Lies, damn lies and (NAR) statistics.

Indeed.

The National Association of Realtors (or NAR) released data today showing that sales of existing homes crept up in June, the 3rd consecutive up month. While sales were a touch lower than they were a year ago, the annualized, seasonally adjusted sale figure was up 3.6% from May. (For more on seasonal adjustments, please read The Magic of Seasonal Adjustments)

This positive data led many pundits and so-called experts to reiterate calls for a bottom in the broad housing market.  “We have finally bottommed out,” Stuart Hoffman, chief econmist at PNC Financial Services told Bloomberg. Hoffman was referring to sales, not necessarily prices, but conventional widsom says that prices follow volume.

Others, like the popular economics blog Calculated Risk, did some actual analysis of the data and came to a different conclusion about the fundamentals of the market:

“It’s important to note that the NAR says about one-third of these sales were foreclosure resales or short sales. Although these are real transactions, this means activity (ex-distressed sales) is much lower.”

The key takeaway is not whether or not the housing market has “bottomed,” but that markets are still being enormously impacted by government backed foreclosure moratoria, first time buyer tax credits and efforts to keep interest rates low. With unemployment stubbornly high, the true outlook for a housing recovery remains uncertain.

Wondering where your market sits on the path to the bottom? Contact Cirios today and we’ll disect your local market like you wouldn’t believe …

This post first appeared in the July edition of Cirios Trends: Getting to the Bottom of the Housing Market

It’s everywhere these days: In the news, on the streets. The “bottom” is coming. We have toiled long and hard through the dark days of this “Great Recession” and are now coming to the bottom of the housing slump. Well, we’ve got bad news.

Not only are we not yet to the bottom, there is no such thing as the bottom. But, as it turns out, the “bottom” doesn’t actually matter, at least not to today’s savvy home buyer.

In mathematical terms, a bottom would represent the lowest value that some function worked out to as it moved its way along one axis or another. In our world, really the only axis that means anything is the axis of time. Everything moves inexorably towards the future, sometimes plodding, sometimes sprinting, but always forward. So why can’t we find a bottom to the function of the housing market?

Isn’t there a given point in time where the market reaches the lowest level it can reach and only heads up from there? Nope.

The problem — as we try to hammer home over and over again here at Cirios Real Estate — is that there is no single “function” that can describe a real estate market. As the old axiom goes, all real estate is local. And indeed it is.

Therefore, the function that describes what home values are going to do over a given time period in one area can be completely different than the function describing home values just a few miles away. The real kicker is that even these simple, very localized functions are so unimaginably complex that their ability to tell us the future through a simple calculation is nil.

So what’s the solution? Why does Cirios keep coming out with all these data and articles about learning housing by the numbers if the numbers can’t give you the answer you’re looking for? The response to that is simple: While we can’t predict the future by using some magical formula — no matter how hard we try — today’s information age allows us to get an accurate picture of what is happening RIGHT NOW, not to mention make a sensible stab at what will happen in the very near term.

While there’s no mathematical function for a home’s future value (despite attempts by myriad websites, the latest of which is called smartzip.com, which tries to assign a 10-year future value to each house in California), there is a light at the end of this algebraic tunnel. The calculations for each of us PERSONALLY are straightforward.

The most important equation is the one that looks at your individual finances and decides whether its right for YOU to buy a home. And fortunately, Cirios can help with it all. We can help you decide whether buying a home is right for you, what kind of home you should buy and when the right time will be.

And while there are no magic formulas that predict the home market’s future, Cirios has the tools and skills that can clear the confusion around today’s confusing market conditions.

This post first Appeared in the July edition of Cirios Trends: Getting to the Bottom of the Housing Market

As the infamous summer buying season heats up, hopeful housing market participants are looking for a respite from nearly four years of woe. Reality, however, is throwing a wrench in their plans.

Two trends have recently emerged that are derailing what many hoped would be the strongest summer in real estate since the downturn began.

First, fears about government’s massive debt load and the specter of looming inflation are pushing up interest rates. Despite trillions of dollars dumped into the secondary market for mortgages, rates have risen nearly a full percentage point in the past month. For more on this topic, please read Higher Rates Strangle Mortgage Market.

Second, in response to a lawsuit filed in New York against Washington Mutual, new appraisal guidelines went into effect May 1. The rules, which try to limit collusion between banks and appraisers, are wreaking havoc in the market for new loans. For more on this topic, please read Keepin’ It Real Estate: Just How Bad Are the New Appraisal Guidelines?.

