Monday, March 31, 2008

The Arlington Artifice: February 2008

This recurring monthly post tracks the latest results of the housing market seen in Arlington Massachusetts.

I choose Arlington as a result of the Boston Globe’s recently published and absurdly anecdotal and ludicrous farce about the town’s “hot” housing market.

The ridiculous tone and outright mishandling of the housing data by the Boston Globe “reporter” would almost be comical if it weren’t for the fact that the Globe’s editor, Martin Baron, ALSO blundered seriously when he responded to my email about the discrepancies.

Baron attempted to justify the articles contents and in so doing, he disclosed his disgracefully poor and obviously unsophisticated abilities with even the most basic economic data.

The February results again confirm that Arlington is by no means a “stand out” amongst its neighboring towns as Baron suggested in his email and, in fact, is following along on a path wholly consistent with the trend seen in the county, state, region and nation.

Why would an editor of a nationally recognized newspaper think that a single town would continue to function as an isolated bubble amongst a backdrop of the most significant nationwide housing recession since the Great Depression?

As I had shown in my prior posts, this data when charted and compared to other towns in the region proves there are absolutely no grounds to call Arlington’s market exceptional.

The most notable feature of the February results is unquestionably the low number of home sales with only nine sales this month and twenty one sales for January and February combined, the lowest readings since the recessionary period of 1991.

Another important point to remember is that when sales decline dramatically the median selling price can jump wildly up or down since the smaller number of sales provides a smaller set with which to determine the “middle” sale price.

The following chart (click for much larger version) shows a history of Arlington’s February median sales price since 1988 along with the annual outcome. Notice that although the latest result spiked up to a high of $526,000, the low sales count is clearly impacting the median price and February may end up being a little misleading as home sales pick up later this spring.

The next chart (click for much larger version) shows that home sales in Arlington have been essentially flat during the last 15 years, a result that is generally to be expected when looking only at the sales of one town in isolation. That being said though, Arlington only saw 9 home sales in February, the lowest result on record since February 1991.

The final chart shows how the year-to-date median sales price for Arlington, Bedford, Belmont, Cambridge and Lexington has changed since 1988. Notice again that the one month median price data is very volatile jumping radically up or down for each of town. It’s important to note that each of the listed towns is seeing monthly home sales counts at or lower than the recessionary environments of the early 2000s and the early 1990s.

In review, the data shows that there is nothing exceptional about Arlington’s housing market proving clearly that the claims made in the Boston Globe article and later endorsed by its editor Martin Baron were entirely erroneous.

Please let editor Baron know what you think of this misstep.

Friday, March 28, 2008

Confidence Game: Consumer, CEO and Investor Confidence March 2008 (Final)

This post combines the latest results of the Rueters/University of Michigan Survey of Consumers, the Conference Board’s Index of CEO Confidence and the State Street Global Markets Index of Investor Confidence indicators into a combined presentation that will run twice monthly as preliminary data is firmed.

These three indicators should disclose a clear picture of the overall sense of confidence (or lack thereof) on the part of consumers, businesses and investors as the current recessionary period develops.

Today’s final release of the Reuters/University of Michigan Survey of Consumers for March further confirmed the recent plunge in consumer sentiment to a reading of 69.5, a decline of 21.38% compared to March 2007.

It’s important to note that this is the lowest consumer sentiment reading seen since the recessionary period of February 1992 which, according to Richard Curtin, the Director of the Reuters/University, indicates that a recessionary environment is firmly upon us.

“A recession has occurred whenever the Sentiment Index has declined as much as it has fallen during the past year, including the recessions occurring from the mid 1950's to the early 2000's,”

The Index of Consumer Expectations (a component of the Index of Leading Economic Indicators) fell to 60.1, 23.63% below the result seen in March 2007 and 31% below the most recent peak set in January 2007.

As for the current circumstances, the Current Economic Conditions Index fell to 84.2, 18.65% below the result seen in March 2007.

