Existing home sales slip 0.8%

posted at 11:40 am on May 19, 2011 by Ed Morrissey

Bloomberg takes a page out of Reuters’ style book by announcing that existing home sales dropped “unexpectedly” by 0.8% in April, but I’m not sure what’s so unexpected about it.  Sales fell in February by 9.6%, rebounded upward by less than half of that amount in March (3.7%), and April’s numbers are just a slight downtick to an annualized rate in between February’s 4.92 million and March’s 5.1 million:

Sales of existing U.S. homes unexpectedly declined in April, indicating the industry is struggling to gain traction as the economy expands.

Purchases of existing homes dropped 0.8 percent to a 5.05 million annual pace last month, the National Association of Realtors said today in Washington. A 5.2 million rate was the median projection in a Bloomberg News survey and the April figure was less than the most pessimistic forecast. The median sales price declined from a year earlier and 37 percent of transactions were of distressed dwellings.

Falling prices and the prospect of more foreclosures entering the market signal more Americans may be hesitant to purchase homes. With unemployment at 9 percent and wages stagnant, any sustained recovery in residential real estate may take years to unfold.

“We’re near minimalist levels right now,” David Resler, chief economist at Nomura Securities International Inc. in New York, said before the report. “Housing isn’t going anywhere.”

Well … yeah.  As long as unemployment remains high, inventory remains glutted, and fuel prices remain elevated, the housing markets aren’t going to move much at all.  So why is Bloomberg caught by surprise by a mild decline?

In fact, this might not be all bad news.  The annualized sales rate still remains above the February nadir, albeit only marginally.  We didn’t see a complete rollback of gains from March, which means that sales have kept the meager momentum gained, for the most part.  Sales prices still fell, especially in year-on-year comparison by 5%, but that’s also a result of increased inventory and small demand, and the 5% decline in prices from April 2010 looks pretty reasonable, considering the markets in that period.

Many of the sales still are coming from foreclosures.  That trend peaked in March as 40% of all existing home transactions were from “distressed sales,” and it only slipped to 37% in April.  Cash transactions had also peaked in March at 35%, and dropped slightly to 31%.  That would indicate that a significant part of the demand in existing homes is coming from investors rather than dwellers; we’re seeing that in the Twin Cities, which has a smaller base of distressed properties than many other metropolitan areas.  Getting interest from investors is a good sign, but the lack of interest from direct homebuyers isn’t.

April’s report on existing homes, unlike that for new construction, indicates a treading-water interval.  The housing markets won’t bounce back until we solve the unemployment issue, but we may be finding the bottom on used housing, and that would be at least somewhat positive news.

Update: Jazz Shaw wonders where all the homebuyers have gone, and then explains.


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Yes, Ed, it’s not all bad news. Like your doctor telling you you have 75 porcupine quills in your a$$ but he can remove three of them. Now, don’t you feel better?

SKYFOX on May 19, 2011 at 11:45 AM

It’s the price stupid.

Home prices are still WAY over valued. Sellers still think it’s 2006 with their asking prices.

angryed on May 19, 2011 at 11:46 AM

SKYFOX on May 19, 2011 at 11:45 AM

Now that there is funny.

angryed on May 19, 2011 at 11:47 AM

http://www.businessinsider.com/may-philly-fed-details-2011-5

And the Philly Fed Index collapsed.

Mark1971 on May 19, 2011 at 11:47 AM

One of the biggest individual losers in the Northeast? Connecticut.

From Jazz’s piece…

I can vouch for that…Am in the process of selling my home soon for moving, just got it appraised at $675,000…3 years ago, it was $875,000.

JetBoy on May 19, 2011 at 11:53 AM

Many of the sales still are coming from foreclosures. That trend peaked in March as 40% of all existing home transactions were from “distressed sales,” and it only slipped to 37% in April. Cash transactions had also peaked in March at 35%, and dropped slightly to 31%. That would indicate that a significant part of the demand in existing homes is coming from investors rather than dwellers; we’re seeing that in the Twin Cities, which has a smaller base of distressed properties than many other metropolitan areas. Getting interest from investors is a good sign, but the lack of interest from direct homebuyers isn’t.

