Real Estate Market Update
I HAVE JUST SPENT SEVERAL HOURS TRYING TO MAKE SENSE OUT OF VARIOUS NEWS REPORTS FROM TELEVISION NETWORKS AND NEWSPAPERS REGARDING THE SALE OF NEW AND EXISTING HOMES.
I HAVE RELUCTANTLY COME TO THE CONCLUSION THAT EITHER THE NEWS IS BEING WRITTEN BY HOPELESS AMATEURS WHO DO NOT AT ALL UNDERSTAND WHAT IT IS THEY ARE WRITING ABOUT – OR, MORE LIKELY, SOME OF THE PEOPLE IN THE NEWS BUSINESS THINK IT WILL CAPTURE AND HOLD MORE READERS AND VIEWERS IF THEY SIMPLY MAKE UP BAD STORIES ABOUT HOUSING AND SCARE THE DICKENS OUT OF PEOPLE.
I have been at this for 40 years now, and I can tell you with certainty that my old bosses of long ago would have torn up the garbage that has been put in print and on the air this week. They would have handed those writers a couple of clean sheets of paper and told them to go back to their desks (and typewriters) and get the story straight and true.
I want you to bear with me while I spell out the actual moderately bullish picture of housing that has emerged this week. And then I will go back to give you some samples of the nonsense being peddled by confused (and confusing) fear-mongers in the popular media. By the way, the stock market for the most part ignored the hysterical babble coming from TV screens. They went right to the heart of the real numbers. Housing stocks actually began to rise on the news, befuddling the so-called analysts on TV. I admit that pleased me to no end and made me smile.
Now let’s you and I review the good news on housing. THE NATIONAL ASSOCIATION OF REALTORS ANNOUNCED THAT THE NUMBER OF EXISTING HOMES SOLD LAST MONTH TICKED UP TO 6.24 MILLION.
That was up from 6.21 million the month before. The number was significantly above the 6.14 million sales pace predicted by economists. You may recall that Fed Chairman Ben Bernanke suggested earlier this year that he expected the number of homes sold to decline moderately this year and bottom out by the first of January. My own studies reached the same conclusion and I have consistently urged readers not to panic as housing went through this procession of digestion.
THE NATIONAL ASSOCIATION OF REALTORS REPORTED THAT THE AVERAGE PRICE OF AN EXISTING HOME SOLD IN OCTOBER WAS $221,000 – THE SAME AS IN SEPTEMBER. Wachovia economist Phillip Neuhart says: “The one month gain in existing home sales may or may not project the beginning of a turnaround in the pace of sales. But it can be characterized as a sign that the overall real estate market is at least stabilizing.” (End quote.)
David Lereah, chief economist for the National Association of Realtors, says: “The demographics of our growing population, historically low and declining mortgage rates, and healthy job creation mean the wherewithal is there to buy homes in most of the country, but most buyers remain on the sidelines. More confidence in the market and a lift to home sales should become more apparent in the first quarter of 2007.” (End quote.) Now that is what I call a truthful and penetrating review of the housing outlook. Too bad the folks in the media do not spend more time interviewing him and capturing his wisdom, instead of offering their readers and viewers their own often-worthless observations and predictions.
Now let’s move on to the topic of existing home prices. The median price of an existing home sold this October was $221,000 – the same as the median price in September. I heard a lot of confusing mish-mash on TV about how this was the worst year-over-year drop in home prices in years. I have no idea what made them say this. I looked up the report that came out exactly one year ago. It showed a median price of $218,000 in the month of October, 2005. We were UP $3000. I mentioned earlier that the media was ranting about price declines. Well, one big, popular TV network claims that existing home prices fell 3.5% year over year, the biggest decline since 1990. In fact, they said it was the only year-over-year decline in all this time.
I have two comments about their report. First, they may be mistaking the all-time high price of $230,000 in July 2006 with a year-over-year decline. If so, I cannot imagine why. Year-over-year means October to October. Any mid-year blip is never recorded as year-over-year, and here it was not even a year earlier number… it was more like five months.
And secondly, given that this October’s median price was higher than that of a year ago, I do not have a clue why they are talking about a decline. One more bit of caution: just as I predicted, people are opting for smaller homes and this by itself in the case of new homes can lower the median sales price posted. But it is misleading to call that an actual price decline. Sooner rather than later, Wall Street and the Financial Establishment are going to be forced by economic reality to admit that the housing market is not falling off of a cliff. A lot of people these days are super bearish on the U.S. economy and the stock market – mainly because of their negative expectations for the housing market. When they find out they are wrong, they are going to be forced to reverse course and admit their mistakes. Some of them will no doubt hang on as long as possible to their negative fantasies. They will only set themselves up to miss out on further wealth building gains in business, stocks and housing. More next week.