As you can see from the chart below (click for larger), the consumer sentiment data is a pretty good indicator of recessions leaving the recent declines possibly predicting rough times ahead.

The latest quarterly results (Q4 2007) of The Conference Board’s CEO Confidence Index fell to a value of 39 with the “current economic conditions” component registering 33.54, the lowest readings since the recessionary period following the dot-com bust.

It’s important to note that on every instance that the CEO “current economic conditions” index dropped below a level of 40, the economy was either in recession or very near.

The March release of the State Street Global Markets Index of Investor Confidence indicated that confidence for North American institutional investors increased 6.91% since February while European and Asian investor confidence increasing comparably all resulting in an increase of 6.61% to the aggregate Global Investor Confidence Index.

Given that that the confidence indices purport to “measure investor confidence on a quantitative basis by analyzing the actual buying and selling patterns of institutional investors”, it’s interesting to consider the performance surrounding the 2001 recession and reflect on the performance seen more recently.

During the dot-com unwinding it appears that institutional investor confidence was largely unaffected even as the major market indices eroded substantially (DJI -37.9%, S&P 500 -48.2%, Nasdaq -78%).

But today, in the face of the tremendous headwinds coming from the housing decline and the mortgage-credit debacle, it appears that institutional investors are less stalwart.

Since August 2007, investor confidence has declined significantly led primarily by a material drop-off in the confidence of investors in North America.

The charts below (click for larger versions) show the Global Investor Confidence aggregate index since 1999 as well as the component North America, Europe and Asia indices since 2007.

The Almost Daily 2¢ - Pricking It The Hard Way

With all the recent economic turmoil and unprecedented actions taken by the Federal Reserve, it appears obvious that the longstanding Greenspan-era policy of not “pricking” asset bubbles, even if, by sensible definitions, one could be plainly observed to be taking shape, may need some rethinking.

The way the conventional logic goes, since central bankers should not be assumed to know how to value assets better then the market, they should not engage in the business of choosing when asset pricing has gotten out of hand and setting monetary policy and other regulation that would seek to control the perceived mispricing.

As Ben Bernanke put it (borrowing a bit from Milton Friedman and Anna Jacobson Schwartz’s study on monetary history) in a 2002 speech entitled "Asset Price Bubbles and Monetary Policy" "I will argue today, I think for the Fed to be an "arbiter of security speculation or values" is neither desirable nor feasible."

Bernanke goes on “Thus, to declare that a bubble exists, the Fed must not only be able to accurately estimate the unobservable fundamentals underlying equity valuations, it must have confidence that it can do so better than the financial professionals whose collective information is reflected in asset-market prices. I do not think this expectation is realistic, even for the Federal Reserve. Moreover, I worry about the effects on the long-run stability and efficiency of our financial system if the Fed attempts to substitute its judgments for those of the market. “

Yesterday though, Federal Reserve Bank of Boston President Eric Rosengren offered some perspective that posed an interesting, albeit subtle, contradiction in a speech given during the Bank of Korea and Bank for International Settlements Seminar.

“I would argue that it is very difficult for a central bank to be an effective lender of last resort without significant knowledge of the current and prospective value of assets and liabilities within financial institutions. Like any counterparty, a central bank acting as a lender needs to be able to evaluate the solvency and liquidity of a borrowing institution.”

When outlining the qualification process used for banks that seek use of the Term Auction Facility (TAF), Rosengren adds “To qualify, a bank first needs to be in sound financial condition, as the Federal Reserve must have confidence that the bank will be solvent over the time the loan is extended. … Our Discount officers determine, as best they can, the market value of the collateral and apply an appropriate ‘haircut.’”

Aside from the dubious nature of a monetary policy that would seek to look the other way during the boom times while working overtime to create a floor under the market when the boom busts, Rosengren’s speech essentially draws a bright ironic spotlight on the fact that the Fed, having taken the substantial risk of junk mortgage securities on their own balance sheet, is now forced to determine asset prices in a VERY deliberate and real way.

