A variety of data packages get dropped in my lap from time to time, an excerpt from the latest:
First, we got the existing home sales data for February and they edged down again, by 0.6% MoM, and “no” — it was not due to the blizzards (sales actually rose in the Northeast and Midwest). Also keep in mind that these are closings — so no reason why they should have been impacted by the weather at all.
This is a new downward trend in sales turnover because it was the third decline in a row and we are now all the way back to the depressed levels of June 2009, at just over five million units annualized. Without the tax credits, which expire at the end of April (we shall see about that — Arnold is already moving to extend the goodies in the Golden State) we would have seen an even weaker figure because first-time homebuyers made up 42% of the sales tally last month. Repeat buyers are hibernating, comprising 39% of the sales pace, down from 43% in January.
What was truly disturbing were the inventory data — listings up almost 10% to their highest level since last September — taking the backlog to a six-month high of 8.6 months’ supply (from 7.8 in January), which is materially above the 5-6 months that generally characterizes a balanced market.
We are back to a classic buyers’ market, which means that we are in for another round of residential real estate price deflation. Indeed, average resale prices dropped 0.8% last month and are down in seven of the past eight months — the Case-Shiller home price index is probably not too far behind (recall that the FHFA house price index has declined in each of the past two months).
The bottom line is that the U.S. housing market is still in a mess fully three years after the collapse. If government policies worked, then it is hardly evident — perhaps at best cushioning the blow but not preventing it from happening. Consider the following:
The slide in housing has shaved $7 trillion from national residential real estate wealth since the third quarter of 2006.
There are an estimated 5 million Americans still in the foreclosure process.
There are still 11.3 million homeowners who are “upside down” on their mortgage. The average “under water” mortgage borrower is in the hole to the tune of $70,700 (see front page article of the USA Today) in Q4, up from $69,700 in Q3.
The unsold housing inventory, when accurately measured, is close to 21 months’ supply. There are over 18 million residential housing units sitting empty right now across the country, and the areas under the most severe pressure are Nevada, Arizona, Florida, Michigan and California (“only” 25% of the country).