Existing Home Sales, Prices Fall

Existing Home Sales and Prices continue to fall, according to the latest release from the National Association of Realtors. Existing Homes Sales fell in 38 states, led by steep declines in Arizona, Florida and California, as once-booming housing market showed further signs of a steep

The WSJ noted that "the declines were the largest in once-booming areas of
the country. Sales fell by 36% in Arizona; 34.2% in Florida and 28.6%
in California. In all, nine states had sales declines in the summer of
20% or more compared to the third quarter of 2005."

The NAR also noted weakness in sales in metropolitan areas. According to a separate
survey by the Realtors group  in 148 metropolitan areas, price surveys
showed that the median — or midpoint — price for an existing home
sold in the third quarter dipped to $224,900, down 1.2% from a year

In my experience, the reported median sale drop of 1.2% simply does not accurately reflect reality; I suspect it is being biased upwards by "trophy" property prices prices and other adjustments.

Warning: Anecdotal story to follow

Last summer (’05), we looked at an out-of-our-price-range 7 figure plus property. "Its for comparison purposes only" said the Real Estate Agent.

Of course, Mrs. Big Picture fell in love with it. Sunken living room, gorgeous kithcen, fireplace in the Master BR, huge piece of property, just a 5 minute walk to the L.I. Sound. We heard thru the grapevine that a deal was had, fairly close to the asking price. Comparables on the same street had gone in the nines and better.

But the deal fell apart,  and the house went back on the market. We watched it over the next 14 months on line at MLSLI, as the sellers chased the market down: $50k off, then another $40k then another $60, and then another and another. The price eventually fell 20% from original asking price.

I asked the agent what the repsonse would be if I offered yet another $50k less than the re-reduced price. She said: "They would jump on it." We would then have to figure out how to sell my more modest home between Thanksgiving and Xmas. (yeah, good luck with that).

In speaking with other agents and watching the online listing of prices drop, its apparent that this was not a unique situation. Prices continue to drop, and a whole lot more than the 1.2% the NAR is revealing. Prices are falling rapidly due to what can be euphemistically described as "motivated" sellers. Maybe this helps explain some of the reason why: Foreclosures spiked up 42% in October (year over year).

Perhaps the usually hallucinogenic David Lereah, the Realtors’ chief economist, got it is right this time: "With the market
in full transition, buyers now have choices
[read: more inventory] and sellers are more
willing to negotiate
[read: desperate]. Under these circumstances, it’s no
surprise that overall home prices are slightly below a year ago."

As the admittedly anecdotal example shows, "slightly" is a slight exaggeration . . .


Total state existing-home sales

Third-quarter metro area single-family home prices

Foreclosures spike in October, Up 42% over a year ago; Colorado, Nevada and Georgia lead.
Les Christie,
CNNMoney, November 17 2006: 9:12 AM EST

Leading Economic Indicators Inched Higher in October
November 20, 2006 10:49 a.m.

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What's been said:

Discussions found on the web:
  1. Mike_in_Fl commented on Nov 20

    Just in case you missed the story here in the Palm Beach Post (West Palm Beach, FL) yesterday, at least one home builder has been dramatically slashing prices to move inventory. The discounts: up to 51% off previous listed model price. An excerpt …

    “That means residents such as Mark and Kim Andersen, who locked in $506,400 when they signed a contract for their five-bedroom home in early 2005, are living just down the street from a nearly identical five-bedroom home that Lennar sold to another buyer for $250,000 in late October.”

    Here’s the link to the whole story:

    Granted, we are in one of the absoulte bubbliest markets and other parts of the country are not as bad off. Granted also that this is just one builder in one subdivision. But similar things are happening all over this state and all over the country. I agree that the median price measures understate the magnitude of the declines we’re seeing (once all incentives are factored in).

    Lastly, even if you accept the median price stats at face value, the news still stinks. Median singe family home prices just fell in September by the largest year-over-year margin (2.5%) in recorded history, per the National Association of Realtors.

  2. Donaldo commented on Nov 20

    Home sales prices, I believe, don’t take into account the incentives offered by the sellers. If the seller sold a home for $500k and offered a $50k BMW along with it. The sales price will still be recorded as $500k even though it is effectively $450K for the buyer.

    And incentives are plenty in this market!!

