Light at the end of the housing tunnel?
posted at 2:50 pm on October 24, 2008 by Ed Morrissey
While the policymakers fretting over the collapse of the housing market, it may have already begun righting itself. Despite the collapse in prices, or perhaps because of it, sales in previously-owned houses rose 5.5% last month — the biggest gain in over 5 years:
Sales of previously owned U.S. homes rose 5.5 percent last month, the biggest gain since July 2003, and the inventory of unsold homes fell, a hopeful sign for a housing market mired in a long slump.
The National Association of Realtors said on Friday that sales of existing homes rose to a 5.18 million-unit annual rate from the 4.91 million unit pace set in August. Economists had expected sales to rise to only a 4.93 million unit rate.
It was the first time the sales pace had risen above its year ago level in nearly three years, a sign the market could be stabilizing.
The surprisingly large jump in sales pushed the inventory of unsold homes down by 1.6 percent to 4.27 million, or a 9.9 months’ supply at the current pace, the lowest since February.
The trends gives some credence to the analysis that we may have already hit bottom in the financial crisis. If pricing stabilizes, fewer homeowners will be at risk of foreclosure, which could also help build a floor for mortgage-backed securities. Once that happens, the real value of those MBSs can be known, and a better analysis of institutional stability can begin.
This also shows that allowing the market to work is the best policy. Once prices moved back to reality, people began buying homes again.
Blowback
Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.
Trackbacks/Pings
Trackback URL
Comments
This is bullshat. I say we have the government buy every house in America and then lease them back to people on a liberal first, everyone else second basis.
Bishop on October 24, 2008 at 2:53 PM
Don’t worry, the democrats will figure out a way to extinguish this little ray of light.
RushBaby on October 24, 2008 at 2:53 PM
Can I still get a mortgage bail out?
I don’t really need one, but still…. shows me dat money
Kini on October 24, 2008 at 2:53 PM
Can we cancel that illegal $700 billion check now?
LimeyGeek on October 24, 2008 at 2:54 PM
Yup. I sold my house last month. And the price?
I didn’t sit down for a week.
S. Weasel on October 24, 2008 at 2:54 PM
I am looking to sell my house in the next five years-believe me when I say that I am paying attention to this!
Doug on October 24, 2008 at 2:54 PM
The Market always corrects itself (the housing market included) just like the price of gas coming back down.
Tony737 on October 24, 2008 at 2:55 PM
ABC/NBC/CBS/CNN/NY TIMES will rush to tell us this…when pigs fly.
perroviejo on October 24, 2008 at 2:55 PM
Desperate to sell?
LimeyGeek on October 24, 2008 at 2:55 PM
I think the financial crisis is bottomed. Libor rates are coming down and credit is flowing near pre-crisis levels. It’s the looming global recession that has people freaked out right now.
The value of my home, at least according to the county taxing me, stayed flat this year.
BadgerHawk on October 24, 2008 at 2:55 PM
I dunno. I’ve seen experts predict that prices won’t begin inching up until next summer, or later.
eea on October 24, 2008 at 2:55 PM
I did my share. I closed on my condo on September 2nd.
Now I’m jump-starting the economy by buying things I need (like a bed for the guest room) and hiring painters and housecleaners and the like.
I’m one of the lucky ones to be in a job that (for now) is fairly secure. Then again, the credit crunch happened three weeks after I closed. Who knew?
Meryl Yourish on October 24, 2008 at 2:56 PM
S. Weasel on October 24, 2008 at 2:54 PM
Can you expand please? I want to put mine on the market in January so I can move back to Virginia. Are you in a hard hit state and were you happy with the sales price you got? Sorry, hate to be nosey.
Cindy Munford on October 24, 2008 at 2:56 PM
Where’s Bawny Frank when we need him?
Mcguyver on October 24, 2008 at 2:57 PM
Ed, correct.
Smarter people are shopping around. They know what they want but they aren’t stupid enough to pay stuch an inflated price that they go bankrupt due to it.
