Local Sales (DQ)

The latest stats on home sales were released by DQ news (ok, I'm tardy blogging them). Basically the trend is a weak 2Q2009 home sales. Oh, the local REIC is trying to make it sound like its almost a seller's market.

It will be interesting to see how we do this winter. We're unlikely to see 2003 before late next year or early 2011 in 90505, 90274/90275, and 90277. But 90278 is almost there. A little winter weakness and it could be there...




With the huge fraction of California mortgages not being paid... its going to be interesting times ahead.

Got Popcorn?
Neil

DQ news, July

I mentioned before that July and November are two months where the data should be just lumped into the quarterly numbers. Unless something had really broken out, the data for those months can be very noisey.

So I charted data from dqnews.com. Sales aren't great for a July. But nor were they bad.

Price per square foot is back to 2004/early 2005 levels. I notice 90278 is slipping back to 2003 values. This could be interesting.

From my perspective, I find the linear drop in price per square foot in 90275 very interesting. Its a linear trend down. $17/ft^2/MONTH! The trend was for zip codes of interest to be dropping $30/ft^2/YEAR! I will be very curious if this trend continues. Since 90278 and 90274 did not drop as 90275 did... I suspect its a trend that is about to be broken. As a potential buyer. :( But then again, one more month of this trend erases a bubble year, in four months!

Basically, nothing broke the downward trend. We have only August left of the 'sales months' of the year. Overall, the dq data (LA times) showed a lot of areas struggling to sell.

Got Popcorn? (Thanks for the icon on CR Ken!)
Neil

Local Sales Data

Home prices continue to drop. All of the zip codes I plot dropped in $/ft^2 terms. Only 90275 had decent sales volume (of course, where I wish to buy). I set up trend lines months ago on $/ft^2 and have not had any reason to adjust them. The market appreciated about $70 per square foot anually on the way up. Now its dropping at the rate of $30 per square food anually on the way down. Or is it...

May, June, or August are the three critical months of the local sales year. In terms of $/ft^2, May and June have been weak. This implies either buyer resistance/fear or that the market is about to capitualate. I think its the later, but the data does not *yet* prove it. It does look like 90275 has broken below $450/ft^2, but let us wait for August data to confirm that.

I should mention a little about the local selling seasons. I'll post July's data, but I'll warn you there are two months locally that do not deserve to have any conclusions made on their data: July and November. November is due to the holidays. The data could fluctuate any which way that month and it wouldn't tell us a thing. July is a weird month. Sales can spike or plummet in July and it would probably correlate best with vacation packages or the price of steaks at Costco; its certainly not a month that produces numbers of interest (locally). Yes, this July is also impacted by 'Bear Chits' (California IOU's) too. Hence, we'll make conclusions after August's data is available. February is the darkest month of the bad selling season (October-February). However, December does have a spike in closing, but I speculate that is just for tax advantage and does not compare to June-August closings. The exception being December 2007 (with the market turning south).

Another caution: While prices seem to be turning down since April at a faster pace, I would hesitate to make a conclusion before seeing the August data. If you cannot tell, I'm expecting no surprises that waiting buyers wouldn't like to see. But I'm not yet ready to declare a major change.

Note: Some friends & coworkers are noting its tougher to procure a mortgage above $417k locally too. Rumors are that mortgage insurance above $417k loans is tough to find. If that is the case, prices in this region of 10% down payments is going to make a huge belly flop. I suspect everything possible will be done to bring back the 'conforming jumbo' ASAP with 10% down. I do not think that any effort will work out, but the REIC will try. (I'm a fan of *real* down payments to stabilize a society.)

We could see the dollars per square foot drop pretty quickly soon... or it could be a blip. Stay tuned.

Got Popcorn?
Neil

The graphs:
Note that the slopes on the sales trendlines are calculated by excel:

Trends updated

This is an update with the recently released April data for California.

My conclusions are not changing. While the last few data points are above trend, there is no break in the overall downward slope. We should expect a season spike this time of year, but what the CAR is raving about is a really weak seller's season. In none of the zip codes is there anything but noise around the long term trend.

I'm assuming that any potential 90275 buyer looks at that coastal developments that are failing:


http://www.terranea.com/,
Wait... they next a tax break!
http://www.dailybreeze.com/news/ci_12302705

Terranea is locally famous as the reason it was given the go ahead based on the expected tax revenue for the city... hmmm...

or
http://www.trumpgolfcoursehomes.com/

ROTFL. Their own web side points out that out of the first 5 homes constructed, only one is is escrow!?! So Trump sues the city as some of the lots are unstable (the local 'slide zone' that swept the signature golf course hole into the ocean)... sigh. 1 out of a planned 50 sold. Trump, leave the city alone. This is like your Baja, Tampa, and other projects, a failure.

