Wednesday, February 24, 2010

Worst January in 40 years

The nation housing market is tanking big time. In SoCal we seem to be holding up a bit better. Here's the national report from

The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who had expected sales would rise about 5 percent over December's pace.

While winter storms were partly to blame, home sales have fallen for three straight months despite sweeping government support. Economists were already worried that an improvement in sales in the second half of last year could falter as various government support programs are withdrawn.

"There is no doubt that January and February are going to be messy months for housing, given the severe weather conditions, but that doesn't take away from the fact that the housing sector has taken another big step back, even with the government aid," Jennifer Lee, a senior economist at BMO Capital Markets, said in a research note.

January's weakness was evident in all regions except the Midwest, where sales posted a 2.1 percent increase. Sales were down 35 percent in the Northeast, 12 percent in the West and almost 10 percent in the South.

The drop in sales pushed the median sales price down to $203.500. That was down 5.6 percent from December's median sales price of $215,600, and off 2.4 percent from year-ago prices.

New home sales for all of 2009 had fallen by almost 23 percent to 374,000, the worst year on record. The National Association of Home Builders is forecasting that sales will rise to more than 500,000 sales this year, an improvement from 2009 but still far below the boom years of 2003 through 2006 when builders clocked more than 1 million new home sales per year.

January's data will increase concerns that the housing rebound could falter in coming months as the government withdraws the support it has used to try to bolster the housing market, which stood at the epicenter of the country's overall recession, the worst downturn since the 1930s.

A $1.25 trillion program from the Federal Reserve which has held down mortgage rates is set to end March 31 and tax credits to bolster home buying are scheduled to expire at the end of April.

First-time home buyers could qualify for a credit of up to $8,000 while homeowners who have lived in their current properties for at least five years could claim a tax credit of up to $6,500 if they decided to move into another home.

Though the overall economy started growing again this past summer, economists are worried because unemployment remains high. This weakness is causing consumers to shy away from spending, especially on big-ticket items such as homes.

The Conference Board reported Tuesday that its Consumer Confidence Index fell almost 11 points to 46 in February, pushing the index down to its lowest reading since last April. At 46, the index is a long way from the 90 reading that economists generally view as depicting healthy consumer attitudes........................

So sales are dead, employment numbers are horrid, consumer confidence is in the toilet and the government support for housing is scaling back over the next few months. Yep, everything looks great, expect the stock market to go crazy.

Anyone else think the numbers would be a lot better if there were houses to buy? There's a million potential listings tied up in mortgage mods, most of which will fail in California and other super bubble areas. In my small group of friends I know 4 people that are looking for a house. I know 2 that just closed within the last couple of months (after looking for ever). We all havbe the same problem, there's just not that much to buy. The government needs to let the free market work so that the people that do want to buy, can.


The Anonymous said...

Its interesting to look back at old posts and see who was correct over time.

I found this one from early last year. The gist of it was "relax people the foreclosures are coming back". Most people were in agreement, even talking about the "wave" that was going to hit soon.

In hindsight, the "wave" did not happen, charlatans like Mr. Mortgage went into hiding never to emerge, and now most accept the fact that the "wave" will never materialize at anywhere near the magnitude first envisioned.

Oh, and a hat tip to this "oldtimer" guy. Seemed like he was the one most on the ball.

The Anonymous said...

Sorry, heres the front page of that thread. Interesting...

golfer_X said...

The problem for most of the predictions was the unprecidented intervention by the govenrment. It's not like the loans were made well. They are still there, still bad and still very likely to end up foreclosed upon. I don't think anyone predicted the massive government bailouts and meddeling in the marktets. Pretty much everyone was wrong because of that. We keep hearing about bottoming out and recovery but this is all based on the fact that the government has thrown a few trillion dollar at the problem. Personally I don't see any way we can sustain this so called recovery once that support ends.

The Yen Guy said...

You relate: "Anyone else think the numbers would be a lot better if there were houses to buy? There's a million potential listings tied up in mortgage mods, most of which will fail in California and other super bubble areas."

Well, yes that is true, and there is a terrific amount in shadow inventory that the banks have in inventory, that they not foreclosed on because of the interpretation of FASB 167 and 168, that being the homes can be marked to bank manager's best estimate and not market.

And you relate: "In my small group of friends I know 4 people that are looking for a house. I know 2 that just closed within the last couple of months (after looking for ever). We all havbe the same problem, there's just not that much to buy. The government needs to let the free market work so that the people that do want to buy, can."

Well, the free market is going to have a seizure -- perhaps a liquidity freeze affecting the money market funds or a massive failure of Treasury Bills. I expect dramatic things to happen very soon because the free market has been constrained by the government.

I weep for your friends who bought, because the knot has been tied -- they are tied down to real estate that is going to fall dramatically in price. I am relieved that you have any such committment.

