Posted on 02/26/2008 3:41:14 AM PST by Shirerwasright
WASHINGTON (AP) -- Sales of existing homes fell for the sixth straight month in January, dropping to the slowest sales pace on record. Median home prices were also down and many analysts predicted further price declines in the months ahead given high levels of unsold homes.
The National Association of Realtors said Monday that sales of single-family homes and condominiums dropped by 0.4 percent last month to a seasonally adjusted annual rate of 4.89 million units. That was the slowest sales pace, going back to 1999, and was seen as evidence that the steepest slump in housing in a quarter-century has yet to hit bottom.
The median price of a home sold in January slid to $201,100, a drop of 4.6 percent from a year ago. Particularly alarming, analysts said, was the fact that the inventory of unsold homes jumped to a 10.3 months' supply, meaning it would take that long to sell the 4.19 million homes on the market at the January sales pace.
That was up from 9.7 months in December and just below a two-decade high of 10.5 months hit in October. During the peak of the housing boom in 2005, the supply of homes relative to sales stood at 4.5 months.
"With sales weak and inventories at extraordinarily high levels, prices are likely to fall a lot more," said Joel Naroff, chief economist at Naroff Economic Advisors. "Eventually, sellers will end their denial and realize that if they want to unload their homes, they will have to cut prices even more."
Analysts said one of the problems was a rising tide of mortgage foreclosures, which is pushing even more unsold homes back on the already glutted market.
Wall Street put aside worries about the weak housing market to stage a strong rally on Monday based on encouraging signs that troubled bond insurers will successfully emerge from the credit market crisis. The Dow Jones industrial average surged by 189.20 points to close at 12,570.22.
Sales of existing homes fell by 12.7 percent in 2007, the biggest decline in 25 years, and are down 20 percent from their all-time high set in 2005, the final year of a five-year housing boom that saw sales and prices soar to record levels. Over the past two years, housing has been in a steep downturn made worse by a severe credit crunch as financial institutions tightened their lending standards in reaction to their multibillion-dollar losses on mortgages that have gone into default.
"With prices expected to continue dropping and banks leery to make loans, few prospective homeowners feel now is the time to buy," said Michael Gregory, an economist at BMO Capital Markets.
Some analysts saw it as an encouraging sign that sales of single-family homes actually posted a modest increase, but the overall number was dragged down by a continued sharp decline in sales of condominiums.
Patrick Newport, an economist at Global Insight, said condo prices rose more sharply than single-family home prices from 2000 to 2006 but have fallen less in the current downturn. He said buyers are likely to remain leery until condo prices drop more.
Sen. Charles Schumer, D-N.Y., said the further bad news on existing home sales should be a wake-up call to Congress and the administration that more needs to be done to help the distressed housing market.
"The housing crisis has mushroomed in part due to Washington's inaction," he said. "Declining home values cut to the very heart of families' sense of financial security and our economy's overall health."
Sales were weak in all parts of the country in January except the Midwest, where sales posted an increase of 3.4 percent. Sales dropped by 3.6 percent in the Northeast, 2.1 percent in the West and 0.5 percent in the South.
Lawrence Yun, chief economist for the Realtors, said he believed the housing market may be on the verge of bottoming out, with a rebound expected to start toward the end of this year. He said he expected demand to be bolstered in coming months by the housing sections of the $168 billion economic stimulus bill passed earlier this month. Those provisions raise the caps on the size of loans that can be backed by Fannie Mae and Freddie Mac and the Federal Housing Administration, an increase expected to provide help in high-cost areas of the country such as California.
But other economists said they still did not see a significant turnaround in housing until late this year or possibly early 2009.
"Expect sales and prices to keep falling," said Ian Shepherdson, chief U.S. economist for High Frequency Economics. "There is no end in sight for the housing disaster."
The severe slide in housing has depressed overall economic growth and raised concerns the economy could slip into a full-blown recession. The National Association for Business Economics said Monday that 45 percent of the members of its forecasting panel believe the economy will experience a recession before the end of this year and even those not looking for a downturn believe growth will slow significantly.
This subprime crisis has many european banks on the ropes and some of our largest financial institutions.
Are we going to wait until the collaspe before we do something with the clowns of washington?
Anyone know how Home Depot and Lowes are weathering this? A couple of local, independent contractor supply yards are packed to the gills with inventory, I’ve never seen them that full.
I have relatives who work at those places. They comment that the last time the housing market collapsed, their product mix changed, but times were not terrible, because people gave up the idea of trading up to a newer house and instead elected to improve the ones they had. So rather than selling pallet loads of shingles and lumber, they were selling doors, windows, plumbing fixtures, etc.
The Beltway has the most experts in delusion and lying per capita. Ergo, they want to bail out their brethren. The longer Washington stays out of this, the better for market forces to work.
