Pending Home Sales: January 2012

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for January showing that pending home sales improved with the seasonally adjusted national index climbing 2% since December while increasing 8% above the level seen in January 2011.

Meanwhile, the NARs chief economist Lawrence Yun suggests that today's results indicates "stabilization" for prices and increased activity for the year.

“Given more favorable housing market conditions, the trend in contract activity implies we are on track for a more meaningful sales gain this year. With a sustained downtrend in unsold inventory, this would bring about a broad price stabilization or even modest national price growth, of course with local variations.”

The following chart shows the seasonally adjusted national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

Pending Home Sales: December 2011

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for December showing that home sales slowed with the seasonally adjusted national index dropping 3.5% since November while increasing 5.57% above the level seen in December 2010.

Meanwhile, the NARs chief economist Lawrence Yun suggests that the rice in contract activity still remains high compared with the past few years and that homebuyers are persistent even in light of notable contract failures.

"Even with a modest decline, the preceding two months of contract activity are the highest in the past four years outside of the homebuyer tax credit period, ... Contract failures remain an issue, reported by one-third of Realtors® over the past few months, but home buyers are not giving up."

The following chart shows the seasonally adjusted national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

FHFA Monthly Home Prices: September 2011

Today, the Federal Housing Finance Agency (FHFA) released the latest results of their monthly house price index (HPI) showing that, nationally, home prices increased 0.94% since August but declined 2.52% below the level seen in September 2010.

The FHFA monthly HPI are formulated from home purchase information collected from mortgages that have been sold to or guaranteed by Fannie Mae and Freddie Mac.

Existing Home Sales Report: July 2011

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for July showing continued weakness with slumping sales and an elevated monthly supply.

Single family home sales declined a notable 4.0% from June but rose notably compared to the level seen last year's post-tax scam weakness while the median selling price declined 4.5% below the level seen in July 2010.

Further, inventory of single family homes declined 5.4% from June and 8.6% below the level seen in July 2010 which, combined with the relatively slow pace of sales, resulted in an still elevated monthly supply of 8.9 months.

The following charts (click for full-screen dynamic version) shows national existing single family home sales, median home prices, inventory and months of supply since 2005.

QE3, QE4, QE5…

QE3 is in the offing…

Consensus expectations just seems to demand it as a generation of gambling speculators, swindlers, government policy junkies and others with short attention spans and a psychopathic indifference for the soundness of the financial system panic at the least sign of slowdown and line up for another dose of the Feds easy money.

Looking at some of the latest trends, a slowdown of sorts would not be so surprising.

The economy is still being seriously impacted by the evolving housing decline, unemployment remains at 9%, oil prices are near $100 a barrel with gasoline prices reflecting that fact, the Federal Government is toying with the debt ceiling, China is likely overheating as it inches ever closer to parabolic residential real estate prices and likely an ugly crash, other notable leading emerging markets like India and the Russian Federation are continuing to slow, Greece and other European countries are moving closer to debt restructuring… the list of negative externalities runs long yet they all carry the telltale ring of the Great Recession about them.

This is the point at which one, having been schooled by the Fed over many years, must begin to ask the question “What will the Feds response be?”… as if a response by the Federal Reserve is nearly a reflexive action to a consensus expectation of looming slowdown.

The answer to that question should not require such a stretch of imagination… the simple short answer is QE3… no more, no less.

Why would the Fed stop now? Should a slowdown materialize, it will ultimately been seen as an offspring of the Great Recession and treated as such.

Recognize that during last month’s historic Fed press conference, “Helicopter” Bernanke made no quibble of the fact that the Fed will continue the principle reinvestment function that they have been carrying out ever since they acquired such a sizable bounty of mortgage securities, a clear sign that pumping liquidity is not only the response de jure but the de facto response.

Like a pair of dysfunctional sweethearts, the Fed knows no different course of action then easing and the consensus expects it, so easing it will be.

But as we move further and further from the point where the Feds intervention is viewed as “pump priming” and nearer a more accurate perception of it as the “pump”, one has to wonder when consensus will begin to lose faith and worry that this scheme has no merit.

Only then will we ultimately realize the true consequence of the years of Fed actions.

Conspicuous Correlation: Retail Sales April 2011

Today, the U.S. Census Bureau released its latest nominal read of retail sales showing an increase of 0.5% since March bringing the total increase since last year to 7.6% on an aggregate of all items including food, fuel and healthcare services.