One out of 50 sold... talk about a missing the boat. Its called 'hamburger hill' for a reason. People stretch to get into the good school districts in RPV. The 'flashy money' is in Manhattan beach, various Westside areas, or elsewhere.

The data really says it all:
1. The price per square foot is declining.
2. Sales are slow. Again, only Rancho Palos Verdes, 90275, broke 20 sales in an area where, for this time of the year, pre-bubble sales would break 30 per month for every zip code!























Why am I being harsh on the coastal developments? They are far overpriced for the local market. When that one home closes in Trump National, it will skew the data. How could the only sale above $2 Million out of 20 sales not skew the data? I have no idea where in the $8M to $10M price range that sucker is going to pay. But ouch... RPV is not where people buy estates. Oh, there are a few true ones in 90274. That is not 90275. There simply is not a market for the combined 82 McMansion 'estates' these two developments are trying to sell.

I have not done my real estate emotions lately. Basically, we're still in Panic. Capitualation isn't here yet. But that is next... When these charts turn down, we'll know we hit the next investment emotional state.

Got Popcorn?
Neil

Data and regrets

I'm really regretting not recording the LA Times data from DQ news more often.

My only other snapshot is from July 2008.

http://www.dqnews.com/

Why? I'm comparing $/ft^2 both where I want to live and some 'interesting areas.'
I just captured the Febuary data.

Just a few zip codes of interest on home much the SFR $/ft^2 has dropped:

Lancaster 93534, 93535, 93536 are down 26%, 33%, and 22% respectively
Manhattan Beach 90266, is only down to $702/ft^2. (1% drop)
Malibu 90265 is down $501/ft^2 or a 22% drop
Palmdale 93550, 93551, 93552, 93591 are down 33%, 22%, 28%, and 49% respectively
Palos Verdes Pen (90275), down 3% (but very few sales, 7 SFR homes)
Pasadena 91101, 91103, 91104, 91105, 91106, 91107 is down 20%, 14%, UP 37% to $470/ft^2, and down 4%.
RPV 90275 is down to $410/ft^2! or down 18% from July! (My first choice zip to buy.)
Redondo Beach 90277, 90278 is down 5% and 19% (nicer area down more?!? Wait... only three 90277 sales in February...)
Torrance 90501, 90503, 90504, 90505 area mixed, down 6%, NO SALES, down 8%, and the last two are up 5%

There is much more. I really wish I had taken more data for I do not know the month to month variety (extreme due to low Febuary sales). I would also like to compare with February 2007, 2006, 2005 (ok, before I was blogging here).

What does this tell us? Not much. Without knowing normal month to month variation... I could be makign conclusions off 'noise.' But what about the price increases (numbers in bold above)? That is price increase per ft^2. I'm not sure what to make of it yet.

But RPV (90275, had only 12 Single family (SFR) sales and 4 condos in February with inventory of 148 to 153 during the month... (per snapshots by me of ziprealty inventory on 2/1/2009, 2/23, and 2/26). Hmmmm... 164 on the market today.

but 90274 is more interesting. 8 total sales (1 condo) and inventory of:
PVE: 98
Rolling hills 21
Roling Hills estates: 44

Hmmm... 163/8=20 months of inventory. Me thinks the great squish down continues...

Off topic:
I've secured my job, but I will be expected to travel 1/2 time. Certainly not the end of the world, just not my ideal. For example, my lunch today was spent holding my infant daughter on a pony saddle! She loved it. If I'm traveling, such events with 'Daddy' will happen less. One makes choices. Note: New efforts are being done to 'accomodate my preference' to spend more time at our main location. But spring and Summer (at a minimum) will be spent with a lot of road time.

Also, the wife likes the idea of a Macbook. I almost forgot I promised her that our next computer could be a Mac... 'Could be' is becoming 'will be.'

I'll take snapshots more often and I've added Ventura, Orange, Riverside and San Bernadeno counties (its all on the same web page, so why not).

I speculate we are in the last major year of decline. But are we? This doesn't mean rush to buy... (Its best to buy after the bottom.) Late edit: I have posted in the past that, for myself, its best to buy before the bottom for best inventory selection. I still believe this. But its tough to blog with advice for those *really* following and those just reading for the first time. But the trend will be interesting.

