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 (NYSE:DHI) and Lennar (NYSE: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.
Housing is Falling Much Faster than Reported
John Burns Real Estate Consulting [JBREC]