Existing Home Sales “Slipped” 23.4%

Existing-Homes sales "slipped" some in January, according to the National Association of Realtors (NAR). The problem, the Realtors point out, is simply that some potential buyers are waiting on sidelines.

Talk about an understatement. The "slippage" the NAR refers to was a 23.4% year-over-year freefall. The term "slip" might not adequately capture the data. Plummet, plunge, nose-dive, crash, tumble or freefall might work. But "Slip?" Gee, that doesn’t quite capture the true essence of the data…

Delve beneath the national average into the details, and you find all manner of ugliness.

-Median existing-home price was $201,100 in January, down 4.6% from a year ago (National average)

-Total housing inventory rose 5.5%

-At the end of January, existing homes available for sale were  4.19 million, a 10.3-month supply at the current sales pace (up from a 9.7-month supply in December). 

-Single-family home sold at an annual rate of 4.34 million in January. This is 22.4% below January 2007. 

-The median existing single-family home price was $198,700 in January, down 5.1% from a year ago.

-Existing condominium and co-op sales dropped 6.5%, and are 30.2% below the year ago levels. The median existing condo price ($220,400) is only 1.0% lower than January 2007.

-Existing-home sales in the Northeast fell 3.6 percent to an annual rate of 810,000 in January, and are 25.7 percent below a year ago.  The median price in the Northeast was $270,800, up 3.1 percent from January 2007.

The only good news in the report was found in the Midwest, where sales rose 3.4%, as the median price fell 4.0% ($154,200)
from a year ago. Note that this was an area that was largely excluded from the real estate boom.

Existing Home Sales, January 2008

Exisiting_home_sales_22508

chart courtesy of Barron’s Econoday

Source:
Existing-Homes Sales Slip in January as some Potential Buyers wait on Sidelines
NAR, February 25, 2008
http://www.realtor.org/press_room/news_releases/2008/ehs_homes_sales_slip2_25_08.html

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  1. michael schumacher commented on Feb 25

    yet another case of “it’s not the apocalypse yet so let’s juice the markets”.

    But you also know that if it were the apocalypse then it would be yet another bottom.

    disgusting

    Ciao
    MS

  2. LFC commented on Feb 25

    “No, no, no! Karl told me that things wouldn’t fall apart until after I got out of office, and the blame could be placed on the next poor sap in the Oval Office!”

    — George W. Bush

  3. Robert A. Niblock commented on Feb 25

    Lowe’s reported same-store sales declined 7.6% for the quarter. But sequentially sales are even worse:

    Same Store sales fell 4% in November (YoY)

    Same store sales fell 9% in December

    Same store sales fell 11% in January

    CEO said he was “a bit surprised” by the weakness.

  4. wunsacon commented on Feb 25

    Condo prices only 1% cheaper from January 2007? Here in SoCal, that sounds wrong. Then again, prices still aren’t cheap enough for me to want to buy. I need about 25% off from current prices.

    Maybe I’ll miss a bottom and curse myself. But, I’ll take that chance over trying to catch the falling knife.

  5. Walker commented on Feb 25

    Note that this was an area that was largely excluded from the real estate boom.

    There is no such area. All that happened in those places was that the housing boom kept prices from going down more than they should have because of economic stagnation.

    I live in CNY and everyone tells me how cheap housing is because I can get a 3/2 on a full acre for $225k. Until I point that I can rent a 3/2 on 10 acres for $900/month.

    While out-of-staters may think prices are low, they are more than the local economy can support.

  6. AGG commented on Feb 25

    I know it’s terribly old fashioned, but I still believe that home prices are a function of wages. Now that the appraisal liars are hiding and the cheap money is gone, determining the proper price for a house or condo is very simple: Multiply the average yearly salary in the area by 4. This is the price for an average house. If you have a lot of extra square feet or land, the price goes up. Take Springfield, Ohio. They have 10% unemployment. The last time they had 10% or greater unemployment was during the great Depression. Get on Google Earth and look at those big mansions northeast of the city near the lake. You want a steal? Have you got a job?
    The excretion is hitting the rotary oscillator and it’s not just flowing down hill.

  7. ThatGuy commented on Feb 25

    “‘Tis but a scratch!” — The Black Knight

  8. rex commented on Feb 25

    The big declines in home sales were in the middle of 2007. Recently, sales do seem to have flattened out a bit. On a three-month average (which smooths some of the monthly volatility and statistical noise), sales are falling at a 13% annual pace now, compared with 40% in October. For single-family homes, the decline in 8% annualized, instead of 39%.
    If prices fall enough, buyers could drift back.
    The time for “plunging” sales has probably passed, unless something horrible happens to the conforming mortgage market. For the next few years, we’ll have to get used to “slipping” or “slowly rising” sales.
    The bottom is going to be very very wide.