I'll restart my 'emotions' series after I travel for a bit more. So do not expect a February update. Overall, people are excited to buy. But I look at those Palmdale $/ft^2 that were once much higher and now are $43 to $94/ft^2. I'd swear I saw it break $300/ft^2, but I didn't save that snapshot of the data.

Oh... notice I never talked median price? Worthless statistic in my opinion.

Got Popcorn?
Neil

Daily Breeze on South Bay LA home sales

Hat tip to Ben Jones' excellent HBB blog.

http://www.dailybreeze.com/ci_11797406

I find it very interesting that less than 30 homes sold on the PV Peninsula last month. There are 313 on the market as of last night. I haven't been tracking the inventory much this year (I'll get better), but have 277 homes for sale in the four cities that make up the PV on 1/5/2009, 297 on 2/1/2009, and 309 on 2/23/2009.

The LA times lists the January sales as 9 single family and 3 condos (from DQnews).

277/12=23.08 months of inventory. Now, I expect some spring improvement, but its very unlikely we'll drop below a year of inventory in 2009.

I think we're approaching a local capitualation as Realtors (like the one in the daily breeze article) are now conceeding 2009 is a lost cause. They're swamped with desperate sellers and very few buyers.

I think its the perfect time for the Screen Actors to rattle their saber. Will they strike? I double dog dare them. ;) (The blowhards are powerless.) edit: I have friends who work the film industry. I do not take joy in what's happening, but the SAG had over a year to be sensible and instead they were stupid. This once powerful union went from feared to sidelined in less than four years. If they strike, many middle class individuals will be hit hard. The 'big name' actors are effectively corporations that will be fine. Just the threat of a strike forced industry wide cutbacks for the entire 1Q 2009. Let's see how SAG handles commercials. This will make or break the union. There was a lot more money flowing around when negotiations first started. Now they're going to be fighting over the scraps instead of the ribeye steak.

Got Popcorn?
Neil

edit: One of my coworkers bought on the PV peninsula in February. He knows of other February 'sales' that went pending amoung his friends. So I expect sales in February to be much better than January. But not enough to drop the inventory enough to matter. There are too many homes overpriced by $1M+ over what the market will bear today. But I bet the Realtors will spin this. March sales will show us how truly broken the market is.

DQ reports California Sales

DQ news link

Let's see...

SoCal Home sales are now ~50% foreclosures.
At the county level, such foreclosure resales ranged from 36.8 percent of September resales in Orange County to 68.9 percent in Riverside County. In Los Angeles County foreclosure resales were 39.1 percent of all resales; in San Diego 47.3 percent; San Bernardino 63.1 percent and in Ventura County 44.0 percent.


SoCal mortgages:
Before the credit crunch hit last August, 40 percent of sales were financed with jumbos, then defined as over $417,000. Last month just 13.2 percent of purchase loans were over $417,000.

Wow... 13% over $417k. Folks, that is a lot of homes for sale with no qualified buyers. This report is the most qualified ever.

Oh, sales were up. Higher than August. But its also evidence that the only buying is extreme bargain hunting. Several internet companies announced layoffs recently (redfin, Zillow, and a few minor ones). Anyone know the concentration of jobs in the Westside? I've seen some very poorly written articles on job losses from Santa Monica, but they are not of the quality worth linking to. Is there a real trend? Or is it just fear?


To think, all of the layoffs I have foresight into do not start until 2Q2009 and really do not get going until 3Q2009 (per current plan). I'm not thinking this will be a big Christmas season. Oh... quite the opposite.

Got Popcorn?
Neil

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.)

Got Popcorn?
Neil

California Sales

DQnews recently posted California sales. What struck me is that 41% of Southern California Sales were foreclosures! That means only 1/3rd as many owner-owned homes traded hands in June of 2008 versus 2006!















Think about that for a minute. Considering how much tighter credit is going to become and how there are more foreclosures waiting to happen in the backed up system than their are buyers for the next 12 months... Consider the implications. Southern California, combined with Florida, Ohio, Michigan, Nevada, and Arizona are really hurting economically. All real estate is local, but all credit is national. Heck, their have been a few articles on how banks will no longer loan against bonus income as that is too variable. One must now save the bonus checks and use them as part of the down payment. How un-American. ;)

California sales in general were so-so. Notice the trend line going forward? Every year has a drop in sales from June on. There is no month later in the year that would be expected to be better than the month we just went through.













