June existing-home sales drop …

posted at 12:50 pm on July 20, 2011 by Ed Morrissey

In defense of Reuters, they didn’t use the “U” word first.  The decline of existing-home sales caught the National Association of Realtors by surprise as well:

Existing-home sales eased in June as contract cancellations spiked unexpectedly, although prices were up slightly, according to the National Association of Realtors®.

Sales gains in the Midwest and South were offset by declines in the Northeast and West. Single-family home sales were stable while the condo sector weakened.

Total existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, declined 0.8 percent to a seasonally adjusted annual rate of 4.77 million in June from 4.81 million in May, and remain 8.8 percent below the 5.23 million unit level in June 2010, which was the scheduled closing deadline for the home buyer tax credit.

Reuters basically rehashes the NAR report, but notes that the sales decline year-on-year is now 8.8%, indicating that we’re still plumbing for the bottom.  They provide a roundup of analyses that basically states that we should keep expecting the “unexpected,” a message one hopes that Reuters’ own economists start heeding.  But Paul Dales points out the spike in cancellations as especially worrisome.

“DNR has stated that the cancellation rate of contract signings rose from 4 percent to 16 percent. That is very unusual. Normally when a contract is signed, the house is sold. Something has happened that has led to more cancellations. It may be jitters from the recent economic conditions or because banks may have tightened lending conditions, meaning that the financing a buyer hoped to get was no longer available. We don’t know for sure but something seems to have rocked the boat a little bit.”

Could that “something” be the increase in unemployment we’ve seen over the last three months?  As people lose jobs, they have to postpone major purchases as new jobs are difficult to find in this economy.  Bank lending got tightened considerably in the aftermath of the 2008 collapse; at the moment, they’re under pressure to loosen lending, not tighten it, which makes that an unlikely explanation.

The lack of jobs may or may not be causing the one-month spike in cancellations, but it’s certainly causing the housing market to remain mired at near-historic lows for sales.  Until we create more qualified homebuyers, we won’t move the inventory already on the market, not even the foreclosures and distressed houses that comprised 30% of sales in June.  We can and should expect more of the “unexpected” until we get reliable and massive job creation back in gear.

Update: Reuters runs another article today on a substantial increase in mortgage applications, the largest increase in four months, but that turns out to be due to refinancing applications prompted by low interest rates.  On actual purchases, the numbers don’t look good at all:

The MBA’s seasonally adjusted index of refinancing applications soared 23.1 percent, but the gauge of loan requests for home purchases dipped 0.1 percent.

The refinance share of mortgage activity rose to 70.1 percent of total applications from 65.6 percent the week before.

People are hunkering down in their current homes rather than looking to move out and up.  That’s not good news for the housing markets, as those refinancing today will have to wait around 3-5 years for a purchase in order to avoid losing money on the decision.

Breaking on Hot Air

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

Something has happened that has led to more cancellations. It may be jitters from the recent economic conditions or because banks may have tightened lending conditions, meaning that the financing a buyer hoped to get was no longer available. We don’t know for sure but something seems to have rocked the boat a little bit Obama.”

forest on July 20, 2011 at 12:55 PM

Can we get a list of names of these constantly surprised economists? I want to be sure they don’t impact me in any way that I can.

DanMan on July 20, 2011 at 12:56 PM

Green shoots. They are just not visible to the naked eye. Has anyone even stopped to consider the mess Obama inherited from Bush?

a capella on July 20, 2011 at 12:58 PM

Use of the word “unexpected” regarding bad economic news is totally expected.

rbj on July 20, 2011 at 1:00 PM

I hate FHA, the program should end. Look the condo FHA market.

The biggest complaint about the new FHA rules, said Lewis, is the requirement that anyone who signs an application for certification or recertification of a project must assume full responsibility under federal law for the accuracy of every piece of information contained in the submission.

The penalties for subsequent findings that information was inaccurate or omitted can be severe — ranging up to $1 million in fines and 30 years in prison for the worst infractions.

Since the certification package submission covers myriad items that can be difficult to pin down precisely — such as the percentage of units currently occupied by renters on a given date, or whether project documents are in full compliance with every state law and regulation — many association boards and managers are reluctant to stick their necks out to guarantee accuracy of the unknowable under threat of future federal fines

Link here

Oil Can on July 20, 2011 at 1:03 PM

Recovery Summer II : Electric Boogaloo

The Chewbacca Defense on July 20, 2011 at 1:04 PM

What about the 14% jump in new housingstarts?

All that flood, tornado damage earlier this year means a lot of people are looking to rebuild.

We need more detailed region by region report.

