Mar232015
OC for-sale home inventory up 45%, sales down 3.6%
Rumors of a surging real estate market are greatly exaggerated.
I recently asked, Did the OC housing market come alive in February 2015? Anecdotal reports of surging buyer demand looks similar to the frenzy at the beginning of 2012 — or so local agents would like everyone to believe. The fact is the market was very weak in January, and the anecdotal reports of a resurgence in February may be more wishful thinking than market reality.
If the market is so hot right now, why is for-sale inventory up 45% while sales are down 3.6%? Wouldn’t the opposite be the case if demand were surging and days on the market were declining?
Many of these new listings will be cloud inventory owners that can’t lower their price, plus each year we always get a fair number of owners that put their houses on the market at wishing prices just to see what happens. Rising inventory and declining sales is not a sign of a raging bull market — that’s a sign of a market top.
Southern California housing market is poised for a stronger spring
By Tim Logan, March 17, 2015
After two years of slim pickings for Southern California home buyers, the supply of houses for sale may be starting to open up, at least a bit. And that could power the region’s housing market to a stronger spring.
Market watchers and real estate agents say they’re starting to see more sellers as prices remain relatively high, interest rates stay low and fewer borrowers owe more on their houses than they’re worth. The number of homes listed for sale in February climbed 9% in Los Angeles County from a year earlier, according to data from the California Assn. of Realtors, and the time it would take to sell every house on the market was at its highest level in three years.
Not to worry, Steve Thomas assure us that “demand for Orange County existing homes is surging” and it’s a “seller’s market.” Unfortunately, the statistics from Redfin above tell a different story. 
According to Mr. Thomas, only 5,443 homes were available for sale in February. Redfin pegs the current number at 6,994. Either the February numbers were wrong, or 1,551 people listed their homes for sale over the last three weeks — and if you plug the current inventory number into the months-of-supply calculation, and rather than showing a brisk market, it looks like a buyer’s market with a glut of supply.
“Supply is not an issue right now, not like it was,” said Rich Simonin, chief executive of Westcoe Realtors in Riverside. “It’s not a problem.”
Did you notice this is the exact opposite of the story in the OC Register a couple of weeks ago?
Supply will become an issue if it keeps building up — an issue in a bad way.
That’s a shift from the last few years, when many sellers held their homes off the market and bidding wars were common for the rare well-priced listing. More supply should help keep prices in check, economists say, and coupled with an improving economy could help fuel a broad recovery in the region’s housing market over the next few months.
That’s the dream. Realtors have relied on the lack of inventory as an excuse for poor sales. When sales fail to materialize over the next few months, they will have to rely on the “tight lending standards” meme as their standard inaccurate spin.
But so far the housing market has been in a slump.
Home sales in the six-county Southland fell 2.7% in February from a year earlier, according to figures out Tuesday from CoreLogic DataQuick; it was the 15th time in 17 months that sales have fallen.
Consistently falling sales is not a sign of a robust recovery. It’s a classic sign of low affordability creating a problem.
Although the region’s median sale price of $415,000 was up 8.4% compared with February 2013, it has been basically flat since last summer, when it plateaued as many buyers hit a ceiling for what they could afford.
Halleluia! A lucid moment of truth!
Selma Hepp, senior economist at C.A.R., … said. “But affordability is going to stare us right in the face again.”
For many buyers looking at the bottom half of Southern California’s high-cost housing market, affordability never stopped being an issue. The supply of homes for sale remains far tighter at prices below $500,000 than above it, according to C.A.R.’s data. And good homes in that price range tend to sell fast.
Aviva Lomeli, an agent with Redfin … said. “It feels like in the last few weeks the market has taken off.”
Once, just once, I would like to see a realtor say “the market really sucks right now.”
Realistically, even if they said it, it would never make the newspaper…
If it has, prices will rise quickly unless still more sellers step in, said Andrew LePage, …”If we don’t see a meaningful jump in inventory, we’ll be right back up against affordability constraints.”
