Matrix Blog

Posts Tagged ‘National Association of Realtors’

NAR Existing Home Sales Blink, And So What?

March 23, 2014 | 9:00 am |

NAR released their Existing Home Sales Report on Thursday with a headline that read: February Existing-Home Sales Remain Subdued that blamed the severe winter weather and low inventory for lower sales.

Of course inventory has been near historic lows for a few years so that’s not a new reason. I’m left with the weather and as someone who hates to use the weather as a crutch, it seems to be a pragmatic – it’s difficult to show or be in the mood to view properties when it is zero degrees outside. The weather explanation was also used in the prior report but those contracts were signed in December for the January report, before the “polar vortex.”

However the recent hand ringing caused by the downshift in sales is the concern that the recovery is cooling off.

I see the recent fretting about the cooling of housing as an indication of how improving conditions were based largely on Fed policy and not fundamentals. The combination of rising mortgage rates and declines from the year ago release of pent-up demand post-”fiscal cliff” likely gets price gains and sales levels in sync with fundamental economic conditions.

I’ve charted NAR EHS stats from the past 4 years without seasonal adjustments. Price gains have been insane so the combination of slowing sales and rising inventory will take the froth out of the market and hopefully get us on a more sustainable path.

2-14NARehs

Tags: , , , , , , ,


On Bloomberg TV’s ‘Bottom Line’ 2-12-14 Talking US Housing Slowdown

February 14, 2014 | 5:24 pm | bloomberglogo | Videos |

Had a great discussion with Mark Crumpton on his show “Bottom Line” about the slowing US housing market. You can see this in the quarterly results:

The median existing single-family home price increased in 73 percent of measured markets, with 119 out of 164 metropolitan statistical areas (MSAs) showing gains based on closings in the fourth quarter compared with the fourth quarter of 2012. Forty-two areas, 26 percent, had double-digit increases, two were unchanged and 43 recorded lower median prices.

The storyline of the last 2 years has been “Housing is Back!” yet prices were rising based on fed policy, not due to fundamentals like income, employment and access to credit. I have been labeled as a bit bearish on the “recovery” but I’m really not. I look at this slow down as a good thing for the long view on housing. We need to have sustainable housing growth (ie sales and prices) and 13.7% YoY price gains are in start contrast to economic fundamentals.

During our interview we were interrupted by the signing ceremony with President Obama for the new minimum wage act, so Bloomberg TV spliced the two parts together quite nicely. This is the second or third time one of my interviews has been interrupted by the President of the United States. Yes, I’m ok with that. ;)

Tags: , , ,


NAR Pending Home Sale Index Sort of Goes Negative

October 28, 2013 | 7:31 pm | nytlogo | Charts |


[click to expand]

According the National Association of Realtors, their Pending Home Sales Index fell 5.6% from August to September 2013 (seasonally adjusted), the largest monthly drop since May 2010 after the artificial prop of the 2009-2010 federal homebuyers tax credit expiration caused contracts to drop by nearly 1/3 from bloated levels.

Removing seasonality from the results makes the year-over-year adjustment show nominally 1.1% higher contract volume from September 2013 than in 2012 rather than a 1.2% decline. Still, the results were weak.

Why did pending sales post weaker results?

  • Don’t blame the partial government shutdown – that came later.
  • After the May 2013 Fed surprise announcement, fence sitters surged to the market to lock in before mortgage rates rose further, bloating contract volume over the summer (and why month-over-month seasonal adjustments to this data are so very misleading).
  • The surge in summer sales “poached” from future organic volume that we would have seen in September so we were already expecting a slow down in volume. Didn’t we learn in 2010 what happens when unusual circumstances press volume sharply higher only to see volume fall sharply when that circumstance disappears?

Weaker conditions prevail, but its really not as bad a report result as being discussed – namely because the seasonal adjustments paint a weaker picture than what actually happened, and we expected a decline in activity because the prior several months were artificially pushed higher with so many more buyers rushing to the market to beat rising rates (or the perception of rising rates).

Tags: , , , ,


NAR July 2013 US Existing Home Sales Unexpectedly Rise 6.5% M-O-M

August 21, 2013 | 12:08 pm |


Source: NAR

After slipping in June, NAR’s Existing Home Sales for July jumped 6.5% unexpectedly from the prior month. Last month the results showed an slight decline (and were adjusted downward for this release) and the thinking was that the market is starting to cool off with the introduction of rising rates to the market in May. The bulk of May contracts probably closed in July, the likely basis of this most recent release. However it looks like the market continued to see a rise in demand in June, following the May bump in rates as people looked to get in the market before rates rose further.

