Our friends at Ticor Title sent me the charts below. What is telling about the Sales chart is that while Resale units sold have been trending down for some time (like, since August 2005), new home sales have been trending up recently. And now the difference between the two is smaller than ever. Will these two trend lines cross? If so, how soon?
This chart further supports the notion that home re-sellers are finding it increasingly difficult to compete with the prices and incentives offered by new home builders.
(click on charts to enlarge)
smarten
I like charts like these because you can pull out all kinds of data, whether directly related to the substance of Guy’s post, or otherwise. For instance,
Although the numbers differ from those previously reported on this blog, look at the drop in the number of monthly resale sales for the six month period from/to May/November – 41% [and we already know from Guy’s figures that the number dropped a bit further in December].
Now look at the number of monthly notices of default recorded for the four month period from/to August/November. After reaching a peak, the number has essentially remained flat.
So what’s my point? Have monthly defaults leveled out so that from here, there’s essentially nowhere to go but down?
And insofar as the number of monthly resales are concerned, can they really go much lower – especially with the pressure from rising new home sales?
And independently, look at what’s happened in the stock market this last week? I submit this data and these events are not unrelated.
We’re getting close to a Reno/Sparks SFR bottom – maybe even earlier than the end of the year.
Reno Ignoramus
I have a question for those folks who are predicting a bottom for the market in 2008.
Up to now, for the first time in history, we have experienced a substantial market downturn in the midst of a healthy economy. All previous market downturns, and certainly all of those where values have dropped as they have so far in this one, were brought about by a regional or national recession. In other words, in the past, every previous downturn was caused by a recession. I have posted before about this reversal of cause and effect.
Now, everybody but the government is acknowledging we are heading into a recession. For the first time, we have reversed cause and effect, and a housing downturn has caused a recession.
Up to now, we have had a declining market in the midst of a relatively robust economy. Are those who are predicting a bottoming of the market in 2008 suggesting we are going to witness a market recovery in the midst of a recession?
Just wondering.
Diane Cohn
Adding on to RI’s questions, I have a crazy theory…
My gut reaction to all that’s going on in our markets is that the United States has peaked. Our glory days as a world superpower are over as new economies rise to take the lead.
Dollars are down as money pours into China, India and Eastern Europe. Perhaps our recent housing collapse was simply the straw that broke the proverbial camel’s back.
We blew threw all our bubbles, we loaded up our credit cards, as did the government, to the point where national debt is staggering (according to the sign in Times Square last week the average per family national debt obligation was $98K). I think there’s no place left to go.
It’s payback time. History cycles over and over again. Nations rise to power, become decadent and finally implode as others rise around them. Our time as top dog is over. This country will eventually recover, but it will take a lot of time. Maybe even as long as it took Japan…
Reno Ignoramus
Adding on to Diane’s crazy theory…..
I just returned from 3 and a half weeks in Europe. It was amusing to hear all the jokes about the American peso every time I exchanged my flimsy dollars into euros. I have been travelling in Europe for 30 years now. I am fortunate to have some thoughtful and informed friends residing across the European continent. There is no doubt, in the perception of these people, that America’s day in the Sun is fading. America’s stature as an economic and political leader is in decline in the eyes of these people.
What all this has to do with the price of houses in Wingfield Springs is probably beyond the scope this thread. But I do believe that the coming recession may have very much to do with the price of houses in Wingfield Springs, and hence my question, above.
Josh
I think the chances of the Reno housing market bottoming by late 2008 are quite a bit better than they were last November. If the median price keeps accelerating its decline at the rate that it did last month, I think it could bottom ($160K median) by Jan 2009 and then stagnate for a decade. I agree with Diane that we probably have an uncomfortable decade or two ahead of us.
smarten
To answer RI’s query as to whether I believe we’re going to witness a market recovery in the midst of a recession, let me suggest the following:
There’s a difference between reaching a market bottom, and the market actually recovering from that bottom. I don’t pretend to be smart enough to predict when the Reno SFR market will actually begin to recover. But that doesn’t mean the decline it’s in can’t bottom out sometime this year.
Insofar as Reno/Sparks monthly sales volume and DOMs are concerned, IMO there’s really not much lower they can go. Whether they remain flat at that time or begin an upturn, I’m not prepared to say.
move to reno?
You guys are a bit negative for me. Didn’t you all hear President Bush the other day say that everything will be fine??
Seriously, the US dollar is in the toilet and we have nobody but ourselves to blame. However, America has been blessed with plenty of natural resources, an extensive industrial base and a skilled work force. All that is needed is focused political leadership that doesn’t bend over for the special interests.
What does this have to do with the price of SFR in Wingfield Springs? Don’t rely on the Japanese experience as a guide to the future of our housing bubble bust. The land mass of Japan is about the size of the State of Oklahoma and they don’t have any cheap foreign labor.