So far, we are seeing a meaningful jump in inventory. As we get closer to the peak, fewer and fewer sellers are trapped underwater, so fewer homes will be trapped in cloud inventory.
But right now, said Simonin, the housing market is as stable as he can remember it being in a long time, balanced between buyers and sellers, appreciating but still somewhat affordable.
“It won’t stay this way very long,” he said. “We should enjoy it while it does.”
Surprisingly, I agree with him.
Even though prices are high, I have to rely on my analysis that shows current pricing is still relatively affordable — at least on a monthly-payment basis.
So is this spring a buying opportunity, or is it the top of the market?
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Hopefully a top. Housing is grossly over priced to the median wage. This was a good article thanks for your thoughts
Real estate has had a 60 year bull market run. With wages not supporting prices their will be a major hit and many fortunes will be lost !
The cost relative to income is certainly at near record highs, but it’s supportable due to near record low interest rates. Of course, if those rates are unstable, then the whole house of cards could potentially come down.
Funny how housing bears ignore the effect current rates have on prices, and how housing bulls ignore the effect potentially rising rates would have on prices.
Its based on a cycle, not the old bear, bull debate!
Rates will need to rise 300+ bps, or nearly double, in this “cycle” for “fortunes to be lost,” no? What’s the probability of that? What’s the timeframe?
Demand is for lower price. In fact, much lower. But, iVY league academics are running the show, and they have the ’cause and effect’ COMPLETELY assbackwards. No small wonder ZIRP (implemented inititally as a temporary “emergency measure”) remains in-play nearly 7 yrs running.
I imagine they would argue the demand is for a lower cost (price be damned), which they provided by providing super-low mortgage rates to greatly reduce the cost of ownership. It’s one of the reasons I still believe ZIRP will survive 2015.
“price be damned” aka ‘the principle’ is precisely the problem.
Keep your eye on DXY, and 3-6 month 50DMA support line.
the dollar has sold off substantially since last Wed/post Yellen, so market participants are becoming more aligned with your “ZIRP will survive 2015” theory. For now 😉
http://quotes.ino.com/chart/index.html?s=NYBOT_DX&t=&a=&w=&v=d3
Republicans attempt to weaken Dodd-Frank
“The consumer agency has put in place strong rules to protect consumers from tricks and traps in financial products,” Warren said in a statement to National Journal Tuesday night. “The big banks don’t like that—and that’s the number one reason the CFPB should remain free of political influence.”
“In addition, it risks returning us to the days of ‘too big to fail,’ protecting Wall Street firms from important regulatory safeguards and putting ordinary citizens and the economy at risk,” the White House said in a fact sheet Tuesday evening.
The House budget also would scrap what’s known as the Orderly Liquidation Authority, a provision that gives the Federal Deposit Insurance Corporation, the independent agency created during the Great Depression meant to maintain stability of the U.S. financial system, the power to assume operational and financial control of a troubled financial institution considered systemically important. In that role, it has the responsibility to merge, sell, and manage the institution’s assets, as well provide money necessary to bring an orderly end to the troubled institution.
Republicans say cutting this provision prevents taxpayers from being on the hook for bailouts of financial institutions behaving badly. But the White House struck back on Tuesday, saying, while Republicans claim the budget does not rely on gimmicks or “creative-accounting tricks,” the savings made by getting rid of the provision would be both.
“[The Orderly Liquidation Authority] was enacted to ensure taxpayer funds are never again used to bail out ‘too big to fail’ financial institutions,” the White House fact sheet said.
The Republican Party has gone completely insane. Insanity used to be the domain of Democrats. Not any more…
On this particular issue, it certainly looks like the Democrats are the adults in the room.
Review the highlights of the Congressional Republicans’ budget offering, and find me one area where this party isn’t completely insane.
I’m an independent – no shill for the Left. I see complex issues for what they are, complex. I don’t have a certain answer to solve every problem, because the problems are complex. Therefore, I remain party-less.