LA sales started the year anemic and have grown to weak. LA inventory is at 120,000+ units per zip realty! With over 21 months of inventory, do not expect this city to turn around in 2008 or 2009. There has never been a case post WWII where New York City or LA has had a recession and the rest of the nation didn't follow.














San Diego is the lead lemming. With the shear amount of construction, employment flight, and misguided policies, this city will be hit hard. Only Miami rivals in the number of condos being constructed. Both with have to become far more affordable to end the current glut.











The recent trend in the SF Bay Area sales should give an indication of where that over-hyped market is going. Yes, this is one of the strongest economic areas of the US economy. However, as the rest of the nation weakens, it cuts IT spending which hurts the Bay Area. This area will be worth watching. I can see prices dropping 40% from the peak (per Case-Shiller).













There are only about six weeks left in the California home sales season. Every single graph I've plotted shows that September has very weak sales in a normal year and that the next strong sales month is March. This time, there is too much in the foreclosure pipeline to create a strong spring selling season for 2009.

My last article was my real estate emotions article. Due to the economic pain in California, we are one major event away from Panic. I think we'll hold on until the Fall, but if a big enough even rolls through... it will happen earlier. Since California does more to fund the Federal government than any other state... there is no "its different here." Quite bluntly, the economy is not in a position where it could handle California contributing 10% less to the Federal coffers.

Got Popcorn?
Neil

The American love affair with the shopping mall is undergoing a trial separation

Sometimes it take a foreign perspective to really capture the moment. Basically, with news of investment properties losing 2/3rds of their dollar value, I'm not expecting foreign investors to come in and save any market.

One blogger asked how to make graphs of Austin.

I've been playing with www.Trulia.com and the graphs seem ok. Not 100% accurate (e.g., others are posting far more researched price/ft^2 data, but its a great start). It shows that most areas still haven't found their market clearing price. However... some areas are into the next stage of the trend. As prices drop sales accelerate. Its a self feeding trend that brings those areas to a bottom fairly quickly. However, due to the substitution principle in housing, this will only create a price drop wave that will go through those communities still holding onto wishing prices.

Here is an Austin Example. Note how harshly the credit crisis hit the city during the winter. Can they maintain the newly re-found momentum into the summer? I doubt it with the credit crisis:




















How What about prestige communities? We've been reading for a year how only the cleanest and nicest homes are selling. I've seen a 15% BETTER trend than these graphs suggest. Basically, the owners of the less nice homes are trying to price up against the nicest homes. Only a few sell... With four or more months of inventory on the market, those willing to discount for a sale can always undercut the stubborn.

Palos Verdes, CA:




















Alexandria, VA:























But but but... "Its different here." Yes, there are worse selling locations. e.g., Ashburn VA is now selling for a more than a quarter off discount and the trend is the buyer's friend:




















Its worth looking at Corona, CA. Why? Now that large homes are available at conforming mortgage prices, sales have spiked up again! Now, these are only knife catchers, but this is a clear demonstration that at the right clearing price, there is a market. With most buyers locked out of jumbo mortgages, expect to see this trend continue everywhere. Every market has a floor under which sales will be stimulated again. Once that floor is found... it only accelerates the price drop! In this case, getting down to circa 2007 era conforming loans appears to dramatically open up the qualified buyer pool. Ouch at that 1/3rd off price...








Rumor mill from my sources is that jumbo loans are drying up in April; we're in a state worse than the October credit crunch per word off the street. Doubt me? Go to the .mortgage broker forums If true, we should see even further reduced sales from March in markets that require them. The same rumor mills say that in many jumbo markets, prices have had to be discounted 5% to motivate *any* buyers to act. We won't see the data for a bit. I really wish Case-Shiller was available on a zip code basis.

For those looking to buy, the consensus over at the HBB is that we're in the bottom of the 3rd inning. Its the spring selling season so the 'Home team' is up to bat. I'll let the graphs speak to how they're doing. Everyone knows that US real estate is being discounted. Even the BBC. Can you imagine what the headlines will be like once the kids have finished going back to school? I'm still amazed the government is implementing policies that will only increase the overhang of surplus housing rather than letting it be soaked up quickly. Credit isn't done tightening. The Fed can help liquidity, they cannot legislate it.

The number of sellers on the sidelines is mind boggling. For every person I know who is waiting to buy, there are two I know of trying to sell their 2nd or 3rd homes... Eventually those surplus Florida condos will fill up. There will be enough inventory to drive prices back to sane price/Income ratios.

