So Cal Real Estate News

(July 24,2008)   This morning’s news provided more evidence that this spring’s buying surge is subsiding, as we predicted.

The National Association of Realtors released their statistics for existing-home closings in June:  Sales were off 2.6 percent from May, at a seasonally adjusted annual rate of 4.86 million units in June, down from a pace of 4.99 million in May.  That’s 15.5 percent lower than the relatively hot 5.75 million-unit rate of June 2007, when the market was just beginning to slow.

Home inventory (available listings) rose 0.2 percent to 4.49 million existing homes available for sale, an 11.1.-month supply at the current sales pace, up from a 10.8-month supply in May.  Inventory is a better indicator of future sales than closings.  Given the ongoing influx of foreclosures, and the normal seasonal trends (See “Predictions 101: Our 2 market cycles“) we were surprised that inventory didn’t grow faster.

To us, this modest increase in inventory is good news, and may actually be an indicator the tsunami of foreclosures may be nearing a peak. On the other hand, the slowdown in June closings would indicate the market started slowing way back in April, since that’s when June closings started going into escrow. That’s real cause for concern.

NAR’s data is less useful than DataQuick’s for several reasons:

1. It’s nationwide, and the smallest breakdown is into 4 national regions (see below)
2. It excludes most resales, FSBOs (”For Sale By Owner) and other transfers that didn’t use a Realtor or were not listed in a local MLS, such as exclusive listings.
3. It’s released about a week later than DQ’s numbers for the same month.

Regular readers already know our complaints about “DataSlow, which also apply to NAR’s medians:”

1. Closings lag actually lag sales by about 45 days, making it “old news.”
2. Median prices area easily skewed by shifts in what price homes are selling, making it hard to read the tea leaves.
3. Most news outlets rarely explain DataSlow’s flaws, so the general public seems to think the numbers reflect actual values in the current market.  (For details on DQ, see Two big problems with DataQuick’s monthly median price reports“

NAR’s stats for the western region are actually more positive, with sales rising 1.0 percent in June to a pace of 1.03 million, only 6.4 percent lower than June 2007.  That’s more in line with what we were seeing locally in April, although the traditional post-spring slow-down has set-in since.  The median price in the West was $288,400, which is 17.2 percent below June 2007.  Medians in most SoCal markets are down about 25% from a year ago, based on DataQuick’s June numbers.

NAR spinmeister and chief economist Lawrence Yun, put his usual positive spin on the numbers.  “About four in 10 homes are purchased by first-time buyers, which frees existing owners to trade up,” Yun said. “With many potential first-time home buyers on the sidelines, a first-time buyer tax credit would have a significant positive impact on both housing and the economy. Combined with permanent increases to mortgage loan limits and enhancing the FHA loan program, the housing stimulus package working its way through Congress would go a long way toward helping consumers and boosting the overall economy.”

While we’re not sure the housing relief bill that passed the House yesterday will go a “long way” towards helping us, we do think it’s a big step in the right direction, and it tends to reinforce our projections in our last post, “Home price bottom near for Orange County?“  In fact, we’re thinking about actually making our numbers there a bit more optimistic due to Bush’s announcement that he will sign the housing bill.

The biggest downside of the housing bill is that it pushes up the federal deficit even further, which will put even more upward pressure on interest rates.  What Congress & the Administration really need to work on is a Deficit Reduction Bill, which would work to eventually reduce the deficit by eliminating “earmarks,” giving our next president a line item veto, and forcing a combination of mandatory budget cuts and mandatory across-the-board spending reductions if certain deficit reduction targets aren’t met.  Don’t hold your breath on that one.

We still believe our economy also needs is a serious effort to reverse the massive outflow of American dollars to OPEC.  We think the envirornmentalists among us need to allow for low risk drilling in Alaska and off shore, as well as safe nucleur power.  Conversly, the U.S. needs to charge market value for new oil, not give it away free to the oil companies.  That would provide billions of dollars to divide between deficit reduction and alternative energy research and development.

All of which would create millions of good jobs, stabilize the dollar, reduce our balance of payments deficit, reduce federal deficit spending, bring down the price of oil, reduce interest rates, and provide real relief for American homeowners and even banks.

Click here for more June sales info from NAR.

For today’s details on the “Federal Housing Finance Regulatory Reform Act of 2008″ and what’s next, click here.