The reason only foreclosures are selling is because foreclosures are priced right. Banks selling properties are easy to deal with. There is no emotion involved. Sellers think because they added a $50K pool their house is now worth $50K more than their neighbor’s house without a pool. In fact the house is worth maybe an extra $10K, and often the pool is worth nothing if it’s in an area where pool season is 2 months a year. Bu the seller is convinced his house is special and he keeps his asking price at $50K above actual market value.

As for only investors being interested, don’t read too much into that either. Investors were buying in 2007 and 2008 and 2009 as well. And they’ve all lost a lot of money. Investors were buying pets.com at $4 because they thought it was a great deal as well.

angryed on May 19, 2011 at 11:53 AM

It’s the price stupid.

Home prices are still WAY over valued. Sellers still think it’s 2006 with their asking prices.

angryed on May 19, 2011 at 11:46 AM

That is part of it but not the whole thing. I have seen plenty of realistically priced properties here in my part of the world, and they aren’t selling either. Because nobody knows what is going to happen next with this inept bunch of “adults in charge” and are afraid to commit to such a major purchase.

Del Dolemonte on May 19, 2011 at 11:54 AM

I can vouch for that…Am in the process of selling my home soon for moving, just got it appraised at $675,000…3 years ago, it was $875,000.

JetBoy on May 19, 2011 at 11:53 AM

It never should have been worth $875K to begin with. And in 2 years it will probably be worth $575K.

angryed on May 19, 2011 at 11:55 AM

Just think how badly home sales would have slipped if It weren’t for Obama and the second stimulus package. This is most assuredly a victory for the President and the Democratic Party.

Tommy_G on May 19, 2011 at 11:56 AM

That is part of it but not the whole thing. I have seen plenty of realistically priced properties here in my part of the world, and they aren’t selling either. Because nobody knows what is going to happen next with this inept bunch of “adults in charge” and are afraid to commit to such a major purchase.

Del Dolemonte on May 19, 2011 at 11:54 AM

What’s your definition of realistic?

Mine is this:

1. Take the amount of money you can rent the house for. Multiply it by 120. That’s what the house is worth. If you can rent a house for $1000 a month, anything over $120K is too much.

2. Take the median income for a zip. Code. Triple that amount. That is what the median house price in the zip code should be. Median income of $40K with a median house price of $300K means homes are overvalued. But it was $500K at some point and thus it seems like prices are “realistic”. But they’re not. It’s like saying a Honda Accord was $60K a few years ago and now it’s selling for $40K so it seems cheap. Yea, cheaper than $60, but still double what the value of an Accord should be.

angryed on May 19, 2011 at 11:58 AM

It’s the price stupid.

Home prices are still WAY over valued. Sellers still think it’s 2006 with their asking prices.

angryed on May 19, 2011 at 11:46 AM

Yup. My next door neighbors are a case in point. They are asking now more than double what they paid for their place in 1998. Naturally, their house just sits, no interested buyers.

james23 on May 19, 2011 at 11:59 AM

Also Del, come one, you seriously believe people make life changing decisions like buying a house based on a budget? I don’t buy it. People don’t live their lives based on the budget in DC.

angryed on May 19, 2011 at 11:59 AM

It never should have been worth $875K to begin with. And in 2 years it will probably be worth $575K.

angryed on May 19, 2011 at 11:55 AM

Homes are worth what people will pay for them. I’m on a desirable cul-de-sac, in perhaps the wealthiest town in per capita income levels in the state.

The only “plus” for me is that, since I’m moving to Florida, home prices have fallen huge, so that makes up the difference.

JetBoy on May 19, 2011 at 12:03 PM

..well, that’s the tri-fecta for this week: new home starts in free-fall (still), new jobless claims down from the previous week only slightly, and exisiting home sales still tanking.

What will it take the mouth-breathing, mirror-fogging American Idol public to realize this clown is barely “conscious”.

