Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
Tuesday, January 24, 2006
'Available Supply Of Homes Is Good News': NAR
Some economist are concerned about housing prices. "While the recent rise in prices in the U.S. housing market is not currently indicating a bubble, the increases may be showing the emergence of one, according to a new report released by the BMO Financial Group. However, bubble conditions are unambiguously emerging in several local markets, especially in the West."
"'Bubble conditions may not be present yet but are approaching such and thus require close monitoring going forward,' stated (economist) Paul Ferley. 'Sizeable declines in housing prices occurred in the early 1980s and the early 1990s, but both of these periods followed recessions,' said Ferley."
"Although housing prices and the national trade deficit worry him, the chief economist at Comerica Bank said the economy is much more resilient than many think. Don't worry that short-term interest rates will be above long-term rates, he told his audience. Normally, that signals a recession."
And Realty Times reports on NAR numbers. "The National Association of Realtors reports that in November, housing inventory, the number of homes available for sale, rose to its highest level since April 1986. Among the cities that topped the list; Chicago, Illinois; Binghamton, New York; and Boston, Massachusetts."
"Chicago, Illinois, peaked at the top of the monthly supply survey completed by NAR. In it they found that the Chicago area had an inventory increase of a staggering 132.2 percent. It seems that everyone wanted to get on what they thought was the last stand for the sellers market."
From the report. "The housing market is going through a transition, shifting from a hot sellers market, as it has been for several years now, to a more-balanced market...And slowing sales are good for the long-term health of the housing sector. So we should welcome a moderate slowdown, not panic from it."
"It is also useful to look at the top 10 markets by increase in month-supply from the third quarter of 2004 to the third quarter of 2005. These would be the markets that some might consider as potential 'red flags' because of the run-up in inventory."
"Top Ten Markets ranked by increase in Months Supply"
Percentage change, 3rd quarter 2004 compared to 3rd quarter 2005.
Chicago/Naperville/Joliet....132%
Binghamton, NY...............125%
Boston/Cambridge/Quincy......115%
Washington, DC................98%
Baltimore/Towson..............95%
Palm Bay/Titusville, FL.......94%
Champaign/Urbana, IL..........83%
Cumberland, MD WV.............73%
Hagerstown/Martinburg, MD WV..64%
Madison, WI...................55%
"Don't Panic...So, even though inventory may rise, home prices are not necessarily headed for a downturn. It is true that price appreciation may slow due to a softening of demand because of higher interest rates. But there will still be buyers out there. The good news is that there will be an available supply of homes for them to purchase."
At 12:21 PM, themanbehindthemanbehindtheman said...
ReplyDeleteAhhh... bubble economics: supply has doubled! Demand is down! This can only mean one thing: single digit price increases!'
Throw in rising rates, a collapse of the subprime market, regulatory tightening, historic unaffordability and greater public awareness!
"'Bubble conditions may not be present yet but are approaching such and thus require close monitoring going forward,' stated (economist) Paul Ferley. 'Sizeable declines in housing prices occurred in the early 1980s and the early 1990s, but both of these periods followed recessions,' said Ferley."
ReplyDelete***********
Bubble conditions may not be present yet? What rock is this guy under?
I don't know about the 1980's.
But I do know that housing markets came to a dead stop, much like the present and near-term future, in 1989 and 1990 in markets on both coasts.
And then a recession came in '91, a mild one on an historical basis, followed by a deflating housing market for at least five years in most coastal areas.
Q: So what came first? A recession or a slowing housing market?
A: A slowing housing market.
Why will this time be much different? Is the economy really more resilient or any of these other "excuses" we here?
"Don't Panic...So, even though inventory may rise, home prices are not necessarily headed for a downturn. It is true that price appreciation may slow due to a softening of demand because of higher interest rates. But there will still be buyers out there. The good news is that there will be an available supply of homes for them to purchase."
ReplyDelete********
Whaaaa?
"But there will still be buyers out there."
Besides true dumbasses (probable victims who will spike a deadcat bounce), only dotcom leftovers and some Googlers are looking to buy in the Bay Area right now.
"Five-six months of inventory only means buyers have more time to visit each property and not rush a decision. (But they will still buy at inflated prices.)"
ReplyDeleteRiiiiiight
"Percentage change, 3rd quarter 2004 compared to 3rd quarter 2005"
ReplyDeleteThis study is already dated. This is 3Q data. Lets wait for NAR's 4Q data. Then they might be more concerned.
Bubble Meter Blog
David,
ReplyDeleteRight, the northern Virginia inventory is up 300% by the end of the year.
An email from the MLS in the northwest:
ReplyDelete'Attention:
Once again, NWMLS is seeing an increase in the practice of cancelling and relisting property. In most circumstances, the practice is a violation of NWMLS Rules. Rule violations of this nature are easy to identify, and NWMLS will initiate disciplinary proceedings against agents and brokers who cancel and relist properties, except in accordance with the following guidelines:
* Agents do not have the ability to cancel and relist property without the aid of their broker or the broker’s designated staff.
* You may never cancel and relist a property without a new listing agreement and new listing input sheets fully signed and initialed by the parties.
* You may not cancel and relist a property, even with a new listing agreement and new listing input sheets, unless there is a material change to the listing (e.g., a significant change in the price of the property, a remodel, a change in zoning, or a change in ownership).
* You may not cancel and relist a property in order to make it appear as a new listing when it is not or to make changes to the property information contained in the listing. For example, it is a rule violation to input a new listing with an insignificant price change, even if the seller executes a new listing agreement.
* In almost all cases, changes to a listing should be made on either Form 18, Amendment to Exclusive Sale and Listing Agreement (price changes, extension of listing) or Form 19, Status Change Input Sheet (changes in status, changes to property information contained in the listing, changes to marketing remarks, etc.).'
I was reading that Realty Times article. I am not aware of any other product that becomes more expensive as it becomes more available. RE is unique in this regard. That is if we believe the industry hype.
ReplyDeletethat NAR article infuriates me. I hope these people get put in their place just like the wall street shills did after 2000.
ReplyDeleteI've got some townhomes across the street from my loft building in Downtown Dallas that are rapidly deteriorating and yet, have appreciated in the current environment.
ReplyDeleteSomething else for California "investors" to consider when speculating in Texas. Arizona and Las Vegas have baking heat. Texas has baking heat, plus sweltering humidity, massive thunderstorms, tornados, hail and the occasional hurricane. A cheap shitbox in the Arizona climate can last a lot longer in the desert climate than a cheap shitbox in Texas. Watch those maintenance costs!