Meanwhile, foreclosure moratoria which expired April 1st were expected to unleash a flood of supply of bank owned homes onto the market. This mountain of new inventory has yet to materialize, as “soft moratoria” are being employed by banks, at the behest of Washington, keeping homes off the market.

In short, its crazy out there. But, amidst the chaos, normalcy is beginning to emerge from the housing market’s charred remains. That is, of course, if you know where to look.

In an environment where prices are careening over a cliff, selling is indiscriminate, fundamentals are thrown out the window and prices move seemingly without regard to logic and all in the same direction: down. The stock market is a great example of this, as during the panics of last fall and this spring, investors sold stocks with both hands; banks, oil refiners, retailers and technology companies alike were thrown out with the proverbial bathwater.

As the chaos recedes, careful market observers look for signs of differentiation. Firms with the best outlook begin to outperform the broader market as investors identify those companies best positioned to emerge on stronger footing. In other words, legitimate recoveries are wrought from opportunistic investors looking for, and finding, value.

Look at the graph at the top of this page, which compares price per square foot of homes sold in San Leandro vs. Albany. No one familiar with the Bay Area would argue the two cities are comparable in anything but BART commute times to San Francisco, but for almost two years, the premium paid to live in Albany shrank to a barely perceptible amount. This isn’t logical, and certainly wasn’t sustainable.

As the housing market heals, fundamentals will once again drive prices. Picking a bottom is a fool’s errand, but looking for relative value is exactly what Cirios Real Estate is here to do for our clients.

By ANDREW JEFFERY

This post first appeared on Minyanville.

Residential real estate is about to get very weird.

In the coming months, housing-market data is likely to show price stabilization in many of the country’s hardest hit areas. Pundits, government officials and real-estate professionals will loudly proclaim the worst of our real estate woes are behind us. Back in reality, however, this data will simply reinforce the axiom that there are lies, damn lies, and statistics.

The lion share of home price declines have, thus far, been focused in low-end markets -areas where property values became the most detached from housing-market fundamentals. Even though the high end is now declining, sales activity is still heavily concentrated in the country’s most distressed markets.

Taking a look at the data below compiled by my firm, Cirios Real Estate — which depict sales transactions for the part of the San Francisco Bay Area between San Francisco and San Jose known as the Peninsula — one can see how rising home prices from 2003 to 2007 shifted sales transactions towards more expensive properties. This makes intuitive sense, and should naturally push up both average and median home prices.

Click to enlarge

Since the market peaked, however, notice how the percentage of sales of homes under $400,000 shot up to more than 50% of sales in the first quarter of this year, from as low as 9% in 2007.

Conversely, sales over $1,000,000 that accounted for almost a quarter of transactions in 2007 now make up less than 9% of total sales so far in 2009.

This heavy concentration of sales in low-end markets is skewing home price data to the downside, exaggerating the impact of depressed markets on broad measures of prices.

As the foreclosure epidemic spreads outwards to more well-to-do areas, and job losses force previously stable homeowners to sell into a weak high-end market, more expensive homes will begin to make up a greater percentage of total transactions. This dynamic — not an overall rise in property values — is likely to push up average and median home price measures.

In other words, high-end markets will be falling as price discovery rears its ugly head, while low-end markets are flat at best, as price declines reach exhaustion levels and investors step in to buy. High levels of supply and looming shadow inventory of foreclosures will prevent meaningful appreciation in these distressed areas for the foreseeable future.

Meanwhile, data will show a housing market on the rebound.

No doubt, banks like Wells Fargo (WFC), Citigroup (C) and Bank of America (BAC) will cheer the end of the real-estate slump. Real estate professionals will pound the table that now’s the time to buy (just like they said back in 2007). Government officials will proudly assert their mortgage-relief efforts were a success.

Nothing, however, could be further from the truth.

Last week, we posted a graph showing home sales over $1,000,000 in the entire Bay Area. Despite the obvious seasonal trends, sales are slowing significantly.

Below is the same data for San Francisco. Notably, although sales definitely fell of the proverbial cliff in Q4 of last year, declines were barely perceptible until this year.

Click here to enlarge

In this month’s issue, check out:

The State of the Markets - 4/1/09
“Optimistic pundits declared the housing market’s bottom just months away, while prices stubbornly maintained their distinctly southward trend.”

By The Numbers: Housing Inventory
“Looking closely at historical months’ supply provides evidence that this measurement can actually be predictive for housing value trends, especially on a localized level.”

Zip Code Spotlight: Berkeley - 94703
“So is 94703 primed for a bigger drop or has it weathered the storm?”

