The Housing Market: GURK!!

From Bob Willis of Bloomberg. The chance of a near-term rate cut just went from 55% to 100%. The chance of a near-term (or current) recession just went from 30% to 40%:

U.S. Economy: Existing Home Sales Tumble 8 Percent: Oct. 24 (Bloomberg) -- The U.S. housing industry plunged deeper into recession last month as the August credit-market collapse made it harder for buyers to obtain loans. Sales of previously owned homes fell 8 percent in September to an annual rate of 5.04 million, the fewest since records began in 1999, the National Association of Realtors said in Washington. The decline was almost twice as steep as economists forecast, while the median price dropped the most in almost a year. Trading in federal funds futures suggests a 100 percent probability that the Federal Reserve will cut interest rates next week.... Economists had forecast resales to fall 4.5 percent to an annual rate of 5.25 million from a previously reported 5.5 million pace in August, according to the median estimate of 76 economists in a Bloomberg News survey. The previous month's sales were revised to 5.48 million....

Chances are this is not the bottom for the housing market," said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. "The extent to which housing is spilling over to the broader economy is still unclear, and that's what the Fed will be trying to determine between now and next week."... The number of homes for sale at the end of the month rose to 4.4 million. At the current sales pace, that represented 10.5 months' supply, the highest since record keeping began in 1999 and up from 9.6 months in August...

Comments

[supersaurus]

more good news here:

http://www.econbrowser.com/archives/2007/10/distressing_pic_1.html

[mitchell porter]

One investor-blogger writes:

"What was the market reaction to this? It priced in more rate cuts! As if that's the solution to whatever ails the market. Here's a hint kids - you can't clear this sort of inventory overhang by making money cheaper when the prices are still being at DOUBLE the affordable maximum!"

http://market-ticker.denninger.net/2007/10/wilderness-wednesday.html

[jim]

"Sales of previously owned homes fell 8 percent in September to an annual rate of 5.04 million, the fewest since records began in 1999, the National Association of Realtors said in Washington."

Interesting.

Calculated Risk has a chart up which shows sales from 1969. Prior to 1997, there was no year when sales exceeded 4 million units. I wonder why the NAR thinks those records don't exist.

[jim]

By the way, I presume the earlier records are actual annual sales, not annualized monthly sales, which is why they can be claimed not to exist.

The rhetoric and cavalier way with facts that is enveloping the housing crunch is rapidly approaching mideastern war levels.

I despair.

[Jonathan King]

On a different note, I am somewhat surprised that Brad thinks there is only a 40 percent chance of a recession. How often has there not been a recession when the Fed has had to lower rates by 75 basis points or more? And this doesn't even include the fact that we have the biggest asset bubble of all time blowing up all around us.

[Ken McKenna]

The Commerce Department reported today that sales of new homes rose by 4.8 percent last month to a seasonally adjusted annual rate of 770,000 units (although still 23.3 percent below a year ago). Analysts had been expecting a 2.5 percent decline. August was a very strange month in the credit markets, and that spilled over into the Sept housing results. There's too much noise to make much of these data, in my opinion.

[Tuco]

The median price of a house declined by 4.2% over a year. Those singing in the choir of how terrible it is that house prices are falling should consider this

http://jeffmilner.com/2007/04/a_history_of_home_values.png

and realize that at *only* 4.2% per year it will take a generation for housing prices to return to any kind of reasonable norm.