From Bloomberg:
Sales of Previously Owned U.S. Homes Rise 0.3% to 6.92 Mln Rate
Sales of previously owned homes in the U.S. unexpectedly rose last month at the same time the number of houses on the market increased, signaling that the slowdown in housing is likely to be gradual.
Purchases increased 0.3 percent in March to an annual rate of 6.92 million, compared with 6.90 million in February, the National Association of Realtors said today in Washington. Compared with the same month last year, existing home sales fell 0.7 percent.
The number of unsold homes at the end of the month represented 5.5 months’ worth at the current sales pace, the highest since 1998. The economy will have to rely more on the labor market and business spending for strength as housing slows after five record years, economists said. While borrowing costs that kept rising this month are putting home ownership out of reach for more people, job growth may support housing.
“We expect to see the continuing moderate downtrend in existing home sales,” Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ in New York, said before the report. “It provides the backdrop for our expectation of slowing consumer spending in the second half.”
From the NAR:
NAR Existing Home Sales (PDF)
Also from Bloomberg:
U.S. April Consumer Confidence Index Rises to 109.6 From 107.5
Consumer confidence in the U.S. economy unexpectedly rose in April to the highest in four years, as an improving labor market helped Americans overcome concerns about near-record gasoline prices.
The Conference Board’s confidence index rose to 109.6, the highest since May 2002, from 107.5 in March, the New York-based business group said today. The April reading exceeded the highest estimate in a Bloomberg survey of economists.
Increased optimism suggests there’s less of a danger that consumer spending and the economy will be bogged down by rising energy costs and interest rates. Wage gains and the lowest unemployment rate in four years will keep buoying spirits and lift retail sales, economists said.
Sales of Existing Homes Edge Up in March
Sales of previously owned homes edged up slightly in March but not enough to keep the inventory of unsold homes from hitting a record high as the once-booming housing market continued to flash signals of a slowdown.
The National Association of Realtors said Tuesday that sales of existing homes edged up a tiny 0.3 percent last month to a seasonally adjusted annual rate of 6.92 million units.
The March increase followed a bigger 5.1 percent jump in February with the two months representing the first advances since five consecutive monthly declines.
Not surprising…sales are always up in the spring. But down pretty decently since last year, although I doubt the realtors will mention that. I wonder how April will fare.
only a 0.3% increase between Feb and March is pretty pathetic. Feb is generally the lowest point in the housing cycle, correct? I know Feb exceeded expectations, but the spring bounce appears to be dead
interesting nat’l stats from Ben Jones’ blog
“The 7% increase in inventory was a monthly number. The year over year increase was 39%.
3.05..2,297,000
4.05..2,474,000
5.05..2,556,000
6.05..2,678,000
7.05..2,756,000
8.05..2,841,000
9.05..2,772,000
10.05.2,868,000
11.05.2,924,000
12.05.2,846,000
1.06..2,883,000
2.06..2,985,000
3.06..3,194,000”
looks like a total meltdown to me.
Can we turn the word verification back on so we don’t have to see these anonymous bloggers posting links all over the place?
Let’s take a vote.. All those in favor of turning word verification back on to reduce spam say I.
grim
more data on the absence of a “spring bounce” from the Calculated Risk blog:
“Also note that mortgage applications fell about 10% in February and March (compared to January). This probably indicates that existing home sales will fall in the coming months on a seasonally adjusted (SA) basis.”
as many experts have been saying over and over, don’t watch the sales number… watch the inventory.
Treasury market not happy with the data out today.
Also a possible factor, Canadian central bank increased rates to 4.0% and changed their language slightly.
As of 10:50
5Y @ 4.98
10Y @ 5.07
30Y @ 5.15
I am actually surprised sales were that strong. Non-seasonally adjusted sales fell 0.5% YOY. When are people going to wise up to the inventory trends and halt the buying. Maybe tomorrow’s new home sales figure will provide a different picture.
