The pace of U.S. existing-home sales fell in March to a seasonally adjusted rate of 4.93 million units. That’s down 2.0 percent from the month prior and down 19.3% from the pace of a year prior. Median sales price is down 7.7% (YOY).
Huh. So much for that February “recovery.” And perhaps that wacky housing market is somewhat seasonal after all. Who knew.
Existing-Home Sales Slip in March [NAR]
The Good And The Bad (But Not Necessarily The Ugly) [SocketSite]

27 thoughts on “U.S. Existing-Home Sales Slide (This Time Despite The Seasonality)”
  1. the data clearly did not look good nationally.
    seasonally adjusted there was a FALL in sales (which is very atypical)
    Non-seasonally adjusted there were more sales in March than in February, but the jump in sales was far less than it typically is, indicating a poor spring selling season.
    very sluggish nationally.
    add in the fact that more lenders are getting even less willing to lend money for residential housing, and we may have a demand problem due to inability of people to obtain mortgages to buy the houses.
    That said: these sales numbers are mainly bad if one compares them to the bubble years of 2003-2007. they don’t look so bad if you compare them to pre-bubble years.
    of course, this data really disagrees with the premise that we’re “near bottoming” in housing.
    but I don’t think that anybody who rationally looked at historical housing cycles would have thought a bottom was possible now anyway. They usually take MANY YEARS to bottom and then recover…
    as I’ve said 1,000 times on socketsite: “watching this will be like watching the paint dry on a painting of grass growing”

  2. Ex-sfer
    Man are you right. Slow motion.
    I thought about the listing on Avila that I liked so much from yesterday. From the back of my envelope:
    Mortgage after taxes: 19.5K per month
    Property taxes 2.5K per month
    Insurance/Yard Maintenance/PG&E: 0.5K per month
    This ignores opportunity costs or any sort of major maintenance: painting, new roof, etc.
    So if it doesn’t decline at all in 5 years (almost an impossibility, IMHO), the “lucky” buyer will pay 22.5K per month to live there, or $750 per day to like in a very, very nice bungalow.
    If it declines a mere 15% over the next 5 years, or a paltry 3% per year (very likely given the economy and the alt A resets that have yet to start in SF), that’s about .25% per month or 6.250K, another $200 per day. So the most likely scenario is that the $2.5M Avila property costs the buyer around $1000 per day, when everything is said and done.
    Is someone really going to live in a bungalow, however nice, for $360K per year? I can afford to, but I’d never do it. The only way to justify this in years past was to presume 10-20% in appreciation, which would make up for the high costs. Without that, there’s just no way.
    Even at $15K per month in rent, which they’d be lucky to get, it’s just way cheaper. I’m sure if you threw in an extra $500 per month, they’d let you paint the walls as many times as you wanted.

  3. Is someone really going to live in a bungalow, however nice, for $360K per year? I can afford to, but I’d never do it.
    will you marry me? 🙂
    (kidding, I’m not available… and besides, I want to be the alpha male!)
    I agree, these last few years have been quite an anomaly… it is now very very difficult in general for properties to make sense from a financial perspective unless you factor in home price appreciation, given the immense holding costs and the disparity between rents and PITI/HOA payments.
    And since we’re talking big money here, the stakes are high.
    Others have tried to crucify your “rent vs buy” calculations in the past, and they sometimes have valid points… but they often ignore the largest issue: regardless of assumptions, it is almost impossible to make these RE deals pencil out unless you assume significant home price appreciation… (or unless you go the “satisfaction of being a homeowner” emotional argument)
    and lastly, FWIW, my standard statement:
    -yes I am a homeowner
    -yes I believe my home is losing significant value
    -no, I don’t care because I LOVE my home, and my home is about 1.5x annual salary and my mortgage balance is about 1/2 my annual salary.
    -yes, I left SF because I “couldn’t hack it” in “the big city” (ROFL)
    -yes I am a housing bear, including for SF city proper

  4. OT:
    front page of has a video about SF real estate.
    from the video:
    “Some houses are still stirring up bidding wars, Stacey Delo reports. One recently drew 22 bids and a $200,000-over-asking-price premium. So what gives?”
    sorry, can’t do a direct link… it’s on, front page. also can be accessed from the “video” section.
    it basically says what we all know.
    SFHs in desireable areas above $2M are moving really well.
    the rest, not as much

  5. anyone catch FunYun’s comments that “restrictive” lending practices, like requiring down payments, was the cause of declines at this point?
    Wait! Lender’s are actually asking people to put down some of their own money before lending them hundreds of thousands of dollars to buy a home that (in the bay area) is 6-10 times their annual income. You mean a high FICO score doesn’t meant that someone making 80k a year, putting 0 down and 100% financed, will be able to pay back that 600-700k mortgage on that one bedroom condo???
    [Editor’s Note: Yes. And it was most definitely a laugh out loud (LOL), if not near milk through the nose (MTTN), moment.]

