Existing Homes Sales Fall; NAR seeks a PhD in Absurdism

"Existing-home sales slowed in April, partly because restrictive lending practices hampered home buyers. At the same time, more areas are showing gains, and a reversal in mortgage policy means the market is better positioned for a turnaround." (emphasis added)

NAR, May 23, 2008


Um, no.

Home sales fell for the follwoing simple and obvious reasons: 1) Prices are still too high; 2) a huge amount of supply is out there, and 3) there is a reasonable expectation on the part of buyers that prices will fall lower still.

Regardless of the data or what their own agents say, the folks at the NAR cannot help but shill for their industry — even when it has become totally counter-productive.  They are apparently quite happy with being known as the Worst. Forecasters. Ever.

How else can you explain their shameless twisting of their own data? Don’t these damn fools realize that they have simply lost all credibility? I have heard more than a few Real Estate agents complain that sellers have unrealistic expectations of prices, due in large part to the ongoing and ridiculous bottom calls and turnaround forecast form the NAR.

Perhaps the absurdist commentary that accompanies each monthly release means someone at the NAR is trying for a doctorate in Absurdism, and these monthly releases are their doctoral thesis. Nothing else (short  of blunt head trauma) explains the ridiculous monthly spin.

Rant over.

Let’s go to the actual data:

• Purchases declined 1% percent from March to an annualized rate of 4.89 million.
• Median prices fell to $202,300 from $219,900 in April 2007, about am ~8% drop from April 2007 (2nd-biggest historical decline), but was up 1% sequentially.
• Sales were down 18% from April 2007
• Inventory of existing homes jumped to 4.55 million, up from 4.12 million in March.
• Months supply for single family homes rose to 10.7 from 9.6, the highest since July 1985
• 11.2 months’ supply at current sales pace, up 10% from 10 months at the end of March (25 yr avg is 6.9 months)
• Months supply in condos/co-ops rose to 14.2 months from 12.8.

Bottom line: Rising inventory levels, ongoing price drops, falling unit sales means the bottom is nowhere in sight for the housing sector.


NAR and Housing Forecasts (June 2007)

Recent NAR Bottom/Turnaround calls (January 2008)

Existing-Home Sales Ease Due to Mortgage Restrictions; Some Markets Rising
NAR, May 23, 2008

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What's been said:

Discussions found on the web:
  1. Pool Shark commented on May 23

    Oh, I wouldn’t say the bottom is nowhere in sight; after all 2013 isn’t that far away…

  2. cinefoz commented on May 23

    BR said

    Home sales fell for the following simple and obvious reasons: 1) Prices are still too high; 2) a huge amount of supply is out there, and 3) there is a reasonable expectation on the part of buyers that prices will fall lower still.

    reply: Don’t you think the high and rising cost of living, coupled with uncertainty about where prices are heading and how much money will be left over after paying for basic necessities played a little part? [BR: yes]

    If you buy a new house you buy a new heat bill, a larger electric bill, and maybe a longer and, thus, more costly commute. It’s not just mortgage payments, interest rates, headline prices, and upfront costs anymore.

    People are starting to fixate on the cost of living today and how to keep it manageable. Buying a new house is not typically viewed as an economy measure.

    The growing commodity bubble will have to burst first and look like it will stay burst before people feel safe enough to buy a new house. Unfortunately, I think it has to grow a lot more before it pops.

    Then, the uninformed will panic when the stock market falls in sympathy. This will be caused by idiots who borrowed to buy a sure thing, then had to sell assets to pay margin calls. While I am salivating at the thought of this buying opportunity, I don’t think it will happen very soon.

  3. speculator commented on May 23

    This isn’t good for the housing crisis. The US is facing a “perfect storm” of a housing crisis, credit crunch and soaring inflation.

  4. bluestatedon commented on May 23

    The good folks at the NAR can’t help themselves; their sunny, don’t-let-facts-get-in-the-way optimism is how they’re wired as people. Small-business owners have to have that general outlook to succeed; pessimists don’t generally become very successful in business. The problem is that natural optimists like this find it hard to turn off the internal bubble machine and look at things with a cold, hard, practical eye, and that can lead to catastrophically dumb decisions, regardless whether it’s real estate, cars, or spouses.

