From the U.S. Census Bureau News:
NEW RESIDENTIAL SALES IN OCTOBER 2006
Sales of new one-family houses in October 2006 were at a seasonally adjusted annual rate of 1,004,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.2 percent (±11.2%)* below the revised September rate of 1,037,000, and is 25.4 percent (±10.0%) below the October 2005 estimate of 1,346,000.
The median sales price of new houses sold in October 2006 was $248,500; the average sales price was $309,700. The seasonally adjusted estimate of new houses for sale at the end of October was 558,000. This represents a supply of 7.0 months at the current sales rate.
From Bloomberg:
U.S. October New-Home Sales Fall 3.2% to a 1.004 Million Pace
Sales of new homes in the U.S. fell in October, dashing expectations that the worst of the housing slump is over.
Purchases declined 3.2 percent to an annual pace of 1.004 million last month from a 1.037 million rate in September that was lower than previously reported, the Commerce Department said today in Washington. The supply of unsold homes at the current sales pace rose to 7 months’ worth.
…
“The housing market is far from the bottom, not with the incredibly high inventory of unsold homes,” Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania, said before the report. “The Fed is worried that a badly faltering housing market could overturn the economic cart, but as of now that has not happened.”New-home sales had been expected to decline to a 1.049 million rate from September’s originally reported 1.075 million pace, according to the median of 64 forecasts in a Bloomberg News survey of economists. Estimates ranged from 980,000 to 1.09 million.
The median price of a new home rose 1.9 percent to $248,500 in October from $243,900 a year earlier, today’s report showed.
The number of homes for sale fell to a seasonally adjusted 558,000 during the month, the lowest since March, from 562,000 the prior month. The supply of homes at the current sales rate rose from 6.7 months’ worth in September.
Keep in mind this data is subject to large revisions and can be quite volatile.
jb
With that, the Northeast saw the steepest decline this month, with a year over year decline of approximately 52.6%.
jb
Builders’ earnings are taking a hit. D.R. Horton, the nation’s largest homebuilder, reported this month that profit tumbled 51 percent in the quarter ended Sept. 30 as orders slid 25 percent.
“We’re in the early stages of a declining market,” Chief Executive Officer Donald Tomnitz said on a conference call with investors and analysts. “Most of these downturns are longer and deeper than we envisioned at the beginning.”
I could not say it any better. He must have been reading this blog. Here’s a guy who’s talking like me/us and he’s the CEO of a major H-Builder.
Any comment from the Hoboken website??? Whatever the hell the name is???
I forgot to post the link;
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2dESOEsZZpk&refer=home
I think the slight uptick in median is due to high-end properties that continue to sell. Certain buyers are so wealthy they are almost immune to market shifts. Still, that’s a whopping decline in new home sales for the northeast.
From the AP:
New-home sales drop in Oct., prices rise
Sales of new homes fell in October by the largest amount in three months, a fresh sign of the cooling taking place in the once-sizzling housing sector.
The Commerce Department reported Wednesday that new-home sales totaled 1.004 million at a seasonally adjusted annual rate, a 3.2 percent decline from September. That was the largest drop since July, when home sales plunged by 9.2 percent.
Home prices, meanwhile, went up in October, after falling sharply in September.
The median price of a new home sold in October was $248,500, up 1.9 percent from the same month a year ago. The median price is where half sell for more and half sell for less.
The 1.004 million pace of sales logged last month was slightly weaker than the pace of 1.050 million economists were forecasting.
Nominal median prices were up, but what did real prices do?
jb
median home prices in Sep 2006 was 217K.
median home prices in Oct 2006 was 248K.
http://money.cnn.com/2006/10/26/news/economy/newhomes/index.htm
Something is really really wrong with the numbers … unless meadian prices jumped ~20% in the last one month which i highly doubt.
The sharp dip in the median price in September looks more like error than anything else.
jb
How long do you think the US vs NAR lawsuit will take?
http://www.usdoj.gov/atr/public/press_releases/2005/211008.htm
I know the answer is probably “depends”, but I am curious how other similar lawsuits have taken before a verdict/settlement.
Also, if proven NAR is proven guilty what kind of impact is that going to have on the housing market (if any)?
Thanks
“The sharp dip in the median price in September looks more like error than anything else.”
..or the sharp increase in oct numbers is an error :)
It looks like we will end the year with about 1.1MM new home sales. YOY sales have really turned for the worse. Just remember that this time last year we were seeing 10-20% declines in sale when comparing to 2004. Man did the NE bite the big one. Look, 50% off of the prior year. Median prices ticked up slightly 1.8% because 13% of new homes sold were in excess of 500K while 11% were more than 500K last year. I think this is due to some rich feeling immune to cycles + the greater fool just jumping in. The only other telling stats I read from this report is that completed new homes for sale are at an all time high per the last page of the report. In addition, 65% of new homes sold this month are subject to cancellations since they have not yet been constructed or are currently under construction. I don’t have time to look but how does 1.1M sales compare with prior years? What did DL forecast?
We really wont know the true pricing move until the final numbers are released. These figures are prone to a high error rate.
I was thinking about that. They have set up a couple of pots boiling on real estate, and can do a lot of cut/paste between casefiles. There’s a whole FTC new section on real estate going, and somebody is maintaining it, approving it and updating it. Why? For a temp project? Naw. Things like that can take on a life of their own.
How would a settlement and a slap on the wrist look, compared to a case? It’s all part of the bigger picture…free trade or good ole’ boys…”free internet” vs. Big Brother.