  6. The price increases in SF are part of a continuing flight to quality that characterizes the end stages of a boom cycle. Lower end units are not selling even at greatly discounted prices. The data that have been exposed in various SocketSite posts show volumes down and at a statistical level starting to take prices down with them.
    In return for having kept the party going so hard and so long SF will be mired in a nasty hangover in property markets when other areas are starting to their property markets bottoming out. Then the big demographic shifts will start to take hold. Will enough people move to the City by the bay to counter the great suck that boomers will leave behind them in their wake?

  7. Badly:
    as you’ve probably heard, lending is going to get even tougher going forward.
    The news agencies are all in a buzz over the new condo rules from AIG Guaranty (a private mortgage insurer)…
    -NO condos will be insured in “declining markets” (yes, that includes SF city proper)
    -MINIMUM of 10% down required
    -MAXIMUM of 30% non-owner occupied in the condo comlex
    The question: will other PMI insurers follow suit?
    if so, it would essentially mean that all SF condo buyers would need 20% down. (those paying 20+% down wouldn’t need private mortgage insurance)
    I am watching this development very closely… it is still unclear if the other mortgage insurers will follow suit or not. it definitely sets a precedent though
    combine this with the numerous restrictions that Fannie/Freddie are implementing, as well as the cutbacks in lending that BofA/countrywide announced today, and forward lending doesn’t look so hot. (of course this is no surprise-many of us have been predicting this since 2007 when bear’s hedge funds blew up)
    Baltimore Sun article
    AIG’s declining markets list including SF, warning PDF
    [Editor’s Note: AIG United Guaranty Cuts Condominium Coverage In…San Francisco.]

  8. Do buyers still need PMI if they borrow 80% on a first, 10% on a second and put 10% down? Or, 80/15/5 respectively? Are those second loans even available at this point?
    I ask because I recall the thought being that “no one” pays PMI anymore…
    Anyone who is in or knows the market right now that can enlighten?

  9. Tom: good point.
    you do not need PMI for an 80/20 loan.
    however availability of second loans is decreasing.
    I assume 80/20’s will always be available (or variants thereof), but they may not come cheaply.
    It is not simply AIG’s action… it is AIG’s action combined with the rapidly rising delinquency rates in subprime, Alt-A, and Jumbo space, as well as the skyrocketing delinquency rates of HELOCs and that all combined with the massive losses/writedowns the banks and investment banks are being forced to take because of all of this.
    condos in “declining markets” are becoming four letter words…
    sorry for the confusion.

  10. Thanks for the clarification. I absolutely agree with you that this is a scary thing for condo sellers, and that it is one more thing in a string of bad news.
    If nothing else, it removes an option that buyers/borrowers had before, and should push the cost of the 80/20 option up (where it is available), raising monthly payments and putting downward pressure on sales prices.

  11. That video was also on this morning. (Funny how the positive news always gets buried in the comments on socketsite.) They also talked about the brisk over-$1m-condo market…
    Guys, I don’t know the property on Avila but I presume it’s a couple million $, based on the math. And I totally get the rent-vs-own argument on a pure financial basis but some people just don’t want to deal with renting and simply choose not to. It’s not rocket science.
    I bought a new 911 a few years ago. Try to “pencil out” that math some time. It’s a horrible “investment”. (I could just ride the city bus instead!) But it was never meant to be an investment. It was meant to be a fun way for me to drive to work and back.
    I’m not saying that there’s a flaw in YOUR logic for YOU to buy that house. Your logic is perfectly reasonable for YOU not buying. But if someone made a ton of money on something (internet stocks, trust fund, selling their old place, etc.) then it may make sense for THEM to blow it on a nice house.
    Can it go down in value? Sure. Can they rent an awesome place for less? Sure. But not everyone needss 20% price increases to justify a purchase. The flaw in your logic is just that you think that your reasoning should be applied to everyone, despite differing individual circumstances.
    Yes, this is the “homeowner satisfaction” argument. I personally don’t think it works on the low end of the market. (Why buy a crappy place when you can rent an equally crappy place?) But when you’re talking about multi-million $ property, you’re talking about discretionary spend in most cases so it tends to hold more water.

