We looked at six home yesterday. All were overpriced and most were empty when we went to see them. Folks are holding on to this $1,000 a square foot price. I talked to a number of brokers about the $740 number that resulted in a quick sale recently, and why the houses were at $1,000 a foot. They lamented their clients and said make an offer at that price (i.e. $740). This confirms my believe that houses are 30% overpriced in the market right now.
I’ve been waiting for today for month. Today is the day that the August housing stats come out (they seem to come out around the last week of the month–the 20-25th). I knew August would be a horrible month because we looked in August and a) it was a ghost town at the open houses, b) houses kept coming onto the market, and c) we didn’t see any of the houses we like get sold.
… I was right IN A BIG WAY (go figure):
The median price of an existing home fell 1.7% year-over-year to $225,000. It’s the first time since April 1995 that median prices have fallen on a year-over-year basis. It’s the second largest decline in the 38-year history of the realtors’ survey, exceeded only by a 2.1% drop in November 1990.
“The price correction is a welcome development,” said David Lereah, chief economist for the realtors group.
OK… so the first price drop in 11 years has *stopped* the bleeding? The first down month is actually the *start* of the bleeding. Folks have not bleed yet–their houses have gone up for 11 years. Having your home on the market for a couple of extra months is not bleeding–that’s waiting. Bleeding is when you lose something, and August was the START of the losing of value.
A 2% drop is about ~10% of the ~20-30% I think houses are overpriced. In my mind we are at the start of a couple of year downturn where prices will fall every quarter as folks who have to sell their homes accept the reality (right now there are a lot of holdouts who don’t need to sell their homes, or who are carrying two homes).
Also, Lereah when says “sales have hit bottom” what evidence does he have of that? Does his title as chief economist and his track record of getting it wrong give him the ability to know when a market hits bottom? For the record, you can only know the bottom of the market after the market rebounds. History tells you the top and bottom of the market–not an economist. If for some reason Lereah did know the bottom of the market he would be investing in real estate and not acting as a “chief
What a joke this guy is… but it gets better:
“I am confident the housing sector is picking up,” Lereah said in a press conference. Lereah expects prices to continue to drop for the rest of the year, which would keep sales from falling further. “If that’s so, we’ll have achieved a soft landing,” Lereah said.
OK, you’re confident the housing sector is picking up while all the data says it is crashing (i.e. last month was the second largest price drop in the history of the index, inventory is at an all time high, arm mortgages are coming due, people are giving away exotics cars in order to sell their homes, people are dropping their asking prices 25-30% and getting no sales).
What planet is this guy on? Can someone who knows David please forward him this post (or post his email below so I can send this to him). Whatever this guy is drinking I’ll take a double!
You can read more of David’s spin at this post. As you read the document you can see they are spinning every single negative piece of data to a positive. Are realtors idiots? Do they actually read this press release and trust what this guy is saying? I mean, lines like this are total spin: “After a stronger-than-expected drop in July, the fairly even sales numbers in August tell us the market is at a more sustainable pace.” Uhhh… the second largest drop in history is a sustainable pace? A 12%+ plus drop from last year and a month-to-month drop is not down market–it’s a “sustainable pace.”
I love when people spin… it’s so obvious.
This guy is paid by realtors and it shows. He should just come clean and say “The market is correcting at a strong pace with the number of homes being sold dropping by double digits, the number of homes on the market is increasing to record levels, and we’ve had the second worst down month in the history of the index. We were clearly in a significant slow-down in 2006, and with August data we’ve moved into a down market. No one can tell if this is the bottom or not.”
Oh yeah, for fun here are the *two* covers of David Lereah’s book (from Wikipedia):
From Feb 2005: Scaring you into missing out!
From Feb 2006: Trying to keep up the market!
Feb 2007: Suggest a third title for David’s book!
1. The Housing Boom will come back some day.
2. Bottom of the Bubble Baby: Get in now while you can.
3. Why Housing Will Continue to Grow At Double Digit Rates for All Time–even if the stats say otherwise.
- Trulia (one of my favorite sites) has a great round table on their blog about the data–FOUR DAYS AGO!
- Miller–who I really liked in the Trulia NAR prediction feature above–says we’re in a classic stand off in this video today. Miller does the excellent Three Cents Worth column at the excellent Curbed NY.