Nominal discretionary retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales, on the other hand, declined 0.64% from March falling 1.44% below the level seen in April 2010 while, adjusting for inflation, “real” discretionary retail sales actually declined a notable 4.39% over the same period.

On a “nominal” basis, there had appeared to be “rough correlation” between strong home value appreciation and strong retail spending preceding the housing bust and an even stronger correlation when home values started to decline.

The following chart shows the year-over-year change to nominal discretionary retail sales and the year-over-year change to nominal the S&P/Case-Shiller Composite home price index since 1993 and since 2000.

As you can see there is, at the very least, a coincidental change to home values and consumer spending during the boom and then the bust, but as home values have continued to decline, retail spending has remained low but has not continued to consistently contract.

Looking at the chart below (click for full-screen dynamic version), adjusted for inflation (CPI for retail sales, CPI “less shelter” for S&P/Case-Shiller Composite) the “rough correlation” between the year-over-year change to the “discretionary” retail sales series and the year-over-year S&P/Case-Shiller Composite series seems now even more significant.

Conspicuous Correlation: Retail Sales October 2010

Today, the U.S. Census Bureau released its latest nominal read of retail sales showing a notable increase of 1.2% since September bringing the total increase since last year to 7.3% on an aggregate of all items including food, fuel and healthcare services.

Discretionary retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales increased 0.49% from September and climbed 5.12% above the level seen in October 2009 while, adjusting for inflation, “real” discretionary retail sales increased 4.15% over the same period.

On a “nominal” basis, there had appeared to be “rough correlation” between strong home value appreciation and strong retail spending preceding the housing bust and an even stronger correlation when home values started to decline.

The following chart shows the year-over-year change to nominal discretionary retail sales and the year-over-year change to nominal the S&P/Case-Shiller Composite home price index since 1993 and since 2000.

As you can see there is, at the very least, a coincidental change to home values and consumer spending during the boom and then the bust, but as home values have continued to decline, retail spending has remained low but has not continued to consistently contract.

Looking at the chart below (click for full-screen dynamic version), adjusted for inflation (CPI for retail sales, CPI “less shelter” for S&P/Case-Shiller Composite) the “rough correlation” between the year-over-year change to the “discretionary” retail sales series and the year-over-year S&P/Case-Shiller Composite series seems now even more significant.

Construction Spending: October 2009

Today, the U.S. Census Bureau released their October read of construction spending showing a notable slowing of the government’s tax-carrot fueled bounce in residential construction spending while indicating an acceleration in weakness to non-residential construction spending.

Even with the governments tax-credit gimmick residential construction spending is still 23.62% below the level seen last year and a whopping 62.99% below the peak set in March 2006.

Worse off though was private single family residential construction spending which declined 30.66% as compared to October 2008 and a truly grotesque 75.94% from the peak set in February 2006.

Non-residential construction spending, currently accounting for over half of all private construction spending, posted another significant year-over-year decline of 20.57%.

The following charts (click for larger versions) show private residential construction spending, private residential single family construction spending and private non-residential construction spending broken out and plotted since 1993 along with the year-over-year and peak percent change to each since 1994 and 2000 – 2005.

Question(s) of The Day - Election Impact Crisis?

How will the election impact the economic crisis?

Since, in general, we are a completely polarized nation of partisan numbskulls isn’t it a foregone conclusion that 50% of the electorate will be depressed and angry?

NARcasting The Future: August 2008

Today, the National Association of Realtors (NAR) provided their latest estimate of annual existing home sales for 2008 increasing their total year sales forecast to 5.51 million units.

As usual, the latest forecast comes with another dose of truly ridiculous spin.

In an effort to put their absurd bias into perspective I compiled all their existing home sales forecasts for 2007 and now 2008 into a chart along with a list of prominent quotes supplied with each forecast.

12/11/2006 Prediction: 6.40 million units.
Lereah "Most of the correction in home prices is behind us."

1/10/2007 Prediction: 6.42 million units.
Lereah "The good news is that the steady improvement in sales will support price appreciation moving forward."

2/7/2007 Prediction: 6.44 million units.
Lereah "After reaching what appears to be the bottom in the fourth quarter of 2006, we expect existing-home sales to gradually rise all this year and well into 2008."

3/13/2007 Prediction: 6.42 million units.
Lereah "Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next."

4/11/2007 Prediction: 6.34 million units.
Lereah "Tighter lending standards will dampen home sales a bit, but by less than a couple of percentage points from initial projections."

4/30/2007
Lereah Leaves NAR for Move.com

5/9/2007 Prediction: 6.29 million units.
Yun "Housing activity this year will be somewhat lower than in earlier forecasts."