From Bloomberg:
Treasuries Tumble as Confidence, Home Sales Unexpectedly Rise
U.S. Treasuries tumbled, pushing 10- year notes down by the most since July, after gains in consumer confidence and home sales bolstered expectations that the Federal Reserve will raise interest rates at its next two meetings.
The reports challenged the view that rising commodity prices and borrowing costs are starting to take their toll on economic growth. Fed Chairman Ben S. Bernanke may give clues on the outlook for rates when he testifies about the economy before Congress’s Joint Economic Committee on April 27.
…
Futures yields indicate traders are certain the Fed will raise the overnight lending rate to 5 percent at its May 10 meeting. The odds of a gain to 5.25 percent at the June 29 meeting were 52 percent, up from 42 percent before the reports.
Ten-year yields rose to the highest since June 2002 last week as signs of quickening inflation led traders to raise bets the central bank will lift interest rates at its next two meetings. Consumer prices excluding food and energy last month had the biggest jump in a year, the government said April 19.
“Inflation risks are rising and the Fed will have to hike rates at least twice more,” said Yasutoshi Nagai, an economist in Tokyo at Daiwa Securities SMBC Co. “We cannot recommend Treasuries.”
10% mortgage rates on the way?
http://www.oftwominds.com/blogapr06/inflation.html
This disconnect from data and reality is quite interesting indeed… looks like it’s going to make it easy for the fed to continue to raise rates… how odd and ironic…
I am a little suspicious about the data. I remember the Feb data shows about 12% price appreciation over last Feb, Why suddenly the year-over-year is only 5% in March. The price only decrease only 2% from Feb to March.
Is there anybody remember the exact number.
“All those in favor of turning word verification back on to reduce spam say I.”
Tough call, spam is annoying, but so is typing in “jhgygtsftcfytsfcubou” before making every post.
I think the spam hasn’t been to bad, seems 1 or 2 every few days.
It seems if you could ban the words “Very Nice!” you would filter out most of the spam right there.
Anon 11:06AM:
Interesting. I was driving in this morning and thinking about how everyone just made the quick assumption, OK – May 10th and the Fed’s done. No news or talk at all about the Fed in over a week. I was actually going to post something here.
These housing numbers are bad – really bad.
I see a train wreck. I was praying for a fender bender.
ETA? The lord knows. 2007?
What’s the cliche? [Insert your choice of: interest rates, inventory levels, energy prices, the Fed’s actions]
____________ don’t matter until they do.
are americans living in a dream world? we spend money like drunken sailors. americans are more deeper in debt than at any time in history. the government is as well exceeding $8 trillion dollars. gasoline will stay high, taxes will only go up and the dollar will continue to be under assault. you almost can’t survive today without 2 people working in a household. for the future generations the outlook is bleak. do i want to be doom and gloom? no, but the facts are the facts.
” Not surprising…sales are always up in the spring.”
These numbers are seasonally adjusted
New Home Sales Data for March to be released tomorrow morning at 10am. Lots of eyes and ears are waiting.
The big question is, was February an anomaly or an omen?
grim
I am pulling for a market slowdown, as I am now looking to purchase. But these mixed signals are KILLING me. I do not think I can wait any longer. I will just have to start making lowball offers….
Sanchez
I’m actually not surprised to see a jump in the March numbers. While many people a more “tuned-in” to the prospect of a housing bubble “somewhere”, 6 in 10 American’s don’t believe “their” area is experiencing a housing bubble; after all, “it’s different here in ______(your location here)”.
For these people, the market probably seems great right now. Lots of homes to choose from, no more bidding wars, more room for actual negotiation and sellers and RE agents are starting to treat buyers like customers again, rather than mangy animals who should be grateful for the opportunity to bid on my house. To the uninformed observer, it looks like a return to a normal market. After all, the mainstream media tell us it’s a “buyers” market or that it’s more “balanced” now or that it has cooled and “returned to normal”.
