Very strong existing home sales reported this morning — the immediate reaction was for yields to tick up, and equities to head south. I assume the strength led traders to conclude the Fed has more work to do.
supply, of 3.03 million, near an all-time record (3.04 million in 1986). Median prices were up 10.6%
year-over-year to $209,000.
And that chart at right shows that this may just be a bounce off of low levels; Very often, sales get put off for a variety of reasons, and we may be seeing the prior 3 months unfinsished business getting put to bed — hence, the bounce.
As much as I mock the retailers for their weather dependent excuses, nice weather does bring out the home shoppers, and we have had a much warmer-than-usual
winter — especially January (those sales may not show up til February).
Here’s the specifics via the WSJ:
The National Association of Realtors said that sales of existing
single-family homes and condomiums rose by 5.2% in February to a seasonally
adjusted annual rate of 6.91 million units. Singe-family home sales rose 4.7%,
while sales of condominiums and co-ops jumped 8.8%.
According to Freddie Mac, the national average commitment rate
for a 30-year, conventional, fixed-rate mortgage was 6.25% in February, up from
6.15% in January; the rate was 5.63% in February 2005.
The national median existing-home price was $209,000 in February,
up 10.6 % from $189,000 a year ago. The median is a the price where half of the
homes on the market sold for more and half sold for less.
I think the working assumption in the pits and on the floor may be "so much for One and Done."
Existing-Home Sales Rose By 5.2% in Latest Month
WALL STREET JOURNAL, March 23, 2006 10:17 a.m.
Compared to January, the February bounce seems very strong. However, I think the more significant question is why did January dip so low.
These numbers are noisy. It’s best to look at the chart and squint so all the detail goes blurry. Watch the longer trends, and don’t obsess over monthly changes.
The real hill to climb comes now — during the spring selling season. Inventory has shot up around the country. Check out inventory stories in Phoenix, Miami, Boston, Sacramento, Tampa, San Diego, etc.
Transaction volumes are slowing down in some of these markets as well.
Does the market grind to a halt in the spring?
Do sellers balk at the low ball offers?
Will buyers and sellers agree to nominal drops in prices and keep the party going?
The year-over-year change on a quareterly basis was up from -2.882% to -2.824%. I’m not too excited. With the warmer January being the month that is usually one of the busiest for homes sales, we’re likely to see lower numbers ahead. Also, yesterday’s mortgage applications shows a coninual fall in numbers….. Mortgages, of course being the vehicle that people buy homes with.
buyers will get more motivated when mortgage rates tick higher to lock in while they can still afford their price point….
the marginal buyer who is driven by the cost of money will be the ones that really get hosed when the inventory build drives prices lower… check the “fire sales” by the homebuilders in the hot areas like PHX.
on cnbc the ceo of KBH despite trying to act bullish seemed very uncertain about the outlook. you could see it in his face. i think the word he used was “choppy” and implied that strength in Feb could be offset by weakness in Mar.
my question is when will the higher inventories take their toll on pricing? doesn’t make sense that inventories remain high but yoy prices rose.. if the free market is alive that should change.
we forget that this huge boom in housing was driven by cheap money and not by fundamentals.. that’s why it is a bubble
“doesn’t make sense that inventories remain high but yoy prices rose…”
Actually, it does make sense. Here is how: the price reported is always the median price. As ARM rates have risen, the first buyers to be squeezed have been the marginal buyers. It has been suggested that this squeeze has shifted the median price higher — because the less ARM rate sensitive buyers are still buying.
thanks mr curious, that does make sense… but also that same marginal buyer was inflating prices last year by buying more house than they could otherwise afford. it seems like it would work both ways but i haven’t looked at the data close enough to determine.
by the for those interested, check the chart of YRCW v the JOE or DHI and TOL.. then check v AAPL and GOOG. interesting how these seemingly uncorrelated sectors chart the same. many analysts noted “inventory adjustments” at YRCW’s 2 largest customers, WMT and HD. liquidity driven consumption binge?
It was a great day for the homebuilders, if you happen to own them. Also a great day to write calls against those same homebuilders.
The real test comes tomorrow, with release of new home sales — “reported at the time of contract signing not closing,” etc., etc.