The War Planner on May 19, 2011 at 12:07 PM

The upside of this is that there are plenty of great deals on homes out there. We just bought a house 2 weeks ago and there are people who are looking to sell and their homes show it. We got a 4.5% APR as well—last home I bought was at 6.0% which I thought was a good deal then (2003). Hang in there. Once we stop shedding jobs, this economy is poised to roar back. Once we flush the t**d in the WH first.

ted c on May 19, 2011 at 12:07 PM

angryed,

It’s the price stupid.

Home prices are still WAY over valued. Sellers still think it’s 2006 with their asking prices.

Even if home prices fell dramatically, I doubt it would make much difference in terms of home sales. So long as underemployment is over 19% you aren’t going to see a meaningful uptick in home sales. Good luck getting a loan for a distressed McMansion when your only source of income is a part time shift at McDonalds earning $10 dollars an hour.

Mike Honcho on May 19, 2011 at 12:11 PM

Still wayyyyyyyy overpriced.

albill on May 19, 2011 at 12:12 PM

Also Del, come one, you seriously believe people make life changing decisions like buying a house based on a budget? I don’t buy it. People don’t live their lives based on the budget in DC.

angryed on May 19, 2011 at 11:59 AM

Well, I’ve been in the real estate industry for almost 35 years now, in all aspects, including the sales end, the mortgage end, the appraisal end, and everything in between. So I am not exactly a newbie in the field.

In my market, people do make a decision to buy a house based on a budget. It may be different for your part of the country.

Del Dolemonte on May 19, 2011 at 12:14 PM

Del Dolemonte on May 19, 2011 at 11:54 AM

What’s your definition of realistic?

angryed on May 19, 2011 at 11:58 AM

The price at which the property will sell in a 60-90 day marketing period. And 10% less than the neighbor is asking for their house!

In my market, the majority of realistically priced homes are still selling for between 90% and 95% of their asking price.

Del Dolemonte on May 19, 2011 at 12:21 PM

Homes are worth what people will pay for them. I’m on a desirable cul-de-sac, in perhaps the wealthiest town in per capita income levels in the state.

The only “plus” for me is that, since I’m moving to Florida, home prices have fallen huge, so that makes up the difference.

JetBoy on May 19, 2011 at 12:03 PM

You’re sort of right. Homes (and anything else of value) are worth what someone will pay. But just because someone paid $X today does not mean that they paid what it’s worth tomorrow.

Anyone who bough a house in 2006 paid what it was worth at the time. But that same buyer paid too much.

Plus it doesn’t matter if you live in the richest neighborhood on the planet. The laws of supply and demand still apply. I don’t know how many times I’ve heard people say their house is immune from the housing crash because it’s (fill in the blank). It’s all a version of it can’t happen here, it’s different here. And one by one they found out it’s not different here, it’s not different anywhere and it can happen here too.

The problem with housing is people have been bainwashed by HGTV and the like into thinking it’s a HOME instead of a HOUSE. It’s BS. A house is an investment of raw land and materials. No different than a share of a stock or a bond or an ounce of gold. The house itself is a depreciating asset. Only the land increases in value (potentially). The house itself starts to deteriorate the second it’s completed. You lose 20% of a new car when you drive off the lot, right? You lose 1% of a house the second you move in, and 1% per year thereafter.

But thanks to HGTV, Martha Stewart, Bed bath and Beyond, Home Depot, etc, people lose touch with what their house is….an investment subject to the laws of economics that has no room for emotion. Nobody has ever made money investing by getting emotional.

angryed on May 19, 2011 at 12:22 PM

Boy on May 19, 2011 at 12:03 PM

One of the problems with Connecticut real estate is the TAXES. On a $600k home, your probably paying >$10k/yr in TAXES just on the property. And that’s IF your city has even adjusted the appraised value down yet. They do the valuations in most cities on a 5 year rolling assessment, so you’re probably sill paying TAX based on the $900k “value”?
Then there’s the 4.3% state income tax, the 6% sales tax, the tax on vehicles/property, gasoline tax, not to mention FEMA running around trying to rezone people into flood zones to come up with the money to pay for the Hurricane Katrina – New Orleans debacle.
Then, on top of all that, you’ve got to deal with congestion, traffic, crappy weather…..its a wonder there’s ANYONE left in the Northeast at all.