Sir Napsalot on July 20, 2011 at 1:06 PM

OT: In O’Keefe’s latest video sting he is playing a plumber named Mario with a wife named Peach and he sells mushrooms…

NotCoach on July 20, 2011 at 1:06 PM

DOTUS still has work to do on the Housing Industry.

Note to Fannie/Freddie.

PappyD61 on July 20, 2011 at 1:08 PM

cancellation rate of contract signings rose from 4 percent to 16 percent.

They got smart and realized that housing is dropping about 1% a month…

PatriotRider on July 20, 2011 at 1:08 PM

If we appointed the first drunk who stumbled out of a Hell’s Kitchen bar to be admiral in charge of a carrier task force, it would be no worse than the choice American voters made for president in 2008. Speaking of bars-a toast to Obama from the drink named after him–AMERICA ON THE ROCKS.

MaiDee on July 20, 2011 at 1:10 PM

OT: In O’Keefe’s latest video sting he is playing a plumber named Mario with a wife named Peach and he sells mushrooms…

NotCoach on July 20, 2011 at 1:06 PM

In a just society, O’Keefe would be winning Pulitzer Prizes for his work.

slickwillie2001 on July 20, 2011 at 1:11 PM

Green shoots. They are just not visible to the naked eye. Has anyone even stopped to consider the mess Obama inherited from Bush?

a capella on July 20, 2011 at 12:58 PM

You forgot your /sarc tag. “Not visible to the naked eye”… I think you meant “scanning/tunneling electronic microscope”.

theCork on July 20, 2011 at 1:14 PM

Any economist who now uses the word “unexpected” to describe the economy will be forced to listen to the Complete Collection of Debbie Wasserman Schultz Speeches until their eyes go white and their ears bleed.

pilamaye on July 20, 2011 at 1:14 PM

“the cancellation rate of contract signings rose from 4 percent to 16 percent. That is very unusual. Normally when a contract is signed, the house is sold.”
 

Thank you President Obama.
 
crr6 on May 1, 2011 at 10:45 PM

rogerb on July 20, 2011 at 1:18 PM

Oil Can on July 20, 2011 at 1:03 PM

I used to be an appraiser and the bulk of my work was for FHA. That ruling you show is a good move by FHA. It protects the buyer, who may unknowingly buy into a condo building that has more rentals than owners, prevents investors from buying condo’s in said buildings to rent out which drive down condo values.

Many condo associations lie with regards to actual owner versus rentals in order to get that FHA certification. That’s bad news for the buyer and the lender.

Knucklehead on July 20, 2011 at 1:22 PM

OT: In O’Keefe’s latest video sting he is playing a plumber named Mario with a wife named Peach and he sells mushrooms…

NotCoach on July 20, 2011 at 1:06 PM

That’s not right. He tricked those workers. In most Super Mario games, the princess was named Daisy or Toadstool.

Doughboy on July 20, 2011 at 1:22 PM

Can we please concentrate on Republicans pushing oldsters over the cliff and subjecting poor minority kids to slavery-like conditions?

Bishop on July 20, 2011 at 1:22 PM

You forgot your /sarc tag. “Not visible to the naked eye”… I think you meant “scanning/tunneling electronic microscope”.

theCork on July 20, 2011 at 1:14 PM

Atomic force microscopy. PBHO, the gift that keeps on giving, until it hurts.

NaCly dog on July 20, 2011 at 1:22 PM

Bear in mind that all of these consistently “unexpected” reports are always based on events that took place between one and two months before the articles are written.

Which always begs the question of exactly WHEN were the obvious conclusions from the data available 1-2 months ago “unexpected?” Yesterday? Last week? Week before last?

…Or was this “unexpected” last month, while all of the events the reports were based on were ACTUALLY HAPPENING?

Of course not. The template for all these articles was set in stone on the day Obama was elected. And no matter how long reality continues to violate that template, “news” stories will continue to refer to months-old data as retroactively “unexpected.”

logis on July 20, 2011 at 1:23 PM

Can we get a list of names of these constantly surprised economists? I want to be sure they don’t impact me in any way that I can.

DanMan on July 20, 2011 at 12:56 PM

I want a list of their employers – talk about a bird’s nest on the ground – if being wrong nearly 100% of the time doesn’t get you fired, nothing will.

Vashta.Nerada on July 20, 2011 at 1:31 PM

Many condo associations lie with regards to actual owner versus rentals in order to get that FHA certification. That’s bad news for the buyer and the lender.

Knucklehead on July 20, 2011 at 1:22 PM

I see your point, if we want to keep FHA. But my point is just to get rid of FHA, which is our tax money, and just have market driving system.