  5. Stuart commented on May 23

    The realm of “commentators” and “analysts” in the MSM are full of the Lawrence Yuns of this world.

  6. John Borchers commented on May 23


    It’s not inflation. It’s perceived inflation which caused everyone to invest in commodities. The inflation is not real.

    It’s deflation. Look at gold.

  7. John Borchers commented on May 23

    Just want to add that we did have inflation unproperly measured for many years. That’s why we have this problem now.

  8. John Borchers commented on May 23

    If the Plunge Protection Team gets its money to buy stocks and futures from the Fed but the Fed has it all loaned out for housing what happens to the stock market?

  9. MarkTX commented on May 23

    “If you buy a new house you buy a new heat bill, a larger electric bill, and maybe a longer and, thus, more costly commute. It’s not just mortgage payments, interest rates, headline prices, and upfront costs anymore.”

    Exactly Cinefoz!!!

    If and when people(a whole generation or two)
    “Fully Realize” that buying a house is a liability, not an asset, we can move one step toward a bottom in housing.

    Further steps will require changing economic
    views on leverage, debt, moral hazard, “headline” inflation, etc…..

  10. Sean commented on May 23

    Barry, I think I have a little defense for the NAR.

    Based on the indicators I used to successfully call the housing bust back in Jan 2006, here is my observations:

    1) The year-over-year inventory increment is coming down at a slower rate. In many major metropolitans, actually inventory are stabilizing.

    2) The sales are not dropping as steep as it used to be. Recalled in previous months we would have sales down like -20% ~ -30% year-over-year. Now it is only -18% y-o-y.

    Therefore, FINALLY, the trends are showing some good signs since 2 years!!

    However, there were studies published saying there are still large phantom inventory of REO by bank that have not been listed out there, simply because banks and lenders are way too busy right now.

    So there are 2 major future concerns:
    1) Phantom inventory
    2) Recession Intensified with mass job losses.

  11. blin commented on May 23


    ‘It’s deflation. Look at gold.’

    I’m not that I understand your point, could you please elaborate?

  12. John Borchers commented on May 23

    Gold has only gone down since the peak at $1000 blin.

    If people were worried about inflation they would buy gold. They aren’t buying it.

  13. michael schumacher commented on May 23

    The inventory numbers seem vastly understated to me. Does the NAR include properties that have not had N.O.D.’s filed?? My guess is that they are under-reported in the same vein as our inflation data….

    Any idea’s?? Posted at CR as well.

    speculator- no one is going to read your blog if you keep making statements without any real opinion’s or analysis. Posting the same thing here and over at CR doesn’t help you either.


  14. Stuart commented on May 23

    There are alot of official interests who do not want bullion higher, alot. Gold is more political than oil..but another time.

    Besides the NAR as candidate for shill of the decade, we have these guys. I’d rather have Shills. These guys need jail time in a big way.

    “Credit Rating Agencies Reportedly Switched Analysts At Clients’ Request

    (RTTNews) – Two days after its stock took a nosedive following a report that a computer error may have mistakenly rated some securities AAA, Moody’s Corp (MCO: News, Chart, Quote ) credit rating unit Moody’s Investors Service is again facing intense scrutiny. The Wall Street Journal reported Friday that the credit rating agency at times allowed banks to determine which analysts covered their deals, switching analysts at the bank’s request.

    The Journal, citing people familiar with the matter, reported that an investment bank requested a switch in analysts after the one assigned to them raised questions about their deals. That analyst was a member of a group that assigned ratings to collateralized debt obligations, the newspaper said.

    In a separate instance, Moody’s moved another mortgage analyst to the firm’s surveillance unit, which assumes a post-operative job to monitor ratings already issued. The switch occurred following complaints from an investment banker that the analyst was “too fussy,” the Journal said, citing a person familiar with the situation.”

