Housing Is Tumbling Even Faster Than Reported

Real Estate Consultant John Burns has looked at the housing data and reached a rather interesting conclusion: "The housing market has softened much more than is being reported."

Given all the negative news coverage, that's almost hard to believe. But John does a good job dissecting the data, and he is now concerned that both the publicly disseminated New and Existing Home Sales information is misleading. Even worse, he fears, is that policy makers are relying on this bad data to conclude that the housing market correction has not been too severe.

My regular readers should recognize some of John's conclusions. Here are his top concerns:

• Closing Data: Sales have actually fallen 22% year-over-year, based on comparing trailing 12 month periods. If you compare year over year sales, the decline is even more severe.

• Mortgage Bankers Association [MBA] Data: MBA Seasonally Adjusted Purchase Application Index is down 18% from its peak in September 2005.

• Builder Data: D.R. Horton (DHI) and Lennar (LEN) have reported that orders have declined 27% to 37%, year-over-year -- even as they have dropped prices significantly. These are the nation's two largest homebuilders.

• Realogy Corporation Data: In 2006, there was a year-over-year decline of 18% in brokerage related transactions at Realogy owned firms (Century 21, Coldwell Banker, and ERA)

• 2005-2006 National Association of Realtors State Data: The NAR is showing some very sharp year-over-year corrections: Florida down 28%; California down 24%; Arizona off 28%. However, the NAR data may actually be understating the falloff. John's data shows the more likely actual sales decrease to be closer to 34%, 27% and 38%, respectively. Prior to 2005, John's data tracked very closely with the NAR, so this deviation is worth further investigation.

The entire piece, and all of its sourcing, is well worth a read.

Source:
Housing is Falling Much Faster than Reported
John Burns Real Estate Consulting [JBREC]
http://www.realestateconsulting.com/usanalysis/usanalysis200705.html

Comments

[wixeywaxy:]

At least in my immediate area the number of houses for sale are much greater than they were at the top of the boom. The inventory is pilling up because the houses put up for sale aren't moving. Those who buy a place prior to selling their previous home are in a serious bind. Lenders won't throw out people who default because the law unfairly protects homeowners. There are reasons why the market is falling however. Older people who die or move to assisted living are adding inventory. Older singles who marry and eliminate the need for two residences also add to the glut. After paying monthly carry for a while these houses are dumped at reduced prices. All this is going to level out but it's going to take another 18 months probably. Vic

2007 May 21 10:52 AM

[jimmy Turano:]

Queens, New York
The areas of Ridgewood, Glendale, Middle Village, Maspeth, Elmhurst,Rego Park and Forest Hills,
have been selling as of late, however they are selling close to assessed value or about $25k-$35k below assessed value. These homeowners are able to find buyers now and the rest of the homeowners will sit in denial probably to the end of 2007. So if the trend continues, and the homeowners who understand that an adjustment needs to be made in order to sell, then houses will level faster within 12 months in these specific areas of Queens. Pricing the Home right is Key especially before summer and the fall with all that's going on in today's market crunch.
Jim T. (Broker 28 years) Queens, New York

2007 May 21 11:57 AM

[Dabbio:]

It's been well known forever that housing prices are "sticky downwards," that is, low negative demand elasticity. People will sit on (or in) their houses for longer than rational, for longer than say they were a stack of corn or other commodity of the same value. What sticky downwards implies for the end of the trend, however, is not a levelling. It is postponing the pain, which usually only makes the pain worse, not better, when it comes. The more that people hold back, in the vain hope that prices will level or return upwards, the more likely it is that there will be a bigger flood of housing coming into the market all at once-- later. Think of piling sandbags on a levee in hopes that the rain is about to end. It's why a bust is called a bust in both instances, and why it is the exact mirror of a boom.

2007 May 21 01:41 PM

[Dabbio:]

Elasticity of supply, not demand.

2007 May 21 01:44 PM

[Johnny Bitc...:]

Bla, bla, bla.........chit-chat about the real estate market.

This is even worse than hearing about it at a cocktail party because there is an implied professionalism behind the chit chat.

The only iota of interesting information here is identified as "worth investigating".

Get off your lazy economic theorist butt and investigate it.

Or heck, can you at least theorize why this might be occurring.

Or maybe explain the sources and methods of the individual statistics.

No, just "worth investigating".

And will you investigate it and report back ?

Or just worthless economic chit-chat intended to pollute the internet ?

Sincerely,

John.

P.S. People know the housing sales and prices are in a downtrend.

People know the NAR statistics are potentially misleading.

If you don't have something new to add......other than the specter of statistics that are worth investigating, would you mind just keeping it to yourself ?

2007 May 21 12:44 PM

[myemail9991:]

johnlewing, read the whole thing before you start your blabber.

2007 May 22 12:11 PM