Existing Home Sales Decline

Hot off the wire..

Existing Home Sales Decline in October.

Home Sales in the Northeast Decline 7.4% compared to last month (seasonally adjusted). The unadjusted fall in the Northeast was 10.6% vs last month, and 1.1% versus last year.

Existing Home Sales were expected to come in anywhere from 7.20M to 7.30M, but instead dropped significantly to 7.09M.

Nationally, the months supply increased from 4.6 in September to 4.9 in October, a whopping 14.0% percent from last year.

Existing Home Sales

More to Follow.

Caveat Emptor,
Grim

This entry was posted in General. Bookmark the permalink.

21 Responses to Existing Home Sales Decline

  1. grim says:

    U.S. October Existing Home Sales Fall 2.7% to 7.09 Million Rate

    U.S. sales of previously owned homes fell a larger-than-expected 2.7 percent in October to the lowest level since March, evidence that rising mortgage rates and skyrocketing prices are putting buying out of reach for some. The inventory of unsold homes rose to the highest since April 1986.

    Sales were lower in all four regions. They dropped 7.4 percent in the Northeast to a 1.12 million-unit pace, 1.9 percent in the Midwest to a rate of 1.58 million units, 1.8 percent in the South to 2.76 million units, and 1.2 percent in the West to 1.64 million units.

    grim

  2. Anonymous says:

    Here’s some more startling numbers from this link below. BTW all these layoffs have to be taking it’s toll. Pfizer was just a few months ago. The lawsuits with Big pharma and the lack of new product in the pipeline. Northern NJ is losing much of it’s high paying jobs. Telecommunication-At&t, High Tech-Lucent.

    “New Jersey foreclosure rates were the highest in the country, with one foreclosure for every 422 households, and New Mexico foreclosures ranked third highest, with one property in every 601 in foreclosure.”

    http://getforeclosures.blogspot.com
    /

  3. Anonymous says:

    Anyone buying a home at these prices deserves the loss they are going to get if they want to sell in next 8-10 years.
    Incomes going down but morons sign up for the most risky loanns to get.
    It’s funny how eager these morons are to sign up for financial despair.
    There are no free lunches folks.
    Paying 8-9 times incomes to buy a house is stupid!

  4. grim says:

    With inventory levels at 20 year highs, it’s hard to argue that there is any sort of shortage of housing. In fact, with the level of building we’ve seen nationally, we’re likely to be sitting in a position of significant oversupply when demand begins to break down.

    grim

  5. Anonymous says:

    The panic has only started and the reality of owning an asset falling in price will force more and more to sell. Inventory levels are going to skyrocket.
    Alot of people sucked in to the real esatte industries con-job are going to be shocked at the losses they are about to face. Many will face financial ruin when this all ends.

  6. Anonymous says:

    November sales will be much lower.

    I think a lot of houses are being pulled from the market right now. People will try to relist them around Feb-March (the beginning of the spring season). We will be in limbo with respect to prices until then. People will remain in denial– realtors keep insisting it’s the typical winter slowdown. There will be an explosion of listings this spring. That is when the real correction will begin.

  7. grim says:

    Keep in mind Existing Home Sales is a lagging indicator. This is a confirmation of the anecdotal evidence we were seeing in September. Quite a bit has happened since then. With the media fixated on the bubble, reports such as these will only serve to emphasize the fact that the bubble is quickly deflating.

    grim

  8. skep-tic says:

    I can’t see this unraveling quickly w/o some kind of economic shock. people have been trained to believe by recent history that they should get massive appreciation from their homes. some will be content to take a lesser profit, but anybody who bought during the run-up will not see this as an option. I think it will take another year of inventory build-up before pricing starts a serious slide

  9. grim says:

    Skep-tic

    Long-time homeowners can sell at significantly reduced prices and will still be making handsome rewards. If demand shifts, it will be these long-time homeowners that can flex comfortably with the market. I’d wager a guess and say we probably have more long-time homeowners than folks that have purchased in the past 5 years. It doesn’t matter if recent buyers refuse to sell, longer term buyers will be able to sell, and will still be laughing all the way to the bank.

    You say that people have come to expect massive appreciation. Wouldn’t the realization that appreciation has come to a grinding halt be enough of a trigger to destroy any demand associated with housing as a high-gain investment?

    jb

  10. skep-tic says:

    my information on this is somewhat anecdotal, but a friend of mine who is in the mortgage backed securities industry told me recently that the level of investor speculation in the NY metro market is pretty low. in the west and FL, it’s a diff’t story.

    resident owners have to move somewhere else once they sell. most people who have owned for a long time are disinclined to rent (maybe irrationally, but still). Long term owners can afford to cut prices, but they also don’t have to sell.

    outside of an economic calamity such as loss of a job, most people don’t want to move unless they can move somplace better, or unless they can make a profit that makes the transaction costs of selling look minor.

    I think many older homeowners were enticed by the crazy market to think about selling. If they don’t think they can get a crazy price, and if they don’t see a great alternative to where they are currently living, then many may decide to just stay put.

    even in this scenario, prices will decline, they just won’t decline rapidly.

  11. grim says:

    Anyone who purchases with an Interest Only or other type of Neg-Am loan is speculating, whether they realize it or not.

    Now, to get a handle on the level of speculation within the market, we can look at the ratio between traditional fixed loans and these high leverage speculative plays.

    I’ll reference an oldie but goodie.

