Sales of Existing Homes Climb 2.1 Percent to New Record in June

[BaysideLiberal]

WASHINGTON (AP) - Sales of existing homes rose 2.1 percent to a new record in June as rising mortgage rates prompted a rush by Americans to close deals before rates went even higher.

The National Association of Realtors reported Monday that the increase in sales pushed the annual rate of existing home sales to an all-time high of 6.95 million units, beating the old record set in May of 6.81 million units.

The pace of home sales this year has surprised analysts, who had been predicting that sales would begin to slow, reflecting the fact that interest rates have started to increase.

"Although we've been expecting sales to ease, it's clear that the market has tremendous momentum," said David Lereah, chief economist for the Realtors. "The improving job market and higher consumer confidence are feeding into a large demographic demand for housing."

http://ap.tbo.com/ap/breaking/MGBYF2FP4XD.html

comment : is this a shift from new construction to existing homes to snap up bargains and hunker down?

[gasperc]

1. while new homes sales dropped in June

Sorry, don't have the link, but it was posted here a couple of weeks ago. You can broker a deal on an existing home, while new home prices are usually non-negotiable and way higher than a comparable existing house. People are looking for the best deal possible and abandoning the "new" market, putting alot of construction and new home suppliers jobs on the line.

The home improvement market might see an uptick.

[Frodo]

3. That was new home "starts" and "permits" - New home "sales" is tomorrow.

Permits (and to a lesser extent starts, depending on the market) are more a measure of anticipated future conditions on the part of the builders.

BTW - New home sales are every bit as negotiable (more so if you soncider options) than resales are.

And don't woryy yet about the construction jobs. These guys have been overworked for the last couple years - this will just reduce the overtime a tad.

[F.Gordon]

13. You're 1/2 right......

And don't worry yet about the construction jobs. These guys have been overworked for the last couple years - this will just reduce the overtime a tad.

The large contractors are buying up the small contractors. New home construction is operating with MUCH fewer crews than in the past. The piece rate price is constantly being lowered. Instead of cutting profit margins, the New Home Builders just lower wages.

I just loooovvvee you Bankers and "economists" that look at some fucking piece of data or a chart and tell everyone how great things are. You really need to "chunk it down" by banker friend and take a look at what is really going on out there......

[Frodo]

19. LOL

What is "really happening out there" is that more people are buying homes than at any time in the past.

I have no idea how I can "chunk" that as anything but a good thing.

[F.Gordon]

21. You don't get out much, do you?

And your response proves my point. How does that expression go??..."Never mind that the horse is blind, just load the cart."

"Chunk it down" is an old corporate phrase. Or, at least it was one used when I wore a suit and tie. It means to break something down to get to the simple parts that make up the whole. It allows one to be "pro-active" (I believe that's the new coporate catch phrase being used today)..you act instead of react.

Why is it that houses are selling in a slow economy? You don't care to ask that question. You just pop the champagne and continue sailing.....towards the iceberg...

It doesn't bother you that piece labor wages for new construction is being cut by 1/2 or 2/3? It doesn't bother you that builders are relying more and more on product from Mexico, Canada, China, and Japan? It doesn't bother you that people are buying houses now with fucking balloon loans or interest only loans? Or worst...they are tacking on 2nds to cover the minimum down payment? It doesn't bother you that people are upside down on a house the day they close?

Never mind....I know the answer to these questions..

Happy Sailing!!

[Baltimoreboy]

22. Interest rates remain low

And many people are buying homes for that reason as well.

[F.Gordon]

23. See post #17 below

The problem is that the marketing of homes is not on the home itself, it's on the interest rates. People are not buying homes, they are buying a payment. The Builder/Realtor will max out a buyer to their income level, and the Mortgage Companies are happy to help them out.

In the BBB newsletter I got this month they listed Mortgage Companies as having the MOST consumer complaints. They're just a tick above Crack Dealers on the Credibility Scale.

I posted elsewhere that less than 1/2 of families in this country can afford a median priced home....that's AT the low interest rates we now have. What does that tell you? Families have less net income after debt to qualify or families are making less income....period. And it all goes back to the Home Industry itself. They are paying lower wages and buying product NOT made in the U.S. The noose just keeps getting tighter and tighter....

Happy Sailing!!!

[Frodo]

25. Simply untrue (mostly)

"I posted elsewhere that less than 1/2 of families in this country can afford a median priced home....that's AT the low interest rates we now have."

That's just not true. The median priced home is currently well within reach of the "median household income" family.