Also, FHA increases the prices for entry level homes by lowering the downpayment requirement to 3.5% of market and artificially creating buyers. If everyone had to save 10% to 20% the price of entry homes would be cheaper.

Oil Can on July 20, 2011 at 1:33 PM

Yes capella, I look at this and other indicators previous to any Presidential Election. I worked two years for Obama, GOTV brunches, phone banks, door to door training, I voted for him and went to his inauguration.

The one thing that does stand out here besides the fact Obama has shown himself to be incompetent is that all presidential candidates will stretch the truth to gain a vote. Obama blew past that and outright lied to me to get mine and about 10,000 other votes out of my precinct of which lies continue, my precinct is now closed and I re-registered an Independent.

The trust is gone and as I teach to my own children, the trust factor must be re-earned. Obama has zero interest in restoring his integrity with the American people and has zero concern as to any consequences of his obvious and in oyur face lying let alone the ongoing volume of his lies. One good thing about this is that same narcissistic dynamic allowing him to make promises he knows will go un-kept will also blind him as to the price that will ultimately be paid for those lies. He had a chance to be great but my ex Democratic Party allowed itself to be coopted by Neo-Progs and basically pissed it all away. Obama‘s gone in 2013 however you can still find pockets of support on both coasts but that’s about it.

Tangerinesong on July 20, 2011 at 1:45 PM

I see your point, if we want to keep FHA. But my point is just to get rid of FHA, which is our tax money, and just have market driving system.

Also, FHA increases the prices for entry level homes by lowering the downpayment requirement to 3.5% of market and artificially creating buyers. If everyone had to save 10% to 20% the price of entry homes would be cheaper.

Oil Can on July 20, 2011 at 1:33 PM

You do know that FHA doesn’t make loans, right? But I agree with you on the down payment aspect. However, FHA/VA does more to protect the buyer than any other lender in the country. Those FHA inspections are tough to get through, or at least they were when I was doing the appraisal/inspection.

Knucklehead on July 20, 2011 at 1:45 PM

This “unexpected” meme that Ed and others keep making fun of is pretty silly. This is how journalists report economic news. They poll economists to get an estimate, and then if the actual numbers are outside of those estimates, they said it’s “unexpected” or “surprising” or whatever, no matter which direction.

For example, a couple days ago homebuilder confidence was “unexpectedly” high: http://www.bloomberg.com/news/2011-07-18/homebuilder-confidence-in-u-s-rises-more-than-estimated-nahb-index-shows.html.

If you want to make fun of anyone, make fun of the economists who can’t always accurately predict the economy. But if you think you can do better, then you can probably make a ton of money doing it.

tneloms on July 20, 2011 at 2:03 PM

Sales dropped…but prices increased.

Hmm, what does that sound like a symptom of? I can’t quite put my finger on it. I know it can’t be inflation because the watered-down CPI measurement says so…

HitNRun on July 20, 2011 at 2:07 PM

Knucklehead on July 20, 2011 at 1:45 PM

Yes, they just insure the loan for the lender. Up to 20% to 25% of market value at the time of the loan?

Oil Can on July 20, 2011 at 2:17 PM

Buy the dip baby!

j_galt on July 20, 2011 at 2:18 PM

In related news I read banks are “slowing down” the rate at which they forclose properties. They are dragging out the process on people that voluntarily or involuntarily turn their homes over to the lender.

In this manner the banks stretch out the inventory impact of DOA property.

dogsoldier on July 20, 2011 at 2:27 PM

In related news I read banks are “slowing down” the rate at which they forclose properties. They are dragging out the process on people that voluntarily or involuntarily turn their homes over to the lender.

In this manner the banks stretch out the inventory impact of DOA property.

dogsoldier on July 20, 2011 at 2:27 PM

The home bust and bust created by a myriad of players has got to be the greatest fleecing of a tax paying populace of all time. It is amazing.

j_galt on July 20, 2011 at 2:32 PM

… boom and bust …

j_galt on July 20, 2011 at 2:32 PM

If the “Gang of Six” plan goes into affect and the home mortgage deduction goes away on homes of $500k or more, I can’t imagine how many home owners in that bracket whose homes are already under water, will simply walk away from the home. Defaults on higher end homes will sky rocket.

People who own homes just under $500k would be insane to invest in the homes or do any substantial home improvements.

If you are looking for a higher end home, you would have to be an idiot to buy one that is worth $500k – $550k, if you can get one almost as nice for $450k to $499k. Home prices nationwide will drop.Never forget the “law of unintended consequences!”

