by Calculated Risk on 6/22/2010 10:00:00 AM

The NAR reports: May Shows a Continued Strong Pace for Existing-Home Sales

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, were at a seasonally adjusted annual rate of 5.66 million units in May, down 2.2 percent from an upwardly revised surge of 5.79 million units in April. May closings are 19.2 percent above the 4.75 million-unit level in May 2009; April sales were revised to show an 8.0 percent monthly gain.
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Total housing inventory at the end of May fell 3.4 percent to 3.89 million existing homes available for sale, which represents an 8.3-month supply at the current sales pace, compared with an 8.4-month supply in April. Raw unsold inventory is 1.1 percent above a year ago, but is still 14.9 percent below the record of 4.58 million in July 2008.

Click on graph for larger image in new window.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in May 2010 (5.66 million SAAR) were 2.2% lower than last month, and were 19.2% higher than May 2009 (4.75 million SAAR).

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory decreased to 3.89 million in May from 4.04 million in April. The all time record high was 4.58 million homes for sale in July 2008.

Inventory is not seasonally adjusted and there is a clear seasonal pattern with inventory increasing in the spring and into the summer. The increase in April 2010 was partially related to sellers hoping to take advantage of the housing tax credit, and a decline in May was expected (I'll have more on inventory later).

The last graph shows the 'months of supply' metric.

Months of supply decreased slightly to 8.3 months in May. A normal market has under 6 months of supply, so this is high - and probably excludes some substantial shadow inventory. And the months of supply will probably increase sharply this summer as sales fade.

This was a very weak report - as anticpated by Tom Lawler yesterday (see Lawler: Home Sales in May: A Look at the Data ). I'll have more ...

by Calculated Risk on 6/22/2010 08:36:00 AM

Moody's reported today that the Moody’s/REAL All Property Type Aggregate Index increased 1.7% in April, after declining for the previous two months. This is a repeat sales measure of commercial real estate prices.

Below is a comparison of the Moodys/REAL Commercial Property Price Index (CPPI) and the Case-Shiller composite 20 index.

Notes: Beware of the "Real" in the title - this index is not inflation adjusted. Moody's CRE price index is a repeat sales index like Case-Shiller - but there are far fewer commercial sales - and that can impact prices.

Click on graph for larger image in new window.

CRE prices only go back to December 2000.

The Case-Shiller Composite 20 residential index is in blue (with Dec 2000 set to 1.0 to line up the indexes).

It is possible that commercial real prices have bottomed - in general - but it is hard to tell because the number of transactions are very low and there are a number of distressed sales. Prices have been choppy and mostly moving sideways.

Commercial real estate values are now down 16% over the last year, and down 41% from the peak in late 2007.

by Calculated Risk on 6/21/2010 10:32:00 PM

Last week I mentioned the potential law change in California: Under California law, purchase money loans are non-recourse. However once a homeowner refinances, the entire mortgage is recourse ... that is probably going to change ...

Note: This bill, if passed, will take effect June 1, 2011. Here is the proposed bill (ht pastafarian)

From David Streitfeld at the NY Times: Battles in California Over Mortgages

Lenders in California rarely chase foreclosed borrowers for deficiency judgments. Pursuing such cases in court can be an arduous process, and few of those in foreclosure have the assets or incomes to make it worthwhile.

But the threat of such action can come in handy for lenders, servicers and collection agencies. By raising the possibility of a court fight, they can negotiate favorable terms when agreeing to loan modifications and workouts, surrenders of deeds and sales for less than the full amount owed, also known as short sales.

“Using the threat of a deficiency, full-recourse lenders often prevail upon distressed borrowers to sign new, unsecured obligations in exchange for their assent to a proposed short sale or surrender of a deed,” said William A. Markham, a lawyer with Maldonado & Markham in San Diego. “This practice will nearly vanish overnight if the new measure becomes law.”

There is much more in the article. Of course the bankers are fighting to make this apply only to new loans after June 2011. The realtors are fighting to make it apply to current loans ...

by Calculated Risk on 6/21/2010 07:15:00 PM

CR Note: As mentioned in the Look Ahead post, the consensus for existing home sales (to be announced Tuesday) is for an increase to 6.2 million sales in May (SAAR), from 5.77 million in April (SAAR). For new home sales, the consensus is for a sharp decrease in sales to around 400K (SAAR), down from 504K in April.

Housing economist Tom Lawler is taking the under. The following is from Tom:

While most (though by no means all) of the country appears to have experienced a sharp gain in existing home sales (closed) this May vs. a year ago, the nationwide increase does not appear to have been as high as the surge in pending sales (related to the expiring tax credit) in March and April would have suggested. Last year’s “comp,” of course, was pretty low: the NAR estimates that existing home sales last May ran at a seasonally adjusted annual rate of 4.75 million, and unadjusted sales were estimated at 447,000. While this May’s “seasonal factor” should be lower than last May’s (meaning flat unadjusted sales would produce a seasonally adjusted increase), I estimate that unadjusted sales this May vs. last May would have to be up about 19.2% for seasonally adjusted sales to be flat to April. Obviously sales in many areas of the country were up a lot more than that, but in some large states sales showed much smaller gains, and a few saw declines.