6/6/2007 Prediction: 6.18 million units.
Yun "Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year."

7/11/2007 Prediction: 6.11 million units.
Yun "Home prices are expected to recover in 2008 with existing-home sales picking up late this year."

8/8/2007 Prediction: 6.04 million units.
Yun “With the population growing, the demand for homes isn’t going away – it’s just being delayed.”

9/11/2007 Prediction: 5.92 million units.
Yun “Patient buyers in most areas who do their homework will recognize that housing remains a good long-term investment.”

10/10/2007 Prediction: 5.78 million units.
Yun "The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains."

11/13/2007 Prediction: 5.5 million units.
Yun "In some ways, the extended real estate boom from 2001 to 2005 created unrealistic expectations that housing is a short-term high-yield investment… 2007 will be the fifth best year for housing on record"

12/10/2007 Prediction: 5.67 million units in 2007, 5.7 million units in 2008.
Yun "The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007."

ACTUAL: 5.652 million existing units sold in 2007

01/08/2008 Prediction: 5.66 million units in 2007, 5.7 million units in 2008.
Yun "A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed toward late 2008."

02/07/2008 Prediction: 5.38 million units full year.
Yun "Where builders have cut construction sharply, and in most areas with improving affordability conditions, we’ll generally see moderately higher home prices."

03/06/2008 Prediction: 5.38 million units full year.
Yun "Significant price declines in some local markets have sharply and quickly improved local affordability conditions, and are inducing buyers to return to the marketplace"

04/08/2008 Prediction: 5.39 million units full year.
Yun "Exceptionally weak home sales related to jumbo loans problems will depress home prices in the first half of the year, but steady liquidity improvements in the conforming jumbo-loan market will help prices recover in the second half of the year"

05/08/2008 Prediction: 5.39 million units full year.
Yun "Although more than half of local markets are expected to see price growth this year, the aggregate existing-home price will decline 2.4 percent in 2008, driven by a relatively few markets that are very oversupplied"

06/09/2008 Prediction 5.4 million units full year.
Yun "We’re seeing healthy price gains in moderately priced areas like Erie, Pa., and Corpus Christi, Texas, and double-digit gains in others"

07/08/2008 Prediction 5.31 million units full year.
Yun "Interestingly, there have been reports of multiple bidding after the large price cuts, so it is possible that most of the price declines have already occurred in those markets."

08/08/2008 Prediction 5.51 million units full year.
Gaylord "buyers [will] get into the market to take advantage of the unprecedented drop in home prices in many areas, as well as a wide selection of inventory, to make an investment in their future,"

Conspicuous Correlation: Retail Sales June 2008

Today, the U.S. Census Bureau released its latest nominal read on retail sales showing an increase of 0.1% from May 2008 and 3.0% above June 2007 on an aggregate of all items including food, fuel and healthcare services.

Discretionary retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales, on the other hand, experienced another decline falling .88% compared to June 2007.

Further, adjusted for inflation, “real” discretionary retail sales declined 5.42% since June 2007.

On a “nominal” basis, there appeared to be “rough correlation” between strong home value appreciation and strong retail spending preceding the housing bust and an even stronger correlation when home values started to decline.

The following charts show the initial analysis plotting the year-over-year change to an aggregate series consisting of the primary discretionary retail sales categories that I termed the “discretionary” retail sales series and the year-over-year change to the S&P/Case-Shiller Composite home price index since 1993 and since 2000.


As you can see there was, at the very least, a coincidental change to home values and consumer spending during the boom and then the bust, but as home values have continued to decline, retail spending has remained low but has not continued to consistently contract.

One problem with this initial analysis is that both retail sales and the S&P/Case-Shiller Composite index are reported in “nominal” (i.e. non-inflation adjusted) terms and thus result in a somewhat skewed view especially for the retail sales data.

In fact, the year-over-year change to “nominal” discretionary retail sales has been positive for seven of the last eight months while the year-over-year change to “real” discretionary retail sales has been negative for twelve straight months (see the following chart).

The key point here is that although inflation (as reported by the CPI) has been relatively stable in recent years it is always a factor and in light of the latest surprise increases to the CPI results as well as many anecdotal reports of producers now passing through increasing energy prices to the consumer, it’s important to adjust retail sales (and home values) in order to fully understand its direction.


As you can see from the above charts (click for larger version), adjusted for inflation (CPI for retail sales, CPI less shelter for S&P/Case-Shiller Composite) the “rough correlation” between the year-over-year change to the “discretionary” retail sales series and the year-over-year S&P/Case-Shiller Composite series seems now even more significant.