>> Therefore, I remain party-less.
Amen. I think one of the most helpful things folks can do is to register to vote as ANYTHING BUT a Republican or a Democrat.
It would remove the illusion these parties have the “consent of the governed”.
Its both parties my friend. Their is no difference between the two !
Never say Never in Politics.
And mark my word. Interest rates will not go up again in the US.
The Fed knows it’s a house of cards. It knows that its a global economy and Americans are losing jobs overseas. It knows that many Americans will have to start their own business and that takes time.
The Fed is not out to lunch like most think. They just act like they are to keep the markets in uncertainty.
>> And mark my word. Interest rates will not go up again in the US.
If this is true, then pensions are in trouble. Pensions are assuming a 7% or so rate of return. Not gonna happen with zirp forever.
Not sure who wins here.
I could see a massive government bailout of the pension industry caused by the low returns relative to their projections. Since such a bailout will be supported by seniors, a major voting block, for as distasteful as the rest of us would find it, a bailout of pension funds is a real possibility.
>> I could see a massive government bailout of the pension industry caused by the low returns relative to their projections.
I had not considered that possiblity until now. Frankly it makes me want to throw up.
I need to go think about that that means in a bigger context.
Thanks for the idea.
We are going to fund the retirements of Baby Boomers one way or another. Either Social Security benefits will rise or pensions will get bailed out. Seniors will always vote for their own entitlements. Who pays isn’t their problem.
This is unprecedented, but not surprising given the conditions
Low Homeownership Rates Push Homebuilders into Rental Market
Lennar homebuilder made a big move when they decided to enter the rental market after disappointing homeownership rates. Now, according to a report from Bloomberg News that risk could be paying off, influencing other homebuilders to make the jump and increase their rental properties.
The business news company reports, Lennar opened its first community of single-family rental homes this month in Sparks, Nevada, and has a construction pipeline of 20,000 apartments exceeding $5.5 billion, the Miami-based company said today.
“We’ve seen and continue to see outsized improvement in the rental market in terms of low vacancies and higher rental rates,” Chief Executive Officer Stuart Miller said on Lennar’s earnings conference call Thursday. “The inability of the American family to access the mortgage market” is forcing many families to consider renting single-family homes because they aren’t able to buy.
The U.S. homeownership rate fell to its lowest level in 20 years at the end of 2014 at the same time the rental housing vacancy rate dropped to its smallest share since 1993, according to the Census Bureau. Demand has shifted toward rentals as millions of homeowners lost properties to foreclosure and potential buyers couldn’t afford to own real estate or had trouble qualifying for loans.
Sales and construction of new homes remain below historical averages. Single-family home starts plunged 15 percent in February from the previous month to an annual pace of 593,000 as bad weather slowed development, the Commerce Department reported this week. The average since 1995 has been 1.04 million.
Have you seen Austin?? There must be a huge apt/ condo complex being being built ever two blocks. In the future they will be either Manhattan lofts or the ” Projects”.
The projects built in good locations will be like Manhatten lofts, and those in poor locations or with poor management will end up like the “projects.” They all purport to be fantastic high-end properties in order to gain financing. Reality is determined by the market after the fact.
Most renters are not ready (or willing) to buy
The rent may be too damn high, but it’s not enough to turn most renters into buyers.
The gap between rental costs and household income is widening to “unsustainable levels” in many parts of the country, new research published Monday by the National Association of Realtors found, “and the situation could worsen unless new home construction meaningfully rises.” In the last five years, a typical rent rose 15% while the income of renters grew by only 11%, the study found. The top markets where renters have seen the highest increase in rents since 2009 are New York (51%), Seattle, (32%), San Jose, Calif., (26%), Denver, (24%) and St. Louis. (22%).
“Many of the metro areas that have experienced the highest rent increases are popular to millennials because of their employment opportunities,” Lawrence Yun, NAR’s chief economist said in a statement. “With a stronger economy and labor market, it’s critical to increase housing starts for entry-level buyers or else many will face affordability issues if their incomes aren’t compensating for the gains in home prices.”