The Federal Reserve is now precisely the “arbiter of security speculation” Bernanke had found so disagreeable in 2002 yet not by its cavalier choosing but by its desperate response to the truly dire circumstances brought on, at least in part, by its own unwillingness to address the obvious problems in the first place.

Thursday, March 27, 2008

GDP Report: Q4 2007 (Final)

Today, the Bureau of Economic Analysis (BEA) released their third and final installment of the Q4 2007 GDP report confirming a truly anemic annual growth rate of 0.6%.

This stunning reversal from the exceptionally “hot” rate of growth seen in Q3 2007 was fueled primarily by accelerating declines in fixed residential investment, slowing growth to fixed non-residential investment, and a sudden deceleration in the export of goods to a much weaker 3.9% growth rate.

In fact, the deceleration to the export of goods was so severe that it seems altogether possible that the Q3 26.6% growth rate was an temporary aberration, a result of there being a brief disconnect between the slowing U.S. economy (and weak dollar) and the rest of the world economies relative strength.

Now that the world economies are slowing as well, it’s unlikely that exports will provide much of a crutch against which the weakening U.S. economy can lean.

Residential fixed investment, that is, all investment made to construct or improve new and existing residential structures including multi–family units, continued its historic fall-off registering a whopping upwardly revised decline of 25.2% since last quarter shaving 1.25% from overall GDP.

The decline to residential housing continues to be, by far, the most substantial single drag on GDP subtracting an amount roughly equivalent to the positive contributions made by all personal consumption of durable (cars, furniture, etc.) and non-durable goods (food, clothing, gasoline, fuel oil) and most personal consumption services during the quarter.

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

Mid-Cycle Meltdown?: Jobless Claims March 27 2008

Today, the Department of Labor released their latest read of Joblessness showing seasonally adjusted “initial” unemployment claims declining 9,000 to 366,000 from last week’s revised 375,000 claims and “continued” claims declined 5,000 resulting in an “insured” unemployment rate of 2.1%.

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.

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

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.

So, looking at the post-“doc com” recession period we can see the telltale signs of a potential “mid-cycle” slowdown and if we were to simply reflect on the history of employment as an indicator of the health and potential outlook for the wider economy, it would not be irrational to conclude that times may be brighter in the very near future.

But, adding a little more data I think shows that we may in fact be experiencing 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.

One 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.

I think there is enough evidence to suggest that our potential “mid-cycle” slowdown, having been traded for a less severe downturn in the aftermath of the “dot-com” recession, may now be turning into a mid-cycle meltdown.

Wednesday, March 26, 2008

New Home Sales: February 2008

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for February showing accelerating deterioration of the already hideous falloff in demand for new residential homes across every tracked region resulting in a 29.8% year-over-year decline and a truly whopping 57.52% peak sales decline nationally.

It’s important to keep in mind that these declines are coming on the back of the significant declines seen in 2006 and 2007 further indicating the significance of the housing bust.

Additionally, although inventories of unsold homes have been dropping for eleven straight months, the sales volume has been declining so significantly that the sales pace has now maintained a peak value of 9.8 months of supply.

The following charts show the extent of sales declines seen since 2005 as well as illustrating how the further declines in 2008 are coming on top of the 2006 and 2007 results (click for larger versions)

Look at the following summary of today’s report:


  • The median price for a new home was down 2.67% as compared to February 2007.
  • New home sales were down 29.8% as compared to February 2007.
  • The inventory of new homes for sale declined 13.4% as compared to February 2007.
  • The number of months’ supply of the new homes has increased 21.0% as compared to February 2007 and now stands at 9.8 months.

  • In the Northeast, new home sales were down 19.6% as compared to February 2007.
  • In the Midwest, new home sales were down 42.5% as compared to February 2007.
  • In the South, new home sales were down 27.9% as compared to February 2007.
  • In the West, new home sales were down 28.3% as compared to February 2007.

