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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: Don W
That's kinda funny: I can remember the Fed using 18% as a hedge against inflation....The Idiots who wrote and edited this article really NEED a lesson in basic economics, but what do I know?

You probably know just enough to be a bit confused. The Fed didn't set those 18% rates back in the '80s. Those weren't short rates, and short rates are the only rates the Fed has the ability to set.

Long rates, like those 18 percenters, are determined by the action of the world's bond traders, who in the aggregate have more firepower than the Fed. Long rates are a function of anticipated inflation plus a real return on capital.

41 posted on 11/20/2006 10:43:38 PM PST by Pelham (1 Billion 'Guest Workers' to do Jobs Americans Won't Do.)
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To: TheLion

Not enough to offset the buying power of some newly rich Indians and Chinese.


42 posted on 11/20/2006 10:44:53 PM PST by Pelham (1 Billion 'Guest Workers' to do Jobs Americans Won't Do.)
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To: GodGunsGuts

I'm no economist but I would think the dynamic of a boom is that it begins with demand and ends when the demand has been met. People, even in the richest country can't keep buying new homes indefinitely. Whatever inventory is left over will be sold at a discount or a loss. Then in a few years it will begin to pick up again.


43 posted on 11/20/2006 10:45:23 PM PST by Brad from Tennessee (Anything a politician gives you he has first stolen from you)
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To: Pelham

I missed this last gold rush....unfortunately. Read an article in a June issue of Forbes about all the billions of dollars that was poured into stocks of mining companies that were not producing anything. I think there could be a big bubble here.


44 posted on 11/20/2006 10:48:55 PM PST by TheLion
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To: montag813
I just heard that this will be the 3rd best year ever for the M&A market. Wall Street is expecting a near record year for performance payout bonuses. That means another shot upward for real estate in the tony sections of the city for at least several more months from just internal demand.


Back on topic: The slowdown in condo sales in central Florida is the most amazing real estate event I've witnessed in my life. (I'm only in my late 20's). Developers who sold out entire multi phase condo complexes are now having to try to resell condos in the now built phase 1 area before even attempting to build phase 3, or 4 or whatever. The condos have just now last month fallen below the pre-construction builder's prices for existing units, AND the cost of building new phases has substantially increased post-Katrina. Which means the value of existing units should hold steady as new inventory won't be made available as fast.

The people who bought into later phases are in for more surprises, even after the surprise 3 to 6 month delays for some new condo complex completion dates. Phase 1 units are now selling for slightly less than unbuilt phase 3 units were sold for, phase 3 buyers locked in a contract that is an immediate loss for them, and no way to sell the condo without accepting a larger loss, because the average # of days a condo is on the market has increased drastically. Herd mentality got these people into this fine mess, and the herd running for the doors is going to exaggerate the downward pressure on the market there.
45 posted on 11/20/2006 10:53:21 PM PST by JerseyHighlander
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To: babygene

Most people do not own 224,000 dollars worth of stocks which is the median price of a home.

Down 1.2 percent is more like down 3 percent if you add in inflation which on 224,000 is a 7,500 dollar loss.


46 posted on 11/20/2006 10:56:11 PM PST by staytrue
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To: Don W

Disposable income is your after-tax income. Discretionary income is what remains of your disposable income after you pay for the essentials- food, clothing, housing, medical care, and so on. It's your spending money, or savings, whichever you choose.


47 posted on 11/20/2006 10:57:39 PM PST by Pelham (1 Billion 'Guest Workers' to do Jobs Americans Won't Do.)
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To: TheLion
Maybe some of the illegals will go home.

If you have unwanted house guests, I guess burning down your house is one solution to getting them to leave.

48 posted on 11/20/2006 10:58:09 PM PST by staytrue
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To: staytrue

Depends on where you live, of course. The median price of a house in southern CA is more like $600,000.


49 posted on 11/20/2006 11:01:19 PM PST by Pelham (1 Billion 'Guest Workers' to do Jobs Americans Won't Do.)
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To: PghBaldy
the bubble wouldn't have gotten so big

The fed has been near perfect. When the 2000 stock market bubble deflated, we lost 8 trillion in market value and then came 9-11. We needed a housing bubble to offset that without a depression setting in. Now stocks have stabilized, it is time to let the air out of the housing bubble.