The Almost Daily 2¢ - After The Shock

This morning I attended a seminar sponsored by The Warren Group’s Banker’s and Tradesman and Dwyer & Collora LLP entitled “Foreclosure Aftershock” that was hosted at the Federal Reserve Bank of Boston and I thought I might share my take on what was presented.

The keynote was given by state Attorney General Martha Coakley who appears to be fully engaged in the process of litigating at least the bleeding edge of the subprime debacle and there was a substantial amount of discussion about the recent and developing Fremont General case.

One point of interest though is that in order to make the case for fraud and unfair and deceptive practices it appears that Coakley’s office must significantly constrain the definition of what constitutes a fraudulently originated mortgage by specifically targeting short teaser period ARMs (2/28 specifically) whereby the borrower’s income could only qualify for the initial teaser rate.

Obviously this limited definition is necessary to effectively litigate this particular case but there seemed to also be an associated bias in Coakley’s presentation toward considering the era of mortgage fraud as both past (as in the era is over and now is cleanup time) and primarily related to subprime, predatory originator and Wall Street activities.

While I certainly wouldn’t argue that subprime and predatory activities were (and are) a major factor, I think Coakley is a little behind the curve in fully recognizing the extent of the actual fraud that drove the housing boom and that still exists today.

For example, I still see a fairly steady flow of homes purchased with an agency “piggyback” loan configuration where the buyer borrows up to $417,000 (now I suppose $520K with the increased limits) from Fannie-Freddie and then makes up additional “deposit” money from a simultaneous second smaller lien supplied by a non-agency lender.

While I have noticed that buyers seem to be at least expected to come up with some deposit (at most 10% resulting in a 90% LTV purchase) these activities are clearly repeating the same mistakes of the past and in a way just represent a milder form of fraud.

If prices fall another 10%, these mortgages, being "upside down", will be statistically far more likely to end up in foreclosure regardless of the fact that they were not originated through predatory activities and were not directly encouraged by Wall Street firms.

Both Fannie and Freddie have gained massive market share since the housing bust began and now mortgage brokers are simply aiming their fraudulent activities in their direction.

After Coakley, Timothy Warren, CEO of The Warren Group, presented an excellent PowerPoint that included a rundown of the most important Massachusetts housing bust data (sales, prices, foreclosures, etc.).

One novel data-point that Warren presented was a chart that essentially plotted the ratio of Massachusetts home sales to foreclosures which currently shows a startling near 1:1 relationship (i.e. there is nearly one foreclosure for every home purchased).

Needless to say there was not much potential good news that could be gleaned from the data and although I don’t believe that Warren is nearly as pessimistic about the current circumstances as I, he had a slide dedicated to what causes him to worry which was primarily related to the job picture in Massachusetts.

Clearly if we experience widespread layoffs, things will heat up significantly.

Finally, there was a bit of Q&A for Coakley, Warren and the other panelists which, to me, disclosed some of the “bias” held by individuals operating in the state’s real estate and related industries.

One questioner asked Coakley directly what she was doing about the (I forget the exact words) fraudulent and deceptive borrowers and another queried Warren about how impervious the “affluent” areas (citing Brookline and Cambridge) have been to the downturn.

Still there was some chuckling about the accuracy of The National Association of Realtors (NAR) data and plenty of the handshaking, card passing and well worded public pronouncements so typical of this type industry seminar.

The Almost Daily 2¢ - Reflecting On Real Big Busts

Today, Eric S. Rosengren, President of the Federal Reserve Bank of Boston (FRBB) gave an excellent speech entitled “A Historical Perspective on Housing Downturns” which, with some fairly thorough detail, attempts to add some context to the current downturn by reflecting on both the prior housing boom and bust seen in New England as well as the gruesome boom and ongoing 17 year bust currently unraveling in Japan.

I strongly encourage the reading of this speech as it both makes a good presentation the basic elements of the unwinding of residential real estate as well as strongly indicating that members of the Federal Reserve are keenly aware of the potential risk.

Although, interestingly Rosengren makes a final plea that homeowners that are experiencing stress seek help at the newly established “Mortgage Relief Fund” but as I have noted before, this initiative as it is currently specified is very limited and at best could only help 500 homeowners with small mortgages and with no late payments.

For some time now I have been working on some basic analysis and predictions for overall home price declines for Massachusetts and elsewhere in the country.