I dad the same thing. Hell my place was built in 73… but it was a very well built place. Now I am just remodeling when I can… bathrooms are first, then kitchen. All out of pocket and I do not plan on getting a seperate loan.
upinak on October 24, 2008 at 3:00 PM
If the Dems were to seize total control, there would be no more bad news.
….just what we needed to hear.
What a concept, profits and markets have cycles. How can liberals accept that when they don’t see the same in nature and the weather?
It’s monetary dropping change!!!!!!!!
Hening on October 24, 2008 at 3:01 PM
Was it the fees to the Realtor or did you lose that bottom? Need a pillow to help you sit down?
upinak on October 24, 2008 at 3:03 PM
It’s true- objects falling off the edge of a cliff tend to accelerate. As prices continue to fall, sales will pick up. But that doesn’t mean a “bottom” is anywhere in sight. Stabilizing home prices will require rising employment totals and growing personal income. Neither are even on the horizon, let alone here now. Please sit down and buckle up for the rest of the ride.
Scotsman on October 24, 2008 at 3:05 PM
I bought last month and got it for $80 square foot, good deal I think
jp on October 24, 2008 at 3:05 PM
Existing home sales are ALWAYS a leading indicator at the beginning of an economic recovery. 100% of the time.
People who buy existing homes are, for the most part, either first time homebuyers or discretionary move-up buyers. Neither group HAS to buy a house.
rockmom on October 24, 2008 at 3:06 PM
It is a month-over-month, not year-over-year, figure and more than a third of the sales are of distressed properties.
It is going to take a lot of time and price reductions to dig out all of the inventory.
dedalus on October 24, 2008 at 3:08 PM
The Free Market is cyclical. Ups and downs. Yes houses will sell. Prices will fall and will rise.
Socialism is not cyclical. Socialism is one long down slide until final collapse and a rebuilding from scratch.
Problem: At least 50% of our country does not realize this. Because they went to College. How I escaped without a similar reality-disconnect is a mystery.
Montana on October 24, 2008 at 3:09 PM
Um, actually, the way to jump start the economy is to save your money and invest. Oh, and work more/harder.
But, truth be told, we probably have to burn out the trash businesses that have been living off of easy credit without really producing much, before we can really get the economy humming.
Count to 10 on October 24, 2008 at 3:11 PM
As soon as people adapt to the new reality, that housing prices have not really outstripped inflation in the last 20 years, and all that excess valuation was an artificial bubble produced by government interference, the better off we will be.
gridlock2 on October 24, 2008 at 3:11 PM
Congratulations, Meryl! BTW I really like your podcasts on OLO!
RushBaby on October 24, 2008 at 3:12 PM
I live in the Bay Area. Sales in my county are up 188% from six months ago. People are snapping up foreclosed houses and buying houses that have dropped in price. I live in a relatively affluent area and we have not had a drop in prices, and houses are still selling. The boom is going on elsewhere where houses were very much overbuilt and where people got in with those “liar loans” without income verification, etc.
This will all sort itself out. I am selling in 4 years to retire and I expect to do just fine.
sdillard on October 24, 2008 at 3:12 PM
Same here. Isn’t remodeling FUN! Congrats!
Closed on Aug. 21st…. been down hill and throwing money at remodeling ever since.
upinak on October 24, 2008 at 3:16 PM
What? Where are the locusts?
HornetSting on October 24, 2008 at 3:17 PM
I hope so..
I have a very nice house in Michigan that needs to be sold..
ready to move in.. attached garage.. big backyard..
any takers? :)
DaveC on October 24, 2008 at 3:18 PM
Also in my modest neighborhood (probably most houses are around 1100 sq ft) I’ve seen a number of new roofs go in, or outsides being repainted or even a general wholescale gutting & remodeling going on.
rbj on October 24, 2008 at 3:19 PM
But,but the Democrat’s are saying its a depression!
Worse than 1929!!
I’m perplexed!
canopfor on October 24, 2008 at 3:21 PM
We were going to move up into a bigger home earlier this year, but we could read the tea leaves and decided to stay put. Have 11 years to go to pay off our modest home, so we are just working with what we have. Updating, remodeling, and generally just making do with what we have.