    Interest-only loans offer payment shock down the road

    The percentage of homebuyers using interest-only loans has skyrocketed.

    National 2005* 22.9%
    National 2004 30.9%
    National 2003 13.4%
    National 2002 6.0%
    National 2001 1.6%

    New Jersey 2005* 20.0%
    New Jersey 2004 19.4%
    New Jersey 2003 9.3%
    New Jersey 2002 6.2%
    New Jersey 2001 2.4%

    * Through May

    Source: LoanPerformance, a subsidiary of First American Real Estate Solutions

    The fact of the matter is, there is a significant amount of speculation in NJ.

    grim

  12. skep-tic says:

    people who choose interest only loans are obviously banking on capital gains to bail them out. you’re right that this is speculation–no question.

    it doesn’t mean, however, that these people will have to sell. so long as they can continue making payments, they can keep their houses.

    if interest rates go up, some will be forced to sell and some will default. But many may refinance with neg-am loans and try to ride out the storm. again, I think it will take a recession, job loss, etc to drive many of these fools from their homes.

    this may not be far off given that the yield curve appears to be inverting. but again I think we will remain in pricing limbo due to creative financing until their is some type of economic shock

  13. Metroplexual says:

    I agree with skep-tic that they can keep their homes if theyt keep making payments.

    But these are the factors against them.
    1) 5 years in their payment increases 40%.

    2) The ARM folks will see payments increment with the fed actions (likely to go up

    3)Low down payments less to lose and if they are below median income according to the new bankruptcy law, they can walk away.

    4) Energy costs will likely remain high pinching homeowners and I believe it is part of the story in NJ with the defaults this past month.

    5) Property taxes have jumped incredibly over the last few years. This is a national trend BTW.

    6) IO’s are marginal loan candidates and in january credit card min. payments will double. (again bankruptcy law)

    If that doesn’t knock more than a few homeowners down?

    By the way my brother in law worked at fannie mae when the idea for IO loans was hatched. It’s original intent was for the executive with IBM syndrome (i’ve been moved) It was a way to backload the transaction costs when these guys got moved in thre years or less.

  14. skep-tic says:

    1) 5 years in their payment increases 40%.

    ***Still, this doesn’t imply prices dropping off a cliff in the very near future

    2) The ARM folks will see payments increment with the fed actions (likely to go up)

    *** Some of these folks will default; others may be able to refinance with a neg-am or interest only

    3)Low down payments less to lose and if they are below median income according to the new bankruptcy law, they can walk away.

    *** I can’t imagine that there are many people below the median income who are homeowners. In fact, most people who file for Ch. 7 bankruptcy have zero assets

    4) Energy costs will likely remain high pinching homeowners and I believe it is part of the story in NJ with the defaults this past month.

    *** energy costs could definitely squeeze some people on the brink. but it’s a pretty temporary shock

    5) Property taxes have jumped incredibly over the last few years. This is a national trend BTW.

    *** I see this accelarating the relocation of baby boomers. Maybe the most significant factor, esp in high tax areas like the NE

    6) IO’s are marginal loan candidates and in january credit card min. payments will double. (again bankruptcy law)

    *** people get creative with credit cards. zero balance transfers aren’t hard to come by. Also, I would be interested to see stats on IO loans. Wouldn’t be surprised if a lot of relatively high income people have them at this point.

    Anyway, I think you make a lot of good points. Each of these factors will certainly have an effect at the margin. I just question whether these factors alone will be enough to send prices into the freefall that some are predicting. I think the most likely candidates for this are recession and demographic shifts. but one way or another, I think most of the appreciation of the last 5 yrs will be lost

  15. RentinginNJ says:

    “but a friend of mine who is in the mortgage backed securities industry told me recently that the level of investor speculation in the NY metro market is pretty low. in the west and FL, it’s a diff’t story.”

    I would tend to agree, but I also believe that the speculation seen in placed like Florida is being largely driven by home equity extractions from people in the NY metro area, either for pure speculation or for retirement/vacation homes.

  16. Mike R. says:

    I think a lot of houses are being pulled from the market right now. People will try to relist them around Feb-March (the beginning of the spring season). We will be in limbo with respect to prices until then. People will remain in denial– realtors keep insisting it’s the typical winter slowdown. There will be an explosion of listings this spring. That is when the real correction will begin.

    I completely agree. People want to sell but they are hoping that the downward pressure will subside by spring and they can sell into a rising market. If prices continue plummeting through the winter, we’ll have a glut of homes on the market dumped by desperate sellers, not wanting to miss the gravy train.

  17. Metroplexual says:

    Skep-tic,

    Points well taken, I just see that these factors will in the aggregate hit people who 2-3 years ago thought all the other factors would remain static. If you go to the blog another f’d borrower there is a story about some guy making $28K/yr with a $40K suv wanting to borrow $400,000. The guy who runs the blog is a loan officer in So. California. He says that he would not touch it with a ten foot pole but he claims that there are other who don’t care because they sell they paper to fannie mae. Check it out it is very scary.

  18. skep-tic says:

    metroplexual,

    I don’t quite understand the MBS market, but from what I do know I agree that it has had some scary effects on lending practices.

    In general I’m rooting for a price correction just as much as the next person on this board, but if it takes a banking crisis to achieve it, I’m not sure it’s worth it.

  19. money says:

    In Daytona Beach the molestation of trash cans is banned Mortage Calculator and money