I've been renting in the York neighborhood of Bellingham for three years -- its primarily a rental neighborhood for studenets at Western Washington University; three or four stundents leave a home for a year; each pays 400 a month plus utilities; Bellingham is a pleasant place to live; no crime, and it has a nice climate.

Ron Paul Warns Americans Of Coming Economic Collapse And Possible Martial Law Courtesy of the Econocrot

Although I'm not a Ron Paul fan, nor a Libertarian, I'm convinced a second great depression is coming soon ... and with the fallout he mentions. I recommend that one rent a farm in Whatcom County Washinton and grow and sell food and goat milk and goat cheeses -- I believe Southern California will become a very rough place to live.

Perhaps my post today entitled The Yen And Gold Rise As Greek Downgrade Concern Boosts Demand For Safety might help one see the economic, political and societal risks that abound today.

theY said...

Where I'm looking (Riverside $200k-$300k) it appears there are a ton of flipper homes for sale. Either that or I'm reading sales history wrong. Every decent list price deal gets eaten up and then put back on the market with a carpet cleaning for $20-50k more. Prices seem actually on the upswing. The regular sale folks are still in bubble land. As for me, I'm perplexed and stuck on the sideline.

golfer_X said...

you are probably seeing the NOT sales price and then the listing price for a REO. They generally list a home for $30k to $50k higher than the amount it went back to the banks for. Two reasons, the banks are offering the homes cheaper now at the auction and they want to recoup the costs involved with selling the home (taxes commisions etc). There are some flippers but they rarely will try a flip with that little cushion for profit. Most flips are looking to make $100k or more. Aboout 1/4 of the homes are now being picked up by investors at the trustee sale. So there are quite a few flips hitting the market. I wish I had a few 100k, I'd be flippin them too. It's easy money right now.

Todd said...

[sarcasm] It's a good thing that Riverside County just approved the Villages of Lakeview development near Perris and San Jacinto which will include 11,000+ houses. [/sarcasm]

What in the hell are they thinking?

golfer_X said...

That's called a hail mary. That's a city approving a development that was proposed during the bubble boom in the hopes that it will miraculously come to fruition and provide some desperately needed tax revenue. It may happen a few years down the road if the economy stabilizes. But I would bet a paycheck that the homes they build will be small and affordable. There's won't be any 3000 s/f homes in that tract. 1000 s/f to 2500 s/f will be the norm for builders in the IE.

askanarab said...

delusional seller in 92503 1.2 million:

Todd said...

The local political blog has an interesting post in reference to The Villages of Lakeview. Apparently the developer has donated to the campaigns of some of the people who voted on it.

golfer_X said...

I came so close to doing a post about that 1.2mil home. It's right across the street from another delusional seller that I did do a post on a couple of months ago. He's asking $1.4M and it's not as nice as this house (judging by the pics). Both these houses are pretty nice and certainly worth much more than the average house in the area but neither of them is worth $1.anything million. These are probably worth around $600k to $700k.

Neudi said...

Yep, that's a nice house. Can't see why anyone would drop a million on a home in Riverside personally.

Couple months back driving around in Sycamore Creek looking at the Richmond homes again, sort of strange but noticed for sale by owner signs in every single yard. Figured it was a protest so stopped and asked a resident. He said he had purchased a few years ago around a million and now Richmonds new builds start at 400k in the same tract. The older homes are a bit bigger but that is a nice discount. I figure you have about another year before the folks that around 500k or more upside down to throw in the towel.

VectorzSigma said...

Here we go. Govt is now reducing principle on deadbeat mortgages. h

Todd said...

There are a lot of dillusional sellers in Rancho Cucamonga and Upland lately.

This one has an interesting history. Sold in 2000 for $335k, sold in 2002 for $403k, sold in 2004 for $641k, sold in 2005 for $779k, sold in 2009 for $595k, and then listed 10/12/09 for $749k.

Here are some others:

Purchsed in 2002 for $192K, listed yesterday for $325k:

Purchased in 2001 for $360k, listed 2/1/10 for $550k:

Purchased in 1999 for $305k, listed 2/20/10 for $675k:

Neudi said...

House: $/Sq. Ft. graph on each one of these show list higher than the sales price. That would contradict everything the realtors are saying.

Neudi said...

If I'm reading that correctly.

Jay & Christina said...

The Anonymous...honestly, how can anyone look at and deny that a foreclosure tsunami is in the making? Look at the map ...about 1 in 10 houses in the IE is in some form of foreclosure.

Banks and the gov't have been kicking the can down the road for a long time now, but eventually all these non-payers will have to be reckoned with, don't you think? Do you really think Obama will pay off all these delinquent mortgages?

golfer_X said...

I think it's closer to 1 in 8.....but who's counting....