3 Positive Notes from Existing Home Sales

Tuesday was a relatively quiet day in terms of news. Wednesday will be the big event when the Fed announces its policy statement. The only news Tuesday was real estate related and it failed to be a market moving event.

Notes & Comments for June-23-2009

Real Estate: Existing home sales rose 2.4% to 4.77mm vs. consensus estimates @ 4.85mm. The report featured a few positive highlights. One was the drop in supply inventories down to 9.6months vs. 10.1 months in April 2009. The other were prices which actually rose 3.8% in the month to a median $173k. However, the fly in the ointment was the year-over-year decline @ -16.8%. A third positive note is the fact that the number of distressed sales declined to @ a third compared to half in previous months. Related securities: XHB; HD; LOW

Global Economy: Europe and the U.S. are once again accusing China of unfair trade restrictions. This accusation is not new news, but worth keeping on the radar.

Tuesday’s economic data took a back seat to Wednesday’s Fed Announcement. No further comments or notes for Tuesday…

Hillbent Economic Monitor

Economic & Market Indicators	Time Period	Reported #s
Economic Bellweathers
Leading Indicators	May 2009	+1.2%
S&P 500 Index	MTD % Chg	895.1 (-2.62%)
M2 Money Supply	June-06-2009	$8353.8bn
Fed Funds Target Rate	Daily	25 bps
Ted Spread	Daily	41 bps
2 -10 Yr Yld Curve Spread	Daily	248 bps
Avg Workweek	May 2009	33.1 Hours
Industrial Production	May 2009	-1.1%
Total Capacity Utilization	May 2009	68.3
Purchasing Mgrs Index	May 2009	42.8
Copper Futures Index	MTD % Chg	221.20 (+0.66%)
Baltic Dry Index	MTD % Chg	3874 (+10.88%)
Real GDP (Revised)	Q1 2009	-5.7%
Trade Deficit	April 2009	-$29.2bn
Consumer Bellweathers
Unemployment Rate	May 2009	@ 9.4%
Initial Jobless Claims	June-13-2009	608k
Continuing Jobless Claims	June-13-2009	6.687mm
Avg Time Unemployed	April 2009	21.4 weeks
Consumer Confidence	May 2009	54.9
Consumer Spending	14 Day Avg	$62 (+1)
Personal Savings Rate	April 2009	@ 5.7%
Consumer Credit	April 2009	-$15.7bn
U.S. Dollar Index	MTD % Chg	79.84 (+0.63%)
U.S. Gasoline Fund	MTD % Chg	32.53 (+1.12%)
Inflation Bellweathers
10 Yr - TIP Spread	Daily	243 bps
CRB Index	MTD % Chg	249.80 (-1.28%)
Producer Prices	May 2009	-5.0%
Consumer Prices	May 2009	-1.3%
Est. Population	May 2009	306.749mm
Real Estate Bellweathers
S&P/Case-Shiller 20 Index	May 2009	139.99 (-19.1%)
Housing Starts	May 2009	532k
Pending Home Sales	March 2009	84.6 (+3.2%)
Existing Home Sales	May 2009	4.77mm
New Home Sales	April 2009	352k
DJ Real Estate Index	MTD % Chg	120.88 (-7.61%)
DJ Home Construction Index	MTD % Chg	206.42 (-5.51%)

(Please click here to see graphs in original format and better visual interpretation of results.)

Disclosure: Hillbent.com, Inc. or its affiliates may own positions in the equities mentioned in our reports. We do not receive any compensation from any of the companies covered in our reports.

Comments

[ksmithdc:]

Interesting read, thanks.

Jun 24 10:05 AM

[TeresaE:]

May is always a good real estate month as people want to be moved before the start of the new school year.

While the numbers are up some, they are still dismal. Can't wait to see the read on 3rd quarter numbers.

Additional note, the number of available homes is going down for two reasons: disparaged sellers and the banks not claiming empty homes and businesses as "foreclosed"--thus not up for sale yet.

Jun 24 10:33 AM

[Cold Reality:]

1. Reality vs. "consensus estimates" (based on previous month's pollyanna hokum from the real estate agent's lobby) is amorphous and thus should not be touted a "rise" in existing home sales. This is a contrived figure that can only be considered positive by the most tortured concatenation.

2. The reported miniscule drop in housing inventory is misleading, as it does not take into account pent-up inventory that would be on the market if it weren't for the glut of depressed inventory already offered. Withheld real property offerings will begin to emerge in a few years at a sign of a genuine recovery in real estate, not mere wishful thinking. Again, positive only by a stretch.

3. The number of distressed sales declining during the period might be considered positive, if it weren't for our undeniable knowledge that the next phase of market stress, i.e., "Alt-A" and "Prime" mortgage defaults is pending, due to the overall depressed state of the economy. That orchestra is tuning up in the wings now and will take the stage in the Fall and beyond for another two years or more--likely more, as it is reasonable to forecast that it will take this segment of the market longer to shake out due to these household's purportedly longer-sustaining financial condition.

The impulse to try to spin elusive positive news ("green shoots") out of inconclusive or negative news by manipulating or selectively interpreting data is both understandable and ubiquitous at this juncture. However, it is not particularly helpful in the overall analysis of the depth and breadth of the economic conditions that currently prevail.

Jun 24 01:45 PM

[Ali Mogharabi:]

Simply put:

May existing home sales of 4.77MM was 2.4% higher than April, but it was lower than the 4.82MM expectation. The numbers were disappointing because May is the seasonally strongest month.

A big chunk of the sales figure was from foreclosures, which explains the lower prices. They dropped another 14.7% Y/Y.

Inventory slightly declined, but the months supply figure remained above 9.5, which remains above where it was during other recession periods. Months supply, although lower than April, is not showing any declining trend. The latest figure is equivalent to what we saw in March. Months supply was at 9.7 in Jan. and Feb. Again, there is no so-called trend of declining inventories.

As a reminder, this was data for not only a seasonally strong month but also a month that saw nearly record low rates. Expect a sequential decline (and of course a Y/Y decline) for June. In addition, the continuing increase in unemployment will continue to drive home sales lower.

Lastly, even with huge downward revisions in April's new home sales numbers, May's numbers were still disappointing. I'd say the glass is a quarter full.

Jun 25 03:34 AM

[Steve Soden:]

Everthing I see here in California says "look out for the next wave of Foreclosers".
Discounters are coming in now and buying foreclosures at about 20 to 30% below allready low Foreclosure prices.
This activity is sending non-foreclosures lower in price. Homes are beginning to not appraise. My realtor has not seen this happen consistantly in 26 years.
Banks are also not letting homes go in Foreclosure. They are leaving people in their homes for up to 9 months paying no rent before taking action.
It seems Wells Fargo and other banks won't take these loses and are waiting for the Feds to buy them.
The California market is Frozen except for New Home Sales.

Jun 25 04:18 AM

[Ray Winter:]

Although we all think that today's foreclosure numbers impose serious problems for the families affected, we all need to be extremely worried for the time when the Government decides to claw back all those TARP loans and interest rates climb to 5%+.

Foreclosures will probably go stratospheric and we could have 15% unemployment with the vast majority of the unemployed also being homeless. Something needs to be done now to avoid such a major catastrophe.

Jun 25 06:36 AM