Ticking Time Bomb?: Fannie Mae Monthly Summary February 2008

With the federal bailout now well underway and seeing that it's the massive mortgage enterprises of Fannie Mae and Freddie Mac that will attempt, with the help of the “temporary” increase of the conforming loan limits, the brazen lowering of their capital requirements and other even more novel actions, to ride to the rescue of the nation’s housing markets, it's hard not to wonder who will rescue these battered "linchpin" enterprises when the time comes?

I suppose you and me, our children and their children too…. It’s a real shame since these enterprises seemed to be doing so well recently, short of that stint in 2004 where Fannie Mae executives fleeced the company of over $100 million in fraudulent bonuses and the like…

Oh well, how’s another socialized bailout of private swindlers going hurt a country so deep in debt that dollar amounts on the order of billions just don’t seem to sting anymore… even trillions of dollars now seem a bit passé.

It’s important to note that all the recent changes are taking place with no required modifications to the GSEs operational practices and no additional powers granted to their Federal regulator the Office of Federal Housing Enterprise Oversight (OFHEO).

Given the sheer size of these government sponsored companies, with loan guarantee obligations recently estimated by Federal Reserve Bank of St. Louis President William Poole of totaling $4.47 Trillion (That’s TRILLION with a capital T… for perspective ALL U.S. government debt held by the public totals roughly $4.87 Trillion) and the “fuzzy” interpretation of their “implied” overall Federal government guarantee should they experience systemic crisis, these changes are reckless to say the least.

One key to understanding the potential risk that these entities face as the nation’s housing markets continue to slide lies in considering their current lending practices.

Although it’s been widely assumed by many that Fannie Mae and Freddie Mac have utilized a more conservative and risk averse standard for their loan operations, it now appears that that assumption is weak.

Whether it’s their subprime loan production, low-no down payment “prime” lending practices, or their conforming loan-piggyback loophole, the GSEs participated as aggressively in the lending boom as any of the now infamous bankrupt or near-bankrupt mortgage lenders.

Additionally, it’s important to understand that Countrywide Financial has been and continues to be Fannie Mae’s largest lender customer and servicer responsible for 28% (up from 26% in FY 2006) of Fannies credit book of business.

To that end, let’s compare the performance of Fannie Mae’s operations with that of Countrywide Financial.

The following chart (click for larger) shows what Fannie Mae terms the count of “Seriously Delinquent” loans as a percentage of all loans on their books.

It’s important to understand that Fannie Mae does NOT segregate foreclosures from delinquent loans when reporting these numbers and that should they report the delinquent results as a percentage of the unpaid principle balance, things would likely look a lot worse.

In order to get a better sense of the relative performance of Fannie Mae as compared to Countrywide Financial, the following chart (click for larger) compares Fannie Mae’s “Seriously Delinquent” loans (which include foreclosures) to Countrywide Financials loans in foreclosure.

Finally, the following chart (click for larger) shows the relative movements of Fannie Mae’s credit and non-credit enhanced (insured and non-insured) “Seriously Delinquent” loans versus Countrywide Financials delinquencies as a percentage of total loans.

Reading Rates: MBA Application Survey – March 26 2008

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 decreased 24 basis points since last week to 5.74% while the purchase application volume increased by 10.6% and the refinance application volume jumped a whopping 82.2% compared to last week’s results.

The volume series are noisy to say the least so it would be sensible to wait a few weeks before drawing any serious conclusion from today’s spike in refinance activity and always remember that all application volume values reflect only “initial” applications NOT approved applications… i.e. originations…

Also important to note, the average 30 year fixed mortgage rate has decreased significantly in the last few weeks but still remain within the mean seen during 2007 while the interest rate for an 80% LTV 1 year ARM jumped significantly and now rests 128 basis points above the rate of an average 80% LTV 30 year fixed rate loan.

It’s important to note that the data is reported (and charted) weekly and that the rate data represents average interest rates, and the index data represents mortgage loan application volume for home purchases, home refinances and a composite of all loans.

