Existing Home Sales Drop 20%

First, the bad news: Housing is still a mess, and is likely to be a drag on the consumer spending and the economy in 2008. Year-over-year sales dropped 20% from November 2006.

However, I am going to surprise a few people, and point out that this single month’s report actually has some good housing news in it:

– Purchases rose 0.4%;

– October sales were revised upwards;

– Median home price fell 3.3 percent.

– Existing homes for sale fell 3.6% percent to 4.27 million. That’s 10.3 months’ supply versus 10.7 in October.

The most astonishing piece of news in the NAR release was this dollop of reality that seemed to have accidentally crept in:

“Inventory is still high, and further reduction in prices may be
required in some areas to induce buyers back into the market”   

-Lawrence Yun, NAR chief economist.

Of course, like a junkie, they just can’t help themselves, going back for another hit of that sweet, sweet shit:

“Near term, existing-home sales should continue to hover in a narrow
range, just as they have since September, and that’s good news because
it’ll be a further sign that the housing market is stabilizing,”

Sure it will.  Once, crack, head, always a crack head  . . .


Existing-Home Sales Rise in November, Market Likely Stabilizing   
NAR, December 31, 2008

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  1. Byno commented on Dec 31

    But Barry:

    It’s been an unseasonably warm winter so far!!! How could you miss that in your analysis???

    /sarcasm off

    Happy New Year big guy. BigPicture is as good as ever.

  2. michael schumacher commented on Dec 31

    My guess as to the reason there was a bump in the numbers is that there were/are enough sheeple out there to actually have all that rhetoric about “the bottom” be believed.

    I’ve said it before and will say it again:


    That is the ONLY thing that will move pricing up or down. Everything else is just lip service and takes away from the original reason: INVENTORY…

    Now have a nice rest of the day and a wonderful New Year……..even Fred…..


  3. DealBreaker.com commented on Dec 31

    Jingle Bell: 12.31.07

    (Ed Note: Well, this is it. Another year in the can.) Times Square Ball Goes Green (AP) Fitting, given the year we’ve had that this year the big ball will don energy efficient LEDs. The most energy efficient solution…

  4. Marcus Aurelius commented on Dec 31

    “Inventory is still high, and further reduction in prices may be required in some areas to induce buyers back into the market”

    -Lawrence Yun, NAR chief economist.


    “Some areas,” like the US, Great Britian, Spain…

    Everything is hunky-dory.

    Happy New Year, y’all.

    My prediction: 2008 will teach us the lesson our grandparents tried to.

    My resolution: Buy gold, guns, and farmland. (Damn! I sound like some sort of redneck hillbilly, but I can’t think of anything more valuable under the circumstances.)

  5. Eric Davis commented on Dec 31

    I keep wondering if the housing numbers are being looked at in a ridiculous way.

    In a normal cycle, one would expect those numbers to behave in a smooth curve, and for those numbers to accelerate, then decelerate into a nice clean bottom..

    But with the mortgage derivatives, credit issues, credit derivatives, I think we are going to see some unexpected volatility in the numbers.

    Though new homes are not being built, still way to many homes will be dumped into the market by foreclosures, and additional foreclosures kicked off by both ARM resets, and loss of equity…

    Even worse, the builders may see some numbers in march that tell them “Hey, lets start building again.”.. and we start building new home inventory.

    I just think the numbers will be choppy, and we will see many people jump into trades which will turn against them, in the housing, and financial… investments.

    I just think that the various housing numbers aren’t going to be clean metrics.

    Maybe if we get down to 3-4 months of inventories….

  6. Eric Davis commented on Dec 31

    I think we are ready, and need to learn that secular lesson our grandparents tried to tech us…. But not like we learned, or that they did either, as their grandparents tried to teach them…

    I scared the crap out of people, when they thought of how great a store of gold would be in a “Real Emergency”…. I said… I bet you would get a better ROI, on Bullets. if things got “That Bad”.

    I tell you what to get long, in a more aggressive economic downturn…. cooking, People have no idea how to cook;Pots pans and cookbooks, appliances…. . and a revival of that PSA we/I saw on Saturday mornings….. “Beans and Rice, Beans and Rice”

  7. lewis commented on Dec 31

    Curiously, I far preferred Yun’s other comment

    The federal government should take two bold steps to rescue the housing market, said Lawrence Yun, chief economist for the real estate trade group:
    The government should allow Fannie Mae and Freddie Mac to purchase larger loans.
    The Federal Reserve should lower interest rates by at least three-quarters of a percentage point.

    The last part in particular just reminded me so much of the old Houston bumper sticker “Lord, please give us another oil boom and this time we won’t screw it up”.

    “Rescue the housing market” – I think that translates to bring back those fairytale days of no doc loans etc, so we can again sell houses to people who can’t afford them.

    The housing market is straightening itself out and over time will be just fine, as long as we don’t “rescue” it. New home starts are just a little above where they should be, and existing home inventory is on a long slow decline. A very small price to the general public for the outrageous excesses of the recent past, and hopefully some of the foreclosures will exact the pain they rightfully deserve from all those “I’m gonna get rich in real estate” fools. Back to the 4am infomercials for them.


  8. Chuck commented on Dec 31

    Amen Lewis! Let is work itself out however painful that will be. If we extend it the trouble will be laid on our children but only worse! this is insane! No bailouts!
    Greed and envy need to be tought a lesson..

  9. michael schumacher commented on Dec 31


    the analogy about cooking will be more true than most are willing to admit.

