More Signs of a Housing Bottom

Both of these charts suggest we've seen the worst of the housing crisis. Existing home sales are picking up after being very depressed, most likely because prices are down, and financing is relatively cheap. The inventory of unsold homes is falling, even as foreclosures rise, a sign that again, homes are more affordable. And the second chart reminds us that the housing slump, by this measure, was worse in the early 1980s.

Comments

[Wesley Mouch:]

This is almost becoming cliche'. Using NAR data to declare a housing bottom ignores absolutely every other fundamental piece of information. Considering rising foreclosures, foreclosure moratoriums, delays in bankers taking ownership, resetting finance structures (ARMS), increased unemployment, unemployment benefits beginning to expire for the recession class of 2008, artificially low rates that are sure to rise (next week's treasury auctions of 1/4 trillion dollars!), inevitable tax increases from cash strapped governments, reality beginning to show itself in local property appraisals, commercial real estate's cross effects on residential housing, and a litany of other realities makes the NAR data little consolation.

We (by that I mean the very independant, strong Federal Reserve who values the middle class over all banking and finance organizations, coupled with an honest, strong dollar policy touting treasury) are doing everything in our power to increase home sales. I wish us well, because it has to work out for all of our sakes.

Jul 24 08:03 AM

[Kacey:]

Here Here

Jul 24 08:47 AM

[Gremalin:]

Historically residential real estate has always LED the way in economic recoveries. This implies that all of the other indicators you mentioned aren't being ignored but hopefully, simply following the same profile in this recovery.

Jul 24 08:52 AM

[Cold Reality:]

Using NAR data for anything is like asking the National Association of Burglers how to make locks.


On Jul 24 08:03 AM Wesley Mouch wrote:

> This is almost becoming cliche'. Using NAR data to declare a housing
> bottom ignores absolutely every other fundamental piece of information.
> Considering rising foreclosures, foreclosure moratoriums, delays
> in bankers taking ownership, resetting finance structures (seekingalpha.com/symbo...),
> increased unemployment, unemployment benefits beginning to expire
> for the recession class of 2008, artificially low rates that are
> sure to rise (next week's treasury auctions of 1/4 trillion dollars!),
> inevitable tax increases from cash strapped governments, reality
> beginning to show itself in local property appraisals, commercial
> real estate's cross effects on residential housing, and a litany
> of other realities makes the NAR data little consolation.
>
> We (by that I mean the very independant, strong Federal Reserve who
> values the middle class over all banking and finance organizations,
> coupled with an honest, strong dollar policy touting treasury) are
> doing everything in our power to increase home sales. I wish us well,
> because it has to work out for all of our sakes.

Jul 24 09:43 AM

[CautiousInv...:]

In the context of today's language I'm unclear as to what a bottom means.

If it means we are selling slightly more homes under the most distressed conditions we have ever witnessed then, maybe, we are putting in a bottom. But I don't think we should confuse sales of foreclosed homes at bargain basement prices with the orderly functioning of a market.

Yesterday's release reported that sales were up 3.6% at SAAR but prices were down 15.4% from a year ago and short sales and foreclosures accounted for 31% of unit transactions. Given that there may be as many as 7.8 million (US Census) that are unoccupied for any number of reasons, we should expect this boom to continue for some time.

Some more good news from Bloomberg certain to keep the foreclosure existing home loop intact:

One in every eight U.S. households with a mortgage is now late on their payments or already in foreclosure, according to Jay Brinkmann, chief economist for the Washington-based Mortgage Bankers Association.

The U.S. delinquency rate rose to a seasonally adjusted 9.12 percent in the first quarter and the share of loans entering the foreclosure process rose to 1.37 percent, the bankers’ group said in a May 28 report. The total inventory of homes in foreclosure, old and new, was 3.85 percent. All three figures were the highest in records going back to 1972.

U.S. foreclosure filings -- notices of default, auction or bank seizure -- rose to a record in 2009’s first half, according to RealtyTrac Inc., an Irvine, California-based seller of real estate data. More than 1.5 million properties, one in every 84 U.S. households, received a foreclosure filing, RealtyTrac said in a July 16 report. That was a 15 percent increase from a year earlier.

U.S. banks in the first quarter held $29.7 billion of property acquired through foreclosure, including repossessed homes and condominium projects gone bust, according to the Federal Deposit Insurance Corp. in Washington. That’s almost double the $15.7 billion of property a year earlier.

Jul 24 11:20 AM

[Tony Petroski:]

I think you are probably right that housing has bottomed, but you wouldn't interpret that from the existing-home-sales chart above. There is a slight uptick (like last year) in what otherwise looks like a long-term rout.

I bought and sold real estate in the early 1980's. The monthly inventory may have matched the chart above (it doesn't match my recollection), but prices did not collapse like our present circumstances (in part because that was the tail end of the inflationary Carter Malaise Years). The present real estate market is the worst I've ever been through.

Jul 24 11:20 AM

[Bigman16:]

I wonder whats going to happen to supply when Banks catch up with their "back logs" of NODs...

You mention "The inventory of unsold homes is falling, even as foreclosures rise, a sign that again, homes are more affordable." Could this be a result of the moratoriums placed on banks that do not have a loan mod program in place? You can file and start the foreclosure process as many times as you want and it wont affect existing home supply, unless you follow through and process it and place it on the market for-sale. I do not see it as a sign that "homes are more affordable", i see it as an insight into the coming problems banks will face with their REO inventories - the calm before the storm. Lastly, where are all these buyers coming from that can "afford" homes? Are they moving up and sellign homes? Speculators forming the next bubble? Previous renters with stellar credit and huge downpayments?