The only clown responsible has quit. The current decline was inevitable after short term rates were too low for too long (2002/3). That was due to an inevitable stock market decline because of the bubble of 2000. The bubble of 2000 was caused by rates set too low during the LTCM and Asian crises in the 90's which was fallout from the 1988 housing bubble and the collapse of Japan. Japan has been the worst culprit in setting rates too low (below zero real rates). The modern credit bubble can be traced back through the 30's and 20's.
Now is an excellant time to buy but caution is needed. Keep your cash handy and shop around.
Advice to younger FReepers is too look around for some clutster type rentals. At my age I need to liquidated most but they provided me with a good income over the yrs.
In my area, they are still building scores of homes that no one wants and no one will buy. I don’t understand it myself but methinks someone is going to be left holding the bag while others live high on their graft.
LLS
The inflated price of fuel worries me more than an “adjustment” in real estate prices and interest rates. The fact that so much of our wealth is being shipped out of this country to buy fuel is contributing to a decline in the value of the dollar. The price of fuel is fueling inflation on every other product and service. We really need to move forward on energy development and exploration in our own country, to include nuclear, oil, coal, shale, wind, solar etc.
Our dependence on FOREIGN oil is probably one of our biggest weaknesses. The sub-prime problem will fix itself, I don’t say this as a person without an investment. I have an ARM, I knew what my loan was when I signed it, I took advantage of the upfront perks, it is a gamble I took. If my rates go up, who is to blame? ME! Who should bail me out? ME! If I can not make my payments, who did not diligently research my financial where with all? My Bank! who should bail them out? No one!
Lumber prices are the lowest I have seen in the past 12 months...
On a side note... While there were quite a few homes for sale when the market took the bad turn... many people around here took their homes off the market.
Also - the few remaining refuse to face reality and are asking the previously inflated “values”... thus buyers are not buying. We have been house shopping for the last 6 month - we figured it was good time as a buyer....wrong. That is all marketing bunk.
In reality - there are two types of houses for sale right now (in our area):
1. Houses the seller thinks are still worth the pre-market plunge “values” - thus are still 20%+ too high.
2. The houses that are priced more in line with their real value - but need a LOT of work - thus making them impractical.
I believe many of the type in #1 are due to folks borrowing too much (particularly home equity loans).
But regardless, the housing market is feeding its own sales problems...
If Japan was suffering deflation, how were the real rates below zero?
The modern credit bubble can be traced back through the 30's and 20's.
Not 1913? Or even the WWI inflation?
The amount of the drop in values varies by region. For the most part, in my area of NC, existing housing has flat lined with maybe a 5% drop from the peak of late 2005, early 2006 in some neighborhoods. The exception to that is the older, affluent, neighborhoods near downtowns in University cities, those are still increasing in value but at a significantly lesser rate than before.
The new construction market has taken a huge hit. The volume builders have pulled out, model home hours have been reduced, and there is tremendous inventory yet to be sold. Prices are being cut 10%-20% with the builders paying an additional 5% or so in closing costs, etc.
Another observation to note for this area is the landscaping biz is way down. Not so much an indicator of economic health as it is of the lengthening drought this area is enduring. The craigslist ads are chock full of large deck lawnmowers, blowers, weedeaters, etc. and it’s not just because it’s winter down here either.
Yes, 1913 is when the gun was loaded, and WWI was when it was fired for the first time. After that credit bubbles became the driving force for the business cycle,
January is traditionally not a hot time to sell a home. Spring and summer are usually the best times. If these numbers hold into spring and summer, then that does signal a serious problem.
Chuckie, Chuckie.
“If my rates go up, who is to blame? ME! Who should bail me out? ME! If I can not make my payments, who did not diligently research my financial where with all? My Bank! who should bail them out? No one!”
Here, here...well said man!
>>>Anyone know how Home Depot and Lowes are weathering this?
Home Depot Profit Drops 27.5 Pct in Fourth Quarter, Reports First Annual Sales Decline
Home improvement retailer Lowe’s Co. says a softer U.S. housing market helped send its fourth-quarter earnings down 33.4%.
Based on the earnings HD reported today and Lowes did recently, they are still profitable but it’s dropping about 30% annually.
“Anyone know how Home Depot and Lowes are weathering this?”
Their profits are both down. HD and Lowes are not as heavily tied to new home starts as your average independent contractor yard. Their homecenters are basically giant hardware stores that also happen to carry lumber, plywood and osb.
However, both companies have/had divisions that are/were contractor yards and I am sure those division lost much more than their homecenter yards.
Home Depot just recently sold their contrator yards to Probuild which is a division of Fidelity Investments.
One personal anectdote: HD cut the price of entry-level baseboards (3 1/4" high) from 75c/ft to 67c/ft last August, and last month dropped them down to 28c/ft in one markdown. That's the new price, not just a one-week loss-leader.
I talked to a guy at a window/door/molding place since then (who was charging 38c/ft wholesale when HD was 67c/ft retail) who figures that HD's must be selling them at a loss.
Lowes told a similar story either yesterday or late last week.
HD 4th quarter down 29.5%
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