Sales of existing homes surprised to the upside yesterday. But one data point does not make a trend. This is the first rise (sequential monthly change) after 5 straight months of falling Home Sales. And that’s before we examine the data.
Before you declare the end of the housing slow down, consider:
– Existing Home sales actually slipped vs. last year by -0.7%; The reported gain was over last month’s data;
– the Inventory of unsold homes soared 7 percent in March, hittting an all-time record; There are now 3.19 million existing homes for sale, or 5.5 months’ supply; That’s the largest inventory since July 1998
– Existing homes edged up 0.3% last month to a seasonally adjusted annual rate of
6.92 million units; (we know that seasonally adjusted data is not always accurate)
– Year over year, the Northeast and Midwest gained, while the previously hot housing markets in the South and the West slipped;
– median home prices are still rising, albeit nmore slowly — up 7.4% year over year, to $218,000.
Here’s a data point that has me scratching my head: Why are there different numbers for the year-over-year changes for seasonally and not seasonally adjusted? Was this March somehow in a different season than last year’s March? I am perplexed.
Note that data for existing home sales comes from National Association of Realtors, a group that is certainly an interested party; Of course, as a homeowner, investor, and someone with a public bearish tilt for the second half, I’m hardly objective myself (hey, I try). But this oddity — down -0.5% for the not seasonally adjusted year over year versus down -0.7% for the seasonally adjusted year over year — is beyond my comprehension.
So much for the hard data on existing sales; Today, we get New Home Sales. Recall our prior admonishments that monthly New Home Sales Data are unreliable; look instead to a moving average.
Let’s move onto some anecdotal evidence. A friend writes:
"Flop! Wow, KB running blue light specials in California. Not surprising,
Chico area was rated one of the most overvalued markets in the country. Houses
in the $200k space. When was the last time you saw that in California? "
Here’s the sales pitch:
"Oak Knoll Place in Live Oak is located in a beautiful
community near the majestic Sutter Buttes. With easy access to Highway 99, it is
ideally located for easy access to Sacramento, Lake Tahoe, Reno and a wide
variety of recreational opportunities. Yuba City and Marysville are
approximately 10 minutes south, Chico is approximately 35 miles north and the
Gray Lodge Wildlife area is approximately 10 minutes west. Live Oak has a
quaint, small-town atmosphere with many nearby recreational water activities,
including the Feather River, Yuba River and Sacramento River. Prices starting
from the High $200’s."
I don’t know Live Oak, but houses like that in California are hard to imgaine . . .
More after the jump.
Existing-Home Sales Rise Again in March
NATIONAL ASSOCIATION OF REALTORS
WASHINGTON (April 25, 2006)
Existing Home Sales data
NATIONAL ASSOCIATION OF REALTORS
Here’s another example of price cutting on New Home Sales:
25 new homes ready for move-in. 25 incredible
One weekend to see it all. Saturday,
April 29, and Sunday, April 30, 10 a.m to 7 p.m.
The biggest homebuying event of the season is here! KB Home is holding open
houses at 25 new homes ready for move-in. Tour as many homes as you like and get
friendly, personalized service. With a variety of neighborhoods, styles, and
prices from the $300s, there’s incredible value waiting for every new
You’ll also get a $10 Target GiftCard just for stopping by. And if
you purchase a ready-for-move-in home during the KB Home 48-Hour House Hunt,
you’ll get a $1,000 Target GiftCard.
This amazing event features homes from 7 KB Home communities throughout the
greater Sacramento region. The homes are priced from the $300s, and many have
great features already built in, including:
• brand-name appliances
hardwood and tile flooring
• large kitchen islands
• master bath
• upgraded backyard landscaping
Don’t miss this opportunity to see all of our open houses in one weekend! For
detailed 48-Hour House Hunt listings, click here.