There's actually a measurement of this to look to. Some quote sales price to income (which doesn't take monthly payments into account. The right stat to look at is the NAR's Housing Affordability Index, currently at it's second-ighest level on record at 144.1

This means that the typical household has 144% of the income necessary to purchase a home at today's median purchase price. That's WITH the recent bump in rates, and it's comfortably within where it needs to be to support home sales at a couple percent higher rate than currently seen.

And no, it doesn't bother me that people are using interest-only or balloon loans. Though short term ARMs are a concern. Even before the current market churned things so violently, the average mortgage paid off in 7-10 years (the reason 30 year fixed mortgages tie more closely to 10yr treasuries instead of some other rate - they are considered to essentially BE ten year securities). I have no problem with someone taking their future plans in to account when buying a home. If you know you're moving out 3-5 years from now and want to get a 7/1 or 7/23 mortgage, it can make great sense. No point in paying extra for something you don't need. I got a 30yr that's interest-only for the first ten (with the same rate for the amortizing period). It makes perfect sense for my family in almost every forseable scenario.

Yes, it bothers me that people borrow for their downpayment (and end up upside-down on the day they purchase it), but in most cases they are still better off for owning than renting if it helps them get that first house they could not otherwise afford. But this is all hardly new behavior, we've gone through at least two extended cycles since these products were popular and we aren't going back to "20% down" though it's still my reconmmendation (and practice).

As for the rest? Please document your piece labor statistic at a national level. It does not match the pricing power subs have had in the markets I've watched.

But I can answer one question: "Why is it that houses are selling in a slow economy?" Answer? "They aren't"

First, the only way this is a "slow" economy right now is in the employment sector (granted a big factor in home sales). But the people who ARE employed are still buying things. Retail sales, auto sales, home sales, etc. Why is it a surprise that lower monthly payments encourage people to move to that next house? The "zero percent financing" scam of the post-9/11 world increase auto sales even though people were tightening their belts. I prefer to think of it as two economies. There are people out there really hurting and some that are doing fine. THEY're the ones buying the homes.

[leesa]

29. What planet are you from?

Reality seems to elude you.

[Frodo]

32. What a well-thought-out response.

Lots of data to back you up too I see.

[F.Gordon]

33. Do you read the NAR reports?

The statistic you are quoting (of 144.1) is on ARM loans. A year ago it was at 155.7 I don't know where the hell you are getting this "second highest level" stuff. For a Fixed Rate it is currently at 127.6 - a year ago it was at 143.2

I get reports from the Meyers Group and Claritas. They both show that the Affordability Ratio is around 46%. Which means 46% of american households can afford a new home. A year ago it was almost 49%.

The NAR is basing their statistic on the weighted income of households in that 46% ratio. Meyers and Claritas use the actual average household income in the United States. Also, the median price for a new home in the United States is currently around 199,000. Where I live the median price is closer to 289,000. Regional differences can seriously taint "statistics". For example, the "great" new housing numbers a couple of months back were "tainted" by the boom in new housing in the Southern regions.

So, you are comfortable with balloon and interest only loans? You seem to suggest that most people have the financial discipline to prepare for the future and handle this? When I was in the "biz" many moons ago the statistic for households that even maintain a budget was only 20%. I don't know what it is today. With the help of computers...maybe it is higher today. Don't know.

As for contractor wages...in lieu of flying you out here and driving you around town to actually talk to the the subs....I'll quote just one category from the US Department of Labor on "Tile and Marble Contractors". In 2002 the average median income for these contractors was 37,740. In 2003 it had dropped to 35,610. And I'll bet you a nickel that 2004 will see another drop....just in this ONE construction catagory.

"Chunk it down" my friend. You can't see the forest...

[F.Gordon]

35. scuse' me. My edit expired

The 49% ratio was two years ago, not one year ago. And the NAR uses the blended total US income.....which includes the very rich...which "taints" their statistics.

Sorry for the mis-quotes.

[Athame]

31. Where I live the median price hit one million dollars a month ago

even 30-year-old mobile homes in dilapidated parks are going for 200,000+ while the state (CA) is in huge budget crisis and real wages are going down. In order to get into the park, a buyer has to prove income 4x the mortgage and the space rent (which is running about 600 per month in most parks). So the absolute cheapest housing still requires an income of 60K.

The community is hemorrhaging teachers, firefighters, administrators, even doctors can't afford to live here unless they bought in several years ago. I can't imagine where this is going.

[Cronus Protagonist]

37. You always seem to bat for the other side

Are you playing devil's advocate all the time, or are you actually employed in that position?