KMC1 on May 19, 2011 at 12:27 PM

In my market, people do make a decision to buy a house based on a budget. It may be different for your part of the country.

Del Dolemonte on May 19, 2011 at 12:14 PM

And you think people are making that decision based on what the federal budget will be? I suppose a few people might. The vast majority of people don’t even know what a budget is, let alone make their house buying decision on it.

angryed on May 19, 2011 at 12:29 PM

The price at which the property will sell in a 60-90 day marketing period. And 10% less than the neighbor is asking for their house!

In my market, the majority of realistically priced homes are still selling for between 90% and 95% of their asking price.

Del Dolemonte on May 19, 2011 at 12:21 PM

You’re using real estate agent speak, which is not based on much other than volume. A house that sells at 95% of asking can easily be be 20% over valued or 20% under valued. It doesn’t mean anything. Real estate agents don’t care about worth of a house, they care about selling the house. That’s not a knock on the agents, it’s in their best interest to have high volume. But it doesn’t mean what they’re selling is priced right (in the macro long term sense).

The 3X income and 120X rent metric has been a time tested
valuation on real estate. Over the long run prices always go back to these simple metrics. Those metrics are unbiased, unemotional and and work for a $50K house in Cleveland as easily as a $5M house in Beverly Hills.

And today in most (not all) areas both of those metric are not being met. Which means real estate is still overpriced.

angryed on May 19, 2011 at 12:37 PM

Houses are still overpriced, when measured in multiples of the average regional salary. One or the other has to give, and in the current economic climate I’m thinking the prices have to go down.

Besides, what we’re seeing now is the bright side of the coin, so to speak; wait until interest rates go up a couple of points. Then the real bloodletting in housing will begin.

More results of Obama’s failed economic policies…

RocketmanBob on May 19, 2011 at 12:41 PM

And you think people are making that decision based on what the federal budget will be? I suppose a few people might. The vast majority of people don’t even know what a budget is, let alone make their house buying decision on it.

angryed on May 19, 2011 at 12:29 PM

Not the federal budget, but what the idgits are doing to the economy. We took a step up because interest rates were low and, if Carter is any indication, they won’t be staying that way.

txhsmom on May 19, 2011 at 12:45 PM

angryed on May 19, 2011 at 12:37 PM

I concur completely, and would but add that real estate agents were part of the problem in the inflation of the housing bubble. Instead of focusing on having folks consider value and real affordability, based on long standing metrics, they instead focused on what kind of nut they could make, and which exotic financing package they could employ to seal the deal.

They encouraged folks to bid asking price or better, lest they “lose the house!11!1!(eleventy)”, and told them not to worry if their finances were tight and could barely stand the deal as made, or that the exotic financing schemes turned rapacious after a few short years.

Because, you know, everybody flips or refinances their home every few years; and makes, or pulls out, a million bucks on the equity appreciation-which many assured their gullible clients would always follow the parabolic curve it had for the last few years.

RocketmanBob on May 19, 2011 at 12:50 PM

If it is a bottom it is a temporary bottom

The demographics of the boomers means they will soon be liquidating homes to get cash, either by sale, or by borrowing against the homes, and then losing them

The home was the main nest egg of the generation. They are beginning to retire, but they have not yet begun to die off.

A fed statistician some years ago calculated a 20 percent drop when the boomers begin to liquidate, because there was a smaller generation of buyers. That did not factor the current crash, or the depletion of our economy to globalization. Or the inflation sure to grow and push them off the edge.

It aint over, IMHO

entagor on May 19, 2011 at 12:51 PM

angryed on May 19, 2011 at 12:22 PM

I dunno…I do consider my house a “home”, and have done a lot of work landscaping, etc…a “labor of love” if you will. But yeah, sentimental value isn’t a part of a home’s price. I’m surprised they don’t tax that as well…

KMC1 on May 19, 2011 at 12:27 PM

Yeah, taxes around here are outrageous. And living in the wealthiest town in the state (but believe me, I ain’t wealthy) we’re taxed the most, and get the least amount of state aid. Around here, we pay for the rest of the state. Glenn Beck just recently sold his home here for a lot less than he paid for it.