    And absolutely true……people have adjusted to all that “extra” money and have stopped preparing meals. I would’nt go so far as to invest in those types of stocks because our wonderful Fed will continue to show that it’s not as bas as it really is.

    It’s alot like homebuilder stocks in 2005 all the signs were there but you had to wait another year before gravity took out what should have happened in early 06. In my case I had to wait until spring ’07 until the ones I had (WCI) FINALLY were allowed to crater (that’s a long story that involves Carl Icahn and Cohen).

    But the cooking thing will be a BIG deal to all those “mommies” who got used to picking up a phone instead of a spatula….


  10. Winston Munn commented on Dec 31

    We Salute Real Men of Financial Genius

    From a Mish Shedlock article:

    “What follows are excerpts from Absence of Fear, an excellent article written by Robert L. Rodriguez at First Pacific Advisors.

    We were on the March 22 call with Fitch regarding the sub-prime securitization market’s difficulties. In their talk, they were highly confident regarding their models and their ratings. My associate asked several questions.

    FPA: ‘What are the key drivers of your rating model?’
    Fitch: They responded, FICO scores and home price appreciation (HPA) of low single digit (LSD) or mid single digit (MSD), as HPA has been for the past 50 years.

    FPA: ‘What if HPA was flat for an extended period of time?’
    Fitch: They responded that their model would start to break down.

    FPA: ‘What if HPA were to decline 1% to 2% for an extended period of time?’
    Fitch: They responded that their models would break down completely.

    FPA: ‘With 2% depreciation, how far up the rating’s scale would it harm?’
    Fitch: They responded that it might go as high as the AA or AAA tranches.”

    We now direct Fitch’s attention to Blood, Sweat, and Tears: “What goes up must come down.”

    Who rated what’s in Your wallet?

  11. Cherry commented on Dec 31

    Gross numbers were down. Which fits the seasonal adjustments.

    I rarely ever look at “existing home sales”.

    New Home Sales plunge tells us all we need to know about where existing home sales are going.

  12. Richard commented on Dec 31

    i don’t think you have to be an idiot to buy today, or even 6-12 months ago. people have various reasons for buying so each circumstance needs to be looked at differently. still if you are buying in a stagnant to declining market you need to ensure you can afford the house payments and don’t plan on going anywhere until the cycle runs its course and turns up again. no one knows how long that is but figure 5-7 years is a good start.

    in my neck of the woods (NYC suburb) the prices started adjusting about a year ago. in the starter market one year ago a SFH would’ve fetched $610k-$620k. that same house today will cost you $580k-$585k. if you bought a year ago you’re ~$35k in the hole plus commission costs so you ain’t going anywhere for a while.

  13. David commented on Dec 31

    Prices are collapsing in the Bay Area. The official numbers for San Francisco are totally fudged because they usually exclude condos (more than half of the stock, IIRC). The East Bay is a train wreck. The only thing that’s holding up is the Google spot on the Peninsula.

    Oakland SFR prices are down 10+% in just the past 6 months. Houses that were $600k are now $550K and there’s no sign of it stopping there. (e.g. foreclosures are being dropped on the market for $350-$450K even in nicer areas)

  14. Pat Gorup commented on Dec 31

    Happy New Year to everyone!!
    Psst…in 2008, buy silver not gold as it will outperform all metals.

  15. Peter B commented on Dec 31

    This was the 2nd lowest reading since this current composite data began in 1998 (started to include condo’s/co-ops).

    Single family inventory to sales ratio fell to 10.3 months from a revised 10.4 which was the highest since 1985.

    Existing home sales make up 85% of all sales so its obviously an important metric to watch. With respect to the ’08 outlook, we all know sales volumes will remain very weak so the real question is how much further home PRICES need to fall in order to drive traffic and thus lower inventories and what lower prices will do to mortgage backed securities from here.

  16. drtomaso commented on Jan 1

    NAR crowing about sales going up- its almost like they make a commission on every sale ;)

    So… what does it mean in technical analysis terms that prices are dropping on rising volume?

  17. sailorman commented on Jan 1


    Don’t all markets move in a sawtooth? The stock bond, Forex and commodity markets do.

    Why shouldn’t housing do the same? I pay close attention to this, since I am looking for a house. In Florida house prices are starting to make major moves downward.

    In one community, for example, house prices have driopped from the high 600s do the high 400s. When a house does that, it sells quickly.

    There is clearly pent up demand for houses and when the price drops, there are buyers. But how many? Clearly enough to drop the inventory a small ammount, but where it goes from here is anyone’s guess. It sure is not a definite sign of stabilization yet.

  18. JohnR commented on Jan 2

    The inventory of unsold, empty or even occupied houses and condos is huge, and quite larger in my view than the 10 months of stock that the NAR says. As time goes on, an invisible stock of properties that are not listed for sale grows.

    A parallel problem exists measuring the number of unemployed and the employed persons. Disguised unemployed drop out in a bad job market and reappear when the job market improves.

    Business Week in the past weeks commented that a record 3% of non-rental U.S. residences are vacant, far above the 1-2% in prior years. That’s about 2 million empty houses. Of course, there are then the occupied houses where the owner wishes to sell, but can’t and is stuck.

    There are many owners who are sitting on empty homes who refuse to lower the price.
    When will they lower the price and who will buy these homes?

    We’ve had five years to get this housing bubble and it may take that long to get rid of it and its consequences.

  19. homeloans commented on Mar 31

    Intersting article. Do you believe that the house market will continue to fall during 2008?

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