SHOVE IT! - Drop Bush Not Bombs! - GO FUCK YOURSELF
http://brainbuttons.com/home.asp?stashid=13

[gasperc]

34. New home sales did drop, 0.8%, just released see link

in line with the drop in building, and motivated really hit it raw, he's on the pulse the problems, smaller work crews, out of country materials, inflated prices and ridiculous loan offers to "get" buyers. In the early 90's, in California, just before the bubble expoded, banks were allowing people to put down 1%,(one % !) on a $400,000+ home. That's $4000, no wonder people just walked away from their houses when they couldn't make payments anymore, they had little to lose, other than having their credit shot. But between buying food and screwing your credit because you can't sell your upside down mortgage that the bank is going to force you to pay, I'll take food.

http://news.yahoo.com/fc?tmpl=fc&cid=34&in=Business&cat=Real_Estate_and_Housing

[havocmom]

2. Do those figures for sales of existing homes also include mortgages being

refinanced? Have family in title insurance industry and a huge portion of the business the past several months has been due to refinance to get lower rates.

The way the powers that be like to manipulate the numbers and what they base numbers on, (so many former CEOs in the junta, you know) I would think the numbers do not actually reflect just house sales but rather mortgages taken out.

Seems anything which really goes up in price is suddenly removed from the index used to formulate the inflation rate. Gotta wonder about just what is included in 'sales of existing homes' when they want to convince us the economy is fine as we are all taking on water instead of getting our boats raised the same as the rich folk.

[Frodo]

4. No. Refinances are counted by the mortgage industry.

This (I think) is a realtor number.

[havocmom]

5. have my doubts about that one

but you may be right. I will ask my sister the title company pres. next weekend. ;)

[F.Gordon]

10. No

This data is actual existing home sales reported to the Realtor group that monitors this. You can view the report here:

http://www.realtor.org/Research.nsf/files/REL0406k.pdf/$FILE/REL0406k.pdf

This isn't surprising considering the recent New Home sales data. The median price (nationally) for an existing home is about 20% LESS than a new home. More people can AFFORD an existing home...than a new home.

It will interesting to see what happens to the median price of homes over the next 2 quarters. Will existing home sales pull more sales away from new homes? It's already happening in the auto industry.

I don't see this original news as "good" news. Resales don't create the jobs that "making new shit" does.

[havocmom]

12. thank you (n/t)

[luaneryder]

6. Wonder if the second and vacation

home buyer is included in this report? I have a house on the market that is appealing only to those types although it is my primary and only residence. It's been listed for almost five months now with lots of lookers, but no bites. I read earlier this year that the second/vacation home market didn't suffer much with the economic downturn.

[mom cat]

7. This isn't about "consumer confidence". It's about people scared

of the forthcoming rise in interest rates and trying to get in under the wire.

[mhr]

8. Hmm, So Why Are There Roughly 12,000 Homes On The Market In Austin, TX

Could it possibly be that the sale of homes is hardly homogeneous.

A colleague of mine, marginally employed, has been told by Austin real estate agents in the last month that he will have to reduce his selling price by 100,000 to move it.

For those that do not know, Austin is one of the hardest hit Texas cities for lost jobs over the last three years.

Thanks GW!

[gasperc]

9. you'd thought a plane crashed into Dallas

with that employment plunge

[mhr]

11. Unemployed Four Years, Tell Me About It!

For those that don't know, Dallas, TX lost 112,000 telecom jobs in 2001 and 2002. That represented 3.2 billion dollars in lost salaries to the local economy. North Dallas has yet to recover from the telcom implosion.

[Wright Patman]

14. But it's all Clinton's fault, right?

One thing about being a North Dallas or Collin County resident is that you spend a lot of time on the river. You know the one. It's called "Denial."

[mhr]

15. Well Patman, I Am Not In Denial And Have No Idea What You Are Saying

The only people in denial are the Republicans that think they will be reelected in Dallas County this go around.

In particular this applies to Pete Sessions who is running against Martin Frost.

Frost is in the process of cleaning his clock.

[Wright Patman]

16. Sorry, I didn't mean you personally

and I wish you well in your attempt to return to your previous standard of living.

One thing, though, I do not understand about North Dallas and Collin County is that it is such a bleak area in terms of scenery (a flat, basically treeless prairie which becomes almost unimaginably hot in the summer) and the like that I don't know why anyone would hang around there very long if one were not making a lot of money.

I understand you cannot just walk away from a house (well, people in Houston did in the late 1980s, but that was a freak occurrence), but I wouldn't ever want to put down roots in, say, Allen or Frisco.

[Frodo]

20. That's actually an interesting stat.

Apparently about 10,000 homes sold in the first half of the year. Which implies that you're seeing about an average of six months to sell a house. Which is historically right around the average nationwide. Just shows how overly hot the national market IS if some of the hardest hit areas are still in that range. BTW that puts a stat called "sales chances" in the 15% range (I didn't find monthly stats). Anything under 20% is supposed to be a buyer's market.

