Tuesday, October 02, 2007
One Awful Pending Sales Report
In case you think I'm exaggerating, go look at it yourself. Those YoY NSA stats are awesomely, fearsomely bad. It's not just that the national was bad - every area achieved deeply respectable badness on its very own.
For once, I find acknowledgment of the truth in the press. Marketwatch:
"This is still absolutely awful, confirming that the existing-homes market is now in freefall," wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics. "This is consistent with existing-home sales falling to just 5 million or so," down 10% from the latest level and 30% from the peak.Later on the article they include chittering from NARrish folk:
"The volume of activity we're seeing today is below sustainable market fundamentals because some creditworthy people are trying to buy homes but can't because of the credit crunch," Yun noted.Look, pending sales are counted when the contracts are signed. In general, closings are what is knocked to heck by disruption in the mortgage markets. And that is bull about "creditworthy" people unable to buy. What's going away are the "who cares if you can pay it back" loans. It's not that this is somehow a "disruption" of mortgages - what is mostly happening now is that mortgage underwriting practices are beginning to retreat to the norm.
The trade group said an informal survey of Realtors showed 10% of sales contracts in August fell through at the last minute because of canceled mortgage commitments. In some areas, 30% of contracts fell through.
The latest round of statistics are converging to the point at which it seems that inventory must continue to rise next year, presaging more and heftier price cuts on homes. It also pretty much moves another 2-5% of mortgages into the danger zone. I'll try to gather my wits and explain further tonight or tomorrow.
You are still doing a little catch up. All the new buyers of 2007-09 bought in 2004-06. All of them. 20 years ago when a couple was buying "their own place" and they were only in their late 20s they were "comers" and "go getters." 2006? Laggards and poor investors.
Then comes part two. Pretty much everyone who bought in the last 2 years is underwater. The few who aren't aren't worth including. In addition to the "normal" sales rate that makes for more than 10 million houses that need to either sit or sell at a loss. We don't have an economic conduit to handle that type of dislocation. CR is looking at 4.6m home sales and is thinking he's being optimistic. Pendings these days are stretched over longer periods and failing at greater rates making actual sales numbers lower still. Death spiral sounds extreme but the fact is price alone won't be enough to save the market from the condition we've placed it in.
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