50 posted on 11/20/2006 11:01:20 PM PST by staytrue
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To: GodGunsGuts

Watch for the markets like Seattle, where prices have basically flatlined since the begining of May for median and below median homes after massive gains the past couple years. Realtors have labeled it one of the cities that will never see major price corrections. Seattle is scheduled to have some massive condo tower projects coming on the market in 2007. Thousands of units in downtown Seattle and downtown Bellevue. There was lots of pre-sale action in the begining of this year with these projects. Lots of speculators looking for a quick flip once construction was complete. Now that prices have flatlined for this long, wonder how many flippers are starting to sweat.

http://housing-watch.com/regionview.aspx?city=Seattle&pct=50&g=m

http://housing-watch.com/regionview.aspx?city=Seattle&pct=25&g=m


51 posted on 11/20/2006 11:02:46 PM PST by Proud_USA_Republican (We're going to take things away from you on behalf of the common good. - Hillary Clinton)
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To: Eric Blair 2084
As the Baby Boomers reach retirement age, they are fleeing in droves to low or no tax red states. Trust me on this. It's not a prediction, it's happening now.

I'm considering this. Why the hell should I pay and extra 5% when I can move to Florida with no income tax ?

52 posted on 11/20/2006 11:05:03 PM PST by staytrue
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To: TheLion

I think so too. If you want to buy gold, I'd wait awhile. If the housing/mortgage market tanks we could see both a credit crunch and consumer spending dry up. Which could cause a bit of a global slow down. Gold might be a good deal cheaper in such an environment.


53 posted on 11/20/2006 11:07:59 PM PST by Pelham (1 Billion 'Guest Workers' to do Jobs Americans Won't Do.)
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To: GodGunsGuts

A decent summary of current trends, whether you agree with the conclusions or not.

http://www.investorsinsight.com/thoughts_va_print.aspx?EditionID=423
The Coming Collapse in Housing
by John Mauldin
11/17/2006

Introduction

What Will Collapse Housing Prices?

The Grand Disconnect

89 Booming Cities

Where's The Unemployment From Housing?

Two Price-Break Triggers

The Fed to the Rescue?

Some Observations on The Big Easy

Disclaimer

Introduction

This week I am in New Orleans at the annual New Orleans Investment Conference and quite frankly with so many good friends that I have given myself permission to not write a letter this week. But you will be getting an even better writer than me for this week's letter.

I arranged for good friend Gary Shilling to condense his 40 page letter on the housing market for you. While this letter will print long (for those of you who print the letter out), it is mostly charts, which Gary excels in. Gary argues that housing prices are not in for just a small decline but a material drop. I have argued that it is housing that will be one of the main causes of the next recession sometime next year. So without adding too much more copy, let's jump right into Gary's analysis. If you like this type of work, you can subscribe at http://www.agaryshilling.com/insight.html.


54 posted on 11/20/2006 11:13:58 PM PST by Blue_Ridge_Mtn_Geek
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To: PghBaldy

"If the idiotic Fed had paid attention to what the price of gold was saying (nearly tripled in 5-6 years), the bubble wouldn't have gotten so big, and other costs wouldn't be rising so much."

That's not what fueled this bubble - toxic loans to people making 24K a year to buy $500K overpriced crap is what fueled it. The real estate industry, banks, and mortage houses have made out like bandits off it, and are still pimping the Koolaid.


55 posted on 11/20/2006 11:14:58 PM PST by ByDesign
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To: ByDesign

They are pumping the Koolaid, at the same time, they have been laying of workers like crazy that deal with the mortgage side of the business.

I work for one of the biggest mortgage lenders/banks in the US. Trust me. They know the ride is over and are already adjusting their hedges and strategies. I see it all over the place at work and in the industry.


56 posted on 11/20/2006 11:26:46 PM PST by Proud_USA_Republican (We're going to take things away from you on behalf of the common good. - Hillary Clinton)
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To: Blue_Ridge_Mtn_Geek

Excellent summary of the coming housing bust.


57 posted on 11/20/2006 11:29:39 PM PST by GodGunsGuts
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To: Proud_USA_Republican

If you have a ping list on housing I'd like to be on it. You seem to be uniquely situated to keep us posted on what's going on in the mortgage/real estate industry.


58 posted on 11/20/2006 11:31:37 PM PST by GodGunsGuts
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To: Proud_USA_Republican

Thanks for the update and charts.


59 posted on 11/20/2006 11:33:37 PM PST by GodGunsGuts
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To: JerseyHighlander

Speculators in real estate can quickly be slaughtered. If you want to watch some carnage over the next 18 months, go here: http://www.perdidobeachcondos.com/PerdidoKeyListingsbyCondo


60 posted on 11/20/2006 11:34:24 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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