Some Odd Stats in Pending Home Sales

Pending home sales (contracts signed but not closed) rose 6.7% for contracts signed in April. The April reading was 90.3 versus 87.5 in March. Low interest rates, lower home prices and government incentives were all factors in pushing up the index.

Of some interest was the geographical disparity in the numbers. From the National Association of Realtors:

The Pending Home Sales Index in the Northeast shot up 32.6 percent to 78.9 in April and is 0.8 percent above a year ago. In the Midwest the index rose 9.8 percent to 90.4 and is 11.1 percent above April 2008. The index in the South slipped 0.2 percent to 93.0 in April but is 3.5 percent higher than a year ago. In the West the index rose 1.8 percent to 94.8 but is 2.9 percent below April 2008.

That’s kind of odd. The West, particularly California, Arizona and Nevada, have seen sales soar over the past couple of months particularly in the lower cost segment of the market. Most of the gains have been fueled by new home buyers and investors. One has to wonder if the lower figures for the West might indicate that the sales surge in that region has any legs. We’ll see over the next couple of months.

On a related subject, Lennar, the nation's second largest shareholder, appears as if it’s going to get clearance from the bankruptcy court to buy up to a 15% in Newhall Ranch for $140 million. What makes this interesting is that in 2007 Lennar sold its interest in Newhall Ranch to the California Public Retirement System for $970 million. Newhall Ranch is one of the few parcels of developable residential land left in Southern California.

The retirement system's interest is now worth zero. Ouch!

More: here

Comments

[2houndz:]

Now that the debt markets are getting frothy, I wonder how many of these pending contracts will fall out of bed.

Jun 02 03:08 PM

[Radardoc:]

I haven't looked at the data they base this report on yet, but any time someone leads with the line "From the National Association of Realtors:" I prepare myself to be lied to. If I were to be kind, I would say they have been wrong quite often lately. If I were to be accurate, I would say they have lied and mislead so many times, I can't trust anything they release.

If the NAR were weather forecasters and they said "sunshine," I'd be grabbing for an umbrella.

Jun 02 03:41 PM

[Can'tSpotAB...:]

Let's see how many of them actually close since financing costs are up about 25%.

Jun 02 04:29 PM

[Mad Hedge F...:]

Lumber loves it. Those fortunate few who took my advice to go long lumber futures (www.madhedgefundtrader... ) can now go out and build a bonfire to celebrate. Since then the homebuilder’s favorite commodity has rocketed by 35% to $200. The biggest producers, Weyerhaeuser (WY), Rayonier (RYN), or Louisiana Pacific (LPX) have also done well. The last gap up was prompted by more mustard seeds that the housing market may have hit bottom. The enormous subsidies offered to first time buyers is also helping eat into inventories. After seeing similar Chinese inspired moves in copper, crude, and coal, this is further proof of the beginning of a much broader, long term bull market in commodities.

Jun 02 04:32 PM

[OptimizedPrime:]

I can't wait until these real estate people start to get hauled off to jail like the Enron executives. Same criminal behavior: lying constantly was just fine back when everybody made money. Now that people are losing their life savings based on their lies they should be prepared for the mobs with torches and pitchforks (and ambitious DAs with indictments).

Or to put it another way, screwed underwater homeowners need to start suing the real estate agents that told them that houses "always go up in value and never go down". Maybe a few multimillion dollar lawsuits will shut their lying traps...


OP

Jun 02 06:23 PM

[2houndz:]

Optimized Prime - two words - caveat emptor.

Jun 02 06:50 PM

[optionsgirl:]

What do you think of Deltic Timber? They're also a play on nat gas- lots of shale.


