Supply and Demand: Housing Sales Increase in California and Florida

According to the Sacramento Association of Realtors, homes sales in 2008 (20,587) almost doubled compared to the previous year (10,620), fueled in part by falling prices (see chart above). Sales in 2008 were also 47% above sales in 2006 (13,970) and were the highest since the peak bubble years of 2005 (21,525 units sold) and 2004 (22,816 units).

The Sacramento home sales rebound continued last month, as sales of 1,542 homes were the most for a January this decade, the Sacramento Association of Realtors reported Friday. Compared to January home sales last year (739), sales increased by 108.7% to 1,542 this year (data here). Thanks to an anonymous CD reader for pointing out that January sales this year were even higher "than the peak bubble years" of 2005 (1,256 January sales) and 2004 (1,234 sales).

As Marketdoc commented on a previous CD post, "Washington better hurry to find a solution to the "toxic asset problem" before market activities correct the problem on their own."

Florida’s existing home sales rose in December, making it the fourth consecutive month that sales activity demonstrated gains in the year-to-year comparison, according to the latest housing data released by the Florida Association of Realtors (FAR). December’s statewide sales also increased over November’s figures in both the existing home and existing condo markets. Existing home sales rose 27% last month with a total of 11,053 homes sold statewide compared to 8,712 homes sold in December 2007, according to FAR (see chart above). December’s statewide existing home sales were 28.9% higher than November’s statewide sales.

Sixteen of Florida’s twenty metropolitan statistical areas (MSAs) reported increased existing-home sales in December; 11 MSAs also showed gains in condo sales, marking the sixth month in a row that a number of markets have reported increased sales activity.

Among the state’s large to medium-size markets, the West Palm Beach-Boca Raton MSA reported a total of 638 homes sold in December compared to 467 homes a year ago for a 37% increase.

HT: Marketdoc

Home sales increased 85% in December in California compared with the same period a year ago, while the median price of an existing home fell 41.5%, the California Association of Realtors reported (CAR). Sales of existing, single-family detached homes in California totaled 544,580 in December at a seasonally adjusted annualized rate, according to information collected by CAR from more than 90 local REALTOR associations statewide. Statewide home resale activity increased 85% from the revised 294,520 sales pace recorded in December 2007 (see chart above).

The median price of an existing, single-family detached home in California during December 2008 was $281,100, a 41.5% decrease from the revised $480,820 median for December 2007, CAR reported (see chart above).

From what you hear in the media, it would seem like we are years away from a real estate recovery, when the statistical data suggest otherwise. Falling home prices and falling mortgage rates are fueling a real estate recovery in states like California and Florida. In other words, markets are working. As the Law of Demand predicts, demand curves slope downward, and when home prices fall, the number of homes sold increases.

Comments

[Stephen Kanitz]

It makes a lot of sense. Latinos , due to years of inflation in their home countries, detect negative interest rates when they see them. And if you think house prices are near bottom, future real interest rates will be definetely negative. Negative interest rates is a misnomer, because it actually means BANKS pay you interest, rather than vice versa. Plus you get Mortage Interest Tax Deduction on the nominal interest rates.

If this spreads around, there will not be a housing problem as I predicted in my Seeking Alpha in November.

2009 Feb 16 08:10 AM

[Doug Poretz]

The conclusions are correct if the statistics you cite are correct, but the statistics are wrong because year-over-year sales provide only a partial picture (and because most of 2008 statistics do not factor-in the meltdown since October). I am spending the winter (renting) in the Palm Beach Gardens area of Florida, and I can see the real state of the market here every day. The supply of homes for sale is much greater than the statistics suggest -- sort of like unemployment figures leave out whole classes of people who do not have jobs but are not included in unemployment statistics for one reason or another. The Realtor for the house I am renting asked if we would be interested in buying the house -- however, this house is not listed for sale. But I can buy it at a deep discount to its previous value. How big a discount? Who knows? There simply aren't enough comps to set a value because there aren't any sales but those that are forced due to bank action or desparate sellers (and given the length of time many of the listed homes have been on the market and the lack of visitors on weekend open houses, there will be more forced sales that will drive prices down lower). I can step outside the door of the house I am renting, look up and down the block and see this model with the same exact features for sale at prices as high as $1,250,000 and as low as $750,000 -- those are asking prices before negotiations. None have sold. And that's the prices for the ones that have been listed -- most of nthe homes that are actually for sale are not even listed. It would be terribly wrong to conclude that the statistics you cite are indicative of a floor to this market or some sort of positive indicator. I'd love to buy a house here -- wonderful life -- but prudence tells me the market here won't be close to having a real floor for another year at the soonest -- first the inventory that is actually listed for sale must be sold, and then the unlisted inventory of homes for sale must be sold. I don't care what the statistics say -- to me, the harsh reality is: prices go lower and the down market continues longer.

