The pace of seasonally adjusted existing-home sales in the U.S. increased 3.7 percent from an upwardly revised 4.92 million in February to a 5.10 million pace in March, down 6.3 percent on a year-over-year basis.
At the same time, the median sale price for existing-homes fell 5.9 percent year-over-year to $159,600 as distressed sales accounted for 40 percent of the sales volume, up one point from February and up five points year-over-year.
Existing-home sales in the west slipped 0.8 percent from February to March, down 3.1 percent on a year-over-year basis as the median sales price fell 11.2 percent.
∙ Existing-Home Sales Rise in March [realtor.org]
It’s interesting how on the two morning news shows I watch, they both mentioned the increase from February, but neither mentioned the decline from last year.
Incompetence or intentional?
Yes, the spin in astounding. Some more interesting facts from the link:
“The median existing condo price was $153,100 in March, which is 10.1 percent below March 2010.”
“The median price in the West was $192,100, which is 11.2 percent lower than March 2010.”
“Distressed homes – typically sold at discounts in the vicinity of 20 percent – accounted for a 40 percent market share in March, up from 39 percent in February and 35 percent in March 2010.”
These downward prices all while “the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.84 percent in March”
Even just look at the title and first few lines of the realtor.org link:
“Sales of existing-home sales rose in March, continuing an uneven recovery that began after sales bottomed last July, according to the National Association of Realtors®.”
The BS disguised as “positive spin” coming out of this group is amazing
Wow, 160K median for a house?
In Euros, that’s almost 100K. You can’t get much house anywhere in western Europe for 100K Euros. If I had Euros, I’d buy up houses right now.
“If I had Euros, I’d buy up houses right now.”
Where? In New Mexico and Alabama? And then do what with them?
Yeah … the idea that foreigners will flood in and save the national housing market is far-fetched at best. Why would Europeans buy in a country where they have to fly all day to get to, be subjected to the TSA, visa regulations etc. etc. … just to occupy an average house in a boring suburb of a nondescript strip-mall and freeway infested city. Please. Get real.
This is a globalized world. If a resource is available in a country that the locals are not fully exploiting, others can capture it if they have free access to it.
For instance say you can collect 600 euros rent in a 200K euro property in your own market, but the US offers the same 600 euros in the US for 110K. This is not far-fetched, these are numbers I have seen. Provided you find a honest and competent property manager, this is a perfectly valid business opportunity.
Of course you have financing issues if you’re not resident. Transportation and distance-wise, it’s not different from friends I have who bought their Florida condos – sight unseen!
Another way to invest in the US RE market from abroad is REITs. Of course many middle-men to pay there.
Anyway, the US is cheap. That was my point. There are good reasons for it, but a lot of it is a temporary situation and one day this will rebalance.
How relevant are national statistics to the local SF Bay Area? Is the consensus that the movement of the national market is somehow predictive of what will happen here?
I don’t want to bury my head in the sand or be the one parroting “It’s different here!”, but didn’t DataQuick report last week that YOY March sales were flat to up for the Bay Area? San Mateo was up 19%, Marin 10%, Santa Clara 4%, San Francisco and Contra Costa were on par with last year.
Historically, has the Bay Area led or lagged national housing trends?
[Editor’s Note: San Francisco Recorded Sales Activity Down 1.0% In March.]
From Bloomberg yesterday, Housing Starts in U.S. Increased to 549,000 in March, Exceeding Forecasts, 2nd ‘graph:
The story doesn’t say what the change was year over year, but if sales are trending down and you have inventory trending up because more new homes are being built and the ‘shadow inventory’ of foreclosures is slowly dribbling into the market of existing homes…
Let’s also keep in mind that this time last year the housing tax credit incentive was in full swing. This is going to seriously distort YOY comparisons through June. Comparisons to 2 years ago might be more informative at this point (sales were up ~10% vs March 2009). Check out the charts at Calculated Risk to see what I’m talking about:
http://bit.ly/gZJKhP
Brahma (incensed renter),
Good point. You’d think these 2 pieces of data would be contradictory. A few possible explanations. New home starts can mean some large home builders have gotten really cheap land due to the downturn and can manage to make a buck building new construction even at the dismal market price. It can mean “natural” growth from infill in desirable areas that are still healthy. It can mean a family finally taking on their project of the right home for them.
Even with a huge overhang of foreclosures, houses will always be built. It’s still very very low by historical standards.
Other positive items in the national numbers are that months of inventory is down:
http://www.calculatedriskblog.com/2011/04/march-existing-home-sales-510-million.html
Brahma, what you’re talking about was addressed by Calculated Risk yesterday in two posts. Apparently this year may have the lowest housing starts on record. The first post mentions housing starts specifically, and the second discusses residential investment in general (which is generally a leading indicator for the economy) and also how long it might take to use up the excess inventory:
http://www.calculatedriskblog.com/2011/04/housing-on-pace-for-record-low.html
http://www.calculatedriskblog.com/2011/04/thoughts-on-residential-investment.html
Ed- Yes, Bay area sales were down by 1% overall, but on a county-by-county basis only Sonoma, Napa, and Alameda counties witnessed more than a 1% drop; San Francisco and Contra Costa were flat and 4 counties showed over 4% growth in sales.
