Crashachusetts Existing Home Sales and Prices: May 2009

Today, the Massachusetts Association of Realtors (MAR) released their Existing Home Sales Report for May showing that single family homes plunged 15.3% on a year-over-year basis while condo sales simply collapsed dropping 24.6% over the same period firmly indicating that the Massachusetts residential real estate market is continuing to seriously erode.

Further, the single family median home value declined a whopping 11.8% on a year-over-year basis to $284,000 while condo median prices dropped 6.2% to $265,000.

Clearly, the impact of the ongoing economic crisis is bearing down on both consumer sentiment and, more fundamentally, credit availability resulting in a significant pullback in spending on homes and other costly purchases.

It’s perfectly clear now that home sellers that choose to wait out the “down market” did so in vain as the 2008 selling season marked likely the last opportunity to sell any residential property at anywhere near the prices set in the peak boom years.

With confidence depressed and eroding and sale volumes this low, Boston area home prices have nowhere left to go but down.

Of course, the Massachusetts Association of Realtor president Gary Rogers continues the realtor spin:

“While sales and median prices are still down from last year, the current trend of month-to-month improvements is noteworthy, especially when you combine it with the fact that consumer confidence and other economic indicators are showing some signs of improvement as well.”


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 home price movement.

Today’s Key Statistics:

Single Family results compared to May 2008

• Sales: declined 15.3%
• Median Selling Price: declined 11.8%
• Inventory: declined 17%
• Current Months Supply: 11.9
• Current Days on Market: 148

Condo results compared to May 2008

• Sales: declined 24.6%
• Median Selling Price: declined 6.2%
• Inventory: declined 19%
• Current Months supply: 13.7
• Current Days on Market: 149

Existing Home Sales Report: May 2009

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for May indicating that home sales declining slightly on a year-over-year basis, despite the significant slide to median selling prices, record low interest rates and significant numbers of speculative sales of distressed properties in the western region.

Existing single family home sales were down 2.97% on a year-over-year basis while the median selling price declined a dramatic 16.07% over the same period.

More notably though, the Condos now seem to have fully tipped into the major decline phase with sales declining 8.9% on a year-over-year basis with median selling prices declining a whopping 21.9% over the same period.

Lastly, the West region, which had since the summer of 2008 looked to be experiencing a market clearing of sorts with surging (mostly distressed) home sales coming on the back of record price declines, is now starting to show some clear signs that it’s housing rally may be drawing to a close.

With the selling price of all housing products continuing to fall at an annual rate of over 30% and regional unemployment near 12% this massive “suckers rally” in residential real estate will deal the West region another serious financial blow.

The NAR leadership continues their truly disgusting and shameless spin with both their chief economist Lawrence Yun and their current president Charles McMillan suggesting that “poor appraisals” are forestalling a “housing recovery”…. For those of you that don’t recognize it… this talk is the simple framing of an appeal (through RPAC the Realtor political action committee) for action from the federal government to contrive the procedures used to conduct fair-market appraisals of residential real estate…

“First-time buyers also are being drawn off the sidelines by the $8,000 tax credit, which is helping to absorb inventory. However, the increase in sales is less than expected because poor appraisals are stalling transactions. Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan.” Yun said.

“To maximize the potential for a housing recovery and subsequent economic recovery, we need realistic appraisals that are based on proper comparisons and done by a local specialist,” McMillan said.

The following (click for larger versions) are charts showing sales for single family homes, plotted monthly, for 2006, 2007, 2008 and 2009 as well as national existing home inventory and month supply.







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

Green Shoots Starting to Wither… Soon To Die

It was such a pleasant spring too… wet mild weather… just perfect for growing “real” crops … Bulls hoped their green would grow too… now though, it looks as if the “Green Shoots” may start to spontaneously shrivel… a casualty of the overarching climate of economic decline.

Things were looking so good too… You had the Philly Fed Business Outlook Survey make a strong showing… the Conference Board’s Index of Leading Economic Indicators seemed to signal recovery… although… these indicators all signaled recovery in 2001 as well… and look how far that “recovery” got us.

Another interesting report came out on Friday as well… the Regional and State Unemployment Report showing one state with over 14% unemployment (Michigan at 14.1% unemployment and increase of 1.2% since just last month) three states with over 12%, and 13 states over 10%.

Further, 27 states experienced a notable re-acceleration to unemployment jumping anywhere from .05% to 1.2% since just last month.

This brings us one step closer to the ultimate “Prime Bomb” detonation… the point at which the level of unemployment is BOTH uncomfortably high causing systemic vicious cycling feedback effects (I would argue we are at that point now) AND obviously beyond a point at which the government can appear to have any form of control over.

