The National Association of Realtors just released data on pending home sales for October. A recap:
* Pending home sales rose 3.7%. That was much better than the 1% decline that economists were expecting.
* On a year-over-year basis, the pending sales index soared 31.8% to 114.1 from 86.6. That is the biggest annual increase on record and it leaves the index at a 43-month high.
* Regionally, sales climbed in three out of four regions. Sales rose 5.4% in the South, 11.6% in the Midwest and 19.9% in the Northeast. They fell 11.2% in the West.
Some people keep arguing with me about my May call that the housing market was turning. But every single data point confirms that call is on target. Maybe that’ll change some day. But today is not that day.
The latest: Pending sales easily topped estimates, with the index hitting its highest level since the waning days of the bubble in 2006. Also encouraging was the broad-based regional strength and the fact that sales held up despite the tax credit uncertainty pervading the market in October.
Moreover, there are reasons to expect the improvement to persist. Mortgage rates are falling again. Housing affordability is rising. And government support for the market looks like it’ll continue until the proverbial cows come home. We can argue about the morality or wastefulness of those efforts until we’re blue in the face. But the results are clear: They’re helping to accelerate the recovery.
By the way, that recovery would have happened anyway because of falling home prices. Price declines are restoring affordability to a market that had gone mad. Or in simple terms: Falling home prices were never the problem here. They were always part of the solution.
{ 8 comments… read them below or add one }
Mike– I don’t think anyone argues the facts of the housing numbers rising. I am just saying they are 100% bogus. Nothing but sales promoted by the Fed’s money making copy machine and maybe they are even distorted (I am not certain about that).
Since they are bogus, they can go into the toilet quickly… OR Obama prints another $1.2 trillion and gets people to buy more homes they probably cannot afford, and can walk away from without repercussions. Especially if the prices continue to drop.
Prices dropping is very good incentive for this new crop of buyers (and older Alt ARM holders) to walk away from their mortgages. It is becoming a national pastime.
As long as the copy machine can print out dollars, the insanity will continue. Obama thinks NOTHING of the printing and spending of monopoly money. –MichaelM
Pure NAR manipulation of data. It is not real, and realtors I’m not talking to don’t see it either. Once again, and I know you know it, you need to look behind the bogus numbers.
In addition, of the very minute fraction of reported pending sales that are actually real, I wonder how many will fall out of escrow. I’m sorry, but no one I talk to believes this media/special interest hype, and I’m talking to people from all walks of life in various parts of the country. I don’t believe that the average American (especially the so-called first-time homebuyer) feels confident enough in this sick economy to stick themselves with a house and a mortgage. I was just working as a loan closer for one of the major 4 banks, and most of our loans were refi’s, not purchases. Even if someone wanted to buy a house, good luck getting the banks to process it in this lifetime. Something just doesn’t add up.
Mike- Again…I am not arguing the numbers. But the idea of “calling a bottom” implies the worst is over. That is where I have my doubts.
This is just getting to the point of lunacy. First the government gives away houses (like the banks did), and now comes this article about FHA insurance troubles on top of the FDIC insurance troubles already squashed.
And also today, I read the government is starting a new program to pay people to DEFAULT on their mortgages. Yes, they will pay people $1,500 to leave the homes that they quit making payments on! If I find the story online, I’ll send it to you.
If I was not actually living here in America, I would think it was a joke and just made up. Unfortunately, it is true. And thanks to the money-making copy machine, the madness can go on.
It is a COLOSSAL mess:
1. The government passes laws encouraging banks to giveaway homes.
2. The banks then fail and the government blames banks for all the problems.
3. The government gives $700 trillion to those banks that caused the problems (and buys their trash mortgages).
4. The government itself starts giving away homes and pays people to buy them ($8K buying bonus).
5. The government pays people to leave them ($1.5K leaving bonus). I’ll find the article later.
6. The government now toughens rules to prevent people from buying them (below article).
I am crying and laughing at the same time. –MichaelM
PS Yes, I now believe the short sales does count double towards the NAR figures of “sold homes.”
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FHA to Toughen Mortgage Rules in Lenders Crackdown
Published: Wednesday, 2 Dec 2009
By: Diana Olick
CNBC Real Estate Correspondent
Amid rising foreclosures and falling home prices, the Federal Housing Administration is proposing new rules to crack down on lenders and asking Congress for the authority to raise certain borrower requirements, all in an effort to reduce risk to its $685 billion mortgage portfolio.
According to a recently released actuarial study, FHA’s secondary reserves have fallen below the required two percent level, to 0.53 percent of total insurance-in-force…. [MichaelM Note: blah, blah, blah...don't worry the money-making copy machine still is working].
PS Whoops… Did I say $700 trillion. I meant billion. But so what.. With a money-making copy machine who cares?