  9. Walker commented on Feb 25

    Multiply the average yearly salary in the area by 4. This is the price for an average house.

    Rent x 120.

    Rents track wages better than housing prices. This also allows you to evaluate individual properties, instead of just determining the average home price.

  10. Walker commented on Feb 25

    On a three-month average (which smooths some of the monthly volatility and statistical noise), sales are falling at a 13% annual pace now, compared with 40% in October.

    A 3-month moving average is insufficient analysis for a market that is well established to be seasonal. You are comparing fall (actually closings started in later summer) with winter.

    But if you want to buy, go right ahead…

  11. Joe Klein’s conscience commented on Feb 25

    Gotta love the disconnect of the markets. They rise how much thinking that this data tells them the housing bottom is near. Talk about living in a world of denial.

  12. JST commented on Feb 25

    East & West Coasts get the best of times but also the worst of times. We here in the Midwest have a modest lifestyle and modest wages but we rarely have to ride the rollercoaster quite as much as the coasts do.

  13. AGG commented on Feb 25

    Walker,
    Rent X 120? I assume you are talking about monthly rent. If you rent a house for $900 a month, that only comes to $108,000. I think that’s too low.
    Also if a manufactured home rents for $900 a month, it would be worth $108,000. That’s too high. Responsible banks used to allow a max of 38% of wages for a monthly payment including other liabilities like car payments in the 38%. Maybe we’ll go back to that.

  14. Joe commented on Feb 25

    Walker: You are right, but exaggerate a bit. I live in the midwest in missouri. Yes, prices here seem high to locals but low to out-of-towners. That being said, I didn’t see any property values double or triple in value.

    Remember, its supply and demand, and with lots of land out here (vs Manhattan island, for example), there’s plenty of supply to keep prices stable over the longhaul.

  15. glenn_in_MA commented on Feb 25

    “…The problem, the Realtors point out, is simply that some potential buyers are waiting on sidelines.”

    I think that’s commonly called a buyer’s market!……as in waiting for prices to fall further

  16. Troy commented on Feb 25

    Sheez, since when is the price of housing going down a bad thing?

    Too many rentiers and not enough worker bees in this society, IMO.

  17. AGG commented on Feb 25

    Walker,
    I agree it all comes down to supply and demand.
    I’m in Vermont and prices here are unreasonable compared to the “show me” state. I expect prices to start coming down faster here.
    By the way, the 3.6% increase in the northeast is misleading. The middle clas has stopped buying so the dollar numbers look higher but the mansion prices are tumbling.

  18. scorpio commented on Feb 25

    Barry: have u changed your mind about the PPT after friday’s rally? and i know the market’s mixed to down today, but friday served to stop what looked like a PLUNGE. Faber’s comment on accelerated discount selling of banks’ leveraged loans had to be countered by right-wing flak/conduit Gasparino. that was simply cover for the operation. no?

  19. Pat G. commented on Feb 25

    Let’s see…housing inventory was up 5.5% while housing prices fell 4.6%? I think until those figures reverse themselves substantially there is no bottom and we aren’t even close to it, yet.

  20. Bob_in_MA commented on Feb 25

    That last chart from Barron’s is not up to date. The rate on 30-year conforming loans jumped back over 6% last week, according to Freddie Mac.

  21. Winston Munn commented on Feb 25

    I’m not so sure “slipped” isn’t the right word, as in, sales slipped on the CDO peel, tumbled down the staircase of the vacant, reposessed house, and broke its bloody neck.

  22. edhopper commented on Feb 25

    I mentioned this on CR. I think that there are at least half a million more homes that the owners would like to sell but aren’t on the market right now for a lot of reasons, negative equity, dead local market, etc…
    There is most likely more than a year of inventory.

  23. techy commented on Feb 25

    i would like to add that there must be atleast couple million people like me waiting to buy……afraid of catching a falling knife…

    once gov comes with some other plan to promote home owner ship..(how abt atleast 100k in mortgage principal also being tax deductible in the next five years?) or housing starts going up….i will buy something in the range of 4 times average houisehold income (available in good locations in my small town, Birmingham, AL).

  24. Cherry commented on Feb 25

    March and April’s will be going tanky again.