What’s your take on the local statistics in the context of the national statistics? Are the flat-to up sales in the majority of the Bay Area vs a 5% drop nationally a sign that the Bay Area is recovering faster than the rest of the Nation, or do you think something else is going on?
“Special Note: Back in January, I noted that it appeared the NAR had overestimated sales by 5% or so in 2007, and that the errors had increased since then (perhaps 10% or 15% or more in 2009 and 2010). […] The numbers reported today were estimated using the old method and will probably be revised down significantly, but they are still useful on a month-to-month basis.”
For those not clicking the CR link, keep in mind that this is NAR data with a know issue overstating sales.
“What’s your take on the local statistics in the context of the national statistics? Are the flat-to up sales in the majority of the Bay Area vs a 5% drop nationally a sign that the Bay Area is recovering faster than the rest of the Nation, or do you think something else is going on?”
Perhaps the tax credit had more of a marginal effect in areas where house prices are lower? So consequently the drop in sales post credit is larger there as well.
@lol:
“Provided you find a honest and competent property manager, this is a perfectly valid business opportunity.”
I personally have never seen a well managed property for an out-of-town owner. I’m sure that there are examples, but in my experience, they are the exception and not the rule. Moreover, with the tricky rent rules in SF, the challenge is even greater. And, all this seems even more difficult if the owner is in another continent. When will that owner ever check on the property?
I agree that buying shares of a REIT is a better way to go to.
Mutie,
What you can do it purchase a 6+ units building where the cheapest and crapiest unit will be offered for free to a live-in super/rent collector/handyman.
For instance you can purchase a 14-unit building in Modesto in the 400Ks (like 410 and 416 6th Street, Modesto, CA, accessible through loopnet.com).
You find an out-of-work contractor, put him into one unit for free, pay him $12/hour to renovate unit by unit and rent out the places one after an other. When he’s done, you keep him as a super/handyman for free rent and a stipend/commission on rent while allowing him to get a day job.
There are many ways to get into this business and in numerous areas (probably not the BA) places are 2 to 3 times cheaper than 2006 and still decently safe.
“I personally have never seen a well managed property for an out-of-town owner. I’m sure that there are examples, but in my experience, they are the exception and not the rule.”
Yeah, I agree. Without at least some amount of oversight, it’s just as likely the manager will rip you off. Also, it’s not like some of these people actually do enough due diligence on these things, so there are realtors, managers, and other promoters who make a cottage industry out of hawking crappy property to rich foreigners.
Foreigners with too much spare cash buying third- and fourth-rate properties is basically the definition of a bubble. See Japan in the 80s, Iceland in the recent decade, and potentially China in the near future.
The prime assets go to people in the know who do their due diligence and are familiar with the landscape, and have better oversight of their various agents. The chumps buy the rest because they think of themselves as investors, when they’re really just speculators.
Foreigners with too much spare cash buying third- and fourth-rate properties is basically the definition of a bubble.
Nope. Not when they are paying a distressed price. For the units I gave as an example, 30K per unit is not by any means a normal price for any rental. This is a distressed area at or near the bottom of a major RE crash. Modesto or cities like it have lost around 70%. I think it’s starting to become oversold.
Also, good luck on these prime asset properties. Like a 1M 2/2s condo in SF that all Joneses want for themselves and that you can rent out for only 3K. After taxes, costs, insurance, you’re left with 0 cash flow. The only upside is appreciation. Now THAT’s the definition of a bubble.
“Also, good luck on these prime asset properties. Like a 1M 2/2s condo in SF that all Joneses want for themselves and that you can rent out for only 3K. After taxes, costs, insurance, you’re left with 0 cash flow. The only upside is appreciation. Now THAT’s the definition of a bubble.”
You and I have different definitions of “prime assets.” When I say prime assets, I mean the asset has a high ROI — i.e. a real investment. You are saying prime based on price or prestige, which is often just speculation.
It’s entirely possible that Modesto could be prime by my definition, but how many foreigners are really buying Central Valley properties? It’s just not sexy. The smart ones who know the landscape (literally and figuratively) might be.
Meanwhile, your hypothetical 1M 2/2 condo is more typical of what a foreigner might be interested in, even though it’s an abject failure as an investment. Buying that overpriced crap in the St. Regis was speculation, not prudent investment.
That’s not very common, but it’s happening. For instance I know one European guy buying in Nashville, TN right now. No other reason than some in-law family close-by. Reliable rent, very low entry on multi-family. The rental pool has mostly bad credit, but evictions are so easy that rent is the first thing tenants will pay. There’s decent demand as well, since so many foreclosed families cannot go back to buying until the ding on their credit fades away.