Although the analysis is not quite complete, I figured that I would share what I have for Massachusetts as it ties in closely to what Rosengren has presented in his speech.

Eventually Ill fold all the charts and data into a recurring post that covers many regions and is updated monthly.

First, a word on the approach… it is basic and not at all unique or new.

Based on Professor Shiller and other notable economists study of long term “real” (i.e. inflation adjusted) home/real estate prices, I simply inflation adjusted either the OFHEO or S&P/Case-Shiller (where there was enough data) home price indices to date and then extended the consumer inflation (CPI sans shelter) and “nominal” and “real” price series data to bring the future “real” prices down in line with the historical average real annual returns seen in the last 30 years.

It’s important to note that that average annual “real” growth of home prices in the last 30 years have ranged somewhere between 1% and 3% above inflation.

It’s also important to note that although this has been the trend seen since 1970, there have been periods with similar durations where “real” growth has fallen below 1% and even turned negative and, as Professor Shiller demonstrated with his 1890 home price series, over the really long term, “real” annual growth rate of residential real estate is between 0% and 1%.

The following chart (click for much larger version) shows that in order to bring Massachusetts “real” home prices (as tracked by the OFHEO home price index for Massachusetts) in-line with the average annual return of 2.5% seen since the early 1970’s, nominal prices have to complete a 16.8% decline (or 28.8% in “real” terms) from the latest peak.

To date, prices have only come off 3.5% so more downside seems inevitable.

Note that I would have preferred to use the S&P/Case-Shiller series for Boston but that series starts in 1985 and simply doesn’t have enough data to adequately capture the long trend of average “real” appreciation.

Although the forecast I have provided shows prices declining through 2012, it’s always possible that the decline will either be slower or faster likely based on wider economic events (recession etc.) so I will continue to update this chart monthly with the latest actual data to get a sense of how the adjustment is actually occurring.

I believe that using the 2.5% average “real” rate of appreciation represents a very conservative guide as there is no evidence to suggest that this rate of appreciation can’t fall to 2.0% or even lower.

Consider for a moment that with the complete 16.8% decline, nominal home prices would simply revert back to where they stood during Q4 2003.

In a future post, I will provide data and charts showing what the decline would look like at lower long term average rates of “real” appreciation but suffice it to say that with every .5% decline to that average, nominal prices have to come off significantly.

Also, as I mentioned, I will provide the same analysis and charts for many other areas around the country but with just a cursory look, there are areas like Miami, Phoenix, and Las Vegas that look simply hideous with truly tremendous corrections in store to put those markets back in-line with their historical averages.

More to come!

New Residential Construction Report: October 2007

Today’s New Residential Construction Report continues to firmly indicate a new leg down in the decline to the nation’s housing markets and for new residential construction showing substantial declines on a year-over-year and month-to-month basis to single family permits both nationally and across every region.

Single family housing permits, the most leading of indicators, again suggests extensive weakness in future construction activity dropping a staggering 31.0% nationally as compared to October 2006.

Moreover, every region showed significant double digit declines to permits with the West declining 30.9%, the South declining 35.6%, the Midwest declining 22.5% and the Northeast declining 17.9%.

Keep in mind that these declines are coming on the back of last year’s record declines.

To illustrate the extent to which permits and starts have declined, I have created the following charts (click for larger versions) that show the percentage changes of the current values compared to the peak years of 2004 and 2005.

Notice that on each chart the line is essentially combining the year-over-year changes seen in 2005, 2006 and 2007 showing virtually every measure trending down precipitously.

Although year-over-year declines to permits, for example, have not accelerated measurably from their peak YOY declines, the fact that they continue to decline roughly 20%-30% should provide a solid indication that they are by no means stabilizing.





Remember that permits, starts, and completions are not simply independent measures but are, in fact, three logically related and dependent measures.

In the process of a building project, first you get the “permit”, next you “start” building, and finally you “complete” the project.

For this reason, one must adjust expectations prior to reading a newly released Census Department report to account for the true nature of the data published simultaneously each month.

As in past months, I have “smoothed” out the unadjusted data and aligned the three data series (i.e. moved starts ahead a month and completions ahead six months) to make more obvious their trend.


Here are the statistics outlined in today’s report:

Housing Permits

Nationally

• Single family housing permits down 30.1% as compared to October 2006

Regionally

• For the Northeast, single family housing down 17.8% as compared to October 2006.
• For the West, single family housing permits down 30.9% as compared to October 2006.
• For the Midwest, single family housing permits down 22.5% as compared to October 2006.
• For the South, single family housing permits down 35.6% compared to October 2006.

