4/22 MAR EXISTING HOME SALES…The Story Within the Report

Posted on April 22nd, 2008 in Mr Mortgage's Personal Opinions/Research

4/22 – YOUTUBE VIDEO VERSION


The story within the story is that prices continue to plummet caused by foreclosure sales, which if sold by a Realtor, get counted in the number. Datquick estimates that 38.4% of all March home sales were from foreclosure stock. Most do not know this. REO/Foreclosure sales have picked up in count due to the massive inventory banks hold. These homes sell for a 20-60% discount. As REO sales grow, prices will come down even further. Right now, banks are only selling a small fraction of their REO mostly through large auction aggregators such as Real Estate Disposition Corp (REDC).

CNBC’s Dennis Kneale loves to talk about what a great thing this is, however, I see it differently. I see it as where one person gets a great deal buying a fire-sake auction home, while everyone in their neighborhood takes a bloodbath due to the price that one person paid. Remember, home values are based upon comparable sales within a small, defined area. I know many of you will say ‘the buyer sets the price so the price is what it would have been anyway’. I say that never before have we seen an economic wildcard in banks releasing inventory slowly (for now) and pricing it at such deep discounts in order to get the inventory off the books as quickly as possible.

On the Jumbo front, prices were down roughly 8.5% nationally and 15% in the Western Region. Dataquick says over half the median drop in prices were due to the lack of jumbo loan financing. Jumbos accounted for just 14% from 38% last year. This is significant. As prices drop, more home owners go into a negative equity position causing more loans to default. The snowball is picking up steam and equity is evaporating quicker than ever.

The only way out off all of this remains a national reduction of mortgage balances for everyone. They will figure it out later than sooner I am sure. -Best, Mr Mortgage

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BLOOMBERG – U.S. Economy: Sales of Existing Homes Fell in March (Update1)

By Shobhana Chandra

April 22 (Bloomberg) — The two-year U.S. housing slump showed no sign of abating in March as sales of previously owned homes fell for the seventh time in eight months.

Purchases dropped 2 percent, less than forecast, to an annual rate of 4.93 million, from 5.03 million in February, the National Association of Realtors said today in Washington. The median sales price declined 7.7 percent from a year earlier. Bloomberg report – Left out foreclosure sale info

NOT SO FAST…below is the Dataquick CA report for March. You can get other States there as well. Very good info.

Dataquick Information services – April 17, 2008

A total of 24,565 new and resale houses and condos were sold statewide last month. That makes it the slowest March in DataQuick’s records, which go back to 1988. Sales were up 19.8 percent from 20,513 in February and down 38.3 percent from 39,811 for March last year.

Of the homes sold in March, 38.4 percent were foreclosure resales.

Dataquick California March 2008 Home Sales

14 Responses to “4/22 MAR EXISTING HOME SALES…The Story Within the Report”

  1. Thanks for keeping us informed! On my way to work this morning, I was listening to NPR and there was a story about two entrepreneurs in Detroit who are snatching up houses they are calling “diamonds in the rough.” They said they are buying nice, 3 BR houses for around $20k, touching them up with a non-profit org and then renting them out for international investors.

    Does this sound reasonable? Will we be seeing more of this type of stuff around the country?

  2. Really love the U tube and the blog, Mark. However, something that rarely gets mentioned in the press is that the Federal Reserve is a privately owned cartel and created this mess. It must be abolished.

  3. The CEO of Coldwell Banker was just on CNBC stuttering his way through yet another softball interview by Maria. He basically sat their sputtering the same old nonsense about RE being local…pay no attention to the media and national numbers. After being asked what would help the market, his only answer was for the media to stop being so negative…LOL

  4. I have some analysis to show the Existing home sales in context (vs. stuffs that went delinquent in CA over Q1 2008) Enjoy:

    http://mtgspy.blogspot.com/2008/04/stunning-foreclosure-statistics-must.html

  5. that coldwell interview was a joke. So is the Fed, Bruce. The Fed just through 300 mil American’s under the buss to save 10 investment banks. The very same banks that started all this.

  6. I got your message 😀

    I was comparing 113k foreclosures, versus 50% x 235k/quarter existing home sales rate as of March which came out to be 117k.

    That’s where the 97% came from.

  7. That article was talking about notices of default. NOD’s come first then 75% are not cured and turn into foreclosures that go to auction and if it does not sell then the bank buys it back as REO. Only 2-3% sell at auction. But you are right it is huge. You also need to add in the foreclosure auction stats for the month, which is less than the NOD’s (x75%) meaning the problem is accelerating.

  8. oh, ok – no i didn’t add the current auction stats.

    About the transfer rate, we did an analysis and show that all transfer rate from

    30d going into 60d, 60d into 90d, 90d into FC is up significantly. What is surprising is the 30d late (missing 2 payments) is going up exponentially given that the economic shock is just beginning to happen.

    I was unsure whether 60d to 90d can actually be 100%, until earlier this week. Perfect transition.

  9. The real stat one should be looking at is the lag time from foreclosure to sale. We should be comparing foreclosures from say three or four months ago which should now be finally selling. What per cent would that be of total existing home sales today? I agree it is large and accelerating. There is also an expanding bubble of pending foreclosures as lenders try desperately to save some of these loans by dragging their feet on the inevitable. I don’t think they will be able to do much good and we may see a tidal wave of foreclosures this summer as the dam bursts. Regards!

  10. Toby – go to http://www.foreclosureradar.com and get on their free monthly forclosure report. You can last months there now. It has all those stats I believe. Or it did.

  11. It is certainly clear that we are getting a bifurcation in the residential markets, arms-length at-market transactions versus REO (non-arms) sales by lender-sellers under duress. Question becomes at what point does the REO market become THE market? Right now, generally speaking, the arms-length sales still rule but non-arms are encroaching fast. This will have a huge bearing on how appraisals are performed & to remain in compliance with “market value” definitions & bank regulations. This was the big, nasty fight in the mid to late 1980’s between the FHLB (Federal Home Loan Bank) & member banks regarding Regulation R41-C which essentially said use of REO sales as comparable sales in appraisals were not allowed. FHLB eventually capitulated on the issue because the REO market had finally become THE market by becoming a domineering influence. Some local markets around the country are already to that point. When this regulatory Pandora’s Box finally opens wide, it will be “Katy, bar the door!”. I am not looking forward to it after having been through it once before. This is going to get real ugly. NAR is going to have an even tougher time selling because the appraisals are not going to support value/price of the pending homes sales listed in MLS, unless the the listing agents (old-timers) really know what they’re doing.

    Mr. M – keep up the outstanding work!

  12. good thoughts REappraiser

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  14. […] 4/22 – March Existing Home Sales – The Story Within the Report […]

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