Monday, August 25, 2008

National July Sales/Ineventory news out

July Existing Home Sales: Record Inventory

The best graphs, as always, are at the above link.

What struck me is this: July sales 501k
Fraction of July sales Foreclosures or Short Sales: ~1/3rd.
In other words, normal resales are at less than half of the peak! (2005)

Also notice something from the curves, 2008 is constantly a lower fraction of 2007 than 2007 is of 2006. In plain Englinsh: The downside is accelerating.

August normally will vie with June to be the strongest sales month of the year Nationally, and for most places that will hold true. But not for Florida and a few other areas that have their best weather at other times of the year.

The WSJ has its take on the data:
The slight increase in the headline will provide some support to claims of a bottom in the market forming. However, the fact that 40% of sales activity came from banks selling foreclosed homes tends to suggest that absent a fire sale in housing sector, we have some ways to go before things truly stabilize. More troubling was the continued increase in inventories. … The data supports our call of the housing sector not seeing anything resembling stabilization until mid 2009 at the earliest. – Joseph Brusuelas, Merk Investments

Whoa... in California foreclosure sales are still happening slower than properties entering foreclosure. Yikes! I believe the ~33% value versus the 40% number. I'm bearish... to a limit. Real estate cycles are slow. Once the California foreclosures really pick up speed, good luck restarting the jumbo market. That is when we'll see the 25%+ down payment requirements. Not for months... But probably sometime in 2009.

Inventories are very high relative to sales rates, and would probably be even more so if all those wishing to sell their home actually had the house on the market instead of pulling it off in the face of weak demand and eroding prices. … [T]here is still a considerable distance to travel before prices sink to levels necessary to balance supply and demand in the housing market. By our estimation, the national home price measure as calculated by S&P/Case-Shiller, which shows a cumulative 18% drop through May from the July 2006 peak, is roughly two-thirds of the way through its ultimate total decline in this cycle. – Joshua Shapiro, MFR Inc.

I agree with everything in the above except the 'two-thirds of the way through' bit. I think we're about 40% of the way through to as much as 50%. No more.

We're also still in the seasonally best time of year to sell a home. As I noted above, August and June vie to be the peak selling months of the year normally (see CR's graphs). CR thinks we'll peak at 12 months of inventory, I think we'll pass that this Fall/Winter. Not by a lot though. (I hope... the alternative is rather scary.)

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