  3. brion commented on Nov 20

    it does seem that a quiet rout is taking place with regards to house prices here in SoCal…Lots of price reductions, lengthy DaysOnMarket,expired listings and cancellations. Realtors still attempting to paint pretty pictures for the few buyers out this time of year, but you can feel it in the air….buyer disinterest.

  4. Michael C. commented on Nov 20

    From Tony Crescenzi on RM:

    Home Is Where the Cash Cow Lives

    By Tony Crescenzi
    RealMoney.com Contributor
    11/20/2006 1:24 PM EST

    Home-equity loans increased for a ninth consecutive week last week, up a smidgen to $466.1 billion from $466.0 billion the previous week. The steady increases indicate that households are once again turning to their homes to obtain cash.

    This suggests that home values have not fallen by enough to cause an implosion in this key lending category, which is something that many in the bear camp have been expecting. That said, recent gains have been small in comparison to the $100 billion increase seen in the year ended June 2005, when home equity borrowing began to fall.

    Still, the lack of a significant contraction in home-equity borrowing reinforces the notion that there has not yet been any meaningful spillover from the weakened housing market into other sectors of the economy.

  5. mojave commented on Nov 20

    Warning: anecdote ahead. True story tho – good friend finally sold their nice house in a nice San Diego neighborhood at a net loss (after selling costs, etc). They bought the house in mid ’04. Everything I read tells me that only those who bought at the “top” in late ’05 are underwater. Hmmm.

  6. Cherry commented on Nov 20

    Yes, recent “gains” are no gains. Give me a break. Simply flat and soon to be dropping. Get the clue Tony. That is a spillover.

  7. Estragon commented on Nov 20

    Michael C.

    Hmmm… Rising HELOC debt and a downward trajectory on house prices. It’s all fun and games until someone loses an eye.

  8. Brad Rundbaken commented on Nov 20


    When you use median sales price for a large numbers of sales it is difficult to see price change. Also the realtors are famous for taking a listing off the MLS and then relisting it with a lower price. Then you have the builders incentives and sellers paying closing costs not factored into these numbers.

    On my website at http://www.charlestonmarketreport.com I track existing home sales, building permits, foreclosures, inventory and interest rates to give readers a macroview of the local market. All of these indicators are in unfavorable status right now.

    Q3 2006 is looking very similar to last real bad real estate market we had in the early 90s during the recession. Some speculators, builders and investors are in deep trouble with multiple mortgages and no buyers in this market. The 4th quarter is only going to get worse due to the holidays.

    I hope it picks up in the spring.

  9. dryfly commented on Nov 20

    I asked the agent what the repsonse would be if I offered yet another $50k less than the re-reduced price. She said: “They would jump on it.” We would then have to figure out how to sell my more modest home between Thanksgiving and Xmas. (yeah, good luck with that).

    We’ll know the RE industry is fully with it when they not only cut price, finance and offer incentives… but also take ‘trade-ins’ to cinch the deal.

    Then it will be a profitable and sustainable as automobile manufacturing.

  10. semper fubar commented on Nov 20

    Then, Barry, who’s to say you shouldn’t offer $100k less or $500k less, or what the heck — $3 million less? The sharp edge of the falling knife cuts deep, doesn’t it?

  11. Barry Ritholtz commented on Nov 20

    More like 1mm, not 3.

    Also, I have found in any deal, I don’t want to extract every last penny, but rather, find a price that represents a good deal for everyone —

    You never know when you may need a concession down the road (post engineer) so starting out in the same ballpark as the seller is a better way to go — there is a lot of ego tied up in selling your home.

    Note: this is existing sales data — not new

  12. Richard commented on Nov 20

    i’m seeing some stability at -10% off peaks in the starter home range ($500-$700k) in NJ commuter towns like Westfield and Summit. then again i have a relative that is trying to sell an existing house in Plainview Long Island. listed in early July at $759k, current price $689k but was under contract that just fell out at $655k and they’ve already closed on their new place.

    the market health isn’t just local, it’s gotten more granular down to the price point and section of a particular town.

  13. lola commented on Nov 20

    My friends who are selling in West Hollywood CA are still seeing HUGE profits. There has been no downturn yet. Price of two bedroom condo in my building
    2001 150,000
    2002 175,000
    2003 250,000
    2004 325,000
    2005 425,000
    2006 550,000 (10 days ago)

  14. Cherry commented on Nov 20

    I bet so Iola, I smell Troll all over your post because my “friend” tells me different.

