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Home Sales Plummet in 38 States in 3Q
Yahoo Finance ^ | November 20, 2006 | Lauren Villagran

Posted on 11/20/2006 9:47:58 PM PST by GodGunsGuts

AP Home Sales Plummet in 38 States in 3Q

Monday November 20

By Lauren Villagran, AP Business Writer

Third-Quarter Home Sales Plummet in 38 States During the Summer; Home Prices Also Tumble

NEW YORK (AP) -- The feeble U.S. housing market showed more frailty when third-quarter home sales plummeted in 38 states, hitting Nevada, Arizona, Florida and California particularly hard, government data showed on Monday.

The once-booming real estate market's persistent weakness over the past year has reined in expectations for economic growth but hasn't been severe enough to offset a rising stock market, lower gas prices and improved consumer expectations.

The National Association of Realtors reported Monday that sales of existing homes fell in 38 states during the summer. Sales retreated to a seasonally adjusted annual rate of 6.27 million units nationwide, down by 12.7 percent from the same period a year ago. Nevada, Arizona, Florida and California led the declines.

Home prices also dropped: The realtors' survey showed that the midpoint price for an existing home sold during the summer dipped 1.2 percent year over year to $224,900. Some 45 metropolitan areas saw home prices decline.

Meanwhile, the latest report of building permits showed the slowest pace of annual growth in nine years in October. Housing construction slid sharply as builders tried to curb swelling inventories of unsold new and existing homes.

Stuart Hoffman, chief economist at PNC Financial Services Group, said he thinks the housing market still hasn't reached its low point.

"I think the permits numbers point to yet another flight of stairs down on housing before we hit the basement," he said. "On the other side, stocks are rising, consumer confidence is good and jobs are rising. Those factors are keeping this decline in housing contained."

A closely watched indicator of future economic activity release Monday provided further evidence of that trend.

The Conference Board, an industry-backed research group based in New York, reported Monday that its Index of Leading Economic Indicators rose 0.2 percent in October. Increased real money supply and improved consumer expectations helped offset the sharp decline in housing permits and weaker vendor performance.

"The economy is growing more slowly, but we have yet to have weakness spread beyond housing and motor vehicles to such a degree that we need to fear the proximity of a hard landing," said John Lonski, chief economist of Moody's Investor Service, referring to when the economy turns from growth to a recession.

The housing market slowdown has weighed on the leading indicators index this year. But all told, strengths and weaknesses in the leading indicators have been roughly balanced, according to the Conference Board report. The index stood at 138.3 versus 139.1 in January -- its peak so far this year. The index has declined four of the last seven months.

The Conference Board's labor economist, Ken Goldstein, said the October index suggests "the economy is unlikely either to reheat or to get significantly cooler."

"Instead, the kind of slow growth now being experienced could continue right through the winter and into the spring," Goldstein said.

In another sign of moderating economic growth, the Federal Reserve held its benchmark interest rate steady last month at 5.25 percent for the third straight session. The Fed had raised interest rates 17 times beginning in June 2004 to stave off inflation, before halting its campaign of credit-tightening in August.


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: alasandalack; bubblebrigade; buygoldbuygold; depression; despair; dispair; doom; doooooooooooomed; dustbowl; gloom; goldshill; grapesofwrath; misery; sackclothandashes; theskyisfalling
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To: PghBaldy
Both art and collectibles are very separate species! Trends come and go and what's "HOT" in one decade or even era, can soon become almost worthless.

And no, rising prices of art and collectibles has NOTHING whatsoever to do with "fiat money"; too much of it or otherwise. Doubt that? Then let's talk about were "hot" collectibles" when gold and silver were the legal tender. Oh heck, we can even skip ahead a bit and talk about the same thing, when ALL of our money was gold and silver backed. ;^)

141 posted on 11/21/2006 8:34:34 PM PST by nopardons
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To: MeneMeneTekelUpharsin

You are, are you? :-)


142 posted on 11/21/2006 8:35:08 PM PST by nopardons
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To: nopardons
You've been here long enough to know that the post that someone responds to, is at the bottom of the reply. Why don't you know that?