  12. “But it was never meant to be an investment.”
    That’s a huge difference. Over the past decade houses have been bought and sold as invesments with expectations to match.
    That video was non-news. More like an advertorial.

  13. “But if someone made a ton of money on something (internet stocks, trust fund, selling their old place, etc.) then it may make sense for THEM to blow it on a nice house.”
    Or, more commonly, borrow it from someone to blow it on a nice house.
    And borrowing it from someone just got a lot harder.
    In my experience, people raised with money are taught not to blow it on bad investments. It’s the Newly Rich that tend to overspend on status and comfort. (Paris and her like notwithstanding.)
    If your whole plan for success is going to be based on people who come into money, you’re liable to be very disappointed in the coming years – all indications are that they’re going to be rather lean.

  14. To paraphrase “Dave” : ‘The stupid money is still flowing and will continue to keep the high end SF prices afloat.’
    And I don’t mean to be condescending with the term “stupid money”. Its money blown without regard to thrift. Most of us spend stupid money : throwing down $500/person on a ritzy meal, driving a fancy and rapidly depreciating sports car, or spending $100/pound on imported chocolates.
    Most of us are not wealthy enough to allocate in excess of $1M towards stupid money purchases. Apparently there are enough fat cats lighting their Cubans with a Grant still around though. Any guess as to whether this source of stupid money is inexhaustible ? If not when will it run out ?

  15. “Stupid Money” or “New Rich Money” is mostly fiat money converted into hard cash. Say morons buying GOOG at 550 hoping it goes to 1000 and basically giving a free lunch and then some to the early Google/YouTube crowd.
    This money is based partly on reality, but also on hope.
    The fact of the matter is, this is “hope” money based on hopes for future revenues that is being spent today. A little bit like credit, except the people who spend it do not have to pay it back.
    As for the future of this “fiat” money, the laws of physics are ultimately calling for a balancing of the books.
    I’d say the balancing will happen either with the rapid decrease of the upper end of the Real Estate Market or a further depreciation of the Greenback. The latter is happening as it appears. Maybe the former will follow soon.
    Call it the “Bonfire of a Currency”.

  16. “Most of us spend stupid money : throwing down $500/person on a ritzy meal”
    There’s a good leading indicator for you: When the French Laundry has openings, you’ll know it’s finally gotten bad for high rollers.
    Unfortunately for the theory of a continuation of stupid money, everyone _but_ French Laundry has openings, it seems, including Boulevard, Michael Mina, and Aqua. 6 months ago, that was not the case. Check it out at OpenTable.
    But if Thomas Keller’s ever hurting, we’re all doomed. That’ll be the final “sell” indicator for high end SF property.

  17. So can we propose a new forward-looking indicator for high-end housing in SF?
    Price of Google stock, divided by the number of high end Michelin-starred restaurants (French Laundry, Gary Danko etc.) with openings on Friday at 7pm (according to OpenTable).
    Perhaps we can add in a weighting factor that is my average commute time on 101 South every morning?
    It can be computed every week on Thursday.

  18. Let me try one more scenario, just to make a contrarian point: A young couple buys a 2-bedroom condo ten years ago. The place inflates in value to some ridiculous price. They decide they want to move into a bigger place (to accommodate a new baby, or grandma, or a pack of german shepherds… whatever.)
    So they sell the place and pocket a giant chunk of change. Most of you would recommend that they rent a bigger place and put the cash into some other investment instrument (corn or Euros or gold bars or whatever the kids are buying these days) rather than throw their “new and/or stupid money” at a sure loser, like a 3-bdrm house in SF.
    Picking sure losers is about as easy as picking sure winners, and the free financial advice doled out here is worth exactly what you pay for it… What if the fed decides to hyperinflate our way out of this mess? It’s not an impossibilitiy.
    What happens then to those asset prices under that scenario? What happens to rents? What happens to the value of the dollar bills stuffed in the mattresses? Sanfronzi (accurately, in my opinion) suggests that the high-end will tank OR the dollar will collapse. Or maybe something else will happen that we don’t see coming.
    I’m not trying to be a jerk. I’m just trying to make a counterpoint. Anyone with absolute certainty about the direction and magnitude of any future price movements (in assets, equities, commodities, art, etc.) could make a fortune off of that knowledge. The rest of us are just guessing and/or wasting each other’s time on message boards… 🙂

  19. “Dave” said: Anyone with absolute certainty about the direction and magnitude of any future price movements (in assets, equities, commodities, art, etc.) could make a fortune off of that knowledge.
    I would also like to add, if one knows for sure about the future direction of any market, he won’t discuss it in public.
    Maybe that’s what Satchel is doing right now? Haven’t seen him for a while.