  15. anon commented on Nov 20

    Well lola, since you have the data you won’t be surprised once prices for 2 bedrooms in your condo return to $150,000 (plus inflation if you’re feeling generous).

  16. steve commented on Nov 20

    Re your comment that median price decline of 2% biased by a few trophy properties. I think you’re confusing mean and median. A few trophy properties wouldn’t affect median price, though they might affect the mean.

  17. lola commented on Nov 20

    No really I’ll give you the adress and you can look up the tax records on the parcel viewer.

  18. traderb commented on Nov 20

    property boom still in full-force over here in the UK…from what I’ve seen, your average london flat (apartment) is up 15-20% from last year, and prices in london are being reported up 1.5-2.0% a MONTH over the last couple of months. there has been no let up for a long time. (and don’t call me a troll, i’m fully bearish!).

    and from what i read, US property prices seem reasonable compared to london…your average/nice/OK 2 bedroom apartment, of say 900-1000 square feet in an ok area of london, is ~$1mm (£500-600k). and trust me i mean average.

    give me a McMansion in florida any time!

  19. seattle guy commented on Nov 20

    This is also completely anecdotal, but prices are definitely not falling everywhere.

    A friend of mine just sold her condo here in Seattle for full price. After 8 days on the market. No gimmicks or giveaways or funky stuff. PLUS she just emailed me to say a second full price offer has come in today.

    Now I have heard that prices here are “flattening”. And the place my friend is selling is in the “affordable” range (under 500k) which is still in pretty short supply here in town. But she is thrilled and is getting a lot more then she paid just 4 years ago.

    So take that for what it is worth. As a renter, I am still hoping for prices to actually come DOWN so I can buy!

  20. JWC commented on Nov 20

    Parents of a friend just sold their home. It was placed on the market on a weekend (September) and they had four solid offers the first week. However, as the previous poster, it was in a moderately priced neighborhood. They had been in their home over 35 years, and set the list price as per the realitors advice. I didn’t ask the price, but would guess from the area that it would be $150,000 to $200,000. Surely, not more.

    On the other hand, in the neighborhood where I live ($300,000 to $500,000) there are several homes that have been on the market for quite a while and not sold, some of which have “reduced” on their for sale signs. This is the midwest, so these are upper tier homes, but not “top” tier.

  21. David commented on Nov 20

    Prices in Seattle are certainly stickier than a lot of us renters would prefer–I agree with Seattle guy about that.

    But I also suspect (memory fails somewhat) that Seattle remained gung-ho about the dot-com craze longer than many places, also.

    In other words, I think Seattle’s exceptionalism is likely a temporary phenomenon. They are still buidling (esp. condos) like its 2003 …

  22. my1ambition commented on Nov 20


  23. dryfly commented on Nov 20

    I see a lot of homes selling in my neighborhood – but that isn’t a ‘bullish’ sign… I live in an older lower cost part of town & people moving in are often times ‘stepping down’ not ‘up’.

  24. Eclectic commented on Nov 20

    Here, BR… here’s a little entry for all our housinistas:

    “Crow Almondine”

    6 large crow, dressed birds on ice (or can substitute 12 dove or snipe split down back)
    1/4 cup flour
    Salt and pepper
    4 tbsp. butter
    1/2 cup white table wine
    2 tbsp. lemon juice
    1/4 cup blanched, sliced almonds
    Dust quartered crow portions in flour seasoned with salt and pepper. Melt butter in a heavy skillet or electric frying pan and saute birds until nicely browned. Add wine and lemon juice. Cover and continue cooking slowly for 15-20 minutes. Add almonds and cook for 5-10 minutes longer or until birds are fork tender. (Allow 2 crow quarters per serving; 4 dove or snipe.)

  25. Mike commented on Nov 20

    Am I reading this right? Home prices dropped 5 to 10% in areas like Detroit MI, Dayton OH, Providence RI, Canton OH, Indianapolis IN?

    WAIT A MINUTE!! I thought any housing slowdown would only affect the “red hot” markets like Flordia and Nevada? That’s what David Lereah told us, right?

    I don’t seem to recall any articles about big booms in Canton or Appleton? How can those markets bust?

