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Wednesday, October 25, 2006

The Last Holdout?

Once a month I scroll through HousingTracker, which tracks real estate listing prices and inventory for metro areas around the country. It takes a few months after the market turns sour for listing prices to go down, but once the reality sinks in, these are not bad proxies. Usually you will see the inventory start to rise for a few months at list before the listing prices drop.

Anyway, it looks like the last good market is Raleigh-Durham. Inventory is not up significantly there yet, so they have at least a few more months. The overall mix of jobs, prices, demographics and local government sanity index in this area is just about the best in the country. It will stall out next year some time when the recession really hits, though. Whether it stalls out or actually drops might almost serve as a proxy for the entire nation's future in 2008. If, by the end of 2007, Raleigh-Durham's pricing has managed not to drop more than 2% from the beginning of 2007, there will be some light at the end of the tunnel. If it goes much below that, don't look for a recovery until late 2009 at the earliest.

Salt Lake City seems definitely to have crossed over. It was extremely, extremely hot, and is now on the downside of that curve. Inventory is up nearly 60% over the last six months and prices have begun to drop.

Austin has been strong, but may be tipping over. It's too soon to know for sure, but it does appear to have stalled. It looks like we'll know in mid-December. As I have tracked these markets over the last year, the MTBF has dropped sharply. In the first ones to slide, it took nearly a year of higher inventory to generate pricing drops. Now it's more like 4 months in the last few. It is clear that the market will not recover next year.

I'm waitiing for the existing home sales breakdown for September to be released. Nationwide, the median home price dropped 2.2% compared to September 2005. But that's not surprising. The meat and potatoes is in the regional figures and the condo/single family figures. There is a mild pleasure in watching NAR's nonsense eddy and swirl from month to month. This is last month's press release:
WASHINGTON, September 25, 2006 -

Existing-home sales stabilized at a sustainable pace in August, while home prices showed an anticipated decline, according to the National Association of Realtors®.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – slipped 0.5 percent to a seasonally adjusted annual rate1 of 6.30 million units in August from a level of 6.33 million Ju1y, and were 12.6 percent lower than the 7.21 million-unit pace in August 2005, which was the second highest on record.

David Lereah, NAR’s chief economist, said home sales appear to be leveling out. “After a stronger-than-expected drop in July, the fairly even sales numbers in August tell us the market is at a more sustainable pace,” he said. “It keeps us on track to see the third highest sales year on record, but we do expect an adjustment in home prices to last several months as we work through a build up in the inventory of homes on the market.”
Needless, to say, the idea of "stabilization" is already contradicted by this month's facts about sales in September:
The pace of existing home sales fell for the sixth straight month in September, hitting a 6.18 million-unit annual rate, according to a report from the National Association of Realtors on Wednesday that was a sharper drop than economists expected.

Year over year, U.S. home prices fell 2.2 percent to $220,000.
The $220,000 median is about what I expected ($5,000 below September 2005's median). The sales are slightly lower than I expected, but only slightly. I am really on tenterhooks waiting for the detailed information, because this is the test of my demographics model. Relatively, I am expecting the midwest to be dead, the northeast to be up somewhat on bargain hunting, the west to be in condos, and the south to have fallen.

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