Still, this month over month stuff is pretty ridiculous to place a lot of faith in. The year over year surge of 20.7% (non-seasonally adjusted) and 17.2% jump (seasonally adjusted) is much more telling of the long term market change.

Here are a few other charts to review. Inventory is much lower than a year ago while showing some gains in excess of seasonal trends. Median sales price growth is off the hook. 13.7% YoY growth is not sustainable with flat income, tight credit and high unemployment and underemployment. Thanks goodness for rising rates.


Source: NAR


Source: NAR

Tags: , ,


NAR: “The Home Price Growth Is Too Fast”

July 1, 2013 | 11:30 am |

When I saw this quote by Lawrence Yun, NAR chief economist two weeks ago in the Existing Home Sale Press Release, I was surprised. I didn’t write about it but ran into someone a few days ago who pointed out the same thing so I was inspired.

The home price growth is too fast, and only additional supply from new homebuilding can moderate future price growth.

My reaction:

  1. I agree that price growth is too fast. Incomes are stagnant.
  2. This partially makes up for him classifying the housing slowdown as temporary back in 2007.
  3. When someone who is generally biased towards the positive, goes negative, that’s a red flag.

Tags: , ,


Broken Appraisal: Lack of Market Knowledge Overpowers Lack of Data

January 27, 2013 | 6:06 pm | nytlogo |

There was a really good appraisal story in the Sunday Real Estate Section this weekend by Lisa Prevost focusing on appraising high end properties whose theme is well-captured in the opening sentence:

As home sales pick up in the million-dollar-plus market, deals are being complicated by unexpectedly low appraisal values.

The higher the price strata of the market, the smaller the data set is to work with so the conventional wisdom seems to be that less data = more unreliable appraisals. However I believe the real problem is lack of market knowledge by more appraisers today as a result of May 2009′s Home Valuation Code of Conduct (HVCC) – the lack of data at the top of the market merely exposes a pervasive problem throughout the housing market.

To the New York Times’ credit, they are the only national media outlet that has been consistently covering the appraisal topic since the credit crunch began and I appreciate it since so few really understand our challenges as well as our our roles and relationship to the parties in the home buying and selling process. Appraising gets limited coverage in the national media aside from NAR’s constantly blaming of the appraisers as preventing a housing recovery (in their clumsy way of articulating the problem, they are more right than wrong).

Here’s the recent NYT coverage:

January 27, 2013 Appraising High-End Homes
January 11, 2013 Understanding the Home Appraisal Process
October 12, 2012 Scrutiny for Home Appraisers as the Market Struggles
June 14, 2012 When the Appraisal Sinks the Deal
May 8, 2012 Accuracy of Appraisals Is Spotty, Study Says
September 16, 2011 Decoding the Wide Variations in House Appraisals

The general theme and style of coverage comes about when Realtors start seeing an increase in deals blowing up that involve the appraisal. The Prevost article indicates that higher end sales are more at risk because the market at the top (think pyramid, not as in ponzi) is smaller and therefore the data set is smaller.

This may be true but I don’t think that is the cause of the problem but rather it exposes the problem for what it really is. I contend that the problem starts with the appraisal management company (AMC) industry and how it has driven the best appraisers out of business or pushed them into different valuation emphasis besides bank appraisals by splitting the appraisal fee with the appraiser (the mortgage applicant doesn’t realize that half their appraisal fee is going to a bureaucracy).

My firm does a much smaller share of bank appraisals than our historical norm these days but it is NIRVANA and we’re not likeley to return to our old model anytime soon.

Since the bank-hired AMC relies on appraisers who will work for half the market rate and therefore need to cut corners and do little analysis to survive, they generally don’t have local market knowledge often driving from 2 to 3 hours away.

Throw very little data into the equation as well as a very non-homogonous housing stock at the luxury end of the market and voila! there is an increased frequency of blown appraisal assignments.

There is always less data at the top of the market – the general lack of expertise in bank appraisals today via the AMC process is simply exposed for its lack of reliability. Unfortunately the appraisal disfunction affects many people’s financial lives unnecessarily such as buyers, sellers and real estate agents (and good appraisers not able to work for half the market rate and cut corners on quality).

The appraisal simply is not a commodity as it is treated by the banking industry. The appraisal is a professional service so by dumbing it down through the AMC process, they have succeeded in nearly destroying the ability to create a reliable valuation benchmark on the collateral for each mortgage in order to be able to make informed decisions on their risk exposure.