HornetSting on October 24, 2008 at 3:22 PM
San Diego foreclosures notices have jumped from 5000 last year this time to 7000 this year. Also California has changed its laws to make foreclosing a longer process.
The supply of homes usually goes down in the fall.In the fall people list less homes, conversely people like to buy in the fall because homes are cheap because they have not sold in the normal buying months, this is ture in a good market. If more homes hit the market in the spring and they stay on the market for a shorter period of time then I would intrepet that as the bottom.
San Diego’s bottom is definitely not here.
Theworldisnotenough on October 24, 2008 at 3:22 PM
Not to be a jerk (I know too late) but one of the reasons the sales figures are up is because banks are unloading foreclosures and taking big losses.
A house in my neighborhood was purchased about 3 years ago for ~$850,000. The owner was trying desperately to sell it for $600,000. (the presumed buyout)
She ran out of time and the bank sold it for her @ $500,000.
Another house around the corner was foreclosed on and another is inches away. And this is a “good” neighborhood.
Look, it’s good news no doubt… but it’s a deeper statistic than it looks.
Diogenes of Sinope on October 24, 2008 at 3:24 PM
Here’s my dream.
I win a 1 million lottery.
I buy 10 foreclosed, market-adjusted-priced houses with that 1 mil.
I rent those 10 houses out hiring a property management company to maintain them.
I get right at or just above 1000 per month in rent on those 10 houses.
10 * 1000 = 10000 per month
10000 * 12 = 120000 per year
Ah, my dream.
BowHuntingTexas on October 24, 2008 at 3:25 PM
The housing market is artificially depressed at the moment. It’s a bargain hunter’s paradise. People can’t afford to sit on an old house in a crappy market, so they’re letting it go on the cheap. If I had some cash, I’d be buying extra houses too.
Nethicus on October 24, 2008 at 3:25 PM
rbj & hornet sting, I agree. We live in a modest home in a great school district (can’t go a mile without seeing new McMansions). My husband and I seem to be the few that did not bail for a much larger house and a ridiculous mortgage. Good luck with the renovations.
Laura in Maryland on October 24, 2008 at 3:31 PM
A 5.5% gain, eh?
Now, didn’t McCain get skewered for saying something about the fundamentals of the economy being strong?
There are no such things as “financial crises” or “recessions”. There are only “buyers’ markets”.
fusionaddict on October 24, 2008 at 3:31 PM
ahem, the annual run rate
in 2005 was 7.1 million – 4.5 months supply.
In 2006 it dropped to 6.5 million 6.5 months supply.
in 2007 it dropped to 5.7 million 8.9 months supply.
An extrapolate 2008 its 5.2 million 9.9 months supply
Forgive me if I don;t do a happy dance because there was a one month little bounce off a very, very low level
TheBigOldDog on October 24, 2008 at 3:32 PM
It’s really too early to make that judgement. The next wave of ARM’s resets in January, which will set California and Florida plunging again. The question is whether or not they will take the rest of the country with them.
And worldisnotenough, I was about to use SD as an example when I read your post. Bravo.
JamesN on October 24, 2008 at 3:35 PM
I’m sorry for you and your neighborhood. Foreclosed houses can be bad news, but it is hard to feel sorry for someone losing an $850,000 house. The first foreclosure story on our local news had a stylishly dressed woman complaining about losing a beautifully decorated house full of new furniture. My modest town home would have fit in her garage. She could have unloaded it then, but she went on the news crying for someone to bail her out.
Laura in Maryland on October 24, 2008 at 3:37 PM
This does seem to point out that if the goverment stays out of things they seem to “self correct”. There are places where this is still a problem but overall it is fixing itself.
duff65 on October 24, 2008 at 3:45 PM
>but it is hard to feel sorry for someone losing an $850,000 house.
wow, how bitter and petty can you be…
I feel sorry for anybody who loses a house. No matter how big or how small…
You’re a jerk.
Diogenes of Sinope on October 24, 2008 at 3:48 PM
TheBigOldDog …
Excellent point… BUT (there’s always a but)
You’re comparing today’s market to the height of the over inflated bubble that got us into the mess.