Currently, the populous has almost innate or inherent confidence in the governing elite… they appear to have “fixed” the financial system and the stock market so why not the job market?

Yet, even with all the multi-trillion dollar government meddling, the job market is getting worse.

This is not a new trend…. We had a “jobless recovery” for the first half of this decade… followed by an historic decline (which destroyed all the jobs created in the jobless recovery leaving us now at payroll levels below that of early 2000… with over 20 million more work age population today) that continues to this day.

As more states push closer to the 15% unemployment level and the current crop of 12-14% unemployment states push on closer to 20%, there will be a point at which there is a clear realization that the “unemployment problem” (as they called it back in the 30s) is beyond the control of current government policy.

This will obviously bring new policies as well as a notable loss of confidence.

As I have pointed out in prior posts, mid-July is the next typical seasonally point for mass-layoff events so look for this recent unemployment re-acceleration to express itself through the summer and, if the economic climate of the second half is particularly week, merge again with the larger typical mass-layoff period of mid January.

In the near term we should be focused on a significant change in outlook for the second half of 2009 as there is clear realization that the “Green Shoots” are dead and the decline will drag on much longer.

The following chart (click for super-dynamic zoom-able version) shows what has to be the starkest evidence that our economy has not only been weak for roughly a decade but further looks to be on course for a protracted bout of nationwide systemic double-digit unemployment.

Sinking Ships – MA vs. RI May 2009

Subtitle: MA Unemployment … Next Shoe Dropping!?

As I had noted in my original post, historically it has been very unusual for there to be more than a 1.5% difference (either more or less) between the unemployment rates if Massachusetts and Rhode Island.

Recently though, we have seen a historically unusual spread between Rhode Island’s high and accelerating rate and Massachusetts’ far lower but now quickly rising rate.

In fact, after a short period of flattening and decline in recent months the latest 3.9% spread has exploded, blasting through the peak set in 2008 and exceeding ALL spreads seen in at least 40 years.

This indicates that either Rhode Island’s current rate would need to fall dramatically or the Massachusetts rate would need to increase sharply…. My sense, especially in light of the financial turmoil seen since September, is that Mass will be continually playing catch-up.

The latest regional unemployment report shows that, in May, the Rhode Island unemployment rate surged to 12.1% while the Massachusetts rate jumped to 8.2%.

In May, Massachusetts experienced the single largest year-over-year increase in unemployment since the recessionary environment that followed the tech-led dot-com bust jumping 67.35% on a year-over-year basis clearly indicating that Mass has now entered a period of truly explosive unemployment growth.

As summer nears look for the unemployment rate to continue the notable acceleration as the second typical seasonal period for mass layoffs culminates mid-July.

Now That’s a Green Shoot!

Looks like mortgage rates are on the move… I suppose you can’t have your cake and eat it too!

As we watch the myriad of economic indicators go from flashing “danger” to giving the early signs of a possible crescendo (to the decline… or the double-dip decline) it’s important to consider the extent of the government manipulation and how it contributed to the current trends.

Clearly, the Fed’s actions brought mortgage rates down … that WAS (or still is) their intention.

The immediate result of the rock bottom lending rates was a boom in re-finance activity and a slight (barely noticeable) blip in purchase activity as witnessed by the MBAs mortgage application survey (see super-dynamic interactive and zoom-able chart below).

But have these actions truly helped the situation?

Is it sensible for the government to forcibly push rates to literal historic lows just to preempt the inevitable un-wind of obviously fraudulent and grossly inflated home values?

Well, as even “sort-of-free” markets generally don’t always abide by the will of the current crop human do-gooders the latest trend in the 30-year conventional mortgage rates may prove temporary or it could signal a rebound off of a level that was essentially unnatural.

And so what happens if the average 30-year fixed mortgage rate heads back up to the more statistically normal 6-7% range?

Let the real healing begin!

Perception is Reality?

Looking at the spread between the Current and Future diffusion indices of the Philly Feds Business Outlook Survey it's obvious that the near manic outlook of the regions manufacturing is a pretty solid indicator of recession and recovery.

To derive the spread I simply subtracted the current index from the future index resulting in a pretty interesting series in and of itself.

When the spread is most negative respondents are generally indicating current expansion but contraction in the future.

When the spread is most positive respondents are generally reporting current weakness but a sense of future expansion.

Currently, respondents appear to see a light at the end of the tunnel though it’s probably safe to wait for a sustained decline in the 3 month moving average before getting too giddy.

