Latest Bad News on the Housing Dilemma

[Joseph Burkeson, CMI]

U.S. home sales slip, stock of unsold homes rises
By Joanne Morrison - 5/23/2008


Sales of previously owned U.S. homes slipped last month and the backlog of unsold properties hit a record high, according to data on Friday that suggested the market's downturn still has a long way to run.

Home resales fell 1 percent in April to a 4.89 million-unit annual rate, the National Association of Realtors said.

The sales pace was a bit better than expected on Wall Street, but the stock of unsold homes surged 10.5 percent to 4.55 million units, leading economists to warn of further housing market woes ahead.

At April's sales pace, the supply of homes was 11.2 months' worth, the highest since the trade group began tracking single-family and condo properties together in 1999. For single units, the supply was 10.7 months' worth, the most in 23 years.

"The increase in unsold inventory suggests that the housing downturn will continue on through this year and well into next," said Moody's Economy.com Chief Economist Mark Zandi.

Stocks initially got a slight lift from the data, but later turned lower as the market digested the news and warily eyed a resumption in the steep run-up in oil prices. The blue chip Dow Jones industrial average (.DJI) closed down nearly 146 points, or 1.1 percent.

Prices of U.S. government bonds rose as investors shifted out of stocks, while the dollar fell and oil climbed above $131 a barrel.

The report showed the median home price in April was down 8 percent from a year ago, at $202,300. It was the second-largest price decline on record, following the biggest drop in February.

"The big surprise was the inventory of unsold homes rising to a record level,' said Rudy Narvas, a senior analyst at 4Cast Ltd. in New York. "This would suggest to us that further price declines are going to be necessary for the inventory to clear."

A report on Thursday showed home price declines accelerated in the first quarter. The federal Office of Housing Enterprise Oversight said its price index fell 1.7 percent in the first quarter, the steepest drop in the index's 17-year history.

Other price measures have shown even steeper drops. The Standard & Poor's/Case Shiller home price index of 20 metropolitan areas showed a drop of 12.7 percent in the 12 months through February, with prices down 15.8 percent from their June 2006 peak. The March index will be released on Tuesday.

"With prices collapsing, the incentive not to buy a home is increasing by the week, and with inventory showing no sign of improvement, prices will keep falling," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.


Moody's Zandi said about one-fourth of the sales likely were due to foreclosure, which he said was another negative sign.

NAR Chief Economist Lawrence Yun said that foreclosed homes, which sell at substantially lower prices, were increasingly showing up in the existing home sales data.

"Several markets are seeing a significant rise in home sales," Yun said. "These markets are also the markets that have witnessed a substantial decline in prices."

Sales declined in the Northeast, Midwest and South but rose in the West, by 6.4 percent. But prices in the region were off 16.7 percent from a year ago, the sharpest regional price decline.

"Anecdotal reports and local data indicate that prices have taken a beating in California, Las Vegas and Phoenix, and foreclosures and sales of foreclosed properties seem to be much heavier in California than anywhere else," economist Stephen Stanley of RBS Greenwich Capital wrote in a research note.

"This would suggest that perhaps the intense downdraft in prices in troubled markets, some of which is being dictated by foreclosure activity, is beginning to draw in buyers," he said.

The trade association said last month's existing home sales pace was 17.5 percent below the rate of April 2007, with single-family home sales off 16.1 percent and sales of multiple family units down 27.9 percent.

(Reporting by Joanne Morrison; Editing by Dan Grebler)

[Michael Larson]

[James H. Bushart]

I think that after this period of cleansing, many inspectors in many states will quickly see the advantage to them of having their existing HI laws repealled. The market cleanses itself...not the laws.

[Brian A. MacNeish]

Originally Posted by jbushart

I think that after this period of cleansing, many inspectors in many states will quickly see the advantage to them of having their existing HI laws repealled. The market cleanses itself...not the laws.

Same old, Same old, Same old!!!!!

Even with laws, the market will cleanse!! There's nothing in the laws that will support an HI and stop them from going out of business.

Just where is your head at??? According to you, laws are ruining our countries. I felt our laws helped make our countries. Should we have no laws against drunk drivers also and when they kill someone......Aw! It was just an accident!!!

[James H. Bushart]

Originally Posted by Brian A. MacNeish

Same old, Same old, Same old!!!!!

Even with laws, the market will cleanse!! There's nothing in the laws that will support an HI and stop them from going out of business.

Just where is your head at??? According to you, laws are ruining our countries. I felt our laws helped make our countries. Should we have no laws against drunk drivers also and when they kill someone......Aw! It was just an accident!!!

I am referring to home inspection legislation where the special interest groups who sell tests and other carpet baggers move into a state, like Prof Harold Hill, and convince them they have a problem that only they (the peddlers) can fix.

