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The 2005-2006 home sales and price peaks
Thursday, July 30, 2009
This chart was pulled from the bottom of yesterday's Has the housing market hit bottom? piece for the benefit of those who didn't make it all the way to the end of the story. While this may have been created elsewhere, it's the first time that I've seen these two together.
Without any doubt, the housing price peak lagged the housing sales peak by quite some time, home prices gaining about another ten percent in the interim. There is little reason to think that there will be a marked improvement on this when housing bottoms.
8 comments:
This is a great graph. However, I'm not sure what it predicts about housing overall. Clearly the foreclosure market has finally discovered prices where buyers exist. But if the market is mostly foreclosures, and with the huge inventory levels, buyers will driving prices down, not up. And we still have an extremely tight credit market for anybody who actually needs it.
Given the seasonal nature of CS, we are probably in a phase where prices continue to go down annually, but at a slower pace, with the occasional uptick MOM.
The low prices for foreclosure sales at the bottom are analogous to the the high prices for wacky subprime sales at the top. Interesting.
Greed and capitalizing on a persons’ misfortunate brings out the worst in us as a nation. The current financial crisis has many culprits, but millions of victims. We can say what we want about over indulgence and living beyond our means. But we must ask; how was this all possible in the first place?
The FAILURE of the prior administration to regulate the mortgage industry, notably those loans acquired by private investors who sought higher returns than the banks is the root problem. Like any parasite or disease, there are innocent victims who suffer because of proximity to the original disease.
At this point in time the CURRENT administration has the ability to step forward, provide a cure and start the healing process. Take a look at a proposed cure called Mortgage Assistance Program (http://accuriz.com/docs/Real%20Estate%20Report/Mortgage%20Assistance%20Program.pdf). This proposed cure has flaws, but it offers a real solution to a disease that needs a real cure.
The real question is, will the CURRENT Administration step forward and lead us, or will it succumb to the efforts of the Banking Lobby, or more appropriately the Loan Servicing Lobby? Greed is not a good thing when our nation is staring into the financial abyss caused by a small group of individuals who sought ways to manipulate the American Dream.
Tim, you've become a contrary indicator. When you throw in the towel on predicting lower home prices, that's when they will begin to slide again.
:)
@accuriz,
The way out of this mess is for the administration to do NOTHING. Stop bailing out those who made poor decisions. Let stuff that should and will fail do just that. Prices will adjust quickly, bad assets will be wiped out and good assets redistributed.
Dynamics is a bit different now.
Suppose that prices go up when you have <6 months of inventory, down when you have >6 months.
Existing home sales peaked when we were at, say, 3 months. (I don't have the exact numbers, but they can be computed) Sales slowed down, inventory influx remained steady, and we crossed the 6-month threshold one year later.
Things are different today. We got hit with all kinds of moratoria, combine with non-distressed owner retrenching, but, most importantly, combine with the fact that subprime wave of defaults is over and banks are actively modifying defaulting alt-a's, and you get dwindling new inventory starting late 2008. Sales stayed steady, but months of inventory started going down in late 2008 and crossed the threshold again in March 2009. By now, many parts of San Diego are at 2-3 months supply. I'm sure things are the same throughout the country.
From that point on, sales would like to increase, but they can't, because there are not enough houses on the market to choose from! And many of the ones on the market are short sales, which will go exactly as fast as banks can approve them, but no faster.
For the next 6 months, we will see low sales, rising prices, and increasingly desperate buyers who can't get anything because they are outbid on every nice place they come across.
Months of supply is not a relevant quantity. It is just the ratio of listings to the sales rate. Houses are not a consumable item. Excepting for 1st time buyers, every house taken from the supply pool is typically replaced by the one the purchaser is vacating. You will not run out unless the pool of 1st time buyers and investment buyers are increasing. They are actually decreasing. Also inventory data is misleading as there is an enormous foreclosure and pre-foreclosure supply that is not being represented.
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