))
Any number can look good or better if you cheat:
From WSJ July 1 2009 http://blogs.wsj.com/developments/2009/07/01/three-reasons-pending-sales-isnt-a-reliable-indicator/
Short Sales: Another big factor for the de-linking of pending and existing home sales are short sales, where a home is sold for less than amount owed to the bank on the property. Realtors often mark short sales as “pending” once a buyer and seller have agreed on a price—even though the bank still must sign off on the transaction. When that doesn’t happen, the pending sale falls through.
Mike– Here’s that deal I was telling you about from the Fed/Treasury/Obama to pay people to buy a house ($8K in their pocket), and now they pay them to leave it after they skip on their payments ($1.5K in their pocket)!
Are you beginning to see why there has been a “bottom” in housing?
Oh..and the NAR can rack up a double-count on a “sale” to pump up the market for more shenanigans.
God Bless America. –MichaelM
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Treasury unveils rules to shorten process of short sales
Associated Press
Wednesday, December 2, 2009
The Treasury Department unveiled sweeping rules this week to help financially troubled homeowners who need to sell but can’t get a price high enough to pay off their mortgages. Home- owners will even get $1,500 to help cover their moving costs….[blah...blah...insane reasoning follows]
Mike Larson Reply:
December 2nd, 2009 at 1:07 PM
Of course the numbers are being boosted by artificial stimulus. But so what? The housing market has been artificially stimulated by government policy since, oh, the 1930s. It got more artificial stimulus in 1997 with the tax law changes. Then the Fed artificially stimulated the market with its asinine interest rate policy in the early 2000s. Then when things started going bust, we got artificial stimulus from FHASecure … HAMP … TARP … Fed MBS purchases … the increase in FHA purchase limits … the “temporary” increase in jumbo loan limits for Fannie and Freddie … the Fannie/Freddie bailouts and on and on and on.
My point? Sure policymakers are driving the market by their actions. But that’s been going on for years and won’t stop until the government is forced to stop by a bond market or dollar crash. In the meantime, as individual investors, you have to deal with the market you have not the market you want. And it is impossible to argue that the government efforts are having no impact on housing — they are, whether we all think it’s morally repugnant or not.
I would also add that you guys are completely missing a real, FUNDAMENTAL, non-government-driven change in the housing market. Housing is cheap again. Period. End of story. All those ratios that I cited YEARS AGO as proof the market would crash (price-to-income, monthly ownership cost vs. rent, etc.) are back to historical trendlines. In some markets, housing is now UNDERVALUED. People can now buy homes at reasonable multiples of their incomes with plain-vanilla 30-year fixed loans rather than stupid option ARMs. And they are. Not in huge numbers, but enough to turn the tide in sales and inventories.
Bottom line: You have a gradual, gentle turn in the underlying fundamentals combined with an extra “kicker” from government subsidies. I predicted several months ago that we would see a bottom in sales rates, a bottom in construction activity, a peak in inventory and — in late 2010 — a bottom in prices. I have been dead right on three out of four calls, with the last remaining to be seen. Hope this helps elucidate my views better.
Mike– Thanks for clearing it up. I was confused by your position. Now, I can see we only disagree on the “bottom” timing and not much else.
I think, because housing sales are almost 100% Fed induced, the housing market will collapse again (sales and prices) if/when the support is withdrawn.
To me, that is why housing is not at a “bottom.” We are at “life support.” Not in recovery coming off a bottom.
I feel this because we agree it is Fed induced.. Then even more people can flee their homes if there is another crisis. There are no repercussions to walking away. Heck, the Fed will even pay you this time. This would really crater house prices even lower.
Now, if the dollar or bond market explodes (independent of Fed policy regarding housing)…it’s lights out for everything including housing.
On another topic… Why can’t you give us some of your ideas about commercial real estate? Maybe you can do an article about that as it will be a hot topic in the next six months I’m sure.
You are not to far from downtown Miami. Looking at that skyline…Doesn’t that make you think something really bad is bound to happen? What is keeping it together today?
Do you think the Fed can actually print an extra $ trillion to mop up that mess IF it starts to blow up?
If commerical blows up while we are fighting an escalted war, and adding to healthcare budget…wow… I’m concerned that the money-making copy machine will burn up.
Thanks for your insights. –MichaelM
Mike Larson Reply:
December 2nd, 2009 at 2:14 PM
Regarding CRE, here’s an excerpt from the just-released Fed beige book …
“Commercial real estate conditions were widely characterized as weak and, in many cases, deteriorating further. Market conditions were reported to have weakened in virtually all Districts, with rising vacancy rates, downward pressure on rents, and little, if any, new development. Expectations for 2010 were also quite low. Boston characterized the commercial real estate outlook as “bleak,” Dallas noted that construction was at “historically low levels,” and Kansas City described the sector as “distressed.” Still, some Districts noted scattered signs of encouragement: Cleveland and Chicago referenced public-works projects as a source of increased business, Richmond noted signs of increased leasing activity from the health and education sectors, Atlanta indicated a modest pickup in new development projects, Minneapolis noted some recently started hotel and retail development, and San Francisco cited slight improvement in availability of financing for new development.”