If you’re forever going to be judging the current housing market against 2005 I’m afraid you might never be happy with that outcome.
Diogenes of Sinope on October 24, 2008 at 3:51 PM
Good God Ed, stop it. Your cheer leading for the economy is getting annoying. Consumer spending is cratering so a blip in home purchases hardly makes a difference.
Didn’t we learn anything from the Clinton victory in ’92?
Bill C on October 24, 2008 at 3:52 PM
A lot depends on the region of the country you live in. There are places where $850K buys a fairly average house for a couple where both parents work. In some cases they might have been paying a little extra just to be in a town with good schools.
dedalus on October 24, 2008 at 3:52 PM
Seconded.
thecountofincognito on October 24, 2008 at 3:59 PM
Most of these sales are not homeowners buying their first home. It’s investors buying up foreclosed properties.
Buy Danish on October 24, 2008 at 3:59 PM
Copy that: we were looking at house prices in the San Fran Bay area a year or so ago, and $850k gets you a 20 – 30 year old tract home with maybe 1800 sq feet–even out on the fringes, with a long commute
Relatives in the northern VA area ( Arlington /McLean ) tell me that a cool million gets you an ‘older’ house in a ‘nice’ neighborhood. Those people talk in code……….
Janos Hunyadi on October 24, 2008 at 4:00 PM
I only get “petty and bitter” when paying for bailouts for homes three times the size of mine. My husband and I have put off rennovations, we don’t buy silly knick-knacks and decorations. To see folks expect me and others who work hard bail them out of their extravagance makes my blood boil.
I might feel sorry for them, but I am still “bitter”.
Laura in Maryland on October 24, 2008 at 4:04 PM
dedalus on October 24, 2008 at 3:52 PM
You’re right there. The case I mentioned was a McMansion. The house was a showplace, and I would be upset losing it too. It looked like she walked into Ethan Allen and ordered each room right down to the knick knacks and pictures. Because this was before the collapse, she could have sold it fairly quickly and at a decent price. Most of MD still has a decent housing market. The prices aren’t skyrocketing like the used to, but you can still sell a home without losing your shirt.
Laura in Maryland on October 24, 2008 at 4:08 PM
Great reporting Mr. Morrissey. This is definitely a great sign; especially with the indexes mainly trading on fear.
I’m a financial advisor in south Florida and I can’t begin to tell you how many phone calls I’ve gotten from my clients in the past month that start with “I just saw on the news”.
Price-to-book, and price-to-earnings ratios are being completely ignored. They are extremely accurate metrics to apply in a situation that has so much uncertainty such as the one we find ourselves in presently. People are putting in sell orders based on what Diane Sawyer, Meredith Veiria, et al. are spewing on their Marxist, uninformed television programs.
FLcapitalistthug on October 24, 2008 at 4:10 PM
Housing prices are based on supply & demand. Supply is influenced by the foreclosure crisis because as houses go into foreclosure, the supply of available homes goes up. Because they’re distressed, the price is very low too, which drags down prices for the whole market. On the demand side, the lack of available credit prevents credit-worthy buyers from buying the homes. That’s not a good situation.
The ship will right itself, but we need to get credit back in the market — and that can’t happen until this crisis of confidence has passed.
Outlander on October 24, 2008 at 4:13 PM
If you think this is the beginning of an economic recovery I would like to take the other side of that trade.
If anything, I’d bet we got a little bump from bottom feeder who have been priced out of the market finally pulling the trigger.
Right now the run rate is right around what it was in 1999.
TheBigOldDog on October 24, 2008 at 4:15 PM
Would it be a good time to invest in the DOW?
I mean I just put a bunch of money into the DOW just to ride DJ.
Kini on October 24, 2008 at 4:23 PM
My house just got reassessed. They lowered the assessment on the house, but raised the assessment on the land, then applied an “EAV” (wtf?), so my taxes will go up again this year. And they have the nerve to ask us to approve more property tax hikes on election day! How can they do this? I guess they are just making sure
they don’t suffer any revenue loss, regardless of the homeowners loss ;-(
bspoogeferd on October 24, 2008 at 4:27 PM
Kini on October 24, 2008 at 4:23 PM
I would NOT put money there in a DJIA index, too volatile. You’re taking the bad with the good and it’s uncertain when we will get back over, say, 10,000.