  25. bluestatedon commented on Feb 25

    Given the general economic/business news coming out re: store closings, bankruptcies, consolidations, postponed commerical development projects, etc. etc., layoffs and reductions in working hours are only going to accelerate in the next few months. Under those conditions there’s no way that the housing market is going to level off. If there’s a meltdown involving AMBAC/MBIA, look out below.

  26. Don commented on Feb 25

    Techy,

    Don’t you read the Birmingham News? All real estate is local, and besides, Birmingham’s economy is “decoupled” from the rest of the country’s. Yeah, seems in this internet age, everyone, from the United States on down to Birmingham, Alabama want to claim that they aren’t really as well connected as it appears.

    At least that’s what all my realtor buddies are saying. I say sit tight for at least another year and half–Birmingham isn’t decoupled, it’s just about six-nine months behind what’s happening elsewhere (as usual), and elsewhere things are not pretty.

    I live in Homewood. Don’t buy anything here…

  27. Brian commented on Feb 25

    Agree with the comments that no area was immune to the boom. We moved from NJ to Upstate NY in 2003. I’m repeatedly told that by real estate agents in this area that prices aren’t at risk b/c “we never experienced the boom”. We had our house appraised this month and they said the current mkt value was 330% above what we paid just 5 yrs ago — That’s ridiculous. I counter with that data point whenever I’m told that we didn’t experience a prices.

    I’m actively bidding on a property in my area, but no one wants to hear a lowball bid b/c they think it’s still 2005.

  28. bluestatedon commented on Feb 25

    Lawrence Yun has to be a mortal lock already for the 2008 Baghdad Bob Award in Business Forecasting. The other contestants might as well go home, although I suppose Kudlow might make a late push.

  29. Walker commented on Feb 25

    once gov comes with some other plan to promote home owner ship..(how abt atleast 100k in mortgage principal also being tax deductible in the next five years?)

    That is not promoting home ownership. That is price support.

    Look at Britain, which removed the interest tax deduction. If we were to remove the interest deduction, properties would still sell; the prices would just drop to where it became affordable to do so. Which is of course why it is political suicide to get rid of it. But you are fooling yourself if you think a principal deduction helps.

    All a principal deduction woudl do is make the prices go up so you still spend the same proportion of your income on housing. Oh yeah, and the financial sector would get the money instead of the government.

  30. Don commented on Feb 25

    Somebody should start a web-site, “Fun with Yun”. He’s so easy to make, it’d all be low-hanging fruit.

    I like where he talked about the “safer” FHA loans. Is he talking safer to the borrower? Well,an FHA mortgagor has no skin in–what could be safer than that? If he’s talking safer to the mortgagee–well that would be you and me taxpayer. Our skin is all over the game.

    And he trumps up the increased limits for Fannie and Freddie’s conforming loans, implying that w/out them, high-end residential would tank. Ahh…the total nationalization of the residential mortgage market.

    Can anyone say “Great Leap Forward”?

  31. Walker commented on Feb 25

    Rent X 120? I assume you are talking about monthly rent. If you rent a house for $900 a month, that only comes to $108,000. I think that’s too low.

    Yes, I meant monthly. 120 x is historic. Most professional landlords won’t pay more than 100xmonthly. What change do you see that would make us deviate from historic levels?

    Also if a manufactured home rents for $900 a month

    I am not refering to a manufactured home. I am referring to a two-story 2k sq ft farmhouse renovated in the 70s with a 40×60 pole barn on the property and a grove of apple trees at the back of the ten acres. The house sans the land is comparable in every way to the 225k properties I see listed around here in the Ithaca NY area. It is just that the last tax assessment is at 110k and the landlord charges rent accordingly.

    That’s a bubble.

  32. Walker commented on Feb 25

    AGG: One more thing.

    You may be arguing that rent in my area is too low based on the housing conversion. That’s a reasonable argument except that landlords generally charge what the market can bear.

    Once you subtract principal and the mortgage tax deduction you are left with costs that cannot be recouped on sale. This is “rent” except that you are mailing that rent to the bank or the insurer or the local property tax assessor. At over 120x, this “rent” is more than traditional renting and so you are losing money.

    If these house prices are correct, either prices must drop or rents must rise. I just see little movement in our economy for the latter.

  33. Walt commented on Feb 25

    Although this report shows another decline in existing home sales, things have picked up quite a bit in the last six weeks here in Austin, TX. Even in my neighborhood of 700K to 1.4MM homes, a bunch of homes that were just sitting there for momths went under contract in January and early February. These sales are goint to be recorded this month and in March, so things are looking up.

