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Thursday, January 04, 2007

November Pendings

Pending Home Sales for November are out, and you can get the release at this page.
NSA numbers:
Nationally: Oct: 103.0; Nov: 89.5; Nov 05: 96.8; YoY: -9.4%
Northeast: Oct: 88.4; Nov: 70.2; Nov 05: 76.9; YoY: -8.7%
Midwest: Oct: 92.4; Nov: 81.5; Nov 05: 90.8; YoY: -10.3%
South: Oct: 115.0; Nov: 99.5; Nov 05: 107.4; YoY: -7.4%
West: Oct: 106.7; Nov: 97.1; Nov 05: 110.7; YoY: -12.2%
A number of 100 would correlate to sales in the base year 2001. Pending sales are signed contracts instead of actual sales. A word of caution: the rise in contingency provisions may indicate that less of these sales close than in recent years.

The bottom line? NAR will claim that its seasonally adjusted figures, which hit a low of 105.6 in July of 2006 compared to the current seasonally adjusted figure of 107.0 show a "stabilizing" trend. I don't see it, but they do. Their seasonal adjustment gives them a lower -0.5% month-over-month loss but a higher year-over-year loss of -11.4%, in which I don't believe.

It look like mortgage rates bottomed out in early December, so we should see a more positive pending home sales report for December. Purchase mortgage apps should correlate well with pending sales, because an app is submitted when the property is identified. I am expecting a YoY increase in the next pending sales report, because December of 2005 was poor.

Through almost all of 2006, the new factor affecting the housing market was first the halt in investment purchases and then the attempt to unload investment purchases. We now proceed to the next phase, in which the market has to reach an equilibrium somehow. This next phase is very dependent upon mortgage rates, the underlying economy and underwriting standards. Relatively to late 2004-2006, underwriting standards for the worst borrowers are tightening somewhat.

I don't think anyone can say much meaningful about this market until the middle of March. We need to find out what's sitting out there first, and see what effect the construction slowdown will really have on the larger economy. Beginning in September, the dominant new force driving the change in the housing market will be employment, so the range of possibilities is quite high going that far out.

There are a lot of bad loans out there. Probably 15% of the mortgages outstanding shouldn't have been written under the contract terms. The bottom 5% are already toast, IMO. What happens to the other 10% will depend on market forces, and underwriting standards in the last half of 2007 will be heavily influenced by those outcomes in the first half of 2007.

Comments:
Through almost all of 2006, the new factor affecting the housing market was first the halt in investment purchases and then the attempt to unload investment purchases.

Including those abandoned sets from the Over the Hedge movie I passed on I-5 somewhere between Tracy & Stockton?

About half a square mile of Yuppie Pink McMansions, walled and gated, sitting beside a rural offramp flanked by billboards pimping "INVESTMENT REAL ESTATE!!!"

No sign any of them had ever been lived in.

No sign of life or structures (except the occasional rice drier or agribusiness barn) clear to the horizon.

Just I-5, the offramp, and the Over the Hedge set.

The Headless Unicorn Guy
 
They say there are acres of semi-completed developments in AZ. Some looting.

I don't know. We've seen this part before, but absent the demented lending. This time, we really overdid it.

Even the mtg brokers are appalled. One of them posted on a forum asking what he should reply to a person who wanted to "roll over" his negative equity in one house to another.
 
Oh, and Headless, you'll enjoy the January special - 0.25% start rate on an option ARM - because hey, people still need to live and spend. Get a $300,000 mortgage with a starting payment of under $200 dollars a month!

If someone had written this as a sci-fi novel a couple of decades ago, the critics would have ripped it as being too fanciful to allow the plot to work.
 
If someone had written this as a sci-fi novel a couple of decades ago, the critics would have ripped it as being too fanciful to allow the plot to work.

Mark Twain is reported to have said "The difference between fiction and reality is fiction has to make sense".

I know I have a hard time distinguishing between CNN and South Park, and it gets harder every day.

It's doubly difficult to write satire in a reality where everyone is racing to push outside the envelope. As exaggerated as you can get for comic effect, there's somebody out there who's twice as far along the same tangent and Dead Serious. (I first encountered this in a radio preacher 20 years ago who "Proved From SCRIPTURE!" that Aslan of Narnia WAS The Antichrist. I don't think I could have made that one up if I tried.)

The Headless Unicorn Guy
 
Cracking up!

Honestly, Baptists can give anyone a run for their scriptural money. The best I ever heard went like this:

Jesus did not turn water into wine at Cana - he turned it into grape juice. This is known because:
A) Jesus could not sin.
B) People were going to drink the Jesus juice at the wedding, and enabling people to sin would have been a sin, therefore
C) It was grape juice, not wine.
 
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