They sell their tests, their education classes, they place their ASHI presidents on board seats...then move on to the next state...telling consumers what is best for them.

It has nothing to do with drunk drivers.

The market rids itself of more bad inspectors than licensing laws. In fact, licensing laws protect bad inspectors by hiding them among hundreds of other "state licensed" inspectors...duping the public into believing that meeting the minimum state requirements makes one an equally qualified and competent inspector.

[Steven C. Meyer]

Brian


Depends on the intent of the law

Laws to protect our libertities and freedom

or

Laws to control our lives (big brother)

Big difference

[whandley]

In California, business is robust. It is an excellent time to purchase property. The investors are currently driving the market. REO's are being bought in large group portfolios. It is an exciting time to be in the real estate biz...

http://www.linkedin.com/answers/pers...ES/237029-3065

[Brian A. MacNeish]

Originally Posted by jbushart

The market rids itself of more bad inspectors than licensing laws. In fact, licensing laws protect bad inspectors by hiding them among hundreds of other "state licensed" inspectors...duping the public into believing that meeting the minimum state requirements makes one an equally qualified and competent inspector.

The market rids itself of more bad inspectors than licensing laws.

SO you agree licensing will take some bad inspectors off the market or never let them into it.

In fact, easy entry associations protect newbie untested, unproven inspectors by hiding them among hundreds of other certified inspectors...duping the public into believing that meeting their requirements makes one an equally qualified and competent inspector.

[Steven C. Meyer]

Originally Posted by whandley

In California, business is robust. It is an excellent time to purchase property. The investors are currently driving the market. REO's are being bought in large group portfolios. It is an exciting time to be in the real estate biz...

http://www.linkedin.com/answers/personal-finance/personal-real-estate/PFI_RES/237029-3065

Robust for who? The vulters are circiling, Just like the first of the 80's in San Diego, picking up properties at deep discounts, from over extended sellers.

Market prices are very depressed, there will be many who will lose and equity they may have had and the banks will take it in the shorts.

You call that an exciting time to be in real estate, as people are losing their homes?

[whandley]

Originally Posted by Steven C. Meyer

Robust for who? The vulters are circiling, Just like the first of the 80's in San Diego, picking up properties at deep discounts, from over extended sellers.

Market prices are very depressed, there will be many who will lose and equity they may have had and the banks will take it in the shorts.

You call that an exciting time to be in real estate, as people are losing their homes?

Good Evening Brian;

I'm talking about business activity. If you've been in the real estate business for any length of time you know if it weren't for corporate transfers/layoffs, divorce and the cyclical foreclosure market, the real estate biz would be but a shadow of its actual size.

The last serious down cycle in California was in the early 90's not 80's...

And yes! I find this an extremely exciting real estate business environment. I've been purchasing investment properties this year and will continue to buy at every opportunity. I've been performing inspections of every type almost seven days per week during 08'... As a professional home inspector and real estate investor its been a very productive year.

BTW, Ford announced today they will be shuttering some assembly lines because of reduced demand for large trucks and SUV's. It's an excellent time to buy a large vehicle if you need one. They will be laying off UAW employees who will experience hardships as well. It's still a great time to buy a new work truck at a steep price reduction...

[Steven C. Meyer]

Originally Posted by whandley

Good Evening Brian;

I'm talking about business activity. If you've been in the real estate business for any length of time you know if it weren't for corporate transfers/layoffs, divorce and the cyclical foreclosure market, the real estate biz would be but a shadow of its actual size.

The last serious down cycle in California was in the early 90's not 80's...

And yes! I find this an extremely exciting real estate business environment. I've been purchasing investment properties this year and will continue to buy at every opportunity. I've been performing inspections of every type almost seven days per week during 08'... As a professional home inspector and real estate investor its been a very productive year.

BTW, Ford announced today they will be shuttering some assembly lines because of reduced demand for large trucks and SUV's. It's an excellent time to buy a large vehicle if you need one. They will be laying off UAW employees who will experience hardships as well. It's still a great time to buy a new work truck at a steep price reduction...

The down turn in the 90'S was a cake walk compaired to early 80's. I know, I was there, invested in the Solana Beach, Del Mar, Fallbrook areas, end of the 70"s, lost my every loving tail. Couldn't sell for what was owed, and that was with 20 per cent down. Sold and bailed at fire sale prices.

If you had cash in pocket, you could pick up some great properties then, should have waited.

Timing is everything!!!!!

[whandley]

http://www.sandiegorealestatereport....nedarticle.htm

http://www.progress.org/2004/fold364.htm

http://www.nytimes.com/2005/10/23/we...=1&oref=slogin

http://sbbeachbubble.blogspot.com/20...ain-wreck.html

[Joseph Burkeson, CMI]

Just the facts please...