A $100,000 hit!?!?! How expensive IS this home???

Interesting chart BTW - Have I seen it somewhere before? I'm not so good with names and faces, but I almost never forget a chart. :hi:

[Yavin4]

17. People Like Frodo Never Cease To Amaze Me

They never, ever take the Fed's actions into their analysis. Of course the housing market is doing well. Why? Because the Fed is handing out money like candy, and it has been doing so for the past four years. The housing market has been doing well because more people qualify for mortgages because of the low interest rates.

However, now that interest rates are ticking higher, this housing market will collapse. Why? There's no real growth in this economy, and there has not been any real growth for the last four years. There is no real job creation going on in the U.S. The only "growth" that there's been is debt growth which masks the true underlying economy.

Parsing through bits and pieces of economic data without taking into account this period of "historically low interest rates" is simply inaccurate data analysis.

[Baltimoreboy]

24. People have talked collapse for a long time

Usually when people predict a cataclysm, they end up wrong.

[Frodo]

26. They also fail to see the finer details

Espetially when they look at Fed policy. Mving from 1% up to 2% would STILL be "easy money" and a stimulus. We've got a long way to go before we get to rates that slow things down.

People treat the real-state industry as if it were incredibly fragile and seeing mortgage rates "JUMP" from 6% to 7% is just going to KILL it. They either ignore history or haven't been around long enough to remember it. They also ignore the fundamental difference between real estate and any other type of investment.

Rates can rise up to the 8-9% range over the next year or two wthout seriously damaging things. Sales will obviously slow, and that's problably a good thing. Some markets will see reduction in pricing - and that's to be expected as well. But it will tale an earthquake to move things down to just a "good" level from "red hot". Rates have already climbed a fair amount and sales are at all time highs.

[Spentastic]

27. Interesting analysis

However, is there any evidence about WHO is buying these properties and how.

a. Is this speculation due to weakness in the Equity market?

b. Are people without the means to sensibly purchase property pursuing employing questionable means to do so?

Whilst a 1% rise should not have an impact, it will affect those who are speculating with borrowed money. If Equities return strongly will property be dumped?

[Media_Lies_Daily]

30. Do you believe the U. S. economy is completely healthy? Do you...

...actually believe the Government reports about unemployment?

Do you believe that average salaries are on the increase or decrease, nationwide?

Do you believe that foreclosures are really not being reported at a record rate?

Do you believe that bankruptcies, both personal and business, are not being reported at a record rate?

Do you believe that the prices of gasoline, heating oil, produce and other commodities are not rising?

[nolabels]

18. I just got quarter point lower rate on my Refi because of the weak market

Which tells me somebody is full of B.S. :evilgrin:

Housing construction fell in June
Another sign U.S. economy slowed last month
The Associated Press
Updated: 8:49 a.m. ET July 20, 2004

WASHINGTON - Home builders took a bit of a breather in June, sending housing construction down to its lowest level in just over a year. It was another sign that the economy slowed down last month.

The number of housing projects that builders broke ground on clocked in at a seasonally adjusted annual rate of 1.80 million units, an 8.5 percent drop from May’s level, the Commerce Department reported Tuesday.
(snip)
http://www.msnbc.msn.com/id/5465549/

[wackywill]

28. I live

in Northern VA between Richmond and DC. The market here is super heated. I built a new home on Lake Anna about 30 miles west of I-95 last year. My lot was 30K, lots now selling at more than twice that at 68K. My house complete with post-construction upgrades, landscaping, deck and paved drive cost around 239K will now market in the high 300K's.
My best friend lives in a very modest middle/lower middle class neighborhood. The home across the street in poor condition needing a lot of work was put on the market at 220K it sold in 2 days. I figured it was realistically worth less than half its selling price.
Many people I know are selling just because prices are soooo high and they can move into better, newer digs and keep the same or even lower their payments.
I'm just wondering if/when the bubble will burst and should I get out now and what will I do for housing if I do? Actually not that bad of a problem to have. Thinking about selling and moving to a less heated market. Our jobs travel anywhere East of the Mississippi , must live within 2 hours of major airport....any ideas?

[nolabels]

36. "shift from new construction to existing homes to snap up bargains"

In the global economy, sums of money flow in and out. Real estate is one of the last legs left in the U.S. We may have a hard time coming back after this one falls.

The fall and rise of the euro



http://news.bbc.co.uk/1/hi/business/3322225.stm

On edit, just wanted to reiterate on the thinking the original poster had it correct