Star20 on July 20, 2011 at 2:40 PM

The reason the Realtors were caught off guard;
In a short sale once the property owner agrees to an offer the property goes to contingent classification in the MLS systems. Historically once in this classification it would have sold but in today’s market the “contract” is contingent on bank approval and the banks are not responding to the incoming offers. After several months of not hearing any response the buyer gets mad and cancels the contract. I have lost 6 contracts in the last month because the banks, all of which were told they were to big to fail in 2009, will not respond to the offers on short sales or property they have bought through the foreclosure sale. This has also created a tightening in the rental market and has caused rents in areas of high foreclosure to rise 50% in 6 months. And the Dems are supposedly trying to keep from breaking the backs of the poor.

NWFLConservative on July 20, 2011 at 2:50 PM

Why being a short-term pessimist is always a winner: you can only be pleasantly surprised.

I haven’t been pleasantly surprised by econmic information in years… perhaps a decade or more now. I considered home values to be overpriced when I bought one… in 1993. It is paid off now so I don’t care what its value is. It is a roof over my head that I own. Do I expect it to ‘appreciate’ in value? Over what? The original value? What I paid for it? What it was worth a decade ago?

It is worth it to have a place I own that keeps me dry and that I can offer as a shelter to those I love.

I cannot put a price on that.

ajacksonian on July 20, 2011 at 2:52 PM

Yes, they just insure the loan for the lender. Up to 20% to 25% of market value at the time of the loan?

Oil Can on July 20, 2011 at 2:17 PM

That crap always ends up in the lenders pockets.

Knucklehead on July 20, 2011 at 2:53 PM

tneloms on July 20, 2011 at 2:03 PM

LOL, let me guess. You work for Reuters or AP?

Del Dolemonte on July 20, 2011 at 2:54 PM

LOL, let me guess. You work for Reuters or AP?

Del Dolemonte on July 20, 2011 at 2:54 PM

I don’t understand why you find my comment funny. Do you think it’s not true?

And no, I don’t work for Reuters or AP, or anything having to do with journalism or news.

tneloms on July 20, 2011 at 2:56 PM

My memory of what a good economy felt like is dimming. Depressing.

txmomof6 on July 20, 2011 at 2:59 PM

One of the problems in housing is the number of foreclosed properties banks are already holding. They are releasing them gradually so as not to flood the market and further depress the prices since they are in the red on most of them already. We probably have at least three more years of this dribbling into the market of foreclosed properties, not to mention the large number of pending foreclosures which have been held up by various things: the robo-signing problems, federal programs to “save” homeowners in default, and the sheer volume which is too great to process and manage with current resources.

For many lenders with an inventory of properties they don’t want already, it is better anyway to leave the defaulted borrowers in the homes, since they will be marginally better cared for than if vacant. At least the wiring won’t be stolen for scrap.

Add this excessive inventory gradually coming into a market already bloated with inventory, and we are talking years before home construction can possibly take off again. Those invested in condo unit they cannot rent are very much at risk as their expected life is far shorter than SFHs, so there remain many baths to be taken in this sector before recovery.

Obama’s policies have made this much worse by delaying business investment as well, so the job market can’t recover at all either. But at least his cronies among union thugs were taken care of . . .

Thank you President Obama.

crr6 on May 1, 2011 at 10:45 PM

Adjoran on July 20, 2011 at 3:06 PM

I am switching from a conventional/Fannie May loan on a condo to an FHA loan just to complete the sale. The condo association is FHA approved but not Fannie May approved (since Fannie May revoked all certifications/approvals in Washington state) and the association has never applied for Fannie May (re)approval until I made an offer on a condo. But the Fannie May approval process is taking longer than stated (BIG SHOCK), so after two contract extensions, Im switching to an FHA loan (with 20% down) because I dont want to wait any longer and the seller is getting impatient and may not agree to sign a third contract extension.

Maddening.

Jeddite on July 20, 2011 at 3:31 PM

That crap always ends up in the lenders pockets.

Knucklehead on July 20, 2011 at 2:53 PM

Please explain. I’m interested really. All this stuff is good to know.

Oil Can on July 20, 2011 at 5:39 PM

Tangerinesong on July 20, 2011 at 1:45 PM

Wow! Stories like yours give me hope. Not the “hope ‘n’ change” variety, but the hope that persons of good will and common sense who were bamboozled by the Bamster in 2008 are coming out of their trance and seeing what’s really happening.

I hope we hear more from you, particularly as we head into the 2012 campaign season. Your campaign experiences, if you’re willing to share them, might help us prepare properly for the likely avalanche of dirty tricks from the left side of the aisle.

Mary in LA on July 20, 2011 at 7:47 PM