But most renters are reluctant to buy. Only 12% of current renters say they plan to buy a home within the next year, according to the latest “Housing Confidence Index” published last week by real-estate company Zillow.
What people say they would like to do — and what they actually do — are two different things. “While the increase in confidence among renters is heartening,” Zillow chief economist Stan Humphries said that it’s important to take a reality check. Among renters aged 18 to 34, 66.2% said owning a home was the best long-term investment, up from 61.4% last year. “Not all renters who want to buy this year will be successful,” Humphries says. “Saving a down payment, qualifying for a mortgage and finding an affordable home to buy all remain formidable challenges for many.”
Mortgage Amounts Rising More Quickly Than Home Prices
Mortgage amounts are rising more quickly than home prices, an unusual phenomenon that seems to confirm continued weakness at the lower end of the housing market, according to the Mortgage Bankers Association.
The trade association reports that the average size of purchase loans began to outpace the recovery in home prices in September 2011. By December 2014, according to the group’s weekly mortgage application survey, the average purchase loan amount had risen by nearly 32 percent. The average for the week ending March 6 was $294,900, a record high. In other words, the average purchase loan now exceeds levels reached before the recession when home prices soared to unsustainable heights.
By comparison, the association noted, a Federal Housing Finance Agency index that measures home purchase prices shows a considerably more gradual rise of 18.5 percent since 2011. Why this unusual parting of the two trend lines? Lynn M. Fisher, the association’s vice president for research and economics, said one possible explanation is that home prices are rising more quickly for larger homes, skewing the loan average upward. But more likely, she said, is that the bulk of the properties being sold are at the high end of the price range. “The mix of people buying is changing,” Dr. Fisher said. “More of the bigger stuff is transacting.”
Buyers on the lower end — looking for homes priced at $250,000 and below — “are generally of moderate credit and are having trouble or being intimidated from applying for mortgages,” said Lawrence Yun, the chief economist and senior vice president for research at the National Association of Realtors. “While on the upper end,” he continued, “given the stock market bull run of the past six years, they have done very well financially. The stock market expansion has given a comfort level at the top tier of families to go ahead and apply.”
This is raw data for 70 MSA’s that shows the following from 2009-2013:
% Change in Rents
% Change in Incomes
% Change in Mortgage Payment
% Change in Renter Households
% Change in Owner Households
http://economistsoutlook.blogs.realtor.org/files/2015/03/NAR-Renter-Research-70-Metro-Areas.pdf
You might find it interesting. I know I did.
Thanks for sharing.
It gives a good understanding of just how undervalued homes were in the Inland Empire. Since 2009, mortgage payments have increased 47.73% while incomes only rose about 7%. The only way that works is if houses were greatly undervalued.
Hysteria Over Drought Stoked by Climate Change Advocates
Climate change driving California’s drought
Research by Stanford University points to climate change as a key driver in California’s historic drought level. It is not a question of whether California has ever before had droughts. The question of this research was how climate change impacts the severity of weather events like droughts. The findings were that “… extreme atmospheric high pressure in this region – which is strongly linked to unusually low precipitation in California – is much more likely to occur today than prior to the human emission of greenhouse gases that began during the Industrial Revolution in the 1800s.”
This research can be yet another climate change deniers’ example of science getting in the way of their personal beliefs or economic incentives, except this time the consequences of denial will impact Americans who eat tomato-based products, use a lemon or search Google.
No water, no economy
Imagine the ramifications for your state if it were to run out of water. That is the immediate challenge facing California. January 2015 was the driest in California since record-keeping began in 1895. This is not a recent weather event: NASA data shows that California’s water storage capacity — in the form of its lakes, snow levels, water table etc. — has been in decline since 2002. There is no contingency plan for this level of climate change for the world’s seventh largest economy.