Participating KB Home communities include:
LIVE OAK — Oak Knoll
OLIVEHURST — River Glen
LAKE — Cobblestone
— The Hamptons
SACRAMENTO — The Hamptons
SACRAMENTO — The Hamptons
YUBA CITY — Walnut Park
Spend a 1/2 million dollars, get a Target gift card!
Dead cat bounce.
Haven’t been up that way in over a decade but Live Oak is (was?) a small, rural upper central valley town – mostly agricultural as I recall but I could be mixing it up with Yuba City. The only major urban center and job market I think would be Sacramento and that would make a fairly long commute – 50 miles or about an hour in good traffic (which you probably won’t get given the growth of exurbia) – but I knew people in So Cal who would drive that far and more if it allowed them to afford their own home: 4 hours or more round trip in heavy traffic, every day. $200K seems about right for that dubious privelege.
Perhaps the difference in seasonally adjusted numbers for March-over-March data has something to do with Easter being in April in 2006 and in March in 2005. That has a big affect on most retail data, though I don’t know if it affects housing seasonal data.
The market has slowed down ALOT. I live in an area on the National Historic Registry. Many times homes sell without even being listed. The market is saturated with homes for sale. In twelve years, I’ve never seen anything like it. And many have been on the market for nearly a year representatitve of sellers not budging on price. I don’t live anywhere near a bubble area. In fact, in a national survey, the general market around this area is “undervalued” by 12%. This is NOT a coast phenomenon. I believe it IS fueled by bubble pumping in the press that has created somewhat of a buyer’s freeze. With the equity markets at all time highs and employment as strong as it was a year ago, prospective home buyers will likely start coming in to the market at some point. ie, They won’t wait forever if they are serious home buyers. The good news is people have a short memory and the press does too. So, after they quit babbling about this, maybe we can get back to a more reasonable demand picture. But, the supply picture is what concerns me. Plus, there seems to be some anecdotal evidence to alot of people listing to try to get out at peak pricing.
The coastal condo market may not be so lucky. I read where Miami has more condos online or coming online for sale than the total amount sold in the last nine years or something like that. Uh……..Is this one of those pigs get slaughtered things?
There is no possible way to classify California as one real estate market. There are many. Bay Area, San Diego, Central Valley, Los Angeles, Sacramento, Wine Country, etc. I just received a letter from a SF realtor where business is brisk and multiple offers are back.
Chico (college town) was red hot in 2004 & 2005, even though there was little job growth. Now, it is not.
Exurbia will suffer the worst from higher gas prices, and the anecdotal evidence cited above cuts right to the chase. If you have an hour commute each way to your cube farm, inexpensive McMansions in Exurbia don’t seem like such a good value.
There are those who say that this is just a preview of things to come. They predict that when gas prices get really high the Exurbs will be abandoned. Picture deserted, treeless subdivisions littered with rusting Hummers looted for scrap metal. Ha!
Mobile workers and flexible work arrangements are helping to fuel the exurbia boom. That will only continue as we become more interconnected via this tremendous technology explosion. There are already millions of workers who have no concept of piling in the car and heading to some edifice. We had senior executives who have moved out of New York to golfing communities in Arizona because it didn’t matter where they lived in today’s world of global business.
We are even seeing call center technology that allows workers to work out of their house. The company saves tens to hundreds of millions by no longer needing office space and infrastructure, productivity rises because the employees have more quality time and customer satisfaction improves because you are dealing with a happy worker. Who, as an aside, now has an additional 5-15 hours a week in quality time with their family not spend getting ready for work, the commute, set up time, etc. This will only continue. Whether it is flexible work hours, the ability to work remotely or the absolute removal of any requirement to work out of an office. Hell, our offices are a convenient Starbucks in whatever city.
Oh, and if oil goes to $100, you will see demand evaporate and the price will ultimately collapse. There is no long or short term issue with oil. While it may sound counter intuitive, there is more evidence that gasoline is driving oil than the other way around. Tight refinery capacity, which has been an issue, even when oil was $10, has allowed the traders to drive up the price of gasoline in the seasonally strong period. This gives oil traders an excuse to drive oil up without hurting the margins of the refiners. May never go back to $10 but……….who would have thunk $10 in 1974? That’s more like $2-3 dollars in 1974 terms.