It’s looking good for the next couple of years. FTC may try to do a little busting here.
http://money.cnn.com/2006/11/29/news/economy/newhomes/index.htm?postversion=2006112910
“That oversupply continued to grow in Wednesday’s report, rising to a record 166,000 completed homes available for sale.”
grim: your post from yesterday about existing home sales
James Bednar Says:
November 28th, 2006 at 6:48 pm
Here is an XLS based on the NJAR data. The date range is 2001.Q3 to 2006.Q3. It contains median price broken down by North/Central/South Jersey as well as 2 Bedroom (and less), 3 Bedroom, and 4 Bedroom plus. This is the best I can do at trying to eliminate the mix issues.
https://njrereport.com/files/NJMedianBedroom.xls
As much as I’d love to point out huge declines nd a bottom to the market, I just don’t see it.
I’ll also take this time to make my bad call known. Roughly 6 months ago I had said that I expected to see year over year declines across NJ by Q3 of this year.
Yes, I know a handful of counties did show YOY declines (Bergen, Warren, Cape May) and even more showed declines when adjusted for inflation (Essex, Morris, Passaic, Somerset). I’ll go on record as being wrong on that one.
jb
Can we discuss this issue further? I feel as if we glossed over it completely. It didn’t compute for most of us here, and so we conveniently seemed to ignore it. If we dismiss data that does not conform to our thesis, then our conclusions will be biased, and potentially dangerously wrong.
Pretorious made the claim – and he appears to be absolutely correct. Do I agree with his forecast? No. However, we need to understand either (1) who are the actors in the market that are responsible for these results? or (2) how do these results suffer from selection bias [i.e. mix]?
Clot or Pret – do you care to comment? I guess we already know Pret’s opinion.
chicago
I think the slight uptick in median is due to high-end properties that continue to sell.
Just my opinion, but I think it probably has more to do with first time buyers, who are more likely to buy lower priced properties, sitting on the sidelines. They have more to lose by buying now.
Trade-up buyers, who didn’t already drain their equity, are already on the RE roller coaster and have less to lose, providing that they can actually sell their existing home and buy the new home without resorting to a toxic mortgage. Also, lower priced existing home values appear to be holding their ground a little better than higher end new homes, which the builders are anxious to get rid of. I’m sure this “price compression” is encouraging a number of trade-up buyers to make the jump.
This will have the effect of skewing the median higher, even though prices may actually be falling.
Calculated Risk, as always, has the New Home Sales data graphed out:
http://calculatedrisk.blogspot.com/2006/11/october-new-home-sales-1004-million.html
Pat, thanks for your insight to my #10 above
chicago,
I shouldn’t have graphed the data linearly, the way I did. NJ Pricing tends to show seasonal variation with peaks typically occurring in the third quarter. It would have been more appropriate to display the data as a quarter over quarter comparison.
Take a look at the numbers, not the graph. The trend is pretty clear across the mix.
Let me regraph the data to allow for a quarter over quarter comparison, so at least we’re comparing apples to apples.
Ideally, we would be looking at price/sqft by MSA.
jb
Ok, here goes:
https://njrereport.com/files/qtr-break.xls
Like I mentioned in my response to pretorius, I see no evidence of any kind of market bottoming and subsequent recovery, only normal seasonal patterns.
jb
Prices [as generally defined] continue their upward move in NJ then? Recognize that the “definition” of prices is biased at best, and flat out misleading at worst…..yes?
Also:
FF 5.25%
3M 5.04%
2Y 4.67%
10Y 4.51%
feh!
We’ve heard the anecdotes of prices falling, both list and sales, based on comps.
Otteau has been talking about prices declining (based on comps as well). He mentioned in the Fall Forecast meeting that he thought prices were already down 10% and would fall an additional 5-10% in 2007.
However, I am not sure that I’m seeing that anecdotal evidence manifest itself in the available data yet. Is this analysis flawed? Are the increases in average and median prices an anomaly based on changes in mix?
While it certainly feels as if prices are lower right now than in Q3 of 2006, I can’t seem to put together any solid evidence of that. Perhaps I just don’t have access to the right data. Maybe I’ve got to start digging through comps from last year?
Frankly, I’m not sure if all this talk about prices being lower right now isn’t simply just wishful thinking or an attempt at creating a sense of urgency in the market. Is Otteau lying or trying to manipulate the market into thinking we’re already seen the brunt of the declines when it just isn’t so? Or am I just on the wrong page entirely?
Maybe I’ll give Jeff a call and ask him if he can elaborate a bit.
jb
Here are my notes from the Otteau meeting, I’m not going to edit these, they are straight out of my transcription of his talk:
Statistics being published are “dead wrong”
Median price calculations are not fair, based entirely on closed transactions. 2-3 months after the price negotationed.
Q3 statistics are Q2 sales.
Market held on until june until saturation point reached
Last years older smaller lower priced homes with this years newer larger improved houses
Median prices do not adjust for incentives, not netting out concessions
Published statistics misleading
“I can tell you that prices are falling and will continue to fall”
Excellent Grim, I wanted to point out the seasonal change yesterday and also questioned how we could bottom out when we haven’t seen a real drop yet. But instead decided to look at what November’s numbers were currently doing.
I’m going to take a guess and say that we will see ’06 Q4 lower than ’05.
PS I fortunately do not remember what I received on the SAT.
from bloomberg article from bc bob
“The decline is slowing,” David Berson, chief economist at Washington-based Fannie Mae, the world’s largest mortgage company, said in an interview. “We’ll still see home sales numbers go down some in coming months, but not as rapidly as we’ve seen in the last several months.”
wishful thinking?
Are these sales #’s contracted sales or closed sales??? If contracted, it’s worse than abysmal, it’s a disaster, especially with the rate of cancellations. Also, if contracted, are the cancellations addressed in future data???
Does sales price data include the free Mercedes, the closing costs, the mortgage payments for 2 years, the landscaping or even the free beer???
Now, back to the mix.. The NJAR does provide the 2/3/4br components by region.