Got Popcorn?
Neil

Sales and Inventory just suck

Let's not mince words. January sales and February inventory just suck. Globally. I'm going to focus on a few US areas, but I could talk about anywhere. Why? The credit crisis. Or more precisely, the easy credit that allowed flipping is gone. Without flipping, homes must return to fundamental values. For some areas that is *only* a 25% price drop. For the most bubbly communities (DC, FL, CA, Phoenix, Las Vegas, Sacramento, Reno and debatable the San Francisco bay area) its going to require a 40% to 60% price drop to get prices down to where incomes justify risking loaning money.

Do I really need to talk about down payments and how requiring full documentation loans and some meat in the game will change the markets?

For the Graphs I'm going to Go by region. Feel free to skip ahead to where you're interested. I'm going to end discussing banking and hattip Calculated risk. If you are not already a reader of one of the best economic blogs out there, become one.



I'm starting with the 'protected core' of DC. For nine months sales have been one or more standard deviations below the decade median. Is there a year one or more deviations above? Yes. Some of 2004. The year of panic buying. This tells us the sales process is broken and must be fixed. The only fix is to reduce the prices in a tightening credit market.



To keep things in perspective, we also have to talk inventory. Look at how the DC inventory trend is broken. Now some areas don't have high inventory... yet. But they'll have to price to compete against the substitution effect.



My... we have a pattern here. Sales absolutely suck.








On to Phoenix!



Here Inventory and sales suck. Multiyear collapse in home prices. No avoiding it. As long as prices are held artificially high... builders will build making the collapse worse.


Another disaster areas is Lost Wages:



My coworkers like to laugh at how harshly Las Vegas is crashing and burning. I'm quiet about this at work. Why? About five of my guys own in Vegas and are realizing their entire life savings are toast. Cest la vie. That's what happens when you get greedy.



Now its time to talk about the 'lead dog' San Diego. Everyone else is trailing this sunny city with perfect weather. We'll see San Diego recover long before most other areas hit bottom. Its leading the cycle and thus is studied by *many* blogs.


The rest of California is following the same pattern. I'm not going to discuss much. The chart on sales speaks for itself.






No Victor/Victoria, the bay area isn't different. Yes there are high wages there. But that doesn't mean anyone has to buy. This bubble is so huge there are rentals available everywhere.







LA sales are falling apart. Look at those turn times.


Here are the sales... horrid.



National inventory, on ziprealty, tells a story of a national housing decline. The first one in a long time. But its happened before. So quite a few people are going to learn it can happen again. Want to really see how the elite areas fare in such a downturn? Read a book called the Hungry Years.















What is driving this? Lenders cannot pass on mortgage debt to bond buyers suckers anymore. I'm just going to borrow a few charts from Calculated risk. Go there to read the indepth analysis.














If you think the layoffs have even started... they haven't. Biff and Buffy will not be able to HELOC out enough for the $100k BMW. High end shopping is toast for three years. All REIC related businesses are cutting back. My wife was riding the train on Friday and the numbers of people who were laid off from commercial real estate companies on board were staggering. The residential side isn't done yet either. Of course these aren't showing up in the layoff statistics, all of these people were independent contractors.

I don't bother to blog Florida with its areas of 10 to 15 years of inventory. Its toast. Read about the Florida real estate speculation and crash of 1925 and 1926. Yes, I said crash. Prices dropped 90%+ over a year, bankrupted all of the state's banks, and left it with a construction surplus that wasn't fully consumed until 25 years later. So the idiots who say we've never had a major real estate crash need to start reading!

Anyone who buys in 2008 is an idiot. Wages will decline and that means rents are going to drop. So the price to rent ratios will get even further out of balance. Exceptions? Actually yes. I'm advising a cousin to buy in Cleveland during his medical residency (recall, where doctors go for residency isn't usually their call) because buying there is far cheaper than renting. If you have a secure job in Detroit ("Hi!" to all the police and fire workers), there are great deals with little downside risk.

Got popcorn?
Neil

January SoCal sales slowest on record

Oh... somehow they 'reset' how they take data prior to 1988. But its bad per Dataquick.

Particularly noticeable is a drop-off in sales of more expensive homes financed with "jumbo" mortgages.

The great squish down has begun. We're going to watch high end homes push prices down. There are some very nice homes going for $2.5 to $3.0 million I'd love to buy. Maybe they'll drop enough that I'll be able to afford one... or maybe they force down the price of a more modest home.