MARKETWATCH FIRST TAKE
Bought but can't hold
Commentary: Put your house on the market now? Are you nuts?

By MarketWatch
Last update: 4:18 p.m. EDT May 23, 2008

CHICAGO (MarketWatch) -- Either American home sellers are an incredibly optimistic lot, or they think they are stock traders who need to dump their assets in a declining market. How else to explain the surge in homes going up for sale in April, in the teeth of the worst downturn in housing since the Great Depression?

Because home buyers are spooked by the current environment, in which home prices have been falling in many markets across the country, there has been a glut of unsold homes on the market for more than a year. Sellers have been cutting their prices to attract the limited buyers out there -- the median price of a home sold in the U.S. in April was off 8% from a year earlier -- but that has done little to cut into the inventory. See full story.

Against that backdrop, sellers still concluded April was the time to move. The inventory of unsold homes on the market jumped 10.5% in April to 4.55 million units. At the current sales pace, that represents an 11.2-month supply of houses -- nearly double what the real estate industry considers to be a health level.

Of course, April is the biggest time of the year for putting houses on the market. That's because of the school-year cycle; families with kids in school who need to move in the June-August summer recess have to get their homes on the market then in order to sell, buy and close on both transactions before the fall term begins.

But even by seasonal standards the number of houses put on the market last month was high. And here is why that is particularly ominous:

• Many of those potential sales are likely forced. Strapped homeowners who are struggling to keep up with mortgage payments may feel compelled to sell and get what they can for their house before the financial burden overwhelms them.
• Many of those houses are foreclosures. With foreclosure proceedings nearly double what they were a year ago, banks are being handed the keys to record number of properties. Their aim is to get rid of them, regardless of market conditions.
• Many of these moves are not discretionary. Let's face it: The job market is not the most stable right now. Folks who face layoffs or are "asked" to transfer may have little choice but to put their home on the market.
• Many of these properties are failed investments. The speculators who bought -- mostly condos -- in the boom times in anticipation of quick profit have been caught with their windows down. They may have been tempted to hold for a rebound, but like stock traders they will also cut and run with no bottom in sight.

Some of the folks who put their houses on the market in April may end up pulling them off the market in subsequent months, once they see how choppy the water really is. But for most, it's now sink or swim.

-- Steve Kerch, assistant managing editor/personal finance

[Dale Duffy]

Originally Posted by whandley

And yes! I find this an extremely exciting real estate business environment. I've been purchasing investment properties this year and will continue to buy at every opportunity.

Me too Will...In California....!!!!.....------------------

I also think California will be one of the first to rebound, a guess, but I think it's a good guess...!!

I've been performing inspections of every type almost seven days per week during 08'... As a professional home inspector and real estate investor its been a very productive year.

I agree Will, the best year, and I only expect to get even better...!!!!

[Steven C. Meyer]

J BURKESON

Great informative post.

Lets face it, we are in a recession, and it's going to be a while before things get any better.

Up here, prices dropping like a rock, many foreclosures, and houses selling well below asking, one developer has dropped his asking price on a new custom home by $300,000, and it still has not sold.

Many recent new home owners are bailing due to:

Lost jobs
transfers
over extended.
Never thought the bubble would burst, is probably the biggest reason.

Many purchased with floating interest rates.
Some, with 0 down
Some with interest only loans
Some with short term future principal payment.

The poor fools thought the double digit yearly increase in housing prices would never end, they would be able to refi, borrow on a second to make pricincipal payment, or sell out at a hansome profit, with an interest only loan, or a no down payment buy.

The biggest problems here, is the most recent buyers (before the bust) have found themselves in a no equity position, thus they are just walking away from it, handing the keys back to the bank.

I have always been of the opinion that housing prices are based not on its worth, but on the ability of a buyer to make the paymets necessary to buy at a certain price at a certain interest rate. The higher the interest, the less a home buyer can qualify for, dollar wise.

I harken back 25 or so years or so ago, when the market was depressed. It was not so much that there was not a demand for houses, it was a problem of sky rocketing 1st TD interest rates, which went as high as 16+%. In order to sell, the house had to be priced at what a buyer could qualify for a loan.

In those years, I had a house that before the bust, appraised at 440,000, when the bust hit, the best offer I had was 285,000, contingent on buyer qualifying for a loan!

Timeing is everything in the housing market, gotta know when to hold them, when to fold them! If you can weather the storm, you will come out ok, if not, you'rs screwed!


Real estate has always had a cycle, everything is timeing, if you can afford to hold on, it will come back, it's the holding on that is the problem.