Those numbers do show a trend towards larger homes in all regions:
North 2br- 3br 4br+
2006.3 8.7 42 49.3
2006.2 10.2 42 47.8
2006.1 11.1 42.3 46.7
Central 2br- 3br 4br+
2006.3 12.4 37.1 50.5
2006.2 13.7 42.9 43.4
2006.1 15.3 42.1 42.6
South 2br- 3br 4br+
2006.3 13.7 50.3 35.9
2006.2 14.5 50.3 35.3
2006.1 15.2 51.2 33.6
State 2br- 3br 4br+
2006.3 11.2 42.6 46.2
2006.2 12.5 44.7 42.8
2006.1 13.8 45.2 41.1
I need to add more data to see if this datapoint is subject to seasonal variation as well.
New Home Sales are contracts, not closings. They are subject to cancellation.
jb
Pro,
Fannie Mae??? Yikes!! Read what Don Tomnitz says!! Something about longer and deeper!!
New Home Sales are contracts, not closings.
JB,
With the slew of cancellations, why does anybody get excited with home sale #’s. It’s a bunch of meaningless short term noise in the midst of a huge upcoming downtrend. It’s a mirage. Doesn’t mean s*it if you don’t close. The chain is only as strong as the wekest link. Too many weak links in this market’s chain.
That’s weakest.
Following are some of the sentences written in today’s Marketwatch column:
1. Home builders have piled on incentives, including offering free vacations and new cars, to sell homes and work off inventories. Such incentives are not subtracted from the sales price reported to the government.
2. Sales are reported when a contract is signed, not at the closing of the sale. Home builders have reported a large increase in cancellations in recent months. Cancellations are not reflected in the government data, so the reported sales are likely overstated.
3. The government cautions that its housing data are subject to large sampling and other statistical errors. Large revisions are common, and it can take up to six months for a trend in sales to emerge. The standard error of 11.2% is so high, in fact, that the government cannot be sure sales decreased at all in October. The 3.2% decline is statistically meaningless.
Yeah, when a company like Horton takes a 51% bath, they have no choice but to wave the white flag
I love that Otteau guy.
JB, we all know that people see what they want to see, but sometimes you gotta go with your gut.
There just isn’t any other way to view the stuff we see on street level. It’s down and dirty. At the track, did you ever read the Racing Form, then go stand next to a horse and change your bet?
Once again, different market, but same perspective on stinky data. I cut and paste those durn stale sales every week for my county, town by town. I know that I’m cutting and pasting fewer and fewer sales. I know inventory is up. I know what comps were last year for just about any house that sells.
But the qualitative supports for median are very difficult to quantify, and until such data is available, you’re a breathing somebody else’s spew.
http://money.cnn.com/2006/11/29/news/economy/newhomes/index.htm?postversion=2006112911
The price jump in October could suggest that the September price was an anomaly, said David Seiders, chief economist for the National Association of Home Builders.
“I argued last month not to pay attention to that price number, so I wouldn’t pay much attention to this number either,” he said. “One thing we know is that prices aren’t climbing.”
Lets give this a shot:
North 2br- 3br 4br+ Median Average
2006.3 8.7 42 49.3 $465,200 $463,300
2006.2 10.2 42 47.8 $455,700 $456,600
2006.1 11.1 42.3 46.7 $431,000 $438,200
Central 2br- 3br 4br+ Median Average
2006.3 12.4 37.1 50.5 $394,200 $414,800
2006.2 13.7 42.9 43.4 $372,600 $394,500
2006.1 15.3 42.1 42.6 $356,800 $375,500
South 2br- 3br 4br+ Median Average
2006.3 13.7 50.3 35.9 $238,500 $267,500
2006.2 14.5 50.3 35.3 $235,900 $263,300
2006.1 15.2 51.2 33.6 $226,100 $256,000
State 2br- 3br 4br+ Median Average
2006.3 11.2 42.6 46.2 $385,200 $404,600
2006.2 12.5 44.7 42.8 $373,900 $390,500
2006.1 13.8 45.2 41.1 $356,700 $374,700
The report showed every region but the West having a decline in sales from September, with sales plunging 39 percent in the Northeast, and slipping 1.7 percent in the South, the largest region for building.
“Yeah, when a company like Horton takes a 51% bath, they have no choice but to wave the white flag”
Anything to do with land deals, private ventures or just calling a spape a spade, good old market conditions??
Pat,
I like the track analogy and the go with your gut advice. My gut likes to be full, and in this respect it likes to weigh the knowns vs. unknowns. If pricing data is this unreliable, what do we peg to that’s reliable? Inventory? Absorption?
Unfortunately, I’m starting to get an empty pit here, wondering about what one of our fearless leaders said were the unknown unkowns.
Read what the Fed reads, the newest Beige Book is out.
http://www.federalreserve.gov/fomc/beigebook/2006/20061129/default.htm
Despite continuing softness in automobile and housing-related sales, most Districts reported that consumer spending increased during October and early November, and the retail sales outlook for the holiday season was cautiously optimistic. According to most reports, growth in other service-producing industries remained generally solid. Manufacturing activity was positive overall, with the weakest reports concentrated among auto and housing-related producers. Reports on housing markets continued to indicate an overall decline in single-family home sales, and there were some reports of lower home prices. Indicators of single-family construction continued to weaken in most Districts. However, housing demand continued to be strong in a few specific markets, and nonresidential activity generally improved. Many Districts noted a continued slowing in mortgage lending, while reports on other lending were mixed. Some Districts reported a slight increase in delinquencies.
(cont)
Housing markets remain mixed: New York City’s rental market has tightened further, and there has been some pickup in co-op and condo sales, stemming the rise in the inventory of unsold units. In contrast, northern New Jersey’s housing sector remains sluggish. Permits to build single-family homes fell sharply in the third quarter, but multi-family construction permits remained strong. Office markets in and around New York City generally tightened in October, with Manhattan Class A rents jumping to record highs. Finally, bankers report some weakening in loan demand in the household sector but little change in the commercial sector; they also note little change in credit standards and delinquency rates.
