On 26 January NAHB reported that existing home sales INCREASED in December: “Existing-Home Sales Spike As Bargains Glut Market: Sales Up a Surprising 6.5 Percent in December.
This was the only “good” economic news in weeks:
24 January 2009 WaPo: “Downturn Accelerates As It Circles The Globe: Economies Worse Off than Predicted Just Weeks Ago.” Record losses in jobs, defaulting banks, defaulting nation-states, riots in Eastern Europe, Autonomobile and retail closings, the four largest print media Enterprises in the US of A lost $18.3-billion in market value in just a year, the new federal administration scrambling for ways to expand bail-outs, consumer confidence at an all-time low, …
The 2001 Nobel prize winner in economics and former chairman of the Council of Economic Advisors Joseph Stiglitz suggested to CNNPolitics that the US of A follow Sweden’s lead: Agencies should take over failing banks – wiping out owner and bank investor interests – instead of just loaning them money or buying preferred stock.
The existing home sales news was apparently what kept the gambling venues (aka, Dow Jones, et. al.) from tanking during the first part of the last week in January because other news from the shelter sector not good:
On 24 January it was reported that Freddie Mac will ask for $35-billion more in taxpayer’s money and on 26 January that Fannie Mae will ask for $16-billion more. On 24 January FHA reported that the number of FHA-backed loans in default were rising.
There was some good news: The Newton Bank of Nigeria is offering loans to all comers over the Internet.
And almost as foolish, Bill Bolling who wants another term as Lt. Governor of Virginia has a “legislative agenda” that includes a $2,500 per person ($5,000 per couple) “tax credit” for Virginian’s buying homes with no location related criteria – such as qualifying for location efficient mortgages.
Perhaps most scary of all was the front page of WaPo’s Real Estate section on 24 January. The feature was a puff piece on green building (this story has already been cited in prior comments): “Seeking a Smaller Footprint: Builders Scale Back House Sizes as Buyers Commit to Energy Efficiency.”
Why is this scary? Check out the photographs of the featured buildings! If there were real standards for journalistic decency this would be stamped “PORNOGRAPHY!” It is well known that even those committed to energy efficiency will not walk forever. These dwellings are said to be “near Winchester.” But from the pictures it is clear they are not THAT near. Where are the Jobs and Services needed to achieve Balance?
Somewhat Better Size House, still in the Wrong Location.
But what puts the December rise in existing house sales in the deception category? The real estate industry is using the percentage drop in home value during the Depression when looking for the “bottom” of the market.
There are major differences in the unsustainable runup in house prices over the past 35 year, and especially the last 15 years with the Roaring 20s and the Depression Era drop of around a third in value. Here are some:
Far lower percentage of homes with mortgages
Far fewer homes
Far more dwellings with two or more generations in a unit.
This later point is critical. These occupants could work to help make ends meet. Multi-generational occupancy was especially prevalent in detached dwelling and detached dwellings were mainly in the Countryside. The occupants of detached dwellings were far more likely to be able to depend on the land for the needs of everyday life.
Then there is the fact that the housing bubble built up over the 20s was a far smaller bubble and it was not nearly as leveraged nor were the mortgages packaged, securitized and peddled around the globe. Home mortgages were a Community and a Regional activity.
If one wants to look for levels of property value declines they need to look not at nation-state wide percentages of owner occupied dwellings but at the bursting land speculation bubbles in Florida, California and elsewhere.
While NAHB reports that sales were up “a surprising” 6.5 percent in December, CNNMoney was reporting: “Flood of foreclosures: It’s Worse Than You Think.” “Banks are moving slowly to list repossessed homes for sale, which could mean that housing inventory is even more bloated that current statistics indicate.”
Of course most of these not yet listed dwellings are Wrong Size House in the Wrong Location – see “THE TRAGEDY OF TRICKLE DOWN.”
The bottom is not yet in sight. December sales numbers are Fools Gold.
And still new units are being built in the Wrong Locations, and the wrong dwelling type, even if somewhat closer in size and energy consumption.
EMR