  15. Vermont Trader commented on May 23

    Housing – We are bouncing along the bottom. no more, no less

    I spent this morning covering so taking a break next 2 weeks.

    That is unless things set up again!

    Have a great weekend everyone.

  16. Vermont Trader commented on May 23

    Oh, had to share this..

    Governor Rendell to Allow Half Gallon Pricing at Some Gas Stations

    Last update: 5/23/2008 12:11:00 PMHARRISBURG, Pa., May 23, 2008 /PRNewswire via COMTEX/ — Gas Stations Must Request Temporary License from Department of Agriculture HARRISBURG, Pa., May 23 /PRNewswire-USNewswire/ —

    With gas prices exceeding $4 per gallon in some areas, older fuel pumps may display half gallon prices in coming weeks, said Governor Edward G. Rendell today.

    The total cost of gas will remain the same.

  17. michael schumacher commented on May 23


    saw half-box sizes of almost all cereals on my trip to the market yesterday. People are so easily fooled.

    have a great holiday..


  18. pigcatcher commented on May 23

    Here are my points
    1) Average US families are in debt
    2) Saving Rate below 0%
    3) gas/food and all other necessities are going up in price which cut into the money we spend on housing.
    4) there is no wage inflation so far (this is important, it is not like in 70s, thanks globalization for equalizing the global wage and living standard)
    5) house price is still not affordable even with the sharp drop.
    6) all the crazy loans almost disappeared overnight, people can not buy a house even they want to be irresponsible.
    7) mass psychology tells you buying a house may not be a good investment anymore, although they still have hope which means we are not hitting the bottom.
    8) as your guys said inventory is still too high

    I just do not see how those situations can turn around soon.

  19. Liv commented on May 23

    @Sean –

    So the good news is that things are not getting worse as fast as they used to be? That’s a hoot.

  20. Mephisto commented on May 23

    Personally, I have been looking to buy a house for 2 years. I haven’t yet and the commodity bubble, perceived inflation, or bills associated with a new house have nothing to do with it.

    House prices are still too high, jumbo mortgages are still too high, sellers are still too deluded, but it’s changing.

    I just moved from a nice street in NJ that had 3 houses for sale at the same time. This competition brought the selling price of the highest listed house from 680K to 610K (and they are still not sure they sold it).

    Now I am on another nice street in NJ with 3 houses in a row for sale. I am interested again to see what they list and where they sell. This type of competition will eventually get these houses to the point where they represent value to a person like myself.

  21. michael schumacher commented on May 23

    re: Gold

    IMO gold has not gone parabolic is fairly simple…..FCB’s sell gold as a way to offset it’s “printing presses”…when you get big down days in it it’s usually correlated (in the next week or so by it’s disclosure) by one of the FCB’s selling it’s stockpiles so it does not ruin it’s currency in the process.

    The other thing about gold is that the Fed values it’s reserves of gold at something like $50/per troy ounce (I read this and cannot find where I did-Anyone else read this!)……think about the scenario that could unfold when they start selling that. IMO that is where the next round of funding for these bailouts will come from. If you low ball it’s valuation and then sell it at ,say $900/per troy, you’ve got quite a bit of capital that was’nt accounted for in it’s static valuation of $50.

    people who have blindly bought gold will wake up one morning and go “Oh F!@#”…..


  22. VJ commented on May 23


    The good folks at the NAR can’t help themselves; their sunny, don’t-let-facts-get-in-the-way optimism is how they’re wired as people.

    So were the Stepford Wives.

  23. jhunt commented on May 23

    well on the bright side, in five years when home prices have finally stopped falling and the NAR gives up being peachy, we can all shout ‘contrary indicator’ and jump back into real estate.

  24. Pool Shark commented on May 23

    “well on the bright side, in five years when home prices have finally stopped falling and the NAR gives up being peachy, we can all shout ‘contrary indicator’ and jump back into real estate.”

    Yeah, five years is about right.

    But don’t worry, you won’t miss the bottom; it will be nice and round, and accompanied by cries of: “Real estate is a horrible investment, don’t buy it, you’ll lose your shirt!”