Both residential construction activity and housing markets continue to be mixed, with New York City generally out-performing the rest of the District. Permits to build single-family homes in New York and New Jersey weakened noticeably in the third quarter, falling more than 25 percent from a year earlier, whereas multi-family permits remained strong, rising 7 percent from 2005 levels, led by New York City. A contact in New Jersey’s homebuilding industry reports that both demand and traffic are weak, and that steep discounts are being offered to sell completed or almost completed units; selling prices are now said to be down from a year ago. A contact also notes that home re-modelers have seen a marked slowdown in business, except at the high end.
(cont) From the Philly District which covers Southern NJ.
Residential real estate agents and homebuilders surveyed in November indicated that sales were declining, continuing the sharp slowdown that began during the summer. Real estate contacts noted that the number of existing homes for sale and the time they are on the market have risen. Home builders reported significant increases in cancellations. They have reduced prices for resold houses and increased the value of free upgrades for all houses sold. Price appreciation of existing homes in recent months has been well below the pace recorded over the past few years. Homebuilders and real estate agents expect the pace of sales to slow further during the winter. While most expect sales to recover next spring, several said they do not anticipate a substantial rebound.
“My gut likes to be full, and in this respect it likes to weigh the knowns vs. unknowns.”
Pro,
Ditto!! I felt this way owning properties over the last 20 years. I felt this way when I liquidated last year. I like to listen to market conditions, not my bias. Been wrong too many times, with the market, that way. The known told me to sell. You can see post #160 yesterday, addressed to you. Unfortunately, no response.
This whole “median price” concept is useless.
Let’s have “average price per square foot.”
BC Bob,
you have mistaken me for Pretorious.
Full disclosure: I neither know Pretorious or am affiliated with his interests
Guys when I pull up a search all I see is price declines, only newly listed homes do not show declines. Now some of those homes originally had overy optimistic prices. I think that price as a whole are difficult to track when one is talking about an entire market.
Price is a lagging indicator. Inventory is really the only leading indicator. In the past the economy as a whole was viewed as a leading indicator, but in this case that has not proven to be true. Housing has slumped and it has not been due to the economy. If a home was purcahsed in 2005 prices have either fallen below or are at that same level. I have seen multiple homes sell below their 2005 sale prices. Why is this not flowing through our stats I dont know. You would have to review the methadology the NAR uses to calculate these statistics. What did these figures look like in the 90’s. One could deduce that even though the stats showed strength in pricing in 90’s, prices still fell. We know this. this could happen again because of some flaw which does not translate price reductions in the stats.
Its too bad that the govenerment does not track this data rather we have to rely on a biased organization.
profuscious,
Sorry!! My mistake, made notice of your full disclosure.
“Housing has slumped and it has not been due to the economy”
ck986,
That’s the key, every other decline in housing was the result of the economy/recession. That’s what makes this one unique. It has imploded on the back of its own weak foundation, a house of cards built on debt,debt and more debt. Make no mistake about it, we are in unchartered waters. Life jackets???
EUR JPY GBP CAD
USD 1.3153 0.0086 1.9458 0.8791
For you scoring at home – that means it takes almost $2 to get ONE(!) Pound Sterling.
I too have seen multiple homes sell below theri 2005 levels, the exact same hosses on the same block.
I am following one now down to an asking price of 450K (and sitting since August) with brand new kitchen, new windows, move in condition. The exact same house, with out the updrades clsoed last Oct at 530K. The price drops are happening, at soem point they will have to show up in the numbers. One final note a local relator told me that in her 20 years or so int eh business, nver has ny town seen so much invntory for sale this late in the year.
Grim: However, I am not sure that I’m seeing that anecdotal evidence manifest itself in the available data yet. Is this analysis flawed? Are the increases in average and median prices an anomaly based on changes in mix?
Here is my thought on this topic. I don’t think you will see decline Median or Avg prices at all much. The major reason being, most buyer stick to budget (for e.g. I want to buy house for $500K). They are getting bigger & better house, but normally stick with amount of money they are mentally prepared to spend. Both Median & Mean do not reflect this difference.
The only number that can represent this is OFHEO’s HPI. But the issue with that it is traking only loans with conforming limit, which is low compared to prices in NJ. Hence even if you look at historical HPI data, it shows very little dip in 1989 to 1993, but anecdotally, you will find many folks saying prices really tanked.
The only other thing to do is look at large development, where houses are similar and prices can be compared. Here are sales in large development in Bridgewater.
12 Bertram Dr Aug 06 $582,450 (Taxasmt $584)
8 Bertram Dr Nov 05 $635,000 (Taxasmt $563)
6 Bertram Dr Jan 05 $584,000 (Taxasmt $571)
Today you have houses in same development asking $539K. That is significantly less then someone who paid $635K.
Sorry for all the typos, typing too fast #53)
Chi,
It’s currency happy hour. Yikes!!
JB:
I agree w/ your conclusion that the data doesn’t point to falling prices…Otteau is wrong here. When he says “prices are falling” he is talking about asking prices, not final sale prices…of course asking prices are falling b/c sellers are asking ridiculous amounts of money…that being said, the final sales prices are in line and are still increasing slightly. But everyone is so focused on asking prices (for example, your price cut segment), but they are really so drastic b/c so many sellers have their heads up their as$%s about the price of their homes.
Hope that made sense.
BOB is annoying: the final sales prices are in line and are still increasing slightly.
I don’t think I agree completely. Look up following 2 sales (zipcode: 08807),
12 Bertram Dr Aug 06 $582,450 (Taxasmt $584)
8 Bertram Dr Nov 05 $635,000 (Taxasmt $563)
That is price drop by 50K. It just takes time.
“that being said, the final sales prices are in line and are still increasing slightly”
That’s 100% false.
Anyone watching transactions in a given town will know this.
I’ve seen several people who bought two years ago sell at steep losses. One who bought 18 months ago sold at a $350K loss.