“Picture deserted, treeless subdivisions littered with rusting Hummers looted for scrap metal. ”
I THINK THIS GUY IS TALKING ABOUT PHOENIX. LOL
“They predict that when gas prices get really high the Exurbs will be abandoned. Picture deserted, treeless subdivisions littered with rusting Hummers looted for scrap metal. Ha!”
Problem is, where are they going to go unless prices also fall in the suburbs or city? It’s not like they can save money by giving up their $500-700k McMansion in a Jersey exurb so they can move into a $500k-700k one bedroom in Manhattan or Brooklyn.
And even if gas prices doubled to $6, that’s only a few thousand dollars more a year for most people. Sounds big, but in the realm of 100k+ family incomes its manageable. Buy less crap, give up some golf games, get a smaller car. Much less drastic steps than moving.
Another point to ponder is what are the prices actually telling us ? As reported they reflect median prices so if higher-priced homes are moving more briskly the price will shift. They’re also list prices and don’t reflect adders in the contract, e.g. $50K of improvements buried in the T’s &C’s.
I owe these points to Irwin Kellner of MarketWatch. The article URL doesn’t appear pastable but he’s on the site and readily available by backtracking.
This one’s pretty simple actually. Existing home sales are recored at actual closing, whereas new homes are booked at the order point. So existing are a lagging indicator whereas new are a leading indicator.
Also, this is the beginning of the listing season. Watch inventories closely into the summer…if you still see a build, the fall is going to be painful for the Californicators.
Prices may start in the high 200s for this development but I suspect strongly that the home pictured is priced in the low to mid 300s…
Live Oak could fairly be considered commuting distance to Sacramento (about an hour) while Chico which is an additional half hour to the north would not. Live Oak is a tiny valley town with nothing to attract residents other than it’s proximity to Sac, affordable housing and possibly some decent fishing.
Chico, on the other hand, is a college town with lots of culture, beautiful girls everywhere you look and, most important, the Sierra Nevada Brewery. In other words it’s a nice place to retire (also has one of the biggest municipal parks in the nation) or to possibly enter into some type of cottage industry. I believe it’s been considered drastically overpriced due to a lack of local jobs but compared to Sacramento or the Bay Area where most people are coming from, it’s still a bargain. So for people looking to simplify, cash out, or just check out of the rat race, it’s ideal.
See itulip.com. The rural areas will be in trouble first, and some already are, with the rising gas prices. The long commutes plus rising ggas costs equal can’t afford the house anymore. There will be infill back to urban areas, that’s why you’re seeing San Francisco doing brisk business…
Nice that the rich execs can still live wherever they like, but it doesn’t work that way for most of us, really…
Get a Beamer
This is funny (even CNBC ran with that ball yesterday)Developer Hopes To Get Mileage From BMW OfferCoupled with this and the action in the bonds that has been discussed here ad nauseam, I really do not understand the stock markets resilience. Of course,
Here in northern Nevada, my in-laws just top-ticked the market. They sold a 30 year old house on an acre of land, bought in 2001 for 135K, at 370K.
Nice to see California softening up–fewer migratory retirees with cash to burn invading our markets. There are huge swathes of development in the Reno / Tahoe area where 1 out of every 3 homes is an investment property.
It’s gonna be ugly…
Everyone has a different perspective on what exactly is going to happen and how bad. I guess no one buys that the housing market is a boom/bust cycle that has gone on since the beginning of time and yet we’ve managed through mini messes before. Condos, well, there is a supply glut. Single family homes….Alot of it depends on many factors that are simply too complex to predict. Including the future of commodity and energy prices, their effect on the global economy, interest rates, the dollar, inflation, etc, etc, etc. So far housing is holding up quite well everywhere. Supply has increased but that may be explainable on many short term factors. Not all end in doom or gloom. But, bubbles, if this is one, don’t come to pass in weeks or months.