The economic ramification will range from measurable to catastrophic. Two-thirds of the state’s water losses are tied to the agricultural community’s pumping the aquifer dry. A point of diminishing return is being reached with increased reports of dry wells. California’s agricultural industry is on the precipice of economic decline and may be heading toward collapse due to a lack of water.
The cost of climate change denial
California is unfortunately positioned to become the first case study on the cost of climate change denial. If California’s water crisis reduces its economic activity by 20 percent, that would equate to a $500 billion decline in our nation’s gross domestic production. This scale of economic decline would represent significant national job loss. It would represent significant food inflation from lost production. It would increase the national deficit from lost tax revenues from California. It would circumvent all the work by the Federal Reserve, Congress and the president to restore economic growth following the Great Recession.
My guess is that California will address this crisis through technology. Over the long term, the state will accelerate its adoption of zero net buildings. Creating economies of scale through state-wide adoption will drive the cost of smart water technology to affordability. New companies will be born, and California will become a global supplier of smart water technologies. But that is the future, after much economic pain tied to the consequences of climate change. The storm cloud on the immediate horizon is the potential first national economic crisis tied to global warming. The forecast is for a very hot political season over whether our country can deny climate change any longer.
If you believe in the science, then by extension you must believe in the climate models that scientists have constructed using the most up-to-date research…
California drought and climate warming: Multiple studies find no clear link
http://www.latimes.com/science/sciencenow/la-sci-sn-climate-change-california-drought-20140929-story.html
US Government: California drought mostly due to natural causes, not global warming
http://www.washingtonpost.com/blogs/capital-weather-gang/wp/2014/12/08/noaa-report-says-california-drought-mostly-due-to-natural-causes/
Get outta here with your “science,” Mr. Mellow Ruse!
The cities where houses are suddenly going underwater
Presents second buying opportunity for investors
Despite an overall housing recovery, it’s suddenly becoming more common in several of the nation’s largest cities for homeowners to owe more on their home than it’s worth.
The national negative equity rate, which had declined for 2 1/2 years, stalled in the fourth quarter of 2014 at 16.9 percent, according to a new report from Zillow.
In the fourth quarter, the rate worsened in 21 of the nation’s top 50 housing markets, including Philadelphia, Boston and Houston.
Zillow estimated that more than a quarter of homeowners are underwater in the metropolitan areas of Virginia Beach, Jacksonville, Las Vegas, Atlanta, Chicago and Memphis.
During most of the recovery, rising home prices and the completion of foreclosures pushed down the number of homeowners with negative equity from a recession peak of 15 million.
Now, however, many lower-value homes are losing value again, Zillow reported, and that’s what’s behind the rising rates of negative equity.
Zillow reported that the underwater rate for top value homes was only about 9 percent, compared to almost 16 percent for middle value homes, and for the bottom tier of home values more than 27 percent.
In places like Kansas City, Cleveland, Atlanta and Chicago, more than 40 percent of bottom tier homeowners were underwater, but 10 percent or less for the top.
Ted Cruz Is Running For President: 5 Obstacles Between Him and the White House
Speaking at the largest Christian university in the country on the fifth anniversary of the enactment of the Affordable Care Act, Texas Sen. Ted Cruz officially announced his campaign for president today, billing himself as the small-government, socially conservative antidote to the Obama administration.
“It is a time for truth, it is a time for liberty, it is a time to reclaim the Constitution of the United States,” Cruz said this morning at Liberty University in Lynchburg, Virginia.
Cruz became the first major candidate to formally declare his candidacy.
“I believe in the power of millions of courageous conservatives, rising up to reignite the promise of America,” he said.
But despite his appeal to the conservative, grassroots elements of the GOP, Cruz faces an significant challenges in the battle for the Republican Party’s presidential nomination.
Here are five obstacles standing between Cruz and the White House:
1. Standing Out As The Conservative Candidate
Ted Cruz’s presidential campaign will largely hinge on appealing to the conservative base of the Republican Party, and his ability to distinguish himself from other conservative candidates.