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).

Tuesday, March 25, 2008

Crashachusetts Existing Home Sales and Prices: February 2008

Today, the Massachusetts Association of Realtors (MAR) released their Existing Home Sales Report for February 2008 and simultaneously Standard & Poor’s released their Case-Shiller Home Price Index for January 2008 both showing, perfectly clearly, the truly dire circumstances that have now befallen the Bay State’s housing market.

Whether it was a slow depression brought about by over two solid years of steadily declining home sales and prices, the credit crunch, a looming recession, a palpable increase in inflation of necessities like food and fuel or just simply a change in attitudes toward the notion of a house as a vehicle for wealth, the regions housing markets have now hit a dangerous tipping point (particularly for fancy south end condos... see for more).

It appears that we have entered the “price freefall” phase of the housing decline where mounting inventory, declining sales, and negative sentiment all combine to result in plunging home prices which, quite possibly, may continue to decline substantially even through the spring and summer months which are typically strong periods in any selling season.

The Massachusetts Realtor leader Susan Renfrew, apparently left a bit speechless by poor results, could only muster a weak one-liner before degenerating into a robotic regurgitation of the NAR party line.

“February single-family home and condominium sales came in about where we expected them to, which was generally in line with January’s activity … The good buying opportunities that exist today, along with the recent increases in the FHA, Fannie Mae and Freddie Mac loan limits could help improve sales over the next quarter.”

MAR reports that in February, single family home sales plummeted 22.9% as compared to February 2007 with unchanged inventory translating to a truly massive 16.2 months of supply and a median selling price decline of 4.6% while condo sales plunged 34.6% with a 4.0% decrease in inventory translating to a startling 17.5 months of supply and a median selling price decrease of 6.7%.

The S&P/Case-Shiller Home Price Index for Boston, which is the most accurate indicator of the true price movement for single family homes, showed accelerating prices declines (prices are falling faster) with Boston declining 3.39% as compared to January 2007 leaving prices now 10.89% below the peak set in September 2005.

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 normalized price movement 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 “normalized” chart compares the normalized Boston price index from the peak of the 80s-90s bust to the peak of today’s bust.

Notice that during the 80s-90s bust prices took roughly 46 months (3.8 years) to bottom out.

The “peak” chart compares the percentage change, comparing monthly Boston index 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.

As in months past, be on the lookout for the inflation adjusted charts produced by for an even more accurate "real" view of the current market trend.

February’s Key MAR Statistics:

  • Single family sales declined 22.9% as compared to February 2007
  • Single family median price decreased 4.6% as compared to February 2007
  • Condo sales declined 34.6% as compared to February 2007
  • Condo median price increased 6.7% as compared to February 2007
  • The number of months supply of single family homes stands at 16.2 months.
  • The number of months supply of condos stands at 17.5 months.
  • The average “days on market” for single family homes stands at 166 days.
  • The average “days on market” for condos stands at 165 days.

S&P/Case-Shiller: January 2008

Today’s release of the S&P/Case-Shiller home price indices for January continues to reflect the tremendous weakness seen in the nation’s housing markets with now 19 of the 20 metro areas tracked reporting year-over-year declines and ALL metro areas showing substantial declines from their respective peaks.

Furthermore, the decline to the 10 city composite index declined a record 11.41% as compared to January 2007 far surpassing the all prior year-over-year decline records firmly placing the current decline in uncharted territory in terms of relative intensity.

This report appears to indicate that we have now firmly entered the serious price “free-fall” phase (look at the charts below) of the housing decline.

Topping the list of peak decliners was Detroit at -21.16%, San Diego at -21.13%, Phoenix at -20.82%, Las Vegas at -20.76%, Miami at -19.75%, Tampa at -18.25%, Los Angeles at -18.08%, San Francisco at -15.83%, Washington at -15.23%, Cleveland at -12.15%, Minneapolis at -11.66%, Boston at -10.89% and Denver at -8.05%.

