Home Sales Decline in 28 States, D.C.

[FRED]

Home Sales Decline in 28 States, D.C.
August 15, 2006 (Martin Crutsinger, AP Economics Writer)

Home Sales Slow in Spring With 28 States and D.C. Suffering Outright Declines

The slowdown in the once-sizzling housing market is spreading, with 28 states and the District of Columbia reporting spring sales declines, led by big drops in former boom areas of Arizona, Florida and California.

Nationally, sales were down 7 percent in the April-June quarter this year compared with the same period in 2005, the National Association of Realtors said Tuesday in its latest state-by-state look at housing conditions around the country.

The Realtors survey showed that the biggest declines occurred in states that had been enjoying red-hot sales during the five-year housing boom.

The five biggest declines this spring compared to the April-June period of 2005 were Arizona, down 26.9 percent; Florida, down 26.7 percent; California, down 25.3 percent; Virginia, down 23.9 percent, and Nevada, down 23.5 percent.

AntiSpin: The collapse of the national housing bubble that never was, according to Fed Chairman Ben Bernanke, is spreading across the nation. As predictable as the declines in boom areas are, the surprise is that some predictions of continued housing booms in other areas came true:

"The Realtors report depicted a tale of two housing markets, with former boom areas experiencing declines and areas of moderate sales gains during the boom years experiencing strong growth. In all, 20 states had sales gains in the spring, led by Alaska, which enjoyed a 48.6 percent jump in sales; followed by Arkansas, up 17.9 percent; Texas, up 11.3 percent; North Carolina, up 11 percent, and Vermont, up 9.1 percent compared to the spring of 2005."

In our interview of Banche Evans May 18, 2006:

Janszen: Makes sense that you'd want to invest in real estate where the local government is investing in infrastructure. Are there any places where the investment in infrastructure has been made but real estate prices remain depressed for various reasons?

Evans: At the risk of sounding self-serving, I would seriously look at the major cities of Texas – Houston, Dallas, Austin, San Antonio, Galveston and El Paso. Texas has been under the national average of housing appreciation for over 15 years. That’s a long time to be undervalued.

Blanche was right. The Texas RE market did take off. That said, how long will the rise in these previously "under-valued" markets continue is anyone's guess.

[SeanO]

Re: Home Sales Decline in 28 States, D.C.

...As predictable as the declines in boom areas are, the surprise is that some predictions of continued housing booms in other areas came true:

"The Realtors report depicted a tale of two housing markets, with former boom areas experiencing declines and areas of moderate sales gains during the boom years experiencing strong growth. In all, 20 states had sales gains in the spring, led by Alaska, which enjoyed a 48.6 percent jump in sales; followed by Arkansas, up 17.9 percent; Texas, up 11.3 percent; North Carolina, up 11 percent, and Vermont, up 9.1 percent compared to the spring of 2005."

There is currently a massive migration of speculators from "bubble" markets to areas of "opportunity". The usual suspects are hawking areas with comparatively little appreciation as this opportunity. The problem is that these areas didn't appreciate for good reason. Undesirability, unemployment, etc. Expect this flow of funds to continue near term. Expect the end result to be far uglier than what we are experiencing in highly desirable locations like California, Florida, etc.

I also believe this trend will push commercial real estate higher near term, at least at the low end.

[lobodelmar]

More evidence, as if you didn't already know...

NY Times August 23, 2006

Home Sales Fall to Unexpectedly Low Rate

By JEREMY W. PETERS

Sales of existing homes fell in July to an unexpectedly low rate, a sign that a widespread softening of the housing market is taking hold.

The National Association of Realtors reported today that purchases fell 4.1 percent last month to an annual rate of 6.3 million homes, the slowest since early 2003. The rate was 11.2 percent higher a year ago.

At the same time, the inventory of unsold homes on the market swelled to a 7.3-month supply, the most in more than a decade.

The national median price of a sold home held steady in July at $230,000. But the association said that prices fell in most areas of the country, and in many places are now lower than a year ago. Only in the South are prices still rising: the median home there sold for 3.2 percent more last month than a year earlier. Had it not been for that gain, the national median home price would have declined for the first time since 1995.

“This surge in excess supply is having a major effect on house prices,” Capital Economics wrote in a research report today.

The number of homes changing hands fell in every region, with the West experiencing the sharpest decline, of 6.4 percent. Sales volume was off by 5.9 percent in the Midwest, 5.4 percent in the Northeast and 1.2 percent in the South.

When combined with other recent statistics showing falling real estate investment and fewer application for building permits, the sales figures today make clear that a housing slowdown is now underway. Most economists, including Federal Reserve chairman Ben S. Bernanke, still expect the slowdown to be orderly. But it remains to be seen just how far home sales will slide in the coming months and what the impact on the economy will be.

Economic expansion in the second quarter slowed to a 2.5 percent annual rate, down from 5.6 percent in the first quarter. Because housing has been so central to the overall health of the nation’s economy in recent years, forecasters are concerned that a steep decline in home sales may help push the economy into a recession.

But so far, many economists are predicting a slowdown, not a collapse. “The trend here is one of stabilizing prices after the sharp gains seen for many years,” said Joshua Shapiro, chief United States economist with MFR. “While certainly a change in trend, so far the official data are not corroborating some of the more alarmist stories being bandied about recently.”