Cruz’s first test will come in Iowa — a state that selected former Arkansas Governor Mike Huckabee and former Pennsylvania Senator Rick Santorum as the winner of its caucus in 2008 and 2012, respectively. Recently, Wisconsin Governor Scott Walker has attracted the attention of Iowa’s social conservatives after his fiery speech at the Iowa Freedom Summit in January. Cruz will need to differentiate himself from these candidates to win over the state’s social conservative voters, who represent a large bloc of caucus-goers, and set the path for the rest of the primary races.
2. Jeb Bush’s Fundraising Juggernaut
With $100,000-per-ticket fundraisers and a purported goal of raising as much as $500 million for the Republican presidential primary fight, former Florida Governor Jeb Bush has emerged as the fundraising heavyweight in the 2016 race, pressuring other candidates to ramp up their own efforts.
Cruz had the backing of traditional donors in his 2012 Senate race, but also raised a significant amount of money from small-dollar donors. Cruz will need that grassroots support once again to sustain his campaign. As the first candidate to declare, he’ll be the first to solicit direct contributions to his campaign. Against Jeb Bush’s prolific fundraising machine, every direct dollar, from contributions big or small, will help Cruz in what is expected to be the most expensive presidential campaign cycle to date.
3. The Canada Question
Can Cruz — who was born in Calgary, Canada — legally run for president? He says yes. His mother, a U.S. citizen, gave birth while his parents happened to be working in Canada at the time.
Cruz was a dual American-Canadian citizen until 2014, when he renounced his Canadian citizenship after its discovery raised questions about his presidential eligibility. While he won’t be the first presidential candidate not to be be born in the United States (John McCain was born in the Panama Canal zone, and George Romney was born in Mexico to American parents), legal experts have concluded that Cruz’s birth isn’t an obstacle to becoming president. In a recent Harvard Law Review article, a pair of former solicitors general said Cruz was “fully eligible” to serve as president. Still, Cruz could face some resistance from within the party – potential candidate Donald Trump has already voiced concerns about Cruz’s eligibility.
4. He’s Not Always The Most Popular Guy In The Room
In his three years in the Senate, Cruz has irked his colleagues over and over — whether it was leading a 21 hour filibuster just days before a government shutdown or making one senator miss a performance of the “Nutcracker” with her family ahead of Christmas.
In 2013, McCain called Cruz a “wacko bird” for his positions and representation of the Republican Party. But Cruz–who tellingly called himself a “proud wacko bird” in response to McCain’s comment–has built his political brand on such confrontations with Democrats and Republicans, and will likely bill himself as an uncompromising candidate willing to stand up to both parties in defense of his principles, and regardless of popularity.
5. He Hasn’t Been Around the Block
Unlike many of the current and former governors in the Republican field, Cruz is a relative political newcomer, having only taken office in 2013. While Bush can draw from eight years of governing experience, and Walker can highlight five years of battling public sector unions in Wisconsin, Cruz has only three years in Washington to his name. That level of experience didn’t stop then Sen. Barack Obama (who had just as much experience as Cruz does now when he ran for president), but it leaves Cruz open to criticism from his potential challengers.
6. He is completely insane.
The reporter did fail to mention that.
Plus, he is so far out on the extreme, he’s simply not electable. He will serve to drag the party platform to the right, which is probably a good fiscal move, but he may also force Jeb Bush to make some far-right statements in the primaries that may hurt him later.
The next candidate to announce will be someone from the religious right, probably Mike Huckaby who will also force the party more to the right.
The Republican party will ultimately rally behind Jeb Bush because he has the best chance to win.
The real entertainment will come from the Hillary Clinton versus Elisabeth Warren battle in the Democratic party.
He also has that creepy glassy-eyed look, like he’s never listening to what others are saying; not to mention the slicked-back hair and the chubby frame. These are all important elect-ability issues.