Housing Starts

Nationally

• Single family housing starts down 25.1% as compared to October 2006.

Regionally

• For the Northeast, single family housing starts down 4.7% as compared to October 2006.
• For the West, single family housing starts down 30.2% as compared to October 2006.
• For the Midwest, single family housing starts down 9.8% as compared to October 2006.
• For the South, single family housing starts down 31.4% as compared to October 2006.

Housing Completions

Nationally

• Single family housing completions down 25.8% as compared to October 2006.

Regionally

• For the Northeast, single family housing completions up 5.8% as compared to October 2006.
• For the West, single family housing completions down 37.4% as compared to October 2006.
• For the Midwest, single family housing completions down 33.5% as compared to October 2006.
• For the South, single family housing completions down 22.0% as compared to October 2006.

Keep in mind that this particular report does NOT factor in the cancellations that have been widely reported to be occurring in new construction.

GDP Report: Q3 2007 Advance

Today, the Bureau of Economic Analysis (BEA) released their first installment of the Q3 2007 GDP report showing a better than expected growth rate of 3.9%, buoyed by strength in, among other things, nonresidential structures, outstanding exports of goods, and federal, state and local government spending while continuing to be weighed down by tremendous weakness to fixed residential investment.

Residential fixed investment, that is, all investment made to construct or improve new and existing residential structures including multi–family units, renewed its historic fall-off registering a whopping decline of 20.1% since last quarter while shaving 1.05% from overall GDP.

Housing continues to be, by far, the most substantial single drag on GDP subtracting an amount greater than the contributions made by all personal consumption of durable (cars, furniture, etc.) and non-durable goods (food, clothing, gasoline, fuel oil) during the quarter.

The following chart shows real residential and non-residential fixed investment versus overall GDP since Q1 2003 (click for larger version).

Housing Decline Spillin’ Over on Consumers!

Ouch!

Today, the latest release of the Reuters/University of Michigan Survey of Consumers showed in unequivocal terms that the US consumer is feeling the burn from declining home values.

In fact, 28% of respondents reported that their own homes had declined in value, well above the record peak result of 24% recorded during the last housing slump in 1992.

Furthermore, the Index of Consumer Sentiment fell 13.56% as compared to October 2006 mostly as a result of consumers’ expectations of future economic prospects.

The Index of Consumer Expectations (a component of the Index of Leading Economic Indicators) fell a whopping 17.33% below the result seen in October 2006 with 22% of respondents anticipating further declines to their homes value.

As for the current circumstances, the Current Economic Conditions Index fell 9.04% as compared to the result seen in October 2006.

Interestingly, the survey reported that the most respondents in 50 years perceived BOTH a high availability of discounted homes AND unfavorable home selling conditions.

Existing Home Sales Report: September 2007

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for September showing, perfectly clearly, that demand for residential real estate has now taken a new leg down uniformly across the nation’s housing markets likely as a direct result of the significant structural changes that have taken place in the credit-mortgage markets.

Within the release, Senior Economist Lawrence Yun now attempts to persuade readers that, although the changes in the mortgage market have been significant and are having an impact on sales, this is merely a temporary situation that is likely to resolve shortly.

“The good news is that mortgage availability has markedly improved in recent weeks with interest rates on jumbo loans falling, and more people are applying for safer and conforming FHA mortgage products. Some of the cancelled transactions will move forward as buyers apply for other loans.”

Additionally, NAR President Pat Vredevoogd Combs continues her absurd attempts to support her trade association by suggesting that if a buyer feels unsure about the conditions in the housing market, they should consult with a realtor.

“Because local conditions vary widely, it’s important for consumers to understand the fundamentals of what’s going on in their area. To sort through the factors in a particular neighborhood, both buyers and sellers should consult with a Realtor to help them navigate the current local market.”

Today’s report is truly stark and provides total confirmation that the nation’s housing markets have now taken a new leg down with EVERY region showing significant double digit declines to sales of BOTH single family and condos as well as large increases to inventory and an explosion in monthly supply as a result of the collapsing pace of sales.

Keep in mind that these declines are coming “on the back” of last year’s fairly dramatic declines further indicating that the housing markets are truly in the process of a tremendous correction.

Below is a chart consolidating all the year-over-year changes reported by NAR in their September 2007 report.

Particularly notable are the following:

• Sales are down significantly in EVERY region and for BOTH single family and condo.
• ALL Inventory and Months Supply show significant increases on a year-over-year basis.