Additionally, both of the broad composite indices showed accelerating declines slumping -13.36% for the 10 city national index and 12.53% for the 20 city national index on a peak comparison basis.

Also, it’s important to note that Boston, having been cited as a possible example of price declines abating, has continued its decline dropping -3.39% on a year-over-year basis and a solid -10.89% from the peak set back in September 2005.

As I had noted in prior posts, Boston has a strong degree of seasonality to its price movements and with both the seasonal drop in sales and the recent stunning new decline to sales as a result of both the looming recession working to erode confidence and the continued lack of affordable Jumbo and Alt-A loans, Boston may continue to decline even through the traditionally string spring selling season.

To better visualize the results use the PaperEconomy S&P/Case-Shiller/Futures Charting Tool as well as the PaperEconomy Home Value Calculator and be sure to read the Tutorial in order to best understand how best to utilize the tool.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as compared to each metros respective price peak set between 2005 and 2007.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as on a year-over-year basis.

Additionally, in order to add some historical context to the perspective, I updated my “then and now” CSI charts that compare our current circumstances to the data seen during 90s housing decline.

To create the following annual charts I simply aligned the CSI data from the last month of positive year-over-year gains for both the current decline and the 90s housing bust and plotted the data with side-by-side columns (click for larger version).

What’s most interesting about this particular comparison is that it highlights both how young the current housing decline is and clearly shows that the latest bust has surpassed the prior bust in terms of intensity.

Looking at the actual index values normalized and compared from the respective peaks, you can see that we are only eighteen months into a decline that, last cycle, lasted for roughly fifty four months during the last cycle (click the following chart for larger version).

The “peak” chart compares the percentage change, comparing monthly CSI 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 97 months (over 8 years) peak to peak including roughly 43 months of annual price declines during the heart of the downturn.

Notice that peak declines have been FAR 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.

Monday, March 24, 2008

Existing Home Sales Report: February 2008

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for February again confirming, perfectly clearly, the tremendous weakness in the demand of existing residential real estate with both single family homes and condos declining uniformly across the nation’s housing markets.

Although this continued and even worsening falloff in demand is mostly as a result of the momentous and ongoing structural changes that are taking place in the credit-mortgage markets, consumer sentiment surveys are now indicating that consumers are materially feeling the current recessionary trend which will likely result in even further significant sales declines to come.

Furthermore, we are now seeing solid declines to the median sales price for both single family homes and condos across virtually every region with the most notable occurring in the West showing a decline of 13.8% to the median single family home sales price and a decline of 14.5% to the median condo price.

NAR senior economist Lawrence Yun now optimistically predicts that there will be a “notable” gain in existing home sales as new FHA limits and other government bailout plans work to “unleash” pent-up demand.

“We’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing, … Buyers taking advantage of higher loan limits for both FHA and conventional mortgages will unleash some pent-up demand. As inventories are drawn down, prices in many markets should go positive later this year.”

Meanwhile NAR president Dick Gaylord, makes another attempt to lure prospective buyers to the trust of local realtors.

“Consumers need to be aware of local market conditions and comparable sales prices to have a clear picture of a home’s value, … realtors understanding of local markets, negotiating expertise, and transaction experience are invaluable to both buyers and sellers, today as much as ever.”

In reality though, realtors, realtor economists and the realtor association have been nearly unanimously (and all too conveniently) wrong in their predictions for the outcome of the housing decline consistently misjudging the severity of declines in both sales and prices and providing very poor guidance to the millions of recent homeowners who now are facing tremendous economic stress.

The latest report provides, yet again, truly stark and total confirmation that the nation’s housing markets are declining dramatically with EVERY region showing significant double digit declines to sales of BOTH single family and condos as well as large increases to inventory and a continued 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 TWO SOLID YEARS of dramatic declines further indicating that the housing markets are truly in the process of a tremendous correction.

The following (click for larger versions) are charts showing sales for single family homes, plotted monthly, for 2006, 2007 and 2008 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.