Also, it’s interesting to see that in recent years there has been more subdued swings in the perception of manufacturing activity during both the up or down of the economic cycle.

The Bigger They Boom, The Harder They Bust!

The current worldwide economic decline is clearly working its mojo on U.S. income derived from international sources.

The latest U.S. International Transactions report by the Bureau of Economic Analysis continued to show a substantial pullback to U.S. income derived from goods sold and services rendered abroad with total income falling 34% on a year-over-year basis.

Philadelphia Feeling: Federal Reserve Bank of Philadelphia Business Outlook Survey June 2009

Today, the Federal Reserve Bank of Philadelphia released the results of their Business Outlook Survey for June showing significant improvement to the regions manufacturing sector with the current activity index indicating only mild continued contraction at –2.2.

This is another strong indicator currently favoring the “Green Shoots” position though as with today’s index of leading economic indicators, the intensity of the “V” should be monitored closely in coming months in order to establish the fundamental trend.

It’s important to note that with today’s release the future general activity index has pushed up near the high set during the strongest portion of the last economic “expansion” clearly indicating that respondents on the whole see a strong recovery in the works.

Is this and accurate take or just a significant bounce from a sense of relief that the events of Q4 2008 are now behind us?


Also, today’s results now show that any recent parallel to the stagflationary eras of the 70s and early 80 have given way to a stronger stag-deflationary force bringing down prices and new orders though the latest release shows predictions on future employment appear to have taken a turn up.

The following chart shows the latest results of the “current new orders” “current prices paid” and “future employment” components (click for larger versions).

The following chart (click for larger) shows these measures during the last stagflationary era seen between 1976 – 1980. Notice the clear divergence of rising prices and falling growth.

Follow The Leader: Index of Leading Economic Indicators May 2009

Today’s results of the Conference Board’s Leading Economic Indicators showed another significant monthly increase climbing 1.2% compared to April while cutting the annual decline to just 1.67% compared to May 2008 leaving the index at a level of 100.2.

On the face of it this is clearly a Bullish “Green Shoots” development as this series (an aggregate of 10 component leading indices) is signaling a clear shift from leading contraction to expansion though the strong “V”-shaped bounce is clearly reflecting the large move up in stocks recently as well as a six month surge in M2 (both components).

Mid-Cycle Meltdown!: Jobless Claims June 18 2009

Today, the Department of Labor released their latest read of Joblessness showing seasonally adjusted “initial” unemployment claims increased 3,000 to 608,000 from last week’s upwardly revised 605,000 claims while “continued” claims declined 148,000 resulting in an “insured” unemployment rate of 5.0%.

It’s important to note that the two most significant periods for job cuts on a non-seasonally adjusted basis is January 15 and July 15 so as July and clearer visibility on H2 quickly approaches it will be interesting to see how initial jobless claims fares.

Also, the continuing claims series is presenting the clearest picture of what is likely to be one of the most problematic aspects of this period of economic crisis namely how to make an immense and growing number of highly specialized (college educated) service/professional service workers productive again.

It’s obvious now that we have reached the first real test of our majority services-based economy.

Unlike the “tech-wreck” of 2000-2002, our current downturn is very broad, leaving no sector and virtually no corner of the country untouched.

With millions of college educated workers now on the market incomes will clearly suffer but moreover, it will be soon all too clear that our prior bubble economy significantly overproduced service workers (particularly professional service workers) for which current employment opportunities will be scant resulting in continued and fundamental vicious-cycle effects.

The following chart shows the recent trend in initial non-seasonally adjusted initial jobless claims with the year-over-year percent change acting as a rough equivalent of a seasonally adjustment.

Historically, unemployment claims both “initial” and “continued” (ongoing claims) are a good leading indicator of the unemployment rate and inevitably the overall state of the economy.

I have added a chart to the lineup which shows “population adjusted” continued claims (ratio of unemployment claims to the non-institutional population) and the unemployment rate since 1967.

Adjusting for the general increase in population tames the continued claims spike down a bit but as you can see, the pattern is still indicating that recession has arrived.

The following chart (click for larger version) shows “initial” and “continued” claims, averaged monthly, overlaid with U.S. recessions since 1967 and from 2000.

NOTE: The charts below plot a “monthly” average NOT a 4 week moving average so the latest monthly results should be considered preliminary until the complete monthly results are settled by the fourth week of each following month.

As you can see, acceleration to claims generally precedes recessions.


Also, acceleration and deceleration of unemployment claims has generally preceded comparable movements to the unemployment rate by 3 – 8 months (click for larger version).


