jones’ Housing Bubble Blog.
I am not sure if 2009 will be too early (it probably will be too early), but slow and steady would seem like your best path. Why not just do one house at a time, and use that house as your primary residence? You get the utility of a residence, which would have to increase any profits, and you minimize risk if it is a modest house in an acceptable neighborhood.
“Are these inventory gluts basically being caused now by unrealistic prices?”
There are a variety of causes, but simply put, too many houses were built. Even if Arizona’s mythic, never-ending population growth never diminished (it is currently diminishing), there still were to many houses built for speculation purposes. As credit has tightened, speculative “value” is gone, and intrinsic value is all that matters.
“It would appear that a recession is looking less likely than it once did. Do you agree with that assessment?”
We are in recession now, and we will be in a worse recession in the near term. IMO.
“Is flipping adviseable under any circumstances in the current market? How about in what the market is likely to be a year from now?”
Let me be clear. If flipping means buying for retail and selling for retail-plus, I believe that is over for PHX and not returning until the bust is forgotten in 20 years. If searching through many houses, finding a rough gem and improving it are what you mean, then there may be a role for that a couple of years from now. There are many unknowns.