  34. cinefoz commented on Feb 25

    Bad news, all. The world isn’t ending. Markets are up. People are working hard to see that the financial markets stabilize. Their efforts aren’t wasted.

    Backward looking housing statistics don’t describe the future, only the past …. which we already all new looked terrible.

    Goldilocks is trolloping around and looking for action. Maybe those of you who don’t relate well to good times can step aside and make way for the rest of us. It’s time for the buzz kills lighten up.

    Note to Larry Kudlow: It’s time to redefine Goldilocks. I see her as a party girl who is looking for action, affluence, and substance. She’s too fast for the bears and not someone they can relate to on any level. She’s in the house and is bringing good times along.

  35. cinefoz commented on Feb 25

    Another couple of days like this, and those stinkin’ shorts will have to cover. Boo Ya! This could be a 4% week, maybe more!

    Ohhh … are you a short seller and are you feeling a little pinched right now? Cry me a river. Tell me how bad it feels. Tell me again. Nyuk Nyuk Nyuk.

  36. rex commented on Feb 25

    Walker said: A 3-month moving average is insufficient analysis for a market that is well established to be seasonal. You are comparing fall (actually closings started in later summer) with winter.

    These data are already seasonally adjusted, so a 3-month moving average is a pretty good technique for seeing what has just happened, rather than what happened last May. I’m not saying the bottom is in, I’m saying the rate of decline is getting less bad.

  37. Walker commented on Feb 25

    These data are already seasonally adjusted, so a 3-month moving average is a pretty good technique for seeing what has just happened, rather than what happened last May.

    I missed that, so I will concede you on this. Though I am skeptical that the traditional seasonal adjustments are a valid mathematical model in a turning market like this.

  38. philip commented on Feb 25

    Well, Austin, TX, the refuge of priced out Californians who are playing with West Coast funny money is looking up a little (though it really is the only major market in the country that hasn’t really gone down). I wouldn’t call that a stop press. Tell me about Houston or Dallas.

  39. philip commented on Feb 25

    Cinefoz, you must be a genius. You sommehow know that all the problems of the market somehow cancel out and everything is healthy and fine. Despite the fact that down markets do happen, this time is different. You are also an a$$hole. Downright insufferable. I hope you keep posting through the downturn unlike our previous idiot cheerleaders, who stopped posting the day things started down. BTW, you sound just like them. You sure you weren’t here before under another name?

  40. Emmett commented on Feb 25

    Walker,
    Good post =>
    Walker | Feb 25, 2008 2:01:50 PM

    Changed my mind about recommending a tax credit for principal reduction.

    Unfortunately, the standard deduction for mtg interest is here to stay. Too late to change now.

  41. wunsacon commented on Feb 25

    Philip, I truly believe cinefoz is different than some of the (perma) bulls who seem to have disappeared. (He certainly isn’t a permabull. I remember reading bearish posts from him late last year.) And that he’s not an a$$hole but merely “ribbing” a few people here who’ve ribbed him.

    Then again, I’m still “net long” myself (mostly commodity sectors — I guess I’m betting on a lower dollar rather than on an improving economy). So, to say this bluntly, maybe I’m as big a “fool” as cinefoz and that’s why his arguments make some sense to me.

    (Of course, if I lose money in the next 6 months, it’s not like no one here warned me.)

  42. cinefoz commented on Feb 26

    wunsacon,

    Thank you for your support.

    I’m neither bear nor bull, although bull is much more fun … no matter how you define the word. I’m a realist who loves volatility because it is profitable. The key is to come as closely as possible to spotting tops and bottoms while keeping religious economics out of the analysis.

    I’ve tried to share some insights here, but the religious nuts are in the majority and frequently shout me down. But I’m too stupid to pay attention to them and will continue to share those insights whenever one bites my ass.

    I wonder if Goldilocks is going to show her wild side again today, and totally cower the cloistered bears? Who are those huddled masses, yearning for bad news? Nobody important is my guess.

  43. Walt commented on Feb 26

    In response to Walker’s comment about Austin being a refuge for West Coast Californians, perhaps there’s some truth to that. I do see a lot of CA plates driving around, although there are also many folks from Florida and Louisiana.
    Also, in regard to all that talk on CNBC about “Housing prices have much further to fall”, the median price in Central Texas (Austin+Surroundings) actually rose 7 percent last month. I wonder how Austin would fare if the housing market were strong now….

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