Need your advice. We are renting a two-bedroom, one-bath apartment in a two-family house for $1500. There is currently a 3 bed, 1.5-bath house for rent in the same town for $2250 plus utilities. This house would sell for about $500K. Is it worth renting for the extra money? We really could use more room, especially since we are not planning on buying a house until 2008.
Are there any statistics out there on the demographics of buyers (i.e. first time versus trade up)? My gut tells me the reason why the median price went up was due to first time buyers increasing sitting on the sidelines. If this happens, you could have falling prices, but the median and average could still go up.
For example
2005 Sales 2006 sales*
$100 No Sale
$200 $180
$300 $270
$400 $360
$500 $450
* after 10% price drop, and one less first time buyer
2005 Median = $300 Average = $300
2006 Median = $315 Average = $315
The stats released by NJAR showed an overall decline in sales, but a higher proportion of sales were more expensive homes. Given that inventory is up across the board, it seems logical to conclude that lower priced homes are available, they are just not selling as well.
SG and unrealtor:
Of course we can pick 2 or 3 (or more) homes and say the sales prices are dropping…but I wasn’t saying that and never did. I am saying OVERALL, taking the average sales price in a town, county, etc. the sales prices are still slightly increasing. That is a fact. You may not like it or think it runs counter to your bubble bursting beliefs, but it’s true.
I mean look at Grim’s headline on this topic as proof.
“that being said, the final sales prices are in line and are still increasing slightly”
sold prices in the towns i’m watching are ~5-10% lower than peak sold prices from the last 18-24 months. no bloodbath yet.
And SG, noone is talking about tax assessments….we are talking about decreasing YOY sales prices…assessments are meaningless in this regard.
they maybe down from peak, but YOY prices are still up…c;mon guys, we cannot argue freaking facts.
RentinginNJ: Average price is meaningless for comparing housing sales. One million dollar house will overshadow four $250K houses. Similar to the example you showed above. The slightly better number is Median.
But I don’t like either of them. As I mentioned above if one decided to buy house worth $500K, they would still spend same money but buy bigger better house. The Median would still be same.
I wished OFHEO tracked all house sales, because it takes into account same house factor. Unfortunately they don’t, hence we get only data on lower end houses.
BOB is annoying:
I put Tax assessment price to reflect that these 2 houses were very similar. If you drive by them (which I have done), you can’t see any difference.
Also I mentioned in earlier post, Average & Median price both are meaningless, because they don’t take into account whether it was same quality house or not. Most people decide how much money they want to spend first, then go looking for houses. They normally end up spending slightly more than decided amount. But if you see larger choices, you normally endup buying better house, but will still pay same amount.
So it doesn’t matter whether Average or Median is down by smaller amount. The real thing is comparable house sales. Also Psychology has turned around now.
Repost to clear moderation:
bobisannoying and Richard:
I don’t know..should I believe you guys, or Igor?
http://tinyurl.com/yfdxte
He has an honest face, and says prices are falling.
Now, I’m not sure about Lisa and Robert, but they aren’t so hot on prices right now, either:
http://tinyurl.com/ydmy8r
“But everyone is so focused on asking prices”
Well pigs do like to play in s*it!! I don’t pay one bit of attention to what they are asking,not important to me.
“I am saying OVERALL, taking the average sales price in a town, county, etc. the sales prices are still slightly increasing. That is a fact. You may not like it or think it runs counter to your bubble bursting beliefs, but it’s true.”
Then surely you can cite some data to support your claim.
I’ve been watching several towns very closely, and there are two trends:
1) Properties are sitting for 150+ days, and relisting under a new MLS # every 90 days or so.
2) Closing prices are dropping.
Nothing is “increasing.”
hmmm…i wonder what grim’s headline is talking about then…
Annoying,
Just a response to your post regarding asking prices. There are a lot of investors that would like to get $80 for pet.com. You said everybody is focused on asking prices.
Can you show me where all the incentives show up in the median prices?? I hope you don’t give a rats a**. Then I know I’m in good shape!!
unrealtor….
here’s your stats.
http://www.realtor.org/Research.nsf/files/MSAPRICESF.pdf/$FILE/MSAPRICESF.pdf
look under new york…prices are up.
does this suffice?
why is it so hard for people to just accept that maybe, just maybe, there will NOT be a total collapse? is it only b/c it will prove you wrong and your own ego gets in the way? sheesh.
Grim’s #38 post proves why the median prices have increased.
North 2br- 3br 4br+ Median Average
2006.3 8.7 42 49.3 $465,200 $463,300
2006.2 10.2 42 47.8 $455,700 $456,600
2006.1 11.1 42.3 46.7 $431,000 $438,200
Reason: lesser number of 2br sales and more 4+ br sales. The shift in sales is backed up by inventory numbers that show 2br (condo) inventory going up. One of the reasons behind this shift is the belief that condo (2br) prices go down more during a crash.
Since more 4+ br properties are being sold, the median will naturally go up.
2Br (Condo) sales went down by 2.4% while 4br+ sales went up by ~2%.
It would be interesting to see what the median prices for 2br, 3br & 4+br was in Q1, Q2 and Q3.
unrealtor:
did you take a look at that data?
Annoying,
It doesn’t matter to me what prices are doing now, up/down 5%. It’s a multi year trend that is just beginning. Very simple, if your are so bullish step up to the plate and buy. If you own buy more, then flip. Can’t afford these prices?? Get an I/O. I’ll ride the trend down and keep my $ in other vehicles.
“why is it so hard for people to just accept that maybe, just maybe, there will NOT be a total collapse? is it only b/c it will prove you wrong and your own ego gets in the way? sheesh”
beware of false bottoms, there is still alot of air to be left out of this bubble.
Bottom line, who new can get into the market without a toxic loan? Answer. nobody.
There is always a mirage in the desert.