Reno Ignoramus
I suggest that Josh and Smarten make an excellent point. Hitting bottom is one thing, actually getting up off the mat is quite another thing. I agree that there will likely be an extended period of stagnation in housing values once the bottom is reached, whenever that may be. But history tells us that in every major extended recession in the past, housing values have dropped, as a result of the recession. It has never before happened that housing values dropped 20%, and THEN the recession began. We are in strange times indeed.
NAS
Haven’t added my .02 for awhile, so why not. Diane and Guy-
nice web site-navigates well and fast load, especially for us out
here with the 5 second attention spans. Choice of colors good.
Housing? HAH! I tend to gravitate toward R.I, smarten, BB, etc.
Reno can be a little too isolating if one’s only resource for news is the infamous RGJ. Check out our dollar devaluation; both Euro and in Canada. If your a stock investor, your portfolio got “lightened” up this week. Deficit? Countrywide? Recession? We’re already there, the Feds just aren’t going to let Bernanke say the dirty word. What’s all this got to do with Reno? A lot.
Side bar: Meeting up with Guy next weekend for a bargain hunt
to find a home. We are looking for a steal. Have $ and are ready
to do some serious house hunting, if the price can be had. Maybe we should do sort of a reverse buyer thing. Buyers post
the price range they will pay and let the sellers make offers?
MIke Van H
You know something interesting, is this is happening in other countries as well. I have a friend who lives in Spain, who mentioned housing prices there have fallen dramatically. Do you think that our market affected their market? Or was it more of a global all-at-once type of thing?
http://spain-real-estate.blogspot.com/2007/11/spanish-property-market-stalls-as.html Doesn’t this blog post about the Spanish market sound hauntingly familiar?
ParkTGirl
“now approximately 95 percent of Spanish homeowners have adjustable rate mortgages, according to the Wall Street Journal.”
95%? Is that number for real? Can someone verify that? That would be catastrophic for any nation amid rising interest rates. I didn’t realize others were in the same boat.
Reno Ignoramus
Oh yes. There was (is) a housing bubble all over Europe. This is not so hard to grasp. Understand that the cheap money policy of the US Fed was mirrored all over the world. The EU central bank essentially followed the US Fed on rate policy. European lenders have offered the same kind of loan instruments as US banks for years and years. So it was as easy to get an ARM in Italy or Spain or Ireland as it was in the US. In fact, ARMs are the preferred instruments in many countries. But it is not the prevalence of ARMs per se that it is the problem. It is the same abandonment of crditworthiness standards that is the problem. In many European countries, over the past few years, it has ben common to see banks making home loans to people equal to 8 or 9 times income.
There was (is) a global housing bubble. And remember, there has never in history been a bubble that did not eventually burst.
GreenNV
I have no clue where Ticor is pulling their numbers from, but it certainly isn’t from the Assessor’s office! The Assessor has new SFR’s declining 60.3% from November 2006 to November 2007, and resales declining 32.1%. The trend lines are growing farther apart, not converging.
Total Sales, New – %, Resale – %
2006 Ticor – 865, 326 – 38%, 539 – 62%
2006 Assess 666, 243 – 36%, 423 – 64%
2007 Ticor – 610, 250 – 41%, 360 – 59%
2007 Assess 429, 103 – 24%, 326 – 76%
I know the data sources may be different, but the percent variation should be close. Here are Ticor’s variations above Assessor data:
2006 New – +39%
2006 Resale – +25%
2006 Average +30% over Assessor
2007 New – +143%
2007 Resale – +10%
2007 Average +42% over Assessor
Conspiracy therorist here!
UNR Center for Regional Studies has fantastic monthly sales summaries to download for free on their web site: http://www.nsbdc.org/what/data_statistics/gis/data_downloads/ All sorts of interesting information, like median $/SF fell 17.0% last year on resales, but only 5.4% on new SFR’s.
bassgirl
I have a response to GreenNV: Are you truly getting the data yourself from the assessor or are you using UNR Regional Studies? If you use Regional Studies, the data is coming from the Northern Nevada MLS statistics and are only properties that are listed and sold on the MLS. What about For Sale By Owners, Attorney Recordings, etc.? Does UNR know the difference between a Grant Bargain & Sale Deed and a Deed that may be a change in how the owners take title? There are a lot of factors to data like this and many people who are not in the title insurance industry do not know what they are looking at. I think Ticor’s data is not supposed to be 100% correct but give us an idea of the trends in Washoe county recordings. I think we need to just look at it in a informational way and not be so critical.
GreenNV
Beg to differ, bassgirl, but UNR Regional Studies pulls their numbers from the Accessor’s office. I also pull the monthly sales reports directly from the Assessor.
The variances in the number may be due to that TICOR may not know what they are looking at, and are counting vesting changes as sales. I still have no idea where they came up with their November new home sales. Just wack.