Housing Headlines: Not as Good as Advertised, Pondering a Priceless Recovery

by Alex Stenback on July 28, 2009

Last Thursday, the National Association of Realtors reported that Existing home sales were up 3.6% for June.

On Monday, the US Census Bureau reported New Home Sales for June, which were up 11% from May.

Today, the Case-Schiller Home Price Index for May was released, showing a slight increase of .5%.

And if you just read the headlines, or listened to your local morning news talker, you might be led to believe that this is just great news and the housing market is poised to turn around.

With that in mind, I’d like to point you to a short piece by Mark Gongloff in Today’s Wall Street Journal, who rightly points out that these recent reports can be more than a little misleading if you stick to the headlines.  He notes:

  • First, home sales quite often jump in June, the height of the spring selling season. When trying to gauge the strength of home sales, then, it makes more sense to compare them with the same month a year ago. That comparison is less kind — sales were down 21.3% from June of 2008.
  • New-home inventories are falling, an encouraging development. But inventories are still higher than their historical norm, and there remains an avalanche of distressed sales.
  • June’s “surging” sales were driven by heavy discounting. The median new-home price — not seasonally adjusted — fell 12% in June from a year ago, to $206,200, the lowest June sales price since 2003. And it was down 5.8% month on month.

And that’s just the New Home sales report – a deeper look at the underlying data for the other reports reveals similar undercurrents of underreported and ongoing distress.  For instance:

  • The Case-Schiller numbers reported as “up” in most headlines were not seasonally adjusted – when adjusted, home prices fell in 12 of 20 cities in the study [Calculated Risk]
  • Existing home sales were down .2% year over year, despite a 3.6% rise from May to June 2009. Sales prices here were down 15%, YOY.

The take away here there are some signs of stabilization in the number of actual sales, but inventory remains elevated, distressed sales continue to exert downward pressure, and, most importantly, prices are continuing to fall.

Call it a Priceless Recovery, if you will.

In other words,  ever more sales at ever lower prices does not make for a healthy real estate market.  A “priceless recovery” in real estate will not free underwater home owners or magically fix foreclsoure rates, so we still have some ground to cover before the market shapes up.

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