First, the Case-Shiller Home Price Indices shows negative annual returns in the U.S. National Home Price Index, the 10-City Composite and the 20-City Composite, as well as 13 of the 20 metro area indices.
As the chart above shows, the annual returns of the U.S. National Home Price Index were down 0.7% from Q4 2006 and down 1.4% from Q1 2006. This is only the second time in the quarterly national index’s history that the annual growth rate has fallen into negative territory. The first time was in the period between 1990 and 1991, as depicted in the graph above.
Shiller made the following comments:
“The fall of the National Index into negative territory, after more than 15 years of positive annual growth, is a reaffirmation of the pullback in the U.S. residential real estate market. The National Index was yielding solid returns as recently as a year ago. Q1 2006 growth rates were up 11.5% vs. Q1 2005, a sharp contrast to the returns we are seeing today.”
The second data point worth reviewing is the Existing Home Sales (released on Friday). The WSJ reported that "Sales of existing homes slipped in April to their slowest pace since June 2003, and a rising inventory of unsold properties appeared to set the stage for weaker prices."
The sales rate in April was down 10.7% year over year.
Existing inventory jumped yet again -- rising 10.4% to 4.2 million homes. At current selling rates, this is an 8.4 months supply (up from 7.4 months in March).
The number of unsold properties relative to sales hit a 15-year high.
So I think we can say that the bottom-calling/stabilization nonsense we heard from such housing experts as Treasury Secretary Hank Paulson was premature.
Third, we had heard repeatedly since from other "experts" from the NAR, and elsewhere that the Spring selling season was where we would see price firming and sales increases.
That turned out to be an over optimistic -- i.e., wrong -- expectation. An article in this past Sunday New York Times noted how simply horrific the Spring selling season has been:
"It's spring, the traditional time for hope and growth in residential real estate sales. But beyond the borders of New York City, there are indications that a wintry chill besets the market in much of the region.
On Long Island and in Connecticut, brokers report the inventory of unsold homes continues to build, while the number of buyers is reduced by new lending restrictions.
In New Jersey, the market seems to have slowed from March to April — just when things would ordinarily be revving up. The number of sales contracts signed in April declined in 20 of 22 counties monitored by the Otteau Valuation Group, which does market analysis for brokers. Even in Hudson County, which encompasses such sought-after riverfront towns as Hoboken and Jersey City, sales volume declined 21 percent."
Pretty amazing. Despite all fo the obvious data, the bottom calling conmtinues unabated. I wonder if Tres. Secy Paulson got an early look at the New Home Sales data, was unaware of how volatile and flawed it actually is, and made his "call" expecting to look smart. (See this, this and this).
If you want to know what the builders themselves have to say, go to this article from Bloomberg today:
"New home construction in the U.S. may
take until 2011 to return to last year's level, said David
Seiders, chief economist for the National Association of Home
Builders in Washington.
Monthly construction starts would need to jump by 21 percent
to reach Seiders's benchmark for full recovery, which is 1.85
million. There were 1.53 million in April, the Commerce Department
said. At the height of the five-year housing boom in January 2006,
construction began on 2.29 million homes.
"We've fallen way below trend because we soared way above
trend during boom times,'' Seiders said in an interview. "The
upswing will be relatively slow, unlike earlier cycles.''
The inventory of unsold homes is the largest since the
Washington-based National Association of Realtors started counting
them in 1999 and house prices have suffered the steepest drop
since the Great Depression, according to the realtors' group.
Defaults and foreclosures also may rise as about $650 billion of
loans to subprime borrowers, those with poor or limited credit
histories, reset at higher interest rates by 2009."
The housing story is only halfway done, going to get worse as time progresses. We are not anyway near a bottom in Residential Real Estate.
Spring Brings No Signs of Warming in Home Prices
May 29, 2007 09:00 AM EST PDF
Home Prices Could Soften as Sales Decline
WSJ, May 26, 2007; Page A3
It’s Spring. Somebody Tell the Buyers.
NYT, May 27, 2007
Home Construction Bust May Last Until 2011, U.S. Builders Say
Bob Ivry and Brian Louis
Bloomberg, May 29, 2007