On Jun 02 04:32 PM Mad Hedge Fund Trader wrote:

> Lumber loves it. Those fortunate few who took my advice to go long
> lumber futures (www.madhedgefundtrader...
> ) can now go out and build a bonfire to celebrate. Since then the
> homebuilder’s favorite commodity has rocketed by 35% to $200. The
> biggest producers, Weyerhaeuser (seekingalpha.com/symbo...),
> Rayonier (seekingalpha.com/symbo...), or Louisiana Pacific
> (seekingalpha.com/symbo...) have also done well. The last
> gap up was prompted by more mustard seeds that the housing market
> may have hit bottom. The enormous subsidies offered to first time
> buyers is also helping eat into inventories. After seeing similar
> Chinese inspired moves in copper, crude, and coal, this is further
> proof of the beginning of a much broader, long term bull market in
> commodities.

Jun 02 08:33 PM

[dcb:]

Once more this is cetin again using another name and spamming. this time he is saying things in a different tune than he would post in his real name. why can't we turn this troll of.


On Jun 02 07:06 PM foobar wrote:

>
> bankers selling our childrens futures..for more bailouts? the disgrace.
> it's horrible. too big to fail needs to fail. we neeed LESS bailouts.
> If you fail U fail.
>
> Total credit market debt as a percentage of GDP has risen from 130%
> of GDP in 1952 to 350% of GDP today. The various bailout and stimulus
> schemes enacted in the last year will drive this percentage above
> 400% in the near future. When a country allows this much debt to
> accumulate versus its GDP, they have done something seriously wrong.
> The country’s politicians, business leaders, and citizens have all
> contributed to this disaster.
>
> good articles: fly2.ws/9SdkpLU

Jun 02 10:21 PM

[Ohrama:]

Your alarms about debt as a GDP should become more louder when you realize that good part of our GDP has become so useless (like Realtors and their companies walking away with 6%; so much useless closing costs; retail jobs pushing Chinese made products; govt. and health care Or normalizing to purchase parity) that what is left to sell abroad to reduce our debt load is very small. I wonder how our children and their children would react when they get the bill!


On Jun 02 07:06 PM foobar wrote:

>
> bankers selling our childrens futures..for more bailouts? the disgrace.
> it's horrible. too big to fail needs to fail. we neeed LESS bailouts.
> If you fail U fail.
>
> Total credit market debt as a percentage of GDP has risen from 130%
> of GDP in 1952 to 350% of GDP today. The various bailout and stimulus
> schemes enacted in the last year will drive this percentage above
> 400% in the near future. When a country allows this much debt to
> accumulate versus its GDP, they have done something seriously wrong.
> The country’s politicians, business leaders, and citizens have all
> contributed to this disaster.
>
> good articles: fly2.ws/9SdkpLU

Jun 02 10:37 PM

[Lightway:]

While your call for diligence is correct, the realtors and the banks were supposed to be the "adults" in these types of transactions. Many of these people had no idea what they were getting into.


On Jun 02 06:50 PM 2houndz wrote:

> Optimized Prime - two words - caveat emptor.

Jun 02 11:15 PM

[optionsgirl:]

Hah, hah, hah. Realtors did this? Here's a news flash:
Realtors don't design mortgage products. They don't package them into neat little investment packages and sell them to investors and tell them they are safe investments. They don't underwrite insurance products that kick in when a default occurs.They don't rate the debt, either.

People went shopping because congress told the banks that
home ownership is the American dream-make it happen. Fannie Mae and Freddie Mac made it happen. Greenspan dropped interest rates. He helped make it happen.
The banks complied. Nobody forced a gun to the head of a person with no assets and said "You must buy a house you can't afford at a teaser rate".
I bet you there isn't a single realtor out there who ever heard of a tranche, until the banks blew up. And no, I'm not a realtor- I'm just wise enough to recognize sheer and utter bologna when I read it.

Jun 03 12:11 AM

[Fighting Yoda:]

There is pending demand and bottom fishing in the market, all this is to be expected. Prices have fallen a lot, and there is an 8K tax credit - buyers are going for it.

But the whole problem is we are nowhere near the bottom - inventories still extremely high, many more foreclosures to come, credit crunch very much there especially for impaired borrowers.

Home prices have fallen by a monthly average of 2.37% in the last 6 months. On a 400K home, you would lose the 8K tax credit in less than a month, so watch out.