He would make good fodder for cartoons…
http://3hvfzc2w6u7kruih321x50k11vq.wpengine.netdna-cdn.com/wp-content/uploads/2014/03/cruz-sabo-poster.jpg
http://www.fairfaxunderground.com/forum/file.php?40,file=130215,filename=TedCruzCanada.jpg
http://cdn01.dailycaller.com/wp-content/uploads/2013/10/Ted-Cruz-fashion-report-card-e1382027197776.jpg
The left certainly doesn’t want to see him win…
http://www.prosebeforehos.com/wordpress/wp-content/uploads/2013/11/ted-cruz-america.jpg
Gold Slips as Investors Sell Into Last Week’s Rally
Bullish sentiment signals further declines forthcoming
Gold prices edged lower on Monday, as traders took profits after a series of sharp gains last week, although some believe the precious metal will resume its upward course in the days ahead.
Gold for April delivery, the most actively traded contract, was recently down less than 0.1% at $1,184 a troy ounce on the Comex division of the New York Mercantile Exchange.
Some investors believed gold’s fortunes have turned, at least for the time being, after the Federal Reserve gave a more dovish-than-expected assessment of the U.S. economy last week and indicated it isn’t in a hurry to raise interest rates. Continued low rates are good news for gold, which struggles to compete with yield-bearing investments when borrowing costs rise. Gold prices are up more than 3% since the March 18 Fed meeting.
“We may give back a little bit of last week’s bounce, but for the longer term, it appears gold has turned a corner,” said James Cordier, a broker at OptionSellers.com. “We expect gold to be over $1,200 an ounce very soon.”
Larry,
Thank you as always for providing articles like this. I think this was a perfect follow up to your previous article about the OC market. I was one of those with anecdotal reports that housing seemed like it was surging again. In late Jan and all of Feb I saw many many homes go pending in the north OC area (where I am located). It seemed like an anomaly since in the previous months I saw those same homes sitting on the market for many months. I honestly thought there was another move in housing.
In March Im seeing things die down again. As a potential buyer, I really hope that this is the trend with subsequent drops in prices. I saw the same report from redfin showing decreased sales in Feb, but could it because these closed sales are a result of a slow Dec and jan? Will a high number of pending sales in Feb be reflected in closed sales numbers in March or April? Would pending sales be a more accurate reflection of current market since it will take a month or two for pending homes to become closed sales.
Thanks again.
Pending sales are touted as a better forecasting tool because pendings are future closings; however, it introduces another variable to the mix: cancellations. Sometimes, cancellations are very high, and sometimes, not so much. This throws off Steve Thomas’s months-of-supply calculations significantly, but since he is motivated more by headlines that stoke demand rather than accuracy, this serves his purpose.
Right now the market is fairly well balanced. The seasonal uptick in demand is being offset by a substantial increase in listings. Since we had a shortage of listings before, these new listings brought back a balance we lacked.
Sales will increase over the next four months per its usual seasonal pattern. We will see sales peak in June, plateau for the summer, then decline significantly from September through January of 2016.
Super low mortgage rates are stimulating demand right now, so if these rates persist, sales will do well, and prices will go up. As these rates start to rise, sales activity will drop off, and if rates go up too much, sales will really fall off a cliff, and prices may follow.
Keep in mind, that even if prices go down, the cost of ownership will not. The reason prices may drop is due to rising borrowing costs, which means the cost of ownership will still be high.
U.S. Existing Home Sales Up 1.2% in February
Existing-home sales increased 1.2% last month from January to a seasonally adjusted annual rate of 4.88 million, the National Association of Realtors said Monday.
Economists surveyed by The Wall Street Journal had expected February sales would increase to a pace of 4.9 million. Sales for January were unchanged from an initially reported 4.82 million.
NAR reported total sales were up 4.7% from February 2014 (which was a particularly bad month last year), however normal equity sales were up even more, and distressed sales down sharply.
Calculated Risk assures us this is positive because “If total existing sales decline a little, or move side-ways – due to fewer distressed sales- that is a positive sign for real estate.” He lowers the bar so that no matter what happens real estate exceeds expectations.