What they don’t realize is that we are seeing the calm before the storm. Those of us who are informed know enough to see the dark clouds of gathering on the horizon.
Let’s take a vote.. All those in favor of turning word verification back on to reduce spam say I.
I vote Nay.
While the spam posts can be annoying, they don’t seem to be at a volume that’s disruptive at this time. Dealing with occasional span seems to be the lesser of two annoyances compared with dealing with word verification.
It’s your blog, however, and I will be supportive of your choice either way.
Bah! I’ve been voted against.
Democracy in action. I’ll live with it.
-Richie
The Condo/Coop data released today paint a very grim picture..
Existing Condominimum and Cooperative Sales
The Northeast saw a 7.3% monthly decline in condo/coop sales in March. YOY is down 4.4%. (These are the seasonally adjusted numbers).
Nationwide Condo/Coop inventory is up to 6.9 months. Up an amazing 86.5% over last year.
March saw median price declines of condos/coops in all regions but the West, where median prices were still $10,000 under highs set last June.
If condos are the canary in the coal mine.. Watch out, this birdie is dead.
grim
What is this soft landing crap I keep hearing about? Does anyone out their believe we are going to have a soft landing?
Correction on my post above, I meant average prices, not median.
grim
This post has been removed by the author.
RentinginNJ said…
What they don’t realize is that we are seeing the calm before the storm. Those of us who are informed know enough to see the dark clouds of gathering on the horizon.
12:33 PM
Good point about momentum. I equate it to a lot of beginner mistakes when buying stocks.
“A stock doesn’t know you just bought it.”
“A stock doesn’t go up just because you bought it.”
People aren’t thinking about where this situation is going, they are just jumping in….fool’s errand
Did you look at the Ten? It’s getting whacked.
5.09%
We’ll see how the consumer confidence survey results fall out this summer when regular gas hits 4.00 per gallon across the country. This time the oil crisis will be real. Current supply = 86MM per day, current demand = 85MM per day. I remember as a child when my parents waited in line for hours only to be denied at the pump. Oh, its coming again and it will get ugly. Buy those locking gas caps now, don’t wait.
I’m sure many in Northern NJ may be interested in this movie which opens this weekend:
http://www.united93movie.com
I think it will be tough to watch, but we are going to see it.
I say we vote to ban use of the word Boyaa on here! KIDDING!
I hated the word verification, so i am glad it is gone. It really is only 2 or 3 posts per thread, and Grim does a great job of removing it. I vote to keep it the way it is now. But i will continue to post here regardless.
Housing Bust!
Lots and lots and lots of FSBO signs
ba ba ba ba ba ba ba ba BOYCOTT HOUSES
BOOOOOOYAAAAAAAA
Bob
Is there anyway to get more granular stats for North & Central NJ? Article mentions 1.7 percent increase in the Northeast, but that is large area to cover. It is possible that there is good amount of decline in North & Central NJ, while people moving to PA or South Jersey?
Normally, I look at any report coming out of NAR with skepticism. As they always try to put positive spin to Housing in general to help the Realtors.
My wife and I placed a bid ($20k below list $420k) on a house about two months ago. The seller snuffed at my offer and wanted us to come close to their asking price. We said no and walked away.
My agent just received a call from their agent and wanted to know if we are still interested and they are ‘willing to’ accept our offer. Now the house has been on the market for about 110 days and house flipper is definitely feeling the pinch.
Since then, the mortgage rate went up and I don’t really even want to pay that price anymore.
It’s bad really bad.
* Nearly one in 10 households with a mortgage had zero or negative equity in their homes as of September 2005, according to First American Real Estate Solutions, an arm of title-insurance company First American Corp. The study of 26 million homes in 36 states and the District of Columbia found that one in 20 home borrowers was upside-down by 10% or more.
