Housing Perspective: Existing Home Sales
This post first appeared on Minyanville.
Put on those Rose-Colored glasses, it’s time again for the Existing Home Sales data:
- September sales came in 5.5% higher than last month, at 5.18 million (annualized) compared to estimates of 4.95 million
- Sales were 1.4% higher than last year — the first year-over-year increase in 3 years
- Inventory shrank to 9.9 months worth, from 10.6 months
- Median home price dropped to $191,400, the lowest since April 2004
- Distressed sales made up 35-40% of sales, with 80% of those going to owner-occupiers (higher than the usual 75%)
Per normal, the National Association of Realtors chief economist Lawrence Yun is as optimistic as ever. He gets paid to obfuscate the truth.
Per normal, the National Association of Homebuilders chief economist David Seiders is as pessimistic as ever. The worse it is, the better chance his group gets on the government dole.
It’s messy out there in housing land, but that’s not exactly news. Keep in mind that the year-over-year numbers line up against this time last year, when credit markets first seized up and home buying all but evaporated for a couple months. Easy comparisons make for premature bottom call.
Of all the myths we were fed about the housing market and its implications for the broader economy, there is no greater one than the spin that housing couldn’t possibly drag the economy into recession. Since the downturn started in the context of economic strength, the argument went, we were better positioned to absorb the fall in home prices. This couldn’t have been more wrong.
Traditionally, housing slowdowns are caused by economic problems, not the other way around. If delinquencies starting running up when times were “good” what would happen when things got “bad?” We are now finding out.
Markets that haven’t seen forced sales in decades could soon find out what it’s like to watch housing wealth evaporate at an alarming pace. Everyone knows Detroit, Stockton, Miami, Phoenix — these areas are in bad shape. But what about upper-middle class suburbs where people haven’t faced layoffs in years? These are the neighborhoods that are more worrisome, since their inhabitants have been largely insulated from the downturn thus far. Prices ran up just as far, albeit for slightly more fundamental reasons, but home values were inflated by fraud and loose lending just like everywhere else.
It is, unfortunately, only a matter of time before reality comes back home.