Tags: , , , , ,


NAR Membership Flows With Housing Market

December 6, 2012 | 11:07 am | Charts |


[click to expand]

Membership is very close to falling below the 1M threshold (1,005,838) for the first time since 2003.

The rise and fall of NAR membership with the S&P/Case Shiller Home Price Index is a logical trend in a commission driven profession with a low barrier to entry – although one would think membership would correlate better with number of sales rather than prices (Case Shiller or CSI is a price index i.e., not based on sales).

The public strongly and incorrectly relates the health of housing with prices rather than sales. Sales activity leads price direction by about a year and membership lags prices so the membership correlation to price probably reflects the time it takes people to jump into the profession when things seem to improve – the chart suggests 1-2 years. You can see the membership lag prices during the boom, at peak and when the market crashed.

In the period like now where the market is transitioning from bad to good, the sharp agents have the opportunity to do very well with less competition from those who were only in it for the quick buck.

The appraisal profession likely shows a similar pattern but perhaps would be more closely aligned with refi applications. On my “to do” list.

Tags: , ,


Get Down With It: Falling Mortgage Rates Are Not Creating Housing Sales

November 27, 2012 | 11:16 am | wsjlogo | Charts |

Inspired by my analysis of yesterday’s WSJ article, I thought I’d explore the effectiveness of low mortgage rates in getting the housing market going. I matched year-to-date sales volume where a mortgage was used and mortgage rates broken out by conforming and jumbo mortgage volume.

Mortgage volume has been falling (off an artificial high I might add) since 2005, while rates have continued to fall to new record lows, yet transaction volume has not recovered. I contend that low rates can now do no more to help housing than they already have.

Even the NAR has run out of reasons and is now focusing on bad appraisals as holding the market back (I agree appraisal quality post Dodd-Frank is terrible and is impacting the market to a limited extent – and I secretly wish appraiser held that much sway over the market).

I’m no bear, but the uptick Case Shiller’s report today (remembering that Case Shiller reflects the housing market 5-7 months ago) still shows slowing momentum and all 2012 year-over-year comparisons in the various national reports are skewed higher from an anemic 2011.

Five years of falling mortgage rates have only served to provide stability in volume. The monetary and fiscal conversation ought to be on ways to incentivize banks to ease credit – falling rates only makes them more risk averse.

Of course a significant drop in unemployment would likely solve the tight credit problem fairly quickly.

Tags: , , , , , ,


Why Doesn’t NAR Lobby Against Standard Time?

November 4, 2012 | 1:30 pm | nytlogo |


[click to read about Daylight Savings Time]

We got an extra hour of sleep last night (in theory) as we left Daylight Savings Time.

I came across this post yesterday that got me thinking (more like chuckling), why doesn’t the National Association of Realtors rally public support for shifting the US from using Standard Time to go all Daylight Savings Time in order to promote more housing activity?

Afterall, who wants to get up early and view a purchase or rental property and isn’t housing significant part of the economy? Daylight in early hours benefits farming while daylight in later hours benefits housing activity. Agriculture is about 1% of GDP and housing is 17% to 18% of GDP.

From Wikipedia:

As modern societies operate on the basis of “standard time” rather than solar time, most people’s schedules are not governed by the movements of the earth in relation to the sun. For example, work, school and transport schedules will generally begin at exactly the same time at all times of the year regardless of the position of the sun…if “standard time” is applied year round, a significant portion of the longer sunlight hours will fall in the early morning while there may still be a significant period of darkness in the evening.

Admittedly this idea is way out there, and NAR would be unlikely to lobby this point anytime soon because they would look foolish.

I guess I just don’t like it getting dark at 5pm and I don’t even sell real estate.

Tags: , ,


Housing Trends & Talk Like A Pirate Day 2012 (10th Anniversary)

September 19, 2012 | 1:42 pm | curbed |

Well, NAR released the August 2012 existing home sale numbers today. Yawn.

More importantly, it’s International Talk Like A Pirate Day and I’ve marked this day on my calendar for nearly as long as the 10-year run it’s had. Just mentioning the annual event to my kids makes them worry about me and yet be embarrassed for me at the the same time.

For more about this important holiday, you can get the story and go right to the founder’s web site.

And yes, home sales are up. [Pirate talk translator]



August Existing-Home Sales and Prices Rise [NAR]
On Talk Like A Pirate Day Jonathan Miller Tells It Like It Is [Curbed DC]
International Talk Like a Pirate Day [Wikipedia]
International Talk Like A Pirate Day [Original Site]
Google’s Pirate Themed Home Page [Google]

Tags: , , ,