This week, the Massachusetts Association of Realtors
(MAR) released their Existing Home Sales Report for December 2007
showing again the utter foolishness of former MAR president Doug Azarian’s yearlong optimistic sentiment.
But, seeing as this is January, the month reserved for the annual “changing of the guards” in the Realtor power structure, let’s offer the incoming MAR president Susan M. Renfrew our warmest congratulations and even go so far as observing a short moment of silence in recognition of another orderly and peaceful transfer truly brazen and unabashed debauchery.
… now that that’s over…
MAR reports that in December, single family home sales plummeted 20%
as compared to December 2006 translating to a whopping 11.9 months of supply
and a median price decline of 3.6%
Hitting the ground running, Renfrew downplays the decline while suggesting that “stable” prices and great inventory may offer some hope for a better 2008.
“December is typically not a month in which sales accelerate… Hopefully, the folks who are on the fence about owning a home will take advantage of this buyer’s market – great inventory, stable prices, last week’s Fed rate cut, and the potential increase of conforming loan limits – to get sales moving in the first quarter.”
Unfortunately for the Fed-glee filled MAR though, many buyers are now nearly “permanently” sidelined as a combination of tougher lending standards (even for FHA and GSE loans), the continued absence of Jumbo loans and outright fear of buying a quickly depreciating asset during an obvious recession all work to provide a powerful deterrent to home sales.
Nice touch on the “stable” prices though but I think that at this point it’s fairly obvious which direction prices are going from here.
Furthermore, 2007 showed the least sales of single family homes since 1996 leaving 2008 poised to set the pace back to that seen during the last major housing collapse.
As usual, The Warren Group’s latest figures
were significantly different than that of MARs showing sales of single family homes down 23.3%
and a median price decline of 10.5% as compared to December of 2006.
With December’s results we have completed our crossing over to the new reality of virtually non-existent (or ridiculously costly and inaccessible… take your pick) Jumbo loans and are now just entering a new phase of recessionary period sales declines.
The housing debacle is now common knowledge (we’ve sure come a long way) as is the looming (or actually existing) recession and related “bear” market conditions on Wall Street.
All of these circumstances will work together to create a sense of urgency not to overspend, get overleveraged or take unnecessary risks in the face of unprecedented uncertainty about the future prospects for the economy.
To better illustrate the drop-off in home prices and the potential length and depth of the current housing decline, I have compared BOTH the year-over-year and peak percentage changes to the S&P/Case-Shiller home price index for Boston (BOXR) from the 80s-90s housing bust to today’s bust (ultra-hat tip to the great Massachusetts Housing Blog
for the concept).
The “year-over-year” chart compares the percentage change, on a year-over-year basis, to the BOXR from the last positive value through the decline to the first positive value at the end of the decline.
In this way, this chart captures only the months that showed monthly “annual declines” and as we can see, if history is to be a guide, we could be about one third of the way through the annual price declines with the majority of falling prices yet to come.
The “peak” chart compares the percentage change, comparing monthly BOXR values to the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.
In this way, this chart captures ALL months of the downturn from the peak to trough to peak again.
As you can see the last downturn lasted 105 months (almost 9 years) peak to peak including 34 months of annual price declines during the heart of the downturn.
Notice that peak declines have been more significant to date and, keeping in mind that our current run-up was many times more magnificent than the 80s-90s run-up, it is not inconceivable that current decline will run deeper and last longer.
As in months past, be on the lookout for the inflation adjusted charts produced by BostonBubble.com
for an even more accurate "real" view of the current market trend.December’s Key Statistics
- Single family sales declined 20% as compared to December 2006
- Single family median price decreased 3.6% as compared to December 2006
- Condo sales declined 28.3% as compared to December 2006
- Condo median price went unchanged as compared to December 2006
- The number of months supply of single family homes stands at 11.9 months.
- The number of months supply of condos stands at 12.7 months.
- The average “days on market” for single family homes stands at 138 days.
- The average “days on market” for condos stands at 144 days.
Labels: Bernanke, economy recession, housing bubble, MAR, massachusetts, susan renfrew