  20. Guys I think Dave makes a couple of good points. In his first posting the key point [as I understand it] is that opportunity cost is a very personal variable and its hard to find one input that fits all homebuyers. If money managers use a risk free rate in determining their excess returns, I don’t think it’s an unfair benchmark. However, others may look at it differently, and I believe that’s his core point, and it’s valid. His second contrarian point is makes sense – when you have everyone shouting about how bad things are, perhaps this might be the time to seize the initiative. The same applies to the cheerleaders from 2004-2006 who thought R.E. could never fail to rise more than 10% per annum … those with a viewpoint that went against the grain are looking fairly good. It’s difficult to get it exactly right, else we would all be wealthier than George Soros.
    I think ex-Sfer point [may have been on a different thread] that the most accurate judge of opportunity cost is looking a a comparable investment you may have made made [in lieu of the one you did] after the fact. It irks me when calculations assume 8% from an equity portfolio, when ex_Sfer accurately mentions that the S&P 500 is lower today than it was at the start of the year 2000. But, it is a way of goosing up the costs of buying [versus renting] to absurd levels, as tends to be the case when cost comparisons are layed out on Socketsite. Calm down – I realize it’s more expensive to rent than buy … it’s just not the chasm that some portray.

  21. I would also like to add, if one knows for sure about the future direction of any market, he won’t discuss it in public.
    This is not true.
    people often discuss things they know for sure (or think they know for sure). it’s called “talking your book”.
    the only time one doesn’t discuss what they know is if witholding that information leads to an advantage.
    There are countless examples every day of world class investors telling us what they know for sure
    I personally have also talked my book.
    often, what I post here I BELIEVE that I “know for sure”. and I’ve also disclosed that I have skin in the game as well. (I disclosed when I got out of stocks, when I went long gold/oil/treasuries, and when I started actively shorting the market as example)
    now if you want, you can debate what it means to “know for sure” because none of us is God!

  22. The tech stock treadmill isn’t related to the currency or fiat money issues. Exciting tech stocks take in money based on hope, that is true. For some of the bigger successes that can be a good bet, for a time. Much of the money is not such a good bet, but it is still just a bet. The result is techies in and around SF with more money than they can handle or know what to do with and a lot of stockholders and investors who end up with less money on account of the valuable experience that they purchased. Issues with fiat money are completely unrelated to gambling on the stock market, even when there are big corrections such as are working their way through the system now.

  23. Agreed, Stock money is not “fiat money” in the strict sense. “fiat money” is currency issued by the Treasury and since the end of the Gold Standard has no substantial backing apart from the promise by the Federal Government that this money will be redeemed.
    But if Stock money for some stocks is not “fiat money”, it very much looks like it. This money does not come from the company, but from investors in this company. And it has few assets to back it up. And its value lies on the “hope” that other investors will pay you at least the price you paid for your shares.
    Every overpaid/overcashed dollar has a price though. For every $1 that someone took out from an overvalued stock, you have a lost dollar on the investor side when he sells at a loss.
    Of course, a solution to prevent this loss is to push more cash into the system. If you add cash, you either add inflation (surprisingly low for the current crisis) or you depreciate the dollar which adds foreign revenue to the US companie’s balance books. The profits mechanically inflate because Euros are worth 20% more than in 2006 and 90% more than in 2001. Stock prices go up with revenue and voila. Things are good if you don’t need to buy gas, food, foreign cars, stuff made with metal, plastics or stuff that needs to be transported somehow.
    But wait for the Euro to go down from its little cloud…
    1 Euro could buy 0.84 dollars in June 2001
    1 Euro could buy 0.97 dollars in June 2002
    1 Euro could buy 1.15 dollars in June 2003
    1 Euro could buy 1.21 dollars in June 2004
    1 Euro could buy 1.22 dollars in June 2005
    1 Euro could buy 1.25 dollars in June 2006
    1 Euro could buy 1.35 dollars in June 2007
    1 Euro can buy 1.60 dollars in April 2008
    It won’t last forever. If the Dollar goes up, stocks might go belly up under the current circumstances. US companies will have to reflect the real state of the US consumer. I hope we will be out this crisis before that, otherwise this will be painful.

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