Jun 03 01:22 AM

[Old Trader:]

As commented upstream, the key will be how many of the pending sales actually come to fruition,, given the much more stringent requirements to actually qualify for a mortgage. I'm guessing people rushed to try to lock in good rates before they continue to march upwards.

Jun 03 10:25 AM

[Lightway:]

I think most of the people that are underwater probably had the same access to information that you and I do to make an informed decision regarding their home purchase. ;-) While there are plenty of people that used their home as an ATM machine (HELOC abuse), and do not deserve any sort of sympathy, there are also plenty of people who were given a bogus deal based off of false assumptions sold to them by someone they were paying commission to to watch out for their interests. The rest of us know there is no such thing - realtors are just there to make money and aren't held to some angelic guardian role for home buyers.

Since 2007, the National Association of Realtors has been pushing the entire populace to purchase, while the market has continued to spiral downwards. This is irresponsible behavior. Nobody forces someone to buy a house, but some people are easily influenced, and this is why things like stop signs are a part of the law, and not just suggestions.

However, I think most people realize that realtors aren't the sole cause of blame, but many do bear responsibility for selling properties to their clients they KNEW could not afford them.

Your food chain analysis of the whole disaster is astute, but you're preaching to the choir.


On Jun 03 12:11 AM optionsgirl wrote:

> Hah, hah, hah. Realtors did this? Here's a news flash:
> Realtors don't design mortgage products. They don't package them
> into neat little investment packages and sell them to investors and
> tell them they are safe investments. They don't underwrite insurance
> products that kick in when a default occurs.They don't rate the debt,
> either.
>
> People went shopping because congress told the banks that
> home ownership is the American dream-make it happen. Fannie Mae and
> Freddie Mac made it happen. Greenspan dropped interest rates. He
> helped make it happen.
> The banks complied. Nobody forced a gun to the head of a person with
> no assets and said "You must buy a house you can't afford at a teaser
> rate".
> I bet you there isn't a single realtor out there who ever heard of
> a tranche, until the banks blew up. And no, I'm not a realtor- I'm
> just wise enough to recognize sheer and utter bologna when I read
> it.

Jun 03 12:01 PM

[2houndz:]

Why were they siging legal documents that they didn't understand? Sure, some people were frauds and deserve to go to jail, but a home is the average person's biggest investment, right? So why not pay an attorney 400 bucks to advise you in what you are doing?

We live in a complicated world, and signing long term financial obligations with a 15th century comprehension of finance, and no clue what the documents state is plain stupid and inexcuseable.


On Jun 02 11:15 PM Lightway wrote:

> While your call for diligence is correct, the realtors and the banks
> were supposed to be the "adults" in these types of transactions.
> Many of these people had no idea what they were getting into.

Jun 03 12:07 PM

[cadoggy:]

The banks are the ones to blame here for 90% of the crisis. Sure Realtors and stoopid home buyers played a hand. But the banks created the products, marketed them ruthlessly, and did the underwriting.

And I'm convinced the banks knew that it would all end some day soon. Maybe they didn't foresee the magnitude of it. But their attitude was "let's get as much as we can as long as we can and deal with the consequences later."

They should be jailed.

Jun 03 12:53 PM

[pitchingpen...:]

The under 200K market is active. Market makeup?, Investors/Speculators and First Time Homebuyers.

The Investors/Speculators are supposed to know what they are doing, but again, many are not pro's, just folks who have been up late watching cable Real Estate Gurus selling CD's.

The FTHB's? Again, the most vulnerable economically, the least experienced, the "Hopeful", being allowed to purchase with zero down (thanks to the 8K tax credit monetized in advance) and used for down payment and closing costs.

Tell me what is different in this methodology now, than what we were doing before? Isn't this what supposedly got us here in the first place? When the government runs out of buyers do they just expand the customer universe like subprime lenders and the MBS/CDO freaks by loosening the guidelines?

Just sayin'

Jun 03 01:55 PM

[Fighting Yoda:]

1. Most states (at least several) mandatorily require that you have a lawyer to oversee the loan documents. So not much excuse here.