But meh, he can afford the loss. You’re almost right on with the amount. I don’t even know if assessment for tax purposes is done even every 5 years…thought it was more, but I could be wrong.

JetBoy on May 19, 2011 at 12:53 PM

Look, let’s not blame realtors for home pricing. The buyer didn’t have a gun held to his head. That’s akin to blaming the bank for someone with no job signing for a mortgage and then claiming it wasn’t his fault that he couldn’t pay his bills.

A widget is worth exactly what someone else will pay for it…no more and no less.

search4truth on May 19, 2011 at 1:04 PM

You’re almost right on with the amount. I don’t even know if assessment for tax purposes is done even every 5 years…thought it was more, but I could be wrong. JetBoy on May 19, 2011 at 12:53 PM

Now don’t take this the wrong way, but WHAT?!?!?!?!?!?!? YOU DON’T KNOW YOUR TAX ASSESSMENT PROCEDURE?!?!?!?!?!AAAARRRRGGGGGHHHHHH!!!!!!!
Seriously, when is the last time you attended a Town Council meeting??!!! Do you not participate in the political process IN YOUR OWN TOWN???!!!!
I’m sorry, but THIS is the problem in our country today. In my case the Mayor and I speak once a month about taxes, budget, spending etc. Whether he likes it or not, I make it a point to attend Council meetings, budget hearings etc. In our town of approx 90,000 people, at a typical Council meeting, there will be FIVE citizens in attendance. Its disgusting.

This is what is killing our country – total apathy.

KMC1 on May 19, 2011 at 1:10 PM

Have all the folks who couldn’t actually afford a house been washed out?

Are the folks that own a house that are paying their bills seeking a new house? I’ll wager that 90% are not doing anything until the morons running the government are gone in 2012.

Everyone is treading water or holding their breath waiting for these socialist idiots to get kicked out.

And somehow I do not think banks will lend to the non credit worthy again, regardless of political threats. Business people are smarter than politicians.

Non credit worthy is non credit worthy.

dogsoldier on May 19, 2011 at 1:13 PM

Now don’t take this the wrong way, but WHAT?!?!?!?!?!?!? YOU DON’T KNOW YOUR TAX ASSESSMENT PROCEDURE?!?!?!?!?!AAAARRRRGGGGGHHHHHH!!!!!!!
Seriously, when is the last time you attended a Town Council meeting??!!! Do you not participate in the political process IN YOUR OWN TOWN???!!!!

KMC1 on May 19, 2011 at 1:10 PM

Admittedly, no…I have signed petitions, and vote in town elections, been to debates for First Selectman, but no…I’m ashamed to admit I don’t go to town meetings.

I’m not apathetic, but in this town, money talks. And my wallet is a deaf mute.

JetBoy on May 19, 2011 at 1:22 PM

#1 According to Zillow, 28.4 percent of all single-family homes with a mortgage in the United States are now underwater.

#2 Zillow has also announced that the average price of a home in the U.S. is about 8 percent lower than it was a year ago and that it continues to fall about 1 percent a month.

#3 U.S. home prices have now fallen a whopping 33% from where they were at during the peak of the housing bubble.

#4 During the first quarter of 2011, home values declined at the fastest rate since late 2008.

#5 According to Zillow, more than 55 percent of all single-family homes with a mortgage in Atlanta have negative equity and more than 68 percent of all single-family homes with a mortgage in Phoenix have negative equity.

#6 U.S. home values have fallen an astounding 6.3 trillion dollars since the housing crisis first began.

#7 In February, U.S. housing starts experienced their largest decline in 27 years.

#8 New home sales in the United States are now down 80% from the peak in July 2005.

#9 Historically, the percentage of residential mortgages in foreclosure in the United States has tended to hover between 1 and 1.5 percent. Today, it is up around 4.5 percent.

#10 According to RealtyTrac, foreclosure filings in the United States are projected to increase by another 20 percent in 2011.

#11 It is estimated that 25% of all mortgages in Miami-Dade County are “in serious distress and headed for either foreclosure or short sale”.