I HAVE RELUCTANTLY COME TO THE CONCLUSION THAT EITHER THE NEWS IS BEING WRITTEN BY HOPELESS AMATEURS WHO DO NOT AT ALL UNDERSTAND WHAT IT IS THEY ARE WRITING ABOUT – OR, MORE LIKELY, SOME OF THE PEOPLE IN THE NEWS BUSINESS THINK IT WILL CAPTURE AND HOLD MORE READERS AND VIEWERS IF THEY SIMPLY MAKE UP BAD STORIES ABOUT HOUSING AND SCARE THE DICKENS OUT OF PEOPLE.
I have been at this for 40 years now, and I can tell you with certainty that my old bosses of long ago would have torn up the garbage that has been put in print and on the air this week. They would have handed those writers a couple of clean sheets of paper and told them to go back to their desks (and typewriters) and get the story straight and true.
I want you to bear with me while I spell out the actual moderately bullish picture of housing that has emerged this week. And then I will go back to give you some samples of the nonsense being peddled by confused (and confusing) fear-mongers in the popular media. By the way, the stock market for the most part ignored the hysterical babble coming from TV screens. They went right to the heart of the real numbers. Housing stocks actually began to rise on the news, befuddling the so-called analysts on TV. I admit that pleased me to no end and made me smile.
Now let’s you and I review the good news on housing. THE NATIONAL ASSOCIATION OF REALTORS ANNOUNCED THAT THE NUMBER OF EXISTING HOMES SOLD LAST MONTH TICKED UP TO 6.24 MILLION.
That was up from 6.21 million the month before. The number was significantly above the 6.14 million sales pace predicted by economists. You may recall that Fed Chairman Ben Bernanke suggested earlier this year that he expected the number of homes sold to decline moderately this year and bottom out by the first of January. My own studies reached the same conclusion and I have consistently urged readers not to panic as housing went through this procession of digestion.
THE NATIONAL ASSOCIATION OF REALTORS REPORTED THAT THE AVERAGE PRICE OF AN EXISTING HOME SOLD IN OCTOBER WAS $221,000 – THE SAME AS IN SEPTEMBER. Wachovia economist Phillip Neuhart says: “The one month gain in existing home sales may or may not project the beginning of a turnaround in the pace of sales. But it can be characterized as a sign that the overall real estate market is at least stabilizing.” (End quote.)
David Lereah, chief economist for the National Association of Realtors, says: “The demographics of our growing population, historically low and declining mortgage rates, and healthy job creation mean the wherewithal is there to buy homes in most of the country, but most buyers remain on the sidelines. More confidence in the market and a lift to home sales should become more apparent in the first quarter of 2007.” (End quote.) Now that is what I call a truthful and penetrating review of the housing outlook. Too bad the folks in the media do not spend more time interviewing him and capturing his wisdom, instead of offering their readers and viewers their own often-worthless observations and predictions.
Now let’s move on to the topic of existing home prices. The median price of an existing home sold this October was $221,000 – the same as the median price in September. I heard a lot of confusing mish-mash on TV about how this was the worst year-over-year drop in home prices in years. I have no idea what made them say this. I looked up the report that came out exactly one year ago. It showed a median price of $218,000 in the month of October, 2005. We were UP $3000. I mentioned earlier that the media was ranting about price declines. Well, one big, popular TV network claims that existing home prices fell 3.5% year over year, the biggest decline since 1990. In fact, they said it was the only year-over-year decline in all this time.
I have two comments about their report. First, they may be mistaking the all-time high price of $230,000 in July 2006 with a year-over-year decline. If so, I cannot imagine why. Year-over-year means October to October. Any mid-year blip is never recorded as year-over-year, and here it was not even a year earlier number… it was more like five months.
And secondly, given that this October’s median price was higher than that of a year ago, I do not have a clue why they are talking about a decline. One more bit of caution: just as I predicted, people are opting for smaller homes and this by itself in the case of new homes can lower the median sales price posted. But it is misleading to call that an actual price decline. Sooner rather than later, Wall Street and the Financial Establishment are going to be forced by economic reality to admit that the housing market is not falling off of a cliff. A lot of people these days are super bearish on the U.S. economy and the stock market – mainly because of their negative expectations for the housing market. When they find out they are wrong, they are going to be forced to reverse course and admit their mistakes. Some of them will no doubt hang on as long as possible to their negative fantasies. They will only set themselves up to miss out on further wealth building gains in business, stocks and housing. More next week.
Labels: Existing Home Sales, Real Estate
posted by Stock Administrator @ 7:05 PM
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