To think San Francisco will be spared because people will move back based on unknown future energy prices is a stretch. That is akin to saying people are going to move back from NJ to NY City or Winnetka to Chicago, etc. There is an extremely high probability oil will be significantly higher or lower in a year. History always says lower at such commodity pricing extremes. San Francisco and SV housing was totally decimated the last time we had a whiff of this mess. I find it hard to believe people are going to sell a $300K house to buy a smaller $800K house to save an extra $1000 a year in fuel expenses that may even evaporate. That is, even if they could afford to do so. San Fran’s population has been stuck in neutral for a long time and from what I’ve seen, the speculation/lack of affordability is only matched by a handful of other cities.
77% of Californians live within 30 miles of the ocean. The interior gets quite hot in the summer. The rest of the state is much more moderate, although resort areas can still be expensive.
BTW, you do know why they call it “Sac” don’t you?
Because you’d have to be nuts to live there!
My roommate is a realtor, he tells me all of the tricks they use to cook the books, including but not limited to, frequently relisting at a lower price to shorten time on market. Removing them all from the market after sales on the same day so they can point to the huge jump in sales, using YoY or non seasonally adjusted depending on what they’re trying to get across. They’re going to start using two year figures as soon as yoy go negative.
“This house has appreciated 40% since Jan 2002!”
Even though it was up 50% a year ago.
Cheap houses are *not* difficult to imagine in California, it is a very big state. The population is concentrated in a few regions.
Sacremento is a secondary region with nice houses under 300,000 and the place losted is a long commute from there. Go a little further north and it gets cheaper and cheaper. Or east.
Nothing much to add to the above excellent comments except to reiterate that all California real-estate is not created equal.
You cannot compare the RE market in greater Sacramento with Orange County, LA or the Bay Area.
Here’s an interesting inside view of the NAR data…
Live Oak is a shithole in the middle of nowhere
Your comments that this is due to the ‘bubble’ stories in the press… seems a bit off. Also, the utopian.. it doesn’t matter where you work… not quite here yet either.
Who wants to live out in the middle of nowhere. If anything, I see more californians leaving for Vegas than the central valley.
I would like to see the rates on births over the last 5-6 years. How many people out there are starting families? I would also like to see how much salary is required to pull a 1 million dollar mortgage on a typical house in the SF Bay area?
The problem is not the deman side. The problem is the price of housing. This is yet another game with mass participants who will get fleeced… the rural areas will go first.
My concerns are this: how do we maintain our capital during this next phase (dollar value, commodity boom, possible bond and stock market drops, etc.)
Remember that there are only 28 days in February vs. 31 in March. Approx. 10% difference, which could account for why sales were up in March over February. Maybe this also contributes to their “seasonally adjusted”?
Hey, I particularly like the BMW touch…I mean, after all, who would bother getting a lease on a BMW for two years, when you could fold it into your mortgage and pay on the same 2 year lease for the next 30 years….
STOP the press, sign me up…this is so good it deserves some numbers…dontcha think? Correct me if I am wrong, but isn’t that about 252.00 extra dollars a month for the next 30 years ($90,720) for the privilege of that two year lease…ummm, did they mention an option two?
Apparently, piracy REALLY is legal. Oh the joys of usury…I wonder how many idiots bought into that one? When I grow up, I want to be a developer…
I have 2 new homes in Oroville California. 5 acre parcel. Both homes were constructed in 2004. One home is 2100 sf with 600 sf attached garage. The other is is vacation or monthly rental and produces extremely well. I have a zero edged swimming pool and am will to carry back a 100 grand second that can be applied for down payment or instant home eq loan. 7.625%, 30 year fixed, no balloon, no pre pay penalities. I am asking 779k. I think it is a deal. What am I doing wrong? This is an absolutely beautiful mountainside view property with no thru traffic. Any suggestions would be appreciated.
Absolutely a beautiful and profitable property.