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I never noticed that. It still would be easier to post the comment so I wouldn't have to refer back (smile).
///////////////////////////////////////

For the vast majority of people, when they buy a house or co-op/condo, it's to live in; it's their HOME! To view it any other way is really stupid!
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I agree that traditionally homes were viewed as living spaces and an investment in a life style. However in today's credit market people have been "speculating" on their home purchase. Many buyers have capitalized on the availability of cheap money to use equity as a source of income. This has resulted in many "homes" in your definition, becoming speculative investments. If you refinance a home to cash out appreciation that then gets used to put you deeper in debt, but your "home" then appreciates some more and again you refinance, you are speculating that the price will continue to rise. When it finally stops appreciating and in fact depreciates, you are now upside down in your loan with no ability to pay. Many more people are in this position than you might think. Yes indeed, they are stupid, but it doesn't change the facts. Of course this is worse than a bad investment in the stock market because the effects of too much debt have much more disastrous consequences.
143 posted on 11/22/2006 6:09:50 AM PST by photodawg
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To: photodawg
How do you sell housing short?

Figuratively.

LOL!

These buyers are in a position where they bought speculatively with poor financing (interest only loans, ARM's, 100% financing) assuming that the value of these "investments" would go up.

Okay, they're over leveraged.

That is leveraged money that puts them in an analogous position to the short seller with a margin call he can't pay because the stock price went in the wrong direction.

No. A short seller benefits when prices drop. These people lose money when prices drop.

With the value plunging and their inability to meet mortgage payments (the figurative margin call)

A margin call is intended to bring your capital up to a safe (for the brokerage firm) level, the mortgage payment is like the debit interest charge in your margin account. Completely different.

these "greater fools" now must default because the asset they have to sell is worth much less than what they owe on it.

Having negative equity is completely different than selling short.

144 posted on 11/22/2006 8:01:42 AM PST by Toddsterpatriot (Goldbugs, immune to logic and allergic to facts. You know who you are.)
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To: A CA Guy
Lots of stuff sitting and going nowhere in California.

Time to buy a beach house (well, let the prices fall some first).

145 posted on 11/22/2006 8:25:05 AM PST by Puddleglum
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To: Southack; Blue_Ridge_Mtn_Geek
Your note was being sold at a discount, why shouldn't you benefit instead of some financial institution.

There is a reason why mortgage in a pool is cheaper than the same mortgage taken individually. It's called prepayment risk. A stand-alone mortgage has more of that risk (defined as volatility.) More risk = more expensive.

The main reason mortgage pools and mortgage-backed secirities were created in the first place was to reduce that risk.

146 posted on 11/22/2006 11:19:57 AM PST by A Longer Name
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To: nopardons

When I said "collectibles" I didn't mean Beanie Babies or the like. I meant things like rare coins.


147 posted on 11/22/2006 4:50:37 PM PST by PghBaldy (Reporter: Are you surprised? Nancy Pelosi: No. My eyes always look like this.)
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To: PghBaldy
Beanie Babies is a collectible fad and don't count.

Coins USED to be a collectible that NEVER went down in price/value ( as all other collectables do, due to fluctuations in taste ), until late 1989. Numismatics was forever changed thereafter; yet, it is a good hobby and somewhat of a good investment. But you REALLY have to know what you're doing and find a reliable and HONEST dealer.

Because of fluctuating tastes, ART ( paintings, lithos, sculpture ) and object d'art are fun to own, pretty good investment, but some things, no matter how old or new, can wind up losing even their original value.

Books ( FIRST EDITIONS ) are wonderful collectibles and don't lose their value, unless one doesn't take care of them.

Musical instruments are only for the MOST serious and knowledgeable collector!

Toys and now I'm not just talking about true collectibles/antiques, because many people are now collecting things less than 100 years old, but NOT anything like and including Beanie Babies, have skyrocketed in price and value. From American Flyer to Lionel to Marklin....the prices of rare, MINT trains, accssories, and their original boxes are in great demand. Stieff teddy bears fall into this category as well. But true antique toys are also great investments, but also only when their condition is very good and ALL of the original pieces are there.

OTOH, none of these things are easily, nor quickly convertible to hard cash.

There are people who collect barbed wire, beer bottles, and you name it. That doesn't mean that they are good investments.

As with homes, most collectors collect because they love the things they collect and while they might see them as investments, that usually isn't WHY they collect.

148 posted on 11/22/2006 6:33:56 PM PST by nopardons
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To: photodawg

True and the same thing is true of people who borrow money on credit cards and then play around in goldbug circles. :-)


149 posted on 11/22/2006 6:36:15 PM PST by nopardons
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To: nopardons
True and the same thing is true of people who borrow money on credit cards and then play around in goldbug circles. :-)
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True, too much debt is too much debt. When the house of cards collapses, they all go down . I guess also you can't blame people for taking advantage of what's available to them. It's just that you don't want to be left without a chair when the music stops. a good work ethic and sound good sense usually prevail.
150 posted on 11/22/2006 8:28:48 PM PST by photodawg
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To: GodGunsGuts

The speculators may have been scared away, but folks will always need houses to live in. Sales may be slow, and folks' houses may show some depreciation from what they THOUGHT they'd sell for, but they're still selling.