There is a 50% YOY drop in sales in LA county! 3,398 sales in a month doesn't even begin to touch the inventory. LA is now up at Florida levels of inventory (in terms of months).

Personally, its become so obviously that there will be a large drop in home prices in 2008 that anyone who buys this year is an idiot. We have years of price drops ahead.

Got popcorn?
Neil

January sales look really bad

The NAR is going to do everything they can to delay reporting January sales. They are looking horrible. I thank the blogs out there that report the data promptly. For example, NOVA bubble fallout presented this data as part of Harriet's "Decade of sales" series. I plotted the data and did an ANOVA analysis. Oh... broken process. The wheels are falling off.















Yes, the data is 3.1 standard deviations below the decade mean. Oh... the decade median is the same number... how interesting. Overall, the 94 sales in Arlington country is a very poor showing; about half the sales needed to sustain prices. Cest la vie.

Anyone else curious to see how bad January's Case-Shiller index will look? Ouch. Evidence is building we're transitioning to desperation. But I have a few weeks until I update my real estate emotions series.

Got popcorn?
Neil

Spain: "the secondary housing market has practically stopped."

Why am I posting this? Why, because all real estate is local. ;)

This article really caught my attention as I googled "real estate sales".

Good thing it won't spread. Oh... from the article: The issue is all the more important as the housing market makes up 7.5 percent of gross domestic product, according to figures from the BBVA bank. The construction industry as a whole employs 13 percent of workers. So what fraction of Spain's employment is in the REIC? We have 13% in construction. But what about Realtors (tm), mortgage brokers, and all the secondary services?

I also loved this little quote by the author:

And when sales slump, prices follow. A recent study by Deutsche Bank forecast that the average rise in house prices in 2007 would be identical to inflation, which was around 4.0 per cent in the 12 months to November.

Now what happens when everyone bets on home price inflation and instead Spain gets deflation?

This isn't local. Its not different here (where ever 'here' might be). 2008 will be the awakening that there is a global problem. (Sorry, but 2007 was but a nudge.)

Why is Spain important? Its going to scare all of those German saviors of Florida in hiding. So what? Simple, once Spain starts to dive there will be no 'foreign investors' to save the US market. Its the lynch pin connecting investor psychology to an understanding of the size of this event.

But there will be growth. Ethanol has soaked up US surplus grain production. This is helping the USA gain tremendous bargaining leverage in international food sales. I'm seeing a slow bleed of aerospace manufacturing back to the US (thanks to a weak dollar). And video games... (Get a Wii, they're fun!) Not to mention it looks like I'll be attending a friend's wedding in the middle of India. ;)

So if they can keep the banking system functioning... we'll avoid the worst. (I think it can be done.)

But first the python has to pass this (real estate) pig.

edit:

Hat tip Guess who's:
Its on the impacts of speculation in Spain.


Got popcorn?
Neil

Predictions for 2008 home sales

Its almost the end of the year!

The NAR is estimating 5.67 million homes to be sold in 2007. What is your prediction for 2008?

Calculated risk had a convincing article that based on historical data, 3.0 Million homes would be a VERY deep recession.

WaMu in their little confession noted that they expect 40% fewer mortgages to be issued in 2008. 60% * 5.67 is 3.4 Million. Hmmmm.... But I'm an optimist... Not to mention it takes a while to really slide into a bad recession. So I'll bracket 3.5 Million to 4.0 Million home sales in 2008. Just for the fun of it, I'll predict two years out: 3.0 to 3.5 Million in 2009.

What's your prediction on price declines in 2008? Where I want to buy has dropped about 5%... Those that predicted where we are predicted a 5% to 10% decline in 2007 and a 8% to 20% decline in 2008. Since I think we're only avoiding the pain on a short term basis... I see a 15% to 20% drop in 2008. For 2009 I predict a 20% to 30% drop in home prices.

I'll add graphs and stuff to this article later. Consider it a 'stub' for now.

Got popcorn?
Neil

Existing home sales down to 5.04 million

Inventory at 10.5 months!

I'm being lazy as I watch bloomberg news.

How much will this impact the market?

Tomorrow is new home sales data.

Prediction for existing home sales was 5.3 Million (taken from WSJ in a previous post of mine):
http://recomments.blogspot.com/2007/10/what-to-expect-in-coming-week.html

Got popcorn?
Neil