  25. Newshoggers.com commented on May 23

    Inventory Reduction

    By Fester The first monthly report from the spring home selling season is out and it is ugly. Sales are slipping, prices are slipping and inventory is accumulating. I find it hard to look at the current environment and be

  26. michael schumacher commented on May 23

    thanks estragon….thought I saw that somewhere. $220 billion is nothing to sneeze at…….

    But I’m sure we know of some I-banks that would gladly destroy that in a few weeks time!!

    I still think gold will have the “oh F!@#” moment sooner rather than later….


  27. Not Specified commented on May 23

    Even if you value the Fed’s gold at $220 billion, it’s still not that much, compared to the, what, $450 billion? they have loaned out so far in all the term auctions and credit facilities they have undertaken in the last several months. Even if they sold it all, it just buys them a little more time until they run out of capital and have to start printing money out of thin air. That $220 billion in bullion will be snapped up whenever they do sell it.

  28. michael schumacher commented on May 23

    THE various auctions have done over a trillion since last August……honestly I stopped counting after it hit $1.1t….

    It makes my head hurt when these people say “everything’s fine….second half growth…strong dollar….500k jobs created by 4Q ’08” etc. and you start to add up the reported amounts…..the actuals are likely MUCH higher.


  29. Elizabeth Tool commented on May 23

    Not sure how much it will effect housing but the only houses that I have seen built in the last 10 years that are worth a damn are custom built. I have seen houses with cute octagonal bathrooms but the walls are crooked…leaking window sills, bad foundations, bad framing, contractors that used the wrong nails on the roof and you won’t know until you have high winds. If the posts that hold up your deck are set in the ground you have just thrown away your money they should be set above ground and on top of concrete. Any wood on the ground is immediately attacked by earthworms and a number of other pesties. I recently heard of a development for retired people that is so bad the electrical is not up to code yet they magically passed an inspection…developer is bankrupt. People really believe that their house is guaranteed for ten years and even if the developer is still in business just try to get them to fix their mistakes. Better yet try suing them.

    I won’t get into the houses that have wells running dry in the West….If only I knew as much about money!

  30. Pool Shark commented on May 23

    Sorry MS & Estragon,

    If the fed chart Estragon linked to is correct, even at a mere $42.22 per ounce; $11 billion worth of gold works out to just over 8 tonnes.

    That’s a mere drop in the ocean.

    The European central banks have been selling up to 400 tonnes per year into the market while the price continues to set records.

    Heck, even the StreetTracks Gold ETF (GLD) holds well over 600 tonnes of gold by itself.

    The fed could dump their entire puny 8 tonnes into the market tomorrow and have almost no affect on the price.

  31. AGG commented on May 23

    I love this “supply of condos or houses or whatever” term. Is this like a 14 month supply of potatoes, meat products, or booze? How can a supply be determined when the past leverage environment where the data was obtained no longer exists? The data for the “housing supply” comes from a liar loan period. How about 1994 housing and condo purchase rates as a baseline? Now we have a 25 or 30 month supply!
    If you like your house, fine. Keep it and enjoy it. But don’t expect to make money off it. The supply of suckers is way down.

  32. Sweeny Texas commented on May 23

    Median home price = $202,300

    Median family income = $40,000

    Price to income ratio = 5X

    Affordability ratio = 3X

    Home prices are overpriced by $82,300.

    Home prices must decline another 40% to be affordable.

  33. Barry Ritholtz commented on May 23

    I think the median income is higher than that — about $48k

  34. ImDUMB commented on May 23

    Re GOLD

    historically, gold is treated as money, when government all over the world print those paper stuff as much as they want, it loses its value against gold. it is not gold goes up in value, it is the fiat currencies lose value.

    yes, eventually there will be a “Oh F&*#” moment once everybody panic and buy gold at whatever price they can get. just like they think they will be priced out of market forever when they bought their houses.