Jul 24 12:33 PM

[HardwoodFlo...:]

In terms of inventory there is a chart that shows housing inventory per million people and I think we are about 2,000-2,500 homes per million. At the peak of the 80s housing recession it was something like 6,500. There is a difference by I agree with my polish/russian friend Petrosky the house price denigration is unbelievable. Also in the early 80s you had interest rates that were much higher- so I'm told.

But housing starts have been at or below 500K now for over 7 months. In the height of the 80s mess they were in the 700-800K range fro only four months. Big difference. We have been sub 800K for 16 mo. Longest deepest housing build crash in 40 years. We also have 40+% more population than we did in '80.

Petrosky is right his is much worse and the price denigration is brutal. Really putting the hurt on housing. As long as people can't get JUMBOs that won't get fixed. Oh yeah and the resets on the horizon. People can't get a JUMBO so they are forced to stay in their Alt-As and/or they can't qualify for an FHA (whch is even a worse sign). This will be a headwind for a recovery.

Jul 24 02:12 PM

[j-dub:]

Hmmmm...........my guess is this author has called 10 of the last 8 bottoms in housing.
I'm not sure what his agenda is...has he tried to catch a falling knife with a couple of "investment" properties? Did he buy over his head in 2002 and is praying he stays above water? Is a dear relative of his in financial distress?

Not sure, but every month is a bottom and every sputter is a roar.

Does he know that unemployment (U3) will fall between 10%-13% and that there is another wave of....
Never mind.
It sure must be nice.....................

Jul 24 09:38 PM

[tobi:]

Even if the economy catches up, unemployment will stay elevated but rates will skyrocket making financing a lot more expensive. The challenge is how to keep the yield on treasuries low while the economy is really gaining traction again, which would cause a huge outflow, maybe even a stampede at the door. A large part of that will flow into commodities, particulary oil, raising the gas bill and again the outflow of dollars. However, the budged deficit will stay elevated for a longer period of time, making most fixed income investments the last thing you want to hold. In order for the world economy to work again, currency markets have to be allowed to work again, letting currencies with weak fundamentals (dollar) fall in value compared to those with strong foreign currency holding (renimbi), which automatically would lead to levelling out the fundamental inbalances that have existed over a long period of time. The US consumer would save more and spend less, the chinese spend more and save less. There is no other solution.

Jul 25 09:15 AM

[Fighting Yoda:]

1. Uptick in home sales has come only with falling prices- bottom fishing - so not good overall for market.

2. Unsold homes have decreased because - sellers have withdrawn from the market - unwilling to sell at these levels. Deciding instead to rent the place - there is higher demand for rentals. These sellers will wait for sometime - depending on holding capacity.

3. Foreclosures- they continue to rise- foreclosures exceed sales - so inventory will continue to build. This is despite foreclosure moratorium and delays.

So no bottom and stability till job losses abate - unlikely till next year.

Jul 25 12:00 PM

[j-dub:]

4 more irrefutable data points showing that we have bottomed!!!!

May I have the honors?
"All clear!!!!"

It's truly amazing what conclusions one can come to when the majority of facts are ignored.


On Jul 24 11:20 AM CautiousInvestor wrote:

> In the context of today's language I'm unclear as to what a bottom
> means.
>
> If it means we are selling slightly more homes under the most distressed
> conditions we have ever witnessed then, maybe, we are putting in
> a bottom. But I don't think we should confuse sales of foreclosed
> homes at bargain basement prices with the orderly functioning of
> a market.
>
> Yesterday's release reported that sales were up 3.6% at SAAR but
> prices were down 15.4% from a year ago and short sales and foreclosures
> accounted for 31% of unit transactions. Given that there may be as
> many as 7.8 million (US Census) that are unoccupied for any number
> of reasons, we should expect this boom to continue for some time.
>
>
> Some more good news from Bloomberg certain to keep the foreclosure
> existing home loop intact:
>
> One in every eight U.S. households with a mortgage is now late on
> their payments or already in foreclosure, according to Jay Brinkmann,
> chief economist for the Washington-based Mortgage Bankers Association.
>
>
> The U.S. delinquency rate rose to a seasonally adjusted 9.12 percent
> in the first quarter and the share of loans entering the foreclosure
> process rose to 1.37 percent, the bankers’ group said in a May 28
> report. The total inventory of homes in foreclosure, old and new,
> was 3.85 percent. All three figures were the highest in records going
> back to 1972.
>
> U.S. foreclosure filings -- notices of default, auction or bank seizure
> -- rose to a record in 2009’s first half, according to RealtyTrac
> Inc., an Irvine, California-based seller of real estate data. More
> than 1.5 million properties, one in every 84 U.S. households, received
> a foreclosure filing, RealtyTrac said in a July 16 report. That was
> a 15 percent increase from a year earlier.
>
> U.S. banks in the first quarter held $29.7 billion of property acquired
> through foreclosure, including repossessed homes and condominium
> projects gone bust, according to the Federal Deposit Insurance Corp.
> in Washington. That’s almost double the $15.7 billion of property
> a year earlier.
>
>
>
>
>

Jul 25 06:26 PM

[Mr. Ed, Jr.:]

Always the same column....just worded a little differently each time

Yawn

Jul 26 12:55 AM