House of the Month: 2 Bathrooms = Desirable in South San Francisco
“Since this property is one of the larger in the neighborhood and could be very desirable after some quality improvements, we expect some higher earners in the area to be interested in the home.”

Doing Your Real Estate Homework: Craigslist
“The intangibles may be difficult to quantify, but they are no less an important part of the rent vs. buy decision.”

This week’s House of the Week takes us down to the South Land, to Santa Ana and the land of endless strip malls and condo complexes. For under $1000 per month in mortgage, tax and insurance payments (assuming 20% down), you can be the proud owner of a 2 bedroom, 2 bathroom condo. The price: Just $139,000. (click images to enlarge)

Condos are cheap - but are they cheap enough? Sure, you can save a couple hundred bucks a month in rent, but is that worth it to risk owning a condo in a lousy real estate market?

WHAT WOULD YOU PAY FOR THIS HOME?
Post a comment below to guess!

Address: 2511 West Sunflower Ave. T15, Santa Ana, CA 92704
Status: ACTIVE
Bedrooms: 2; Bathrooms: 2
Living Space: 875 square feet
Lot Size: N/A
List Date: 3/14/2009
Original List Price: $139,000
Current List Price: $139,000
Average School API: 737
Zip Code Sales Last 3 Months (year-over-year): +166.0%
% Homes in Foreclosure in Zip: 4.6% (High)
% Housing Inventory For Sale in Zip: 1.1% (Moderate)

Breaking a trend of rising Pending Home Sales, the index of signed purchase contracts fell in January, down 7.7% from December, according to the National Association of Realtors (or NAR). The drop was more than twice as bad as economists’ expectations — and by “expectations” we mean wild stabs in the dark.

Pending Home Sales, which measure contracts signed in a given month, are considered a leading indicator of actual sales, which typically close 1-2 months later.

Notably, a trend discussed for the past few months here at Cirios persists: Sales activity in the West continues to outperform the rest of the country. In January, signed contracts dipped 13% in the Northeast and 12% in the South, but ticked up 2.4% in the West. New England is being hit particularly hard as Manhattan reels from the meltdown on Wall Street, sending home prices in the concrete jungle off the proverbial cliff. This shouldn’t be news to avid readers of this site — we’ve been on this trend for months.

Nevertheless, despite dour economic news and sickly data, the spin doctors over at the NAR remain hard at work. Lawrence Yun, living proof that being wrong for 1000 days running qualifies you to head up the biggest real estate lobby in the country, postulated that he “[expects] similarly soft home sales in the near term, but buyers are expected to respond to much improved affordability conditions.”

Just like they did this month Mr. Yun? Keep on spinning, sir.

By AUSTIN NELSON

Nationwide home values continue to decline into the New Year.

The National Association of Realtors (NAR) released existing home sales data today for January, indicating an overall 3.1% decline in the median sales price of US homes from the previous month. This drop follows the same national trend we have been seeing since July of last year: Prices have been declining steadily since that time at a rate of 2-5% per month.

The most interesting aspect of today’s numbers is a 5.3% drop in seasonally adjusted, nationwide sales rate. This reverses last month’s numbers, when sales had actually ticked up by 4.4%. Interestingly, the sales rate has seesawed over the past year, showing increases in Feb, May, Jul, Sep and Dec but declining in the other months. Overall, the trend has been down, with an 8.6% decrease since this time last year. The volatility of these numbers could simply be an artifact of an imperfect seasonal adjustment or cycling demand, but the long term trend is clear.

The West region showed no change in its sales rate, continuing its trend as the strongest region in terms of sales activity. In fact, the West has seen a 29% increase in sales since last year, largely due to the fact that the rate was extremely depressed in early 2008. As we have mentioned before, we expect the West to be a leader in buying trends as price declines have been most severe in that area and homes are finally becoming affordable to residents. Continued price declines (median price in the region declined 4.2% last month) will only make homes more affordable as time goes on.

The Northeast region has been the hardest hit of late, posting a 14% decline in rate combined with an 11.2% drop in median prices from December to January. That is a monster drop in a single month. Recent data indicating that New York City’s real estate market is cracking is adding to these drops. But Cirios readers knew about this trend months ago …

This month’s dismal sales numbers are likely closely related to extremely low consumer confidence, as prospective home buyers are holding off on big ticket purchases in the face of the continued and worsening economic decline. Considering that the sales included in these newest numbers were originated in November and December of last year and consumer confidence has dropped significantly since that time, we may be in for further declines in sales rate.

Even if national figures continue to decline, we would encourage readers to look beneath the data. Certain markets are still showing strong increases in activity, even as prices fall. Real estate, still, is local.