SAS
bob:
i’m glad you know so much about me.
in fact I AM buying now…i think there are certain good deals out there…and i have NEVER lost money on real estate and I have owned a lot.
but this has nothing to do w/ putting my money where my mouth is…is has to do w/ all fo you denying simple facts.
the facts are what they are today, not in a year from now.
Annoying,
Want facts?? Read post # 3, from a big honcho in the industry!!
So, a bunch of exhausted buyers (assuming that the inventory levels are caused by truant buyers) think that prices are dropping.
A bunch of realtors think that prices are dropping.
[Assume for a moment that in a declining price market, asking price means most sales will NOT close over asking price.]
Builders think that prices are dropping.
What is creating this mass delusion?
“the facts are what they are today, not in a year from now”
? Hugh ?
Isn’t it more important what your house will be worth in the next few years vs. present?
SAS
pat:
realtors, exhausted buyers and builders all think ASKING prices are dropping…they are.
sales prices (YOY) are not.
no delusion.
do i need a chalkboard?
BOB is annoying: I don’t know that people here think are hoping for a total collapse in its true definition so much as they hope there will be a BIG correction to align prices to fundamentals. In the minds and eyes of some here this is a collapse because the drop will need to be significant in order for a return to affordability. Moreover in the minds of others (perhaps Realtors) this correction would be considered a collapse because it would probably pose thinner days for many of them.
As for egos, it probably goes further than hurt egos due to being wrong. It speaks to peoples desire to be able to afford a home. Given the foreclosure rate and current affordability it looks like a lot of folks cannot afford to buy today.
SAS:
only to someone who will be selling in a year. some people don’t view their house as an investment, others do.
let me hear someone say the truth…as of right now prices ARE NOT declining? can anyone on hear at least admit that truth or are you all so absorbed by bubble bursting mania that you can’t even tell the truth?
“have NEVER lost money on real estate and I have owned a lot.”
Annoying,
Same here, NEVER lost, since 1985, liquidated in 2005. The market, to me, was a screaming sale. I am also putting my money where my mouth is. That happens to be outside RE.
JMO, Be careful using the word never. It seems to be popping up often from the Toll’s and Hov’s of the world!!
spelunker:
if you are looking at home prices in the window of the last 5 yrs, then yes there should be a correction as prices skyrocketed.
however, if you look at home prices in the window from let’s say the last 60 yrs, from day 1 to now the avg increase per year is only 2-3%…nothing needs correction about that.
the toll’s and HOV build houses on spec…i don’t. i buy deals.
and bob, if you are putting your $$ elsewhere, what is the point in you participating in this forum cheering on the sidelines for the market to collapse? just so you can revel in other’s pain?
“so the OPINION of a CEO is now a fact?”
He is basing it on facts, declining sales, tumbling profits and bloating inventory. I don’t claim to have a better handle on his business than him. Do you???
B is Annoying.
Sorry, but prices need to align with income and they are not. Prices need to catch up with affordability and they are not. These are the fundamentals i speak of. 80% + of a person’s income cannot be the “norm” of home ownership. Otherwise when compared to renting there is no benefit in owning a house whatsoever.
BOB is annoying:
I’m always up for simplifying things, and won’t turn you down on your chalkboard offer.
If you feel like it, go ahead. I made crockpot this morning, so I’ll have time. It might make for good discussion.
“prices ARE NOT declining?”
yes, for the most part, prices are not declining. Agreed.
I have been admitting that for awhile on here.
Because in all bubbles, especially RE bubbles, prices drops are actually the last thing to happen. The fundamentals have to line up first, and that is starting to happen.
So, right now we have the lamb market. i.e. a Mexican standoff…
with that said, there is a potential the bulls will win the mexican standoff. But I think JB posts enough stats, that pertain to RE directly & indirectly, that more so supports the bears.
So, we will see…yes, but I do think, once we let time take its course, we will see the bears win this mexican standoff, and will be eating bear burgers for dinner.
yummie……
SAS
prices seem flat compared to other items. the movement has been in a sharply declining rate of appreciation, steadily rising inventory, and steadily decreasing transactions.
Many here may be wishing for price drops that haven’t really occured yet. Still, when the balance of factors is taken into account, I can’t see how much solace you can take from the fact that price has moved much yet. It’s usually the last shoe to drop
spelunker…the norm right now is definitely not 80% of income…why don’t you back that up w/ some data?
and BOB: I am in the real estate industry myself and trust what i see and read and not the CEO of a company trying to make more $$ for his stockholders. sales prices have not declined…the data proves it…cmon BOB just say it out loud…noone will think you are an a$%
Annoying,
I’m not cheering, don’t want to see anybody get hurt. Unfortunately the I/O’s & flippers are trapped. Don’t want to see anybody else get stuck!!
so let me get this straight.
1. all of you have consistently said that this bubble is not like other bubbles b/c its not related to a recession or other factor and is sort of stand alone, BUT
2. at the same time, prices usually lag and will come down as in all previous bursting bubbles.
so….it;s not the same, but it’s the same?
i got it.
“some people don’t view their house as an investment, others do”
Lets put it this way…. your bank does, and whom ever gives you the loan does. Trust me, they will know, way before you do if your house goes below the loan amount, and they will gladly remind you in ways that are unfair.
Depeding on the loan, they will call it, ouch…not alot of fun.
If you have cash on hand, thats another story.
SAS
SAS:
There is not one loan agreement signed in this state that allows the bank to declare a default if the market appraised value falls below the mortgage amount if the buyer is up to date on payments…that’s a flat out lie and proof of you trying to scare everyone on here.
SAS:
At least admit what you said is just false…
This is beginning to look a lot like a Wisconsin deer hunt
thesmokinggun.com/archive/1122061deer1.html
BIA,
the inventory buildup, deceleration of appreciation and dropoff in transactions have occured during a period of historically strong employment and historic liquidity. So in that respect, this time is different from prior market turns.
