My latest Real Money column is up, looking at what to expect from the latest home sales data: Existing Home Sales Will Rise: Be Cautious With Builders.
It builds on some of the prior work we have done on the Seasonality of home sales.
Here’s an excerpt:
"Not surprisingly, it turns out January is the slowest month of the year when it comes to home sales. That intuitively makes sense, as most people are otherwise engaged in December – they are busy with Holidays and vacations. Many fewer people are shopping for homes then, so we get fewer contracts signed in January.
Once we get past January, the lowest sales month of the year, its pretty much all good for existing home sales through June. A pull back in July, a bounce back up in August, and that’s the best first part of the year.
Why? Well, consider how many families want to minimize the disruption to their kid’s education during a move. It seems most families with school-age children want to be in their new homes before the new school year starts in September. This makes sense in terms of both the overall pattern of sales, and the flurry of closings in August. The big fall off in September reflects the start of the school year; With so few buyers looking in December, its no surprise that January is the weakest month for sales."
Its on the subscription only site, but I will try to get it moved to the free TheStreet.com section tomorrow . . .
Existing Home Sales Will Rise: Be Cautious With Builders
RealMoney.com, 4/22/2008 9:09 AM EDT
I am very familiar with the Florida housing market particularly on the west coast.
There is now a market price where people are comfortable buying. It is down at least 30% from its peak and not many houses are priced there as yet. More and more owners are now sensing the market. So are brokers, appraisers and buyers.
When a house prices at the new perceived market, it sells in a few weeks as it always did. This is the first time I have seen this if three years of actively looking for a house in the Sarasota – Naples west coast.
There is plenty of people looking now and there is a pent up demand. No one will overpay, since there are so many overpriced houses that sit for years and chase the market down.
Somewhat off topic, but related, this morning, a well respected commentator (Denis Gartman) took the view that one of the best indicator of economic health are Government tax receipts, since pays payroll taxes are only paid in income generated. Right now, tax receipts are rising, whereas during the recession of 2001/2 they fell by more than 5% (again quoting from Mr. Gartman’s daily newsletter). A very interesting statement that I have a hard time accepting, being somewhat of a macro-bear on the U.S. economy.
Two sides to the equation:
1. Existing Home Sales
2. Existing inventory
Lots of folks plan to sell when their kids finish school too. Lots of new inventory this year.
Regarding the off-topic comment at 10:50:
Not having had the benefit of hearing Gartman directly, it’s not clear to me from statement itself that the rise in tax receipts is due simply to payrolls. How much is due to capital gains and other things?
Barry, why not go to Minyanville instead? They’ve got great commentators without the theatrics and baggage of some other sites.
The chart at the bottom of this page
You can see that in the Seattle area pending sales are the worst since March 2000 (not just worst but 23% worse), and around 37% below March 2007.
I spoke with a homebuilder just yesterday who’s planning on starting a custom home next door soon (though they just delayed demo indefinitely). He has two unsold $3 million dollar houses in the area (Microsoft, WA) and he just shook his head when I asked if he’d sold anything last weekend.
“Banks are telling these people who make plenty of money and have excellent credit they want 40% down on these houses. Most of them don’t have that kind of cash laying around and don’t want to sell stocks with the market where it is right now”
Same with the builder a friends working for who has 7 unsold houses from %1.2 to $2.5 million in the area. “Lots of people lookin. Nothin sold. Doing remodel work where I can find it until something sells.”