Thursday, July 24, 2008

Existing Home Sales Report: June 2008

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for June further confirming, perfectly clearly, a continuation of the tremendous weakness in the demand of existing residential real estate with sales of both single family homes and condos declining uniformly across the nation’s housing markets while inventory and supply continues to climb.

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

Furthermore, we are continuing to see SOLID declines to the median sales price for both single family homes and condos across virtually every region.

As usual, the NAR leadership continues spinning the results all the while turning to Washington for additional handouts.

“With short sales and foreclosures accounting for approximately one-third of transactions, it’s hard to make an apples-to-apples comparison with a year ago when they were only a minor portion of the market, … With many potential first-time home buyers on the sidelines, a first-time buyer tax credit would have a significant positive impact on both housing and the economy. Combined with permanent increases to mortgage loan limits and enhancing the FHA loan program, the housing stimulus package working its way through Congress would go a long way toward helping consumers and boosting the overall economy.”

Meanwhile, NAR president Dick Gaylord continues to spin his yarn that a home is a vehicle for wealth creation:

“A recent online survey of Realtors shows nearly a quarter of potential home buyers are waiting on the sidelines, … However, timing the market can be very tricky, which is why home buyers should always have a long-term view to build wealth.”

Too bad for the Realtors though since lending standards will only get more restrictive as lenders further realize losses from subprime, alt-a, prime Jumbo and even prime conforming loans.

The era of FICO driven “slam-dunk” lending is coming to a close and with it will inevitably go all the absurdities leaving borrowers and the real estate industry, if they are lucky, to simply operate in an environment of the traditional “rule of thumb” requirements of substantial down-payments and sensible earnings to debt ratios.

The latest report provides, yet again, truly stark and total confirmation that the nation’s housing markets are declining dramatically with virtually EVERY region showing significant double digit declines to sales of BOTH single family and condos as well as increases to inventory and an unusually elevated monthly supply resulting 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.