by Calculated Risk on 8/29/2010 07:24:00 AM
Sunday, August 29, 2010
Summary for Week ending August 28th
It was a busy week ...
The NAR reported:
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 27.2 percent to a seasonally adjusted annual rate of 3.83 million units in July from a downwardly revised 5.26 million in June, and are 25.5 percent below the 5.14 million-unit level in July 2009.
...
Total housing inventory at the end of July increased 2.5 percent to 3.98 million existing homes available for sale, which represents a 12.5-month supply at the current sales pace, up from an 8.9-month supply in June.
![Existing Home Sales](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiII7cP4147hD8L2-DDEIAiqVRWvCfMRYnWti8EqcxYjmWHGiyf0mB1D9TyTCjsZ1oB8lA0TyI-uYWpqPSSxudQFu_7WZuaFVI8XN_SqpWxF7OFBuRIQwrd_6TKN5tGDw8lZFkT/s320/EHSJuly2010.jpg)
This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.
Sales in July 2010 (3.83 million SAAR) were 27.2% lower than last month, and were 25.5% lower than July 2009 (5.14 million SAAR).
The next graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Inventory is not seasonally adjusted, so it really helps to look at the YoY change.
![Year-over-year Inventory](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQBqEecokj1SiXwxJwfX3Wk1hLofGlke_P3lzeXmmKU3fc1STPPUnezieBn0Hz5nBGxfao59ka-u2RcmeXAVW6RdOFHYnJ_y-LHaC659Kq2aRPqLbT3pVKPAr-wxZ4e3qJ0j9v/s320/ExistingHomeInventoryMonthsJuly2010.jpg)
Note: Usually July is the peak month for inventory.
A normal housing market usually has under 6 months of supply. The following graph shows the relationship between supply and house prices (using Case-Shiller).
![Months of Supply and House Prices](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6xZS8zpaRndCcj7wUe0Ng-GcmLrC5_DNjdFA89_XbU4sYrVP03nfVx33UjaxEwr_pOdW9dsJvOSWO5bTWiHkmAp6324bKJEKAXwELnvEbYANukVtNd729FHjQBH7rtpQvakn2/s320/ExistingHomeMonthsPrices.jpg)
Below 6 months of supply (blue line) house prices are typically rising (black line).
Above 6 or 7 months of supply, house prices are usually falling. This isn't perfect - it is just a guideline. This is a key reason why I expect house prices to fall further later this year as measured by the Case-Shiller and CoreLogic repeat sales house price indexes.
![New Home Sales and Recessions](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjidH5olWtat-xdz42GBUt-4daj-0xlsAga9YJ0z9QPZC6CPEn0dFhptYXr3HrfA_YkMfIc9e_D0b0I6xrW7yWhDGjNmRZ9zRbfdrREZvERUx4073xPBMHDy2XpGWXTBVLx5-L/s320/NHSJuly2010.jpg)
This graph shows New Home Sales vs. recessions for the last 47 years.
And another long term graph - this one for New Home Months of Supply.
![New Home Months of Supply and Recessions](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjivsQbvkRPty4HUBNzxMZ5bsPiME4JDresNZfzJZ0-QtZVL21oouyLpsU23MM_3bw3FAfEcqn33yHSDCP88v9d6LfgYsPQQnzlxJkLHupKDYTXswjXTJiMaWA6ts8TKLf2ON8p/s320/NHSMonthsJuly2010.jpg)
The 276 thousand annual sales rate for July is the all time record low (May was revised up a little). This was another very weak report. New home sales are important for the economy and jobs - and this indicates that residential investment will be a sharp drag on GDP in Q3.
Here is my post on the MBA Q2 delinquency report: 14.42% of Mortgage Loans Delinquent or in Foreclosure . This graph (from the earlier post) shows the delinquency rate by "bucket" (30 days, 60 days, 90+ days, and in foreclosure process):
![MBA Delinquency by Period](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9M30elesmY3m6jOUmD10eYcJ4YBCdoK-lmJ8-3nErUDKDTEaXGohCJESuB1rge7Teetbtwfl8KIIY7UXwILsdf3TMxJ0Kf_kaOL3gr8gxXK47CdB3Qtr8vLAlsByL-ErFhvuP/s320/MBADelinquencyQ22010.jpg)
Loans 30 days delinquent increased to 3.51%, and this is about the same levels as in Q4 2008 (slightly below the peak of 3.77% in Q1 2009).
Delinquent loans decreased in all other buckets - especially in the 90+ day bucket. MBA Chief Economist Jay Brinkmann suggested the decline in the 90+ day bucket was because of some successful modifications - since the lenders reported the loans as delinquent until the modification was made permanent.
![MBA Delinquency rate by State](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiek4GQF5bTOI8lEDyjs1aRKaR5btxnnQKm-0GSgkSswWblBCCLWqsE0szPXebmVDvdE3lv1shLIlnZcwSEP6sFVOFo_5gu9VMeSuuTk66o-4kXrIoqO3xAPVx0O3yhpSa5u0ZW/s320/StateDelinquencyQ22010.jpg)
Clearly Florida and Nevada have a large percentage of loans delinquent or in foreclosure. But the delinquency problem is widespread with 36 states and D.C. all having total delinquency rates above 10%.
With house prices falling - and growth slowing - the delinquency rate will probably increase later this year.
![Negative Equity by State](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgUIEFegb0k1GxwYOBFeYxQoJNBh-IzzkxL9Oh8loBJ1ebtP7G58pEIkHtu4ve3EbRrapnlZI504OyWrmiQVUB3o2Wche3idf4_trhBViJKV_jk4jbr7mf42S-2qwHIs5yeI7a_/s320/NegativeEquityStatesQ22010.jpg)
This graph shows the negative equity and near negative equity by state.
Although Nevada, Arizona, Florida, Michigan and California, have the largest percentage of homeowners underwater, there is a negative equity problem in most states. In 33 states and the D.C., 10 percent or more of homeowners with mortgages have negative equity.
Best wishes to all.