151 posted on 11/22/2006 8:35:01 PM PST by SuziQ
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To: A Longer Name
"There is a reason why mortgage in a pool is cheaper than the same mortgage taken individually. It's called prepayment risk. A stand-alone mortgage has more of that risk (defined as volatility.) More risk = more expensive. ..."

Incorrect. One pays less for lottery tickets (high risk, but high return potential) than for soveriegn debt (low risk, low return potential).

More risk means that you are willing to pay less, not more. More risk = cheaper, not "more expensive" as you claim.

Mortgage pools do reduce risk for the investor, you are correct, but the homeowner *knows* the risk of buying his/her own mortgage note back from investors (at least, he/she knows that risk better than the investors because he/she has a better idea if he/she is about to default on her mortgage payment).

So it is often a good deal for a homeowner to buy her own note back from an investor at a discount to the note's face value, even if the homeowner must pay the investor a premium for her note compared to the price being charged on average in the entire mortgage package.

152 posted on 11/22/2006 9:59:17 PM PST by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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To: Southack; GodGunsGuts

I agree. A credit crunch and deflation will come with a housing bust- liquidity will be at a premium, and that's not a recipe for gold going up- or even staying even.

The housing/mortgage bust is going to shrink the quantity of credit sloshing around the economy. And that credit won't return quickly either- tighter lending standards are coming back to stay. We are going to see fraud exposed that will rival what happened in the S&L debacle. The next three years ought to be very interesting.


153 posted on 11/22/2006 11:43:39 PM PST by Pelham (1 Billion 'Guest Workers' to do Jobs Americans Won't Do.)
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To: nopardons

Good points. Happy Thanksgiving.


154 posted on 11/23/2006 4:56:56 AM PST by PghBaldy (Reporter: Are you surprised? Nancy Pelosi: No. My eyes always look like this.)
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To: quantim
...If you lived in Michigan and watched your home decrease in value in almost monthly real-time (ex. Zillow) you might have a slightly different take...

If you purchase a house for the purpose of living in it, what is the downside of its value decreasing? Property taxes should go down, your mortgage interest is still deductible, etc. UNLESS, you overbought, put little to nothing down, aren't paying down the principal, and will have to move because of job or other reasons. It looks like the people who fit in the latter are the ones who are going to be in trouble.

155 posted on 11/23/2006 5:05:59 AM PST by Gaffer
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To: Pelham; Southack
Hi Pelham, just wanted you to know I'm not ignoring your deflation argument as it relates to gold. It's a serious challenge to the idea that gold will continue to appreciate, and it deserves an answer. I have been researching the problem, and while I have bits and pieces of a counterargument, I'm still a long way from being able to demonstrate anything that tips the scales. If I find that you are correct, I'll concede. If I come to the conclusion that the weight of evidence is on the side of gold, I will state my case and it will be your turn to do research :o)
156 posted on 11/23/2006 11:47:43 AM PST by GodGunsGuts
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To: Pelham

PS....Happy Thanksgiving!!!


157 posted on 11/23/2006 11:49:24 AM PST by GodGunsGuts
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To: PghBaldy
Thanks! :-)

I hope that you and yours had a lovely Thanksgiving.

158 posted on 11/24/2006 1:09:50 PM PST by nopardons
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To: Southack
How can you disagree?! Either the Dollar plummets (e.g. inflation), or else home prices plummet (e.g. deflation). You can't have the Dollar increasing and decreasing at the same time, so pick one (inflation or deflation).

This is only true if you mistakenly believe inflation has a homogenous effect on all prices in an economy. In reality credit expansion can be highly localized in its effects as can a credit bubble collapse.

159 posted on 11/24/2006 6:33:39 PM PST by AdamSelene235 (Truth has become so rare and precious she is always attended to by a bodyguard of lies.)
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To: nopardons

Thank you. It was nice - which isn't the norm (no fighting)... Hope you and your family did too.


160 posted on 11/25/2006 12:51:00 PM PST by PghBaldy (Reporter: Are you surprised? Nancy Pelosi: No. My eyes always look like this.)
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