I would comb through the market for strong brands that are near all-time lows: GM, Apple, Motorola, etc. In my opinion, these are strong companies that are cheap and have a very good chance of bouncing back.
FLcapitalistthug on October 24, 2008 at 4:57 PM
This doesn’t mean a great economy is right around the corner. But history unequivocally shows that even the worst recessions and the worst housing slumps began to end when existing home sales started to improve. It has been true in every single recession since they have been tracking recessions.
And it has never mattered whether the homes being sold are foreclosures or not, or at what prices ho,es are selling. What matters is that people are buying. Sales are sales, and when anyone buys a house who doesn’t really have to, it means they are betting on a better tomorrow for their family. If hundreds of thousands of people are making the same bet, it means tomorrow will be better.
And I think it is especially important now, because non of these buyers are getting subprime loans, or 100% financing, or teaser rate ARMs. They are getting fairly expensive 30-year fixed-rate mortgages with 20% down.
rockmom on October 24, 2008 at 5:07 PM
Over valued markets have to find their water level sometime, I wonder did our super brainy elite leaders actually think the housing bubble would last forever or maybe they thought us plain folk tweren’t smart nuff to know the differnce.
Same thing for Wall Street, if volatility would settle and stop driving the stock market down maybe it’ll land somewhere around 9500.
Speakup on October 24, 2008 at 5:32 PM
Southern California home sales were up 65% in September over September 2007. Northern California is doing well too but I don’t have the sales figures. Modest single family homes are “selling like hotcakes” according to a real estate broker who was interviewed recently on a local radio station (KCBS).
crosspatch on October 24, 2008 at 5:39 PM
I think this is good news. The whole point to putting money into the financial sector was to thaw out the credit markets, get money moving through the system again. That will not help with this quarter’s earnings reports or make things okay overnight, but if the credit market is functioning and houses are starting to sell again that is way better than nothing.
Terrye on October 24, 2008 at 5:54 PM
Gag – “feel sorry” for those who have lived in houses beyond their means for years and are now crying that they may have to leave – when pigs fly!
corona on October 24, 2008 at 6:13 PM
I live in southwest Florida… mortgage fraud and foreclosure central, I agree… BUT, I write software for a living but I have access to the LOCAL MLS via a side business.
In my community alone:
REO/Short Sale listings: 3,255 (doesn’t include “regular” listings)
Units sold 2007: 2100+
Units sold YTD 08: 3200+
So far, so good…
Now, foreclosures currently pending judgement: 23,000+
Plus, new foreclosure filings are coming on at a rate still above 2,000 per month.
In this area, at least, it looks like it will be several years until the possibility of any improvement comes along.
Prediction: If Obama is elected, he will do a Clinton and “work harder than he has ever worked in his life” but will not be able to do the “tax cuts” for the 95%. He will, however, find it necessary to raise taxes on anyone currently making any money. After that, I expect some type of phase out of mortgage interest deduction… something like it starts phasing out at $50K or $100K and is completely gone by $200K or $300K. Another strong possibility I see is the government purchasing a large volume of foreclosure/foreclosed homes and then turning them into a new kind of government (subsidized) housing.
CC – BHO: “my Muslim faith”
CapedConservative on October 24, 2008 at 7:04 PM
When I moved from one area here to another, I put more than 30% down and have seen the “current market value” drop to somewhere around my mortgage balance. Current market value is a bit of a misnomer because banks are selling foreclosed homes for a 60-70% discount of their judgment value just to get them off their books and get the cash…. their typical criteria is “a price that will get a contract in less than 30 days”. All the foreclosed homes being dumped are driving values down in the entire area and will be for some time.
I am not living in a house beyond my means at all… I can easily afford my mortgage payment. However, if I see the current market value decline to somewhere around $200K to $250K less than my mortgage balance, I have to consider that it is currently taking around 2 years for foreclosure sale to actually take place from the point that mortgage payments stop… so at what point does a person say “Hey, I can stop making mortgage payments for 2 years, stash the cash and then go buy an equal or better home for cash and not have a mortgage payment at all”?