* The situation is even grimmer for recent borrowers. Of those who bought or refinanced homes in 2005, 29% had zero or negative equity, and 15.2% were underwater by 10% or more.
* Interest rates on about a quarter of all mortgage loans outstanding, or $2 trillion, are scheduled to reset this year and next, according to Economy.com. Homeowners who opted for extremely low teaser rates in recent years could see their payments eventually double, said Christopher Cagan, First American’s director of research and analytics.
* Defaults and foreclosures are already on the rise, thanks in part to higher interest rates, cooling real-estate markets and overextended borrowers. Nationally, 117,259 properties entered some stage of foreclosure in February, according to foreclosure-monitoring firm RealtyTrac, a figure that’s up 68% from February 2005.
http://moneycentral.msn.com/content/Banking/Homefinancing/P148861.asp
anon 3:06 –
come back to them with another offer, even if it is lower than your original. Don’t be shy to pay much less than what they are asking
Do not pay $400K. Tell them that inventory is soaring up, interest rates are up and that now you can only afford $340k now.
Then if they turn it down and come back you offer $320K.
DO NOT BE A BAGHOLDER. PRICES ARE GOING DOWN.
Check this out. The house buyer of the $400k home.
http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=4687220&tid=aol&sid=4687220&mid=891629
here’s what the message said.
“Just before June 1989 I bought my first house in Torrance Ca. for $270k , 6 months later the market price for it was $210K, 3 months later $170k and a year later $150k. it took 12 years before it was back at $270k agian…
This market is just like those days… if you have cash on hand wait a year and then buy.”
RentinginNJ said…
I’m actually not surprised to see a jump in the March numbers. While many people a more “tuned-in” to the prospect of a housing bubble “somewhere”, 6 in 10 American’s don’t believe “their” area is experiencing a housing bubble; after all, “it’s different here in ______(your location here)”.
For these people, the market probably seems great right now. Lots of homes to choose from, no more bidding wars, more room for actual negotiation and sellers and RE agents are starting to treat buyers like customers again, rather than mangy animals who should be grateful for the opportunity to bid on my house. To the uninformed observer, it looks like a return to a normal market. After all, the mainstream media tell us it’s a “buyers” market or that it’s more “balanced” now or that it has cooled and “returned to normal”.
What they don’t realize is that we are seeing the calm before the storm. Those of us who are informed know enough to see the dark clouds of gathering on the horizon.
12:33 PM
I could not agree more!!!
Yes. I agree I don’t even think I want that house any more.
“My agent just received a call from their agent and wanted to know if we are still interested and they are ‘willing to’ accept our offer.”
Tell them you would rather save $100,000 and will give them a call in 12-18 months.
Chicago,
Care to elaborate on your reasons why the housing numbers are so bad?
Perhaps you can answer this question for me.
If you look at any of the homebuilders, all of them have been in a downtrend since July of last year.
Yet, a few of the subprime mortgage lenders–New Century (Symbol: NEW) and Accredited Home Lenders (Symbol: LEND) have both put in solid performance since the start of the year.
Both sectors have stocks with high short interest, which is usually a long term negative for a stock (contrary to the commentators in the media). I’m curious if you know what is holding the up the stock prices of these lenders.
With mortage originations going down, volume of loans should decline, and fees should also drop as well.
I do know they earn interest on the mortgages, but if delinquencies increase, as I expect, then there should be problems with earnings, and at least for New Century, the huge dividend would need to come down.
It would seem we are a long way out from there, but what would explain why people continue to bid up the mortgage brokers when it is clear housing, and by implication–mortgage brokering, is going to slow?
Grim thank you for Co-op, Condo numbers –just as I suspected — and watch as these properties turn ever more radioactive in the coming months
I’m curious if you know what is holding the up the stock prices of these lenders.