  35. Estragon commented on May 23

    Pool Shark,

    We’re off topic here, but my arithmetic shows a different answer for US gold holdings; $11,041,000,000 / $42.22 = 261,511,132 oz / 16 = 16,344,446 lbs. / 2,204.622622 = 7,414 tonnes. Is my arithmetic wrong?

    Put another way, at current prices this (~$220billion) represents a bit under 1/3 of the value of all US currency in circulation. Finite, for sure, but hardly trivial.

  36. Sweeny Texas commented on May 23


    Mea Culpa.

    The median home price has to fall only another 29%.

    Boy, that’s a relief. As Butch Cassidy once said, “For a moment there, I thought we were in trouble.”

  37. hal commented on May 23

    here is an easy prediction.

    Some day, when the housing market actually turns up–there will be huge hype as to the percentage increase in sales.

    Of course, if we start from a base of say 200k units a year….

    and the next prediction would be when they do start up, prices wil rapidly escalate in the same way the early part of a new bull market in stocks prices escalate-the so called low hanging fruit.

    notice: I am not including dates in this prediction.

  38. Sweeny Texas commented on May 23

    Hal, you’re right. Every time a new report comes out about the drop in home prices or sales, they fail to mention that it’s simply a reversal of the ridiculous, unsustainable run-up in both we had over the last 5 years.

    It’s enough to drive a man to drinkin’.


  39. Pool Shark commented on May 23


    Oops, my bad; dropped some zeroes.

    In either case, $220 bil (assuming all that gold is really still in Fort Knox) is less than half of this year’s federal deficit, and little more than the recent ‘stimulus’ package.

    Though $220 bil likely would put a temporary dent in the gold market, I can’t see the feds dumping the last remaining item of value (other than federal lands) our government holds.

  40. Nick commented on May 23

    Re: “bottom is nowhere in sight…”

    I beg to differ. GSE’s are already starting to make idiotic loans again, banking on a bailout by the time they go bad. The FHA has started making ridiculous loans, to start offloading bank losses on taxpayers. Look for lending institutions to follow if/when it becomes more clear they will be included in the bailout, and/or the democratic presidential candidate will prevail in the upcoming election (ensuring a massive bailout program).

    I predict a bailout-created bottom shortly after the new year, depending on how long it takes the democrats to write all the zeros on the checks to all the banks and speculators. Figure by late 2009 the government will have paid off everyone’s losses with the hard-earned savings of all the responsible Americans, and we can get back to housing being completely unaffordable to everyone except speculators and fraud artists.

  41. michael schumacher commented on May 23

    Pool shark-

    My point was the values are not current in the Fed’s own accounting so when they finally do something they will have the difference between the value they set ( $42.XX ) and the actual gain they record… (somewhere around $870 if we use a current price).

    My other comment was since the Fed’s balance sheet is finite… at the current rate of “auctions”-along with the declining value of it’s collateral-they are rapidly approaching a looking glass moment with regards to continuing to fund these things at the same rate. Where will they get the funds to continue this?? I was pointing to gold as the next funding source of bailouts. When they decide to do this it will be the “oh F!@#” moment. To me, it’s just the level 3 bullshit but in reverse.

    and Estragon is right almost 8,000 tons is not trivial….I imagine they will be just as careless with the selling of that as they have been with buying crap debt from the banks.

    Could be worse though……Gordon Browne screwed England for the forseeable future with his gold sales several years ago. It’s karma that he is now in charge with no bullets left. I only wish it were the same for GW….no actually I don’t…..since we may have Johnny McBush in the near future.


  42. flipper commented on May 24

    MS, and do not forget that US has another pet bank which hold huge ammounts of gold – IMF.

    IFM have said that it will sell gold and buy stocks and bonds some time ago. “accidentially” that corresponded to the top in gold market.

    Imho fed and imf dumping gold to keep markets afloat is a very plausible scenario.

    Remeber, they can later confiscate all gold in US again, like they did in 1933:)

  43. michange commented on May 25


    I’m afraid not to be Marco-litterate enough to unerstand what “dumping gold to keep markets afloat” means.

    What is the implied chain of causality?

Read this next.

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