The National Association of Realtors announced Existing-Home Sales today. The data is consistent with our expectations of softening sales and prices and increased inventory:
• Total existing-home sales slipped 0.5 percent in August; This was 12.6% lower than August 2005;
• National median existing-home price for all housing types was
$225,000 in August, down 1.7 percent from August 2005 when the median
was $229,000. . .
• The drop in prices is the first year-on-year decline since 1995, and is the second-largest decline in the 30-year history of the survey;
• Total housing inventory levels rose 1.5 percent at
the end of August to 3.92 million existing homes available for sale — a 7.5-month supply at the current sales pace. This is the highest supply
since April 1993;
• Sales have now declined for five months in a row and 9 of the past 12 months;
• Existing home sales weakness is similar to the New Home Sales report last week , which showed construction plunging by 6% in August; New Home Building activity has returned to leves seen in 2003.
As we noted last month, there are a variety of reasons Why Don’t Big Housing Sales Drop Produce Big Price Drops. Suffice it to say, the data assmebly methods leave something to be desired.
I continue to be impressed with the disconnect between Housing and the Equity markets. Its pretty clear the bond markets get it, as have the commodity markets. Equity markets, on the other hand, are still contemplating some sort of a a soft landing / Goldilocks environment. Well, someone will be right and someone will be wrong . . .
The WSJ’s Marketbeat noted a disconnect between "today’s figures on sales of existing homes and other data from the
National Association of Realtors:"
"Richard Iley, senior U.S. economist at BNP
Paribas, goes so far as to say today’s figures are "suspiciously strong." He
notes that the NAR’s index of pending home sales is down 11% in 2006, while
existing sales are down just 4%. The year-over-year rate of decline in
existing-home sales is 12.5% through August, but the pending index, as of July,
was down 16%. "Expect catch-up in the ‘official’ NAR resale numbers next month,"
Mr. Iley wrote.
The existing-home-sales report’s headline number — that sales
had only fallen 0.5%, better than expected — buoyed the stocks of homebuilders
after it was released at 10 a.m. EDT. But those stocks fell sharply thereafter,
as the underlying data still remain weak…
Mr. Iley also notes that the housing-price decline is likely to
hurt consumer spending. Mortgage-equity withdrawals, which consumers have used
in the past several years to finance spending, have declined. According to last
week’s Fed flow-of-funds data, mortgage-equity withdrawal sits at 1.5% of
household disposable income, the lowest since the 2001 recession. Lower home
prices won’t help that, and prices could stay under pressure as more houses go
unsold — 7.5 months’ worth of supply is on the market now, the most since April
1993. "As the rate of house-price inflation continues to fall and heads into
negative territory, this wealth spigot is not only being turned off, but may
move into reverse," he said."
Most astounding of all, the National Association of Realtors somehow spun the data as Bullish:
David Lereah, NAR’s chief economist, said home sales appear to be leveling out. “After a stronger-than-expected drop in July, the fairly even sales numbers in August tell us the market is at a more sustainable pace,” he said. “It keeps us on track to see the third highest sales year on record, but we do expect an adjustment in home prices to last several months as we work through a build up in the inventory of homes on the market.”
Kevin Depew pointed out the absurdity of this:
"Just ask the chief economist for the realtors group: ‘The price correction is a welcome development,’ he said, because it stops the bleeding. ‘Sales have hit bottom,’ he said. ‘Sellers are finally getting it.’ "
Given that Realtors routinely describe tiny apartments as "cozy," and manage to use the phrase "Handyman Special" to describe houses which you and I would call "shit-holes," perhaps we shouldn’t be all that shocked by any spin from the group’s chief economist . . .
UPDATE 2 September 25, 2006, 8:08pm
Via Mike from interest rate round up, these 2 charts show the price drop and inventory rise:
UPDATE September 25, 2006, 1:45pm
The Canadian Globe and Mail points out that U.S. house prices could drop another 10%:
Stéfane Marion, an economist at National Bank, disagrees with the NAR’s
statement that the faltering U.S. housing market has hit a trough and prices
will start climbing again. "In our opinion, this forecast is way too
The inventory of unsold U.S. homes climbed 1.5 per cent in August to its
highest level since April, 1993. That surge, Mr. Marion said, has changed the
dynamic of the housing market, but houses are still too expensive for many
people . . . Even
at the current reduced price of around $225,000, it is important to keep in mind
that the median single family home is still selling at 3.7 times median-family
Existing-Home Sales Down With Softening Prices
National Association of Realtors, August 23, 2006
MarketBeat: House of Pain
Housing Prices On the Decline
David A. Gaffen
WSJ, September 25, 2006 12:00 p.m.
Existing Home Sales Bullish!
Minyanville, Sep 25, 2006 10:11 am
Why Don’t Big Housing Sales Drop Produce Big Price Drops?
The Big Picture, Friday, August 25, 2006 http://bigpicture.typepad.com/comments/2006/08/why_dont_big_ho.html
U.S. house prices could drop another 10%
Globe and Mail (Canada), September 25, 2006 12:00 p.m