There was a story about this in the Wall Street Journal a month or two ago. I apologize, but I don’t have the link. Anyway, these companies originated a number of option-ARM mortgages. When the borrower makes the minimum payment, the unpaid interest causes the loan balance to increase. This unpaid interest is booked as earnings by the lending institution. Looks good on paper, but very dangerous in reality.
RentinginNJ
I would have thought as much, but in order to pay out such a hefty dividend, like New Century does, they have to have the cash flow.
The dividend on New Century is something like 15%. I seriously doubt something like that is sustainable. Either the stock is priced way too low, or the dividend isn’t stable.
Rob Ryley said…
Yet, a few of the subprime mortgage lenders–New Century (Symbol: NEW) and Accredited Home Lenders (Symbol: LEND) have both put in solid performance since the start of the year.
==================================
1 These guys are transaction oriented, so as long as volume is maintained, they collect their fees.
2 They are both residential and commercial. The commercial market is just fine, and we have not really discussed this issue at all here, because it is not topical.
To the extent they take the loans and repackage them as CMOs/CDOs, they are basically washing out the risk from their books. What you should see is margin compression as conditions deteriorate.
What you don’t know is the extent of contingent liabilities in the contracts that they use to syndicate the loans. Further, you get the general feeling that they are getting a little bit of a halo because the housing numbers keep coming out strong.
I think it is fair to throw out that there is certainly going to be the equivalent to an Enron-Worldcom style blow-up somewhere in this industry. To the extent that you are dealing with financial markets that do not have long-track records and refined defintions of GAAP, you have the potential for abuse. I don’t want needlessly wave red flags, but “caveat emptor” with these stocks as they say.
Recognize the dynamics are different than most of our discussion here. To reiterate, as long as volume is maintained they are making money. The balance between supply and demand is not as important.
Your task – figure out when supply peters out and also, what happens. You also need to assess the capabilities of the management of these firms, as well as their integrity.
If you are a technical analyst, this probably does not concern you.
I have to use caveat language here. Please do not rely on this information to make investment decisions. Sorry – but I have be careful discussing individual securities.
This post has been removed by the author.
If you want a doomsday scenario, check out PXT, a reinsurance company that help underwrite risk for insurnce firms for hurricane Katrina/Rita – I guess they didn’t do a good job.
Note two things:
1 – observe not only the hit when Katrina/Rita came through, but also when they reported their 4Q05 Earnings in Feb 2006
2 – idiots didn’t invest in this company – a lot of hedge funds took a serious BATH!
5:58 PM
Chicago,
Thanks for the info. I already suspected something along the lines of your reply.
What is interesting about NEW (I already have puts on it), is that it is a mortgage REIT, so it is required to use capital to invest in mortgage assets, which would expose it to risk of loan losses.
It doesn’t merely originate the paper to sell it. In order to pay out that hefty dividend, it has to hold significant amounts of the mortgage debt, or perhaps MBS with high yields.
Now, the new mortgage numbers have been on a downtrend. This would suggest to me volumes are going to decline if not in this quarter, then most likely the next.
What I’m surprised at is that this hasn’t been priced into the stock.
What do you make of a REIT that has a 15% dividend?
To me, that tells me there are some big risks floating around.
BTW, you neglected to mention your take on the housing numbers. What about them leads you to feel so negative about them?
BTW, you neglected to mention your take on the housing numbers. What about them leads you to feel so negative about them?
=====================
If Bernanke said the Fed is going to be data driven. Well, the data says tighten more.
In general, it means that every last drop of investment capital is being put to work in the real estate market. The supply is already exploding, but at least it is being met with a healthy [though not equal] demand.
At this point, you have to believe that the last bit of demand is being wrung out of the system and will be exhausted.
What is means is that every day this extends will create more carnage in the end. I don’t want to see blood in the streets, but all these sob stories are already being written as we speak.
Why does the truth have to hurt so much?
Think people are just happy that spring is finally here.
Hard to imagine they feel RICHER than they did last month.
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