The fact that price drops continue to lag these other factors does not mean that everything else is the same as past corrections. Doesn’t it raise some concern that this downturn is ocurring without the unemployment levels of the early 90s and with mortgage rates 1/3 lower? what do you think would happen to housing if those conditions were to emerge today?
The point is that housing is in surprisingly rough territory given the overall strength of the economy. The fact that prices haven’t dropped much yet should not be taken to mean that housing isn’t extremely vulnerable
“did you take a look at that data?”
First of all, I’m watching ‘prime’ NJ towns, not NY. This is the “Northern NJ Real Estate” blog.
That said, the data you cite is median prices, which are thrown off when very expensive homes sell and ‘regular’ priced homes do not sell (because so many people are priced out of the market).
In addition, your source says sales price in the Northeast is down -4.8%.
I’m watching properties sit, get relisted, and neighboring homes sell for substantially less than what they sold for last year. I trust my own data, in the ‘primo’ NJ towns I’m watching.
If you think now is a good time to buy, knock yourself out:
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
Me, I’m waiting until prices fall back in line with incomes.
BC Bob, keep up the good work!! don’t listen to that annoying guy, he’s a prick.
This bubble is not the same as other housing downturns because its supply driven. In 1980’s it was higher interest rates that killed the bubble, in 1970’s the oil crisis. In bot demand fell off first, then supply followed (supply followed demand). In this one, demand got completely out of hand with speculators, crazy finances and new builds but now supply has come surging back on the market while existing underlying demand (ex flippers and speculators) is still strong. iBob is right too when he says it will end up like every other crash, only this time more so, because when underlying demand turns down (and I believe it will in 2007), then the supply is still stuck there but demand is falling. what’s complicated about this? and what’s wrong with calling Lereah, MSM etc on their bullsh*t?
Given time I could find more examples of folks having to spend closer to 80% just to jump into the market. The research below indicates that there are a considerable amount of people overextended given today’s prices.
The most common notion of affordable housing implies that households that spend more than 30 percent of their income on housing have an affordability problem. According to the U.S. Department of Housing and Urban Development, approximately 12 million households currently allocate more than 50 percent of their income to housing.
Hope you weren’t implying that i would run away. No reason to fear a little debate right?
8^)
http://web.mit.edu/cre/research/hai/aff-index.html
unrealtor…
nothing like jumping on my typing “new york” and hoping people don’t click my link to see if you are lying…the new york market is nyc, li, and NORTHERN NEW JERSEY, as clearly indicated on my link, so NORTHERN NEW JERSEY PRICES havenot fallen.. there is also newyork-whiteplains-wayne, nj included there too.
you are not intentionally misrepresenting things are you?
and you are the one who asked for data to back up what i was saying…i provided it, and it backs it up..but that’s still not good enough right?
the ‘Bob is annoying’ guy said:
“let me hear someone say the truth…as of right now prices ARE NOT declining?”
PRICES ARE DECLINING.
I don’t crunch numbers for a living, but I have driven around and been following a few neighborhoods in south brunswick for last 5 months.
Prices have fallen anywhere between 50K – 100K to comparative houses sold last year.
4br, $500k – $650k single family homes
I can back that up with mls numbers.
mr. annoying.. stop the BS
if median prices aren’t important why do you all rely on Shiller’s graph (as posted above by unrealtor)…his graph is based on median prices…go read his site.
why are posts disappearing?
Because I’m deleting anything that is even remotely confrontational, regardless of who posted it.
jb
I believe we have slung too much mud BIA. JB is probably trying to keep us a cleaner clan and probably rightfully so.
I have no problem with your facts “buddy”, I do have a problem with the personal attacks on those you don’t agree with. Inventory up, demand down, not a good sign for rising prices! your “facts” are just that “facts” supplied by either statistically insignificant surveys or massively biased NAR data. BC Bob’s facts are the same, but at least he’s making a call on the bullsh*t that its always a good time to buy. If I want someone to tell be that, and that prices never fall, that they are not falling now, I only need to watch TV, read a mag, a newspaper or any of the other maintsream outlets that don’t have the balls to talk about the weakness in this market without putting NAR and realtor spin front and center because they buy ad space. Where the f*ck is Elliot Spitzer when you need him anyway!!
BOB IA,
Get me some proof that Otteau’s analysis is based on falling asking prices please.
jb
hey renter:
i like how you simply make things up..it’s interesting.
i never ever said prices never fall or don’t fall…but thanks for playing.
i never attacked anyone personally…i think BOB has been cheering for a crash for a long time in here…and that’s afact..we can go back and look at his posts.
but hey, you get all your info from some anonymous stranger on a message board so who am i to argue?
jb:
you have a pipeline to him…call him up and ask him…i was at his presentation as well…he said it. there is no data to provide you except asking the man directly.
BC Bob Says:
November 29th, 2006 at 4:03 pm
Chi,
It’s currency happy hour. Yikes!!
Bost: Sharp. I like it. Too bad the subject matter is sad. :-P
“that’s a flat out lie and proof of you trying to scare everyone on here”
who said I was lying? Who am I trying to scare?
“say something false to back up your case”
not on all loans yes… remember I said..”depending on the loan”…be on the look out for acceleration clauses and things similiar to margin calls. I don’t have stats on hand, but I am sure with some effort, I could get some, or someone may come forward with stats as well.
“and run away when called on it”
I am not running. I am just doing other things as well.
“if the buyer is up to date on payments”
thats just it too….. going back to that market psychology…
once people feel they are paying more than what the house is worth…they “can” fall behind, because people tend to start building anomisity and not giving a shit anymore.
SAS
“nothing like jumping on my typing “new york” and hoping people don’t click my link to see if you are lying.”
A little red herring mixed with ad hominem — weak.
I was referring to your post #76, which states: “look under new york… prices are up.”
I then proceeded to comment on NY and NJ and the Northeast in post #109.