CC – BHO: “my Muslim faith”
CapedConservative on October 24, 2008 at 7:13 PM
How did folks get all these mortgages? I thought there was absolutely no credit available to anyone, anywhere, for any reason?
xblade on October 24, 2008 at 8:28 PM
We haven’t even had an official recession yet and you are predicting recovery? I see it just a bit differently… in 12 months (maybe a little less, maybe a little more), the trillions pumped out will grab hold and inflation will rapidly begin rising to somewhere in excess of 10% (15%?). In order to combat inflation, interest rates will rise to a BIG number… think 1979-80. Business failures? Unemployment? Zoom… Consider that Ford and GM could be GONE in two or three years… strangled by safety regulations, EPA regulations and union overhead… they are dead men walking right now.
Typical hedge for inflation is real estate and gold… hard assets. In the late 70′s, with inflation and interest rates zooming, real estate prices doubled. With the foreclosure/foreclosed homes still entering the market (at a slower rate) at that time, real estate may not be the hedge it used to be. How many people don’t/wont qualify for buying a home because they have one or more foreclosures on their credit record? The current economic problems are world wide… consider this: there is a country on the verge of default and I’m not talking about Iceland… Russia. No small player. We have world wide immigration/infiltration of third world populations into industrialized countries. Those people readily favor socialism. The future looks very grim without strong leadership with political will.
CC – BHO: “my Muslim faith”
CapedConservative on October 24, 2008 at 8:33 PM
I have been thinking of picking up one of the many foreclosed homes… homes that sold for $350K two years ago that banks are unloading for $75-$100K. I called 5th/3rd and they have no problem doing a mortgage for the purchase. Banks with local presence that do mortgages are very willing to do mortgages for people they know/see on properties they know/see.
CC – BHO: “my Muslim faith”
CapedConservative on October 24, 2008 at 8:36 PM
Thanks, RushBaby.
upinak, I’m not exactly remodeling. My condo’s only eight years old. Just adjusting it to my tastes and needs.
But I sure do love owning my own home.
That reminds me. Time to send out the mortgage payment.
Meryl Yourish on October 24, 2008 at 8:46 PM
xblade:
I think the thing that was worrying them the most was that banks and institutions were not lending to each other and that threatened liquidity. That does not mean it was impossible for everyone to borrow money, but it was getting tighter and tighter.
Now, I do think that it has been getting easier in recent weeks, but that does not mean we are home free.
Terrye on October 24, 2008 at 9:09 PM
Can you move it someplace else? Anywhere except Michigan?
Squiggy on October 25, 2008 at 8:01 AM
Mooseman on October 25, 2008 at 2:16 PM
Wow, this is quite a turnaround under George W. Bush. The housing situation of moving. Can the stock and credit markets be far behind?
kanda on October 25, 2008 at 3:27 PM
Count me among those who just closed on a brand-new house in the Houston area on Friday afternoon. (Long story. The husband was told to relocate to headquarters from his Corpus Christi office. We didn’t want to move away from an area we loved and lived in for the past ten years, but that’s the way life is…) This brand-new house was on the builder’s inventory, and is in move-in condition. Since the builder needs to sell those last few units before it can build more houses elsewhere, the price on this one was reduced by over $20 grand… while valued at very close to its original price by the county and the appraisers! It was a bargain, indeed… Of course, on Friday afternoon, we got the keys, drove to the new house and entered it as the new owners! We also popped some popcorn in the over-the-range microwave installed with the house. The popcorn pack was included with the booklets for the appliances.
On the same day, our Corpus realtor called us with the news that a very acceptable offer was placed on our house here… in less than a month after we placed it on the market.
The movers are coming on Monday and Tuesday. We ride to Houston on Wednesday and unpack on Thursday. After that, we have to buy blinds or shutters for every window in the house, and we also need a new table to sit eight…
Recession? What recession? This is Texas!
newton on October 26, 2008 at 12:26 AM