“It has been suggested that this squeeze has shifted the median price higher — because the less ARM rate sensitive buyers are still buying.”
True, but this will continue for only so long. The bottom is about to fall out from this real-estate ponzi scheme. BTW, has anyone seen the MLS for-sale inventory numbers from Phoenix? Up over 350 % since 7/20/05….ouch!
“BTW, has anyone seen the MLS for-sale inventory numbers from Phoenix? Up over 350 % since 7/20/05….ouch!”
YES, MR BUBBLE, I HAVE. IT WAS AT 4500 7 MONTHS BACK AND NOW SITS AT 33,000. OF COURSE, YOU DON’T SEEM TO KNOW WHAT THAT MEANS, SO HERE IT IS: Equallibriam is about 6 months supply and we are now there. Many “listings” will soon come off either by expired or voluntary as many simply threw their home out for sale at unrealistic prices (on purpose). Rates remain low on an historic basis. The inventory is also being reduced by actual sales, as well. In short, we had many people list all at once and many will change their minds just as fast. (we have seen little retracing of price at this moment)
Equilibrium ! (LOL)
The reason that rising inventories has not caused a decline in prices is a combination of several factors.
It is likely that starter level buyers are fading, leaving a higher priced median. However, the more significant considerations are that the inventory, while rising, is not excessive yet in most places. But it soon will be. There is also a lag efect in buyer and seller reaction to these shifts. Further, we are still in the quiet off-season for housing sales. The strength of the market will be severely tested in the next few months as we enter the active season with a large and growing supply of homes for sale. The changing supply and demand balance will likely tip the scale soon.
All the pro-real estate spin I’ve heard lately feels like “whistling-past-the graveyard” to me.
Lets see: long rates going up, short rates going up, inventory levels going up (and accelerating), a large % of exotic mortgages resetting in the next 6-18 months, layoffs starting to heat up in this real-estate driven economy of ours, homebuilders incentivizing or flat-out undercutting prices. Hmm, no problem here. I’ll just take my home off the market and relist at full price in the summer when things will be “back to normal”. Maybe I’ll have to throw in a plasma T.V. and granite countertops to seal the deal. Yeah…that’ll work.
BTW, will FNM EVER file their financial report? Good to see the NYSE is kind enough not to delist them. Wouldn’t want to scare all the sheople.
Buying homebuilders is just ridiculous right now. The market believes that the Fed wants to kill the housing boom, which is why bonds sold off today. Why would you invest in something the Fed wants to moderate?! Tomorrow’s #s will be interesting…
An interesting way to play the crash from WSJ
S&P Will Launch
Indexes to Track
By KAREN TALLEY
March 23, 2006; Page D2
Investors who think the housing bubble is about to burst will soon be able to bet not only on when it will happen, but where.
Standard & Poor’s, a unit of McGraw-Hill Cos., is rolling out 10 indexes that will track housing prices in various regions of the U.S., as well as a composite index. The indexes, which plan to launch in April, will serve as the basis for futures and options contracts that will trade on the Chicago Mercantile Exchange.
The contracts will allow investors to go long or short on a specific housing market — that is, bet on it rising or falling in value.
Dubbed the S&P/Case-Shiller Metro Area Home Price Indices, the 10 cities comprise Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington, D.C.
The composite index will be weighted, with New York, for instance, carrying more influence than Miami because the Big Apple has higher housing values and more homes.
“Obviously all this talk about housing bubbles is going to enhance interest in the product,” says David Blitzer, chairman of Standard & Poor’s Index Committee. But he adds the indexes are also meant to serve as a reliable source of information about what is many consumers’ most valuable asset.
The indexes will use calculation techniques developed by economics professors Karl Case and Robert Shiller, such as repeat-sales calculations and a database comprised of home sales from a variety of sources, including lenders, multiple-listing services and public records. Data will be gathered continuously, and the indexes will be updated and published monthly, Standard & Poor’s said.
Futures contracts obligate an investor to buy or sell an underlying asset on a certain expiration date at a fixed price, unless the investor makes an offsetting trade beforehand. Options grant the right, but not the obligation, to buy or sell an underlying asset at a fixed price anytime before expiration.
Write to Karen Talley at email@example.com
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As existing house sales tick up, new house sales drop 10%, the biggest drop in 10 years. Ouch.