Any other questions?
sas:
all you simply said was that if the bank finds out the value is less than the mortgage they can call it (you didn’t saying anything about falling behind in payments).
as at his presentation as well…he said it.
BOB IA,
If you are associated with the real estate industry please make that known here.
jb
BIA,
Great, we are on the same page. I just don’t see why you’re pushing the fairly steady price angle so hard. If you understand all of the other factors at play, then you know that prices will be coming down in real terms at some point soon. Everyone right down to David Liareah agrees on this point.
So, assuming you don’t actually think that recent price firmness precludes future price drops, I guess you’re just trying to point out that none of us has a crystal ball. That’s fine. We don’t.
Many of us have been wrong in predicting short term numbers, but I think that if you’d read this site for a while you’d admit that the people here have been pretty accurate on the big picture. Recall that during 2005, the bubble was a fringe idea. Now it is very mainstream.
Maybe you can provide some insight as to why the overall negative view here is wrong. So far, you haven’t really refuted any of the main points.
“if median prices aren’t important why do you all rely on Shiller’s graph (as posted above by unrealtor)…his graph is based on median prices…go read his site.”
The chart desn’t say as much, but I thought all you cared about was median price? You should love the chart then:
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
Mmmm, looks like prices are ripe for an increase, better buy now!
Bob IA.
well the label you picked is not a friendly start! I hope I didn’t accuse you of saying that prices never fall, but you do say that they are not falling now and you bashed on Otteau for asking prices. I would hope that I would never base a long term investment on one data point, one source or on one point in time. BC Bob is giving an opinion, he uses data and he adds an aggressive spin. That’s fine by me!
jb:
i did…see post #97.
skep-tic…see my post #89…that is a starting point as to why i think generally speaking sales prices are in line historically.
Thanks, I didn’t see that one.
jb
Who says prices are not declining.I have been following few towns in NNJ and have seen price erosion to the tune of 80k to 100k for a 500K townhouse.Go to http://ingdirect.com and get sales history in any townhouse developemnt and you will see it is quite evident by the numbers.
“all you simply said was that if the bank finds out the value is less than the mortgage they can call it (you didn’t saying anything about falling behind in payments)”
My mistake, and hold me accoutable, I should have mentioned that point that you pointed out. Thanks.
But it is true, depeding on the bank & loan and the accleration clause, its can happend, and does happen. They may not be as common, but they are out there. And with all the gimmicks from the RE cartel and naive of joe 6 pack, I would suspect they are more common than we both may want to admit.
perhaps a banker or a lawyer on the blogs may shed some light.
SAS
Unrealtor:
I’ve been wondering when you were going to yank out that blasted chart.
BC Bob Says:
November 29th, 2006 at 10:13 am
Builders’ earnings are taking a hit. D.R. Horton, the nation’s largest homebuilder, reported this month that profit tumbled 51 percent in the quarter ended Sept. 30 as orders slid 25 percent.
“We’re in the early stages of a declining market,’’ Chief Executive Officer Donald Tomnitz said on a conference call with investors and analysts. “Most of these downturns are longer and deeper than we envisioned at the beginning.’’
I could not say it any better. He must have been reading this blog. Here’s a guy who’s talking like me/us and he’s the CEO of a major H-Builder.
Any comment from the Hoboken website??? Whatever the hell the name is???
HAHAHAHAHAHAAAAAAAA
BLEED’EM DRY….IT’S PAYBACK TIME BABY!
BOOOOOOOOOOOOOOOYAAAAAAAAAA
Bob
bklynrenter….yeah BOB’s really giving useful advice…i especially love the “bleed ’em dry”…nice touch and very informative.
GIVE’EM NOTTTT”’ING
NOTTTT”’ING
IF YOU HAVE STRONG FINANCES AND ARE PRUDENT WITH YOUR MONEY AND ARE CONSIDERING BUYING A HOUSE
YOU ARE IN THE DRIVER SEAT…YOU DICTATE THE TERMS OF ANY SALE NOONE ELSE
BOOOOOOOOOOYAAAAAAAAAA
Bob
I’m not sure if SAS was referring to this specific type of mortgage, but it does fit his description somewhat..
Asset-backed mortgages do function in the way similar to what SAS mentioned. These are also sometimes referred to as Pledged-Asset loans.
However, these loans are incredibly rare and typically marketed towards those with large stock portfolios. I hear pledge-loan ads on Bloomberg all the time.
It’s a stretch though, since it’s a fall in the pledged asset that will trigger the “margin call”.
jb
SAS:
Your scenario (sans non-payment by the borrower) only happens in commercial loans where there are certain financial covenants in the mortgage or security instrument…it is not something that occurs in residential mortgages as there are no financial covenants. the only defaults under any type of residential mortgages are non-payment, cross-defaults under other agreements, the filing of liens, changes to the property w/o the bank’s consent, etc.
buy jb, asset-backed mortgages do not have the property as collateral and SAS is explicitly talking about the property as collateral falling below the mortgage amount…that simply is not and cannot be a default under any residential mortgage.
BIA,
OK, let’s examine the last 60 years. You’re right that prices have only increased about 2.5% per year during this period.
Yet if you look at the chart, you’d see that the overwhelming portion of the appreciation occured during two periods: the years immediately following WWII, and the last 10 yrs.
There was a small correction period right after the post-WWII growth, but prices generally plateaued. But the key during this time was that prices came back after being extremely devalued during the Great Depression.
If you include prices from the beginning of the 20th Century, you’d see that prices were flat in real terms for 100 years.
The real long term real growth rate of RE is 0%. It simply keeps pace with inflation. By choosing your start point from the immediate post-War period, you are choosing to include the two biggest booms in recent history, but neglecting to include the biggest bust.
The point is that 2-3% real returns are abnormally high for RE and shouldn’t be expected going forward
This thread is closed.
jb
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