In the above charts you can see, especially for the last three post-recession periods, that there has generally been a steep decline in unemployment claims and the unemployment rate followed by a “flattening” period of employment and subsequently followed by even further declines to unemployment as growth accelerated.

This flattening period demarks the “mid-cycle slowdown” where for various reasons growth has generally slowed but then resumed with even stronger growth.

Until late 2007, one could make the case (as Fed chief Ben Bernanke surly did) that we were again experiencing simply a mid-cycle slowdown but now those hopes are long gone.

Adding a little more data shows that in the early 2000s we experienced a period of economic growth unlike the past several post-recession periods.

Look at the following chart (click for larger version) showing “initial” and “continued” unemployment claims, the ratio of non-farm payrolls to non-institutional population and single family building permits since 1967.

The most notable feature of the post-“dot com” recession era that is, unlike other recent post-recession eras, job growth has been very weak, not succeeding to reach trend growth as had minimally accomplished in the past.

Another feature is that housing was apparently buffeted by the response to the last recession, preventing it from fully correcting thus postponing the full and far more severe downturn to today.

It is now completely clear that the potential “mid-cycle” slowdown that appeared to be shaping up in late 2007, had been traded for a less severe downturn in the aftermath of the “dot-com” recession, and now has we have fully entered, instead, a mid-cycle meltdown.

Seasonal Cycles Up-Market and Down

The Radar Logic RPX Home Price data series are not only accurate but they are exceptional at reflecting with great precision and clarity the effect seasonality has on residential home pricing as well as the subtle variations in seasonality from region to region.

Probably the country’s most seasonal housing market with regularly tracked data is the Boston metro market which typically shows (up market and down…) a very regular fluctuation in prices from the highs in June to the lows in February.

It’s important to consider how these striking oscillations of price are both created from the buying activity BUT also affect the buyer behavior.

In the Boston area, the springtime seasonal competition for quality housing is palpable … even in down market years… but the larger cycle of the overarching multi-year declining trend… is not nearly as obvious.

The following chart (click for super-cool dynamic zoom-able chart) shows the 1, 7 and 28 day aggregates for the Boston metro area... the typical seasonal bounce has begun but will inevitably relent to the larger declining trend come September.

Material Pullback!

It appears that the "Green Shoots" have not found their way through the still smoldering patches of durable material production.

Yesterday’s Industrial Production report showed that in May, durable materials continued its staggering decline, nearly the worst on record (second only to 1949s major decline) with a 26% YOY contractions and a 2% loss since just last month.

Now that's a Material Pullback! (click the following for super-surf-able-dynamic chart!)

Reading Rates: MBA Application Survey – June 17 2009

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages, 1 year ARMs as well as application volume for both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage declined slightly dropping 7 basis points since last week to 5.50% while the purchase application volume decreased 3.5% and the refinance application volume slumped a whopping 23.3% compared to last week’s results.

It’s important to recognize that while the Federal Reserve’s “quantitative easing” measures appeared to hold rates down in recent months, the trend now seems to be changing.

In any event, while low rates clearly impacted re-finance activity, purchase activity never showed notable improvement.

The following chart shows how the principle and interest cost and estimated annual income required to cover the PITI (using the 29% “rule of thumb”) on a $400,000 loan has changed since November 2006.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages over the last number of weeks (click for larger version).


The following charts show the Purchase Index, Refinance Index and Market Composite Index since November 2006 (click for larger versions).

Production Pullback: Industrial Production May 2009

Today, the Federal Reserve released their monthly read of industrial production showing a further continuation of the simply stunning declines to the aggregate production and widespread declines across many industries, particularly those related to consumer spending, construction and autos, resulting in the largest year-over-year decline seen during this period of 13.41% as compared to May 2008 and a whopping 1.13% decline since just this April.

“Final product” consumer durable goods continue to show weakness falling 22.89% as an aggregate on a year-over-year basis, with particularly significant declines coming specifically from home appliances, furniture and carpeting which declined by 20.68% on a year-over-year basis.

Construction supply production has been showing the most severe contraction seen in at least the last 20 years with wood products falling 21.51% on a year-over-year basis.

Although automotive production has been showing weakness since the middle of 2004, business vehicle production is now showing a stark contraction.

Finally, HVAC (heating ventilation and air conditioning) appears to be firmly reflecting the substantial pullback in fixed commercial investment falling a stunning 23.75% on a year-over-year basis.

The following charts (click for larger) show the overall consumer durable component along with the Home Appliances, Furniture and Carpeting sub-component on both a time series and year-over-year basis, construction supply production with the wood products sub-component, and general and business related vehicle production all overlaid with the last two recessions for comparisons purposes.