2009 Feb 16 08:49 AM

[brpinion]

If the government lowers principal what incentive will their neighbors have to keep paying their full mortgage payment? Are we saying the less responsible should benefit at the cost of their neighbor who may be cutting way back to keep up their payments? If I knew my neighbors were getting their mortgage cut I would want the same from the bank.

Also, What about the person who put 20% down and prices drop 25%. He can keep making his payment (because it is on a smaller principal balance) but his neighbor who put nothing down and puts in a pool can get his principal cut 25%?

I cant wait to see how the people who had the audacity to make a large down payment react to principal cuts for people who bought more than they could afford with no money down. And, if you bought any house with no money down you bought more house than you could afford!

2009 Feb 16 09:26 AM

[Obvious Adam]

Once again Perry shows his ignorance of statistics and markets. The statistical base that he uses is contingent on real estate transfers filed with the particular County. Those transfers include foreclosed property that have been "purchased" back by the lender. Which also accounts for the dramatic decrease in values.

2009 Feb 16 09:53 AM

[The Hern]

I was also in Florida for the past month and my development had alot of sales action. the lower prices and lower mortgage rates have definitely increased sales. If you are thinking of a retirement home, this may be the best time to buy.

2009 Feb 16 10:50 AM

[CoinMiner]

We track actual sales figures for Solano County, two counties west of Sacramento County. Our sales figure graphs are similar to what the author provided for Sacramento. However, I suspect Obvious Adam's suspicion is correct since Solano County is further along the foreclosure curve than Sacramento.

Mr. Poretz also makes a salient point. I know there are owners who pulled their homes off the market at much higher prices, and would like to sell today if they weren't facing so much competition from foreclosure sales. We bought our house at a foreclosure auction at a much lower price than the 'comps'. Folks no longer look at these (foreclosure) sale prices as data outliers, but as the new short/medium term price point - even though purchase at auction carries more risk to the buyer.

Our county sales reflect not so much the banks - but the local RE investors, first time homebuyers and Asian investors looking to park capital in the US, but outside the Treasury bills.

2009 Feb 16 11:26 AM

[Mr. Ed, Jr.]

NAR, CAR...any of the "...Association of Realtors" numbers will always be suspect. There is no standard for all areas to report. In fact, there are many situations where the numbers have been bad and the local "Association" just did not report-- it was not in their interest.

2009 Feb 16 12:19 PM

[Did U Think The Ponzi Schem...]

Anyone buying a house right now is catching the falling knife according to Nouriel Roubini. Since he has a pretty good track record for being right I would listen to the man. Case-Shiller research indicates housing has not returned to the norm until it goes down another 20% from here. That is a national average figure but CA and FL will need a much larger % plunge.

Don't think of buying a home until 2010 at the very earliest or until the home you are looking at has returned to 1995 prices. That is where the bubble took off.

2009 Feb 16 12:46 PM

[mallarde]

If a disproportionate number of sales can be attributed to foreclosures versus pre-bubble bursting when few were, then the numbers make sense.

In the nicer parts of Los Angeles, you see For Sale signs everywhere and, more often, For Rent signs. The price drops have a long way to go outside of foreclosure-land. To put it in perspective, prices for condos remain almost 100% greater than 2000 prices even after a slight decline off of the peak.

2009 Feb 16 01:07 PM

[Hmm?!]

I will keep reposting it, until everybody knows it. These two statements say it all, if you can do simple math (from Mortgage Liquidity Du Jour by Credit Suisse, March 2007)

"low/no documentation loans increased from just 18% of purchase originations in 2001 to 49% in 2006"

"sampling 100 stated income loans found that 60% of borrowers had "exaggerated" their income by MORE than 50%"

That means 30% of ALL mortgages in 2006, the buyer only had 66% of the income they claimed. Some of the other mortgages were also likely bad from minute one. If the buyer lied by 49% or 30% on their application? I can not see how this burns off quickly!

2009 Feb 16 01:54 PM