  26. GerryL commented on Nov 20

    I know that realtors pull houses off the market and then put them back on because it resets the days on market to zero. I wonder if they can play similar games with price.

  27. Michael C. commented on Nov 20

    Personally, I think the top of the equity market will be on Dec 5.

    On that day, everyone of us will learn how to make money the easy way and retire.


    JJCramer’s book “Jim Cramer’s Mad Money: Watch TV, Get Rich” comes out in full force on that date and making money in stocks thereafter will be like printing money so long as you have that 50 inch HD LCD TV turned up full blast.

  28. Kevin_r commented on Nov 20

    I think the Midwest is falling for different reasons than the coasts. In the Midwest, the problem is not too many new condos locally but too many new factories in China.

    Mike said: Am I reading this right? Home prices dropped 5 to 10% in areas like Detroit MI, Dayton OH, Providence RI, Canton OH, Indianapolis IN?

    WAIT A MINUTE!! I thought any housing slowdown would only affect the “red hot” markets like Flordia and Nevada? That’s what David Lereah told us, right?

    I don’t seem to recall any articles about big booms in Canton or Appleton? How can those markets bust?

  29. Eclectic commented on Nov 20

    Funny…. listenin’ to people tryin’ to piss up a rope.

  30. matt wilbert commented on Nov 20

    Prices here (outside Boston) seem soft, but what I noticed today was that in our neighborhood advertising circular there were more real estate ads than I have ever seen in it. Normally, as you would expect, the ads are most numerous in the spring, and there are relatively few this close to the holidays.

    I’m guessing that means there is a lot of inventory, and people are not willing to wait to try to sell it in the spring.

    It will be interesting to see how much inventory there is then.

  31. Jay Walker commented on Nov 20

    Median prices changes are usually a good reflection of the typical change in value, but where they aren’t is when the whole market skews towards/away from one type/price of product.

    This would be highly unusual, not impossible, but fairly improbable. A better explanation is that the median change IS accurate, but some ends of the market are experiencing more rapid changes.

    Median prices will begin falling more rapidly – wait till the first quarter …

    Jay Walker

  32. M.Z. Forrest commented on Nov 20

    Speaking for Appleton (relative proximity to me) any influence there would predominately relate to Kimberly Clark shuttering a facility. (300 some jobs) Just south of Appleton (I’m not sure if this is in the Appleton evaluation) another company announced a closing. Not to be dour though, Oshkosh Truck and Manitowoc Crane are doing fine and expanding.

    Indianapolis and Detroit’s problems I’m sure relate to the auto industry.

    I’m just not seeing the indicators of a curve shift in real estate (outside of a few markets where there have been massive layoffs). At this point, it is nothing more than a correction. When foreclusures are +2-3x yoy, I think we can say there is a curve shift occuring.

  33. my1ambition commented on Nov 20

    From what it seems, the Realtors have been trying to squeeze every penny out of buyers and speculators alike who were heading into this market. Hence, sayings like “Housing only goes up” and “Always good time to buy”.

    I believe that as soon as it becomes primarily relevant to all that we have a serious housing “recession” in our midst, these same Realtors will be jumping to the other side of the fence shouting bloody murder for every owner to “Sell as soon as possible at any cost”. Again pinching every penny, but this time from the selling spree.

    Remember, it’s their job.

  34. Karen commented on Nov 21

    any connection between the recent increase in teh money supply and the housing crash?

  35. Andy Nardone commented on Nov 27

    I hadn’t heard of this one before. $1mil + development in NJ incents with “furnished garage.” That’s a garage outfitted with a 6 figure Maserati. But home prices aren’t falling.

  36. Nathan commented on Nov 30

    “I suspect it is being biased upwards by “trophy” property prices prices and other adjustments.”

    Actually, as we are looking at the median price and a large number of transactions, that can’t be the case. An average price would be affected more severely by an upward price skew, but the median reduces a lot of that skew. The lower median price, does tell us that the sales mix is trending downward, so it’ll be interesting to see how it all turns out.

  37. The Big Picture commented on Dec 6

    The Not-So-Hidden Truth About Home Prices

    David Leonhardt gives the business to a topic we have covered several times here: What is really going on with residential real estate prices?Based on the official housing statistics, you might have guessed that the sellers would have made out just fin…

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