2. Mortgage contracts are simpler than lets’ say a credit card contract. No sudden arbitrary change in interest rates. In case of ARMs etc - it is very well defined - exact time and rate formula (Libor). So essentially exactly defined- no change in contract- so there is no excuse. The only thing we have is buyers’ remorse- as prices have fallen. And of course lots of undeserving people were granted loans- buyers and lenders lined up – that is what a bubble is. Both sides are to be blamed.

3. Wall Street mortgage securitizations: by some estimates private label mortgages (by Wall Street instead of Fannie) are 15% of all mortgages but 51% of seriously delinquent. So Wall Street screwed up big time, far more than much maligned GSEs



On Jun 03 12:07 PM 2houndz wrote:

> Why were they siging legal documents that they didn't understand?
> Sure, some people were frauds and deserve to go to jail, but a home
> is the average person's biggest investment, right? So why not pay
> an attorney 400 bucks to advise you in what you are doing?
>
> We live in a complicated world, and signing long term financial obligations
> with a 15th century comprehension of finance, and no clue what the
> documents state is plain stupid and inexcuseable.

Jun 03 04:36 PM

[Lightway:]

Again, many people are making the mistake of painting the entire group of people underwater in a black and white way. They're either: 1) diligent homeowners who did their homework, saved up 20% down, and paid 3 times their income, dotted all the i's and crossed their t's or 2) lazy and greedy consumers who wanted to get theirs, and deserve everything coming to them.

There is a mix of people in foreclosure here:

1) People with questionable credit, who overleveraged, bought more house than they should have, and expected the price of their home to go up indefinitely. They hoped they could eventually refinance into an actual monthly payment they could afford. Now that home prices have busted, and their payments have skyrocketed, while their home value has plummeted, have chosen to walk away from their obligation.

2) People that could actually afford their home, but turned it into an ATM machine, to fuel their high-flying lifestyle, by taking out repeated HELOCs, and ballooning their debt to a point where the falling price of the home value now leaves them with tremendous debt they no longer want to pay, and a deflated asset they can no longer borrow against.

3) Speculative flippers, who were only in the game to take advantage of rising home prices, hoping to turn a quick buck. This group watched too much HGTV, complete with cash register sound effects, and huge dollar sign graphics promising dreams of money for a cost of a coat of paint, stainless appliances, granite countertops, and hardwood floors. Many are saddled with renovation bills that now cost more than the profit on their investment.

4) Naive buyers with questionable credit, low income, and massive leverage, who had no idea what they were getting into, who should have been screened out first by the real estate agent representing them, secondly by the bank, and thirdly, by the FHA. Three places where the transaction could have been stopped but it wasn't. Do you really think this type of buyer considers, or even has any idea, what the Libor rate is? Many of these cases are outright fraud.

5) Good buyers who put that 20% down, purchased a house priced 3 times gross income, had good credit, and even had the elusive 6 months emergency fund. Maybe they lost their job, they or someone in their family got into a major accident, and now are saddled with a financial burden that takes years to make up. This group is now one of the fastest growing groups defaulting, made up of prime borrowers, who are now paying the price for a down economy. They did thing the right way and are paying the price of others' greed.

So you can see, there is a wide spectrum of buyers, across all walks of life, not just "good guys," and "bad guys."

Personally, 1-3, I could care less about. But 4-5 are the groups who do deserve some kind of assistance. They were either naive or just fell on hard times, and greed had absolutely nothing to do with their situation.


On Jun 03 12:07 PM 2houndz wrote:

> Why were they siging legal documents that they didn't understand?
> Sure, some people were frauds and deserve to go to jail, but a home
> is the average person's biggest investment, right? So why not pay
> an attorney 400 bucks to advise you in what you are doing?
>
> We live in a complicated world, and signing long term financial obligations
> with a 15th century comprehension of finance, and no clue what the
> documents state is plain stupid and inexcuseable.

Jun 03 09:39 PM