Dataquick estimates that new and resale home sales in California were up 4.9%, with the “small” gain mainly resulting from a decline in foreclosure sales. While this stat is based on deeds recorded and includes new sales, MLS data I’ve seen aren’t too far off. The Michigan Association of Realtors reported a YOY decline in sales in May, with the drop coming many in foreclosure sales in very distressed areas. Sales in both Las Vegas and Phoenix were also down from a year ago, with both areas seeing sizable declines in foreclosure sales.

Many other states saw YOY sales gains that were decent, but hardly explosive. Based on realtor data from North Texas, Houston, San Antonio, Austin, Lubbock, and Wichita Falls, it appears as if Texas sales increased about 19.2%. Other states with “so-so” YOY sales gains include Iowa (20.8% statewide), Colorado (18% for Denver and Colorado Springs combined), Birmingham (16.8%), Indiana (14% Indianapolis and Fort Wayne combined), Minneapolis-St-Paul (10.7%), Greater Northern Virginia (6.2%), and quite a few (but not all) Florida markets showed very modest gains.

To be sure, many areas of the country saw sizable increases, but interestingly the vast bulk of these areas saw smaller YOY sales gains in May than in April.

When I add everything I have up, and make estimates for areas where I couldn’t find any reliable data, I come up with an estimated seasonally adjusted annual rate for existing home sales that is much smaller than I would have expected a few weeks ago – something in the range of 5.83 to 5.84 million, which would translate into an unadjusted YOY sales gain of around 20.5 to 20.6%, and would be a boatload under consensus.

Of course, my regional tracking – which until the last few months has easily produced a better-than-consensus estimate, of late has been low to the downside. More troubling (to me, at least), I’ve had trouble “reconciling” to the NAR data even after getting state/local realtor sales data not available until the day of the existing home sales report (or later in some cases!).

Nevertheless, the “raw” data I’ve seen so far suggests that existing home sales in May will come in well under “consensus” – for reasons that are unclear, and until recently to my surprise.

On the new home sales front (to be reported by the Census Bureau), anecdotal reports from a wide range of builders, as well as from some local realtors, suggest that new home sales as defined by the CD probably ran a bit lower than last May, when sales (based on contracts signed/deposits taken) ran at a SAAR of 367 k. I’m “guessing” that the preliminary number for May will be somewhere around 330 k, which would be a monthly decline from April of 34.5% (which is probably close to the monthly decline we’ll see in the pending home sale index scheduled to be release by the NAR on July 1.

CR Note: This was from housing economist Tom Lawler. Note the caveats, but clearly the data suggests a downside surprise.

by Calculated Risk on 6/21/2010 03:48:00 PM

The Obama administration has introduced a "monthly housing scorecard". Here is the website: www.hud.gov/scorecard

Some excerpts and a couple of graphs:

• Home price performance has improved. After 30 straight months of decline and an expectation of continued significant deterioration, home prices have leveled off in the past year and expectations have adjusted upward. Homeowners have benefitted from the stabilization, as owner equity has increased by over $1 trillion since the first quarter of 2009

Click on graph for larger image in new window.

This graph from the Obama Administration "scorecard" shows the actual house prices, and future house prices. The light blue line was the projected house prices based on futures in January 2009 - before the Obama administration started supporting house prices with various programs to limit supply and boost demand.

Note: I don't know why they use washed out colors on the graphs.

I believe the overall goal of supporting house prices was a mistake. It wasn't horrible - because prices were much closer to the bottom than the top - but by keeping prices too high, the market hasn't cleared and there is still a huge overhang of existing home inventory.

The second graph from the housing scorecard shows the Obama administration's estimate of the housing overhang.

I'm not confident in the "held off market" category, but that is probably their method of estimating the shadow inventory (not all "held off market" is shadow, but some probably is). The existing home inventory - and shadow inventory - are still very high.

More from the report:

• More than 2.5 million first time homebuyers have purchased a home using the First-Time Homebuyer Tax credit, helping to stabilize home sales and prices and increase affordability.

This is really sad news. This program was a disaster - most of these buyers would have bought anyway, and the others was just pulling forward future demand at a higher price. Now that the program is almost over (hopefully), demand and prices will probably fall again.

• Martgages are now more affordable. Due to historically low interest rates, more than 6 million homeowners have refinanced, saving an estimated $150 per month on overage and more than $11 billion in total.

• Servicers report that the number of homeowners receiving restructured mortgages since April 2009 has increased to 2.8 million. This includes more than 1.2 million homeowners who have started HAMP trial modifications and nearly 400,000 who have benefitted from FHA loss mitigation activities. Of those in the HAMP program, 346,000 have entered a permanent modification saving a median of more than $500 per month. In addition, HUD approved mortgage counselors have assisted 3.6 million families.

• Based on newly available survey data, nearly half of homeowners unable to enter a HAMP permanent modification enter an alternative modification with their servicer, and fewer than 10 percent of cancelled trials move to foreclosure sale.

Note: the Obama administration needs a better spellchecker (what is a "martgage"?. And I think it is "benefited" with one "t")

This raises more questions: fewer than 10% of cancelled trials have moved to a foreclosure sale? What about short sales? Does that mean that the homeowners are curing the delinquency (getting caught up), or does that mean there are many more distressed sales to come?

There are many more graphs (and a list of sources) in the report and this report might not have much good news in the coming months ...