#12 Two years ago, the average U.S. homeowner that was being foreclosed upon had not made a mortgage payment in 11 months. Today, the average U.S. homeowner that is being foreclosed upon has not made a mortgage payment in 17 months.

#13 Sales of foreclosed homes now represent an all-time record 23.7% of the market.

#14 4.5 million home loans are now either in some stage of foreclosure or are at least 90 days delinquent.

#15 According to the Mortgage Bankers Association, at least 8 million Americans are currently at least one month behind on their mortgage payments.

#16 In September 2008, 33 percent of Americans knew someone who had been foreclosed upon or who was facing the threat of foreclosure. Today that number has risen to 48 percent.

#17 During the first quarter of 2011, less new homes were sold in the U.S. than in any three month period ever recorded.

#18 According to a recent census report, 13% of all homes in the United States are currently sitting empty.

#19 In 1996, 89 percent of Americans believed that it was better to own a home than to rent one. Today that number has fallen to 63 percent.

#20 According to Zillow, the United States has been in a “housing recession” for 57 straight months without an end in sight.

http://theeconomiccollapseblog.com/archives/dont-buy-a-house-in-2011-before-you-read-these-20-wacky-statistics-about-the-u-s-real-estate-crisis

Rebar on May 19, 2011 at 1:32 PM

There just aren’t going to be large numbers of buyers any time soon. First time buyers aren’t going to make an investment until we hit the bottom and current home owners, such as myself, can’t buy another home until they find a buyer for their current home, and there are no buyers.

BohicaTwentyTwo on May 19, 2011 at 1:46 PM

we may be finding the bottom on used housing

Not even close.

Still to come for housing:

1. Fannie and Freddie exit the lending market completely.
2. New risk retention rules make the remaining private lenders much more cautious about lending.
3. New qualification rules for buyers (20% down, etc.)
4. The “shadow inventory” of foreclosed homes gets put on the market.
5. Much lower limits on government guaranteed mortgages (mainly an issue in pricey markets like CA and NY).
6. Interest rates rise permanently from all time lows.
7. Possible reduction or elimination of the mortgage interest and real estate tax deductions.

We are far from the bottom in housing. Unemployment doesn’t have much to do with it either. It was a classic bubble, much vaster in scale than the dot.com boom or tulipmania, fed by cheap money from Fannie, Freddie and Wall Street and Democratic social engineering policies (aided and abetted by Bush).

As angryed pointed out, buying housing right now is like buying pets.com at $4 because “it looks like a deal”. You are still going to lose all your money.

cool breeze on May 19, 2011 at 1:58 PM

4. The “shadow inventory” of foreclosed homes gets put on the market.

cool breeze on May 19, 2011 at 1:58 PM

Yeah when those hit, the housing market will really crater.

dogsoldier on May 19, 2011 at 2:49 PM

By most accounts, there is still a lot of air left in the Housing Bubble which began to deflate in late 2007 and early 2008. The question is: How much air?

Banks continue to withhold inventory from the market in an effort to try to keep the market artificially inflated. It’s called “Price Fixing” and is illegal in most circumstances, unless the gov’t orders you to do it.

The only way we’re going to find out when there is no more air left in the bubble is going to be AFTER banks have released all their shadow inventory onto the market. This will, of course, cause housing prices to collapse. But eventually they’ll stabilize. At that moment, you can be assured that there is no more air left in the bubble.

The market could still be inflated by 35% to 70% depending on the State.

With banks propping up housing prices to preserve their own equity, air will continue to remain in the bubble which will, at some point, need to be released.

Mahdi on May 19, 2011 at 3:07 PM

As high a percentage of sales as foreclosures and distress sales are, inventories are still very bloated here in the Southeast. We typically have a 6-month inventory of current sales, now it is close to a three year inventory at the old numbers, it will take at least that long to work through it.

Banks are sitting on their choicest foreclosures, doling out a few to the market so the flood doesn’t further depress prices, and keeping the prime properties on hand in the hopes of better days ahead.

Adjoran on May 19, 2011 at 10:29 PM