Care to Guess How Many NEW Homes Sold Over $750,000 in June and July?
NOTE: This article ran for about 11 hours without the qualifier “NEW” in the headline. The Website, Global Economic Analysis, which published the answer to the headline question was not clear as to this distinction, and Hat Tip to reader John Cannon, for correcting it. However, my points in the article, including those based on data from Fannie Mae, remain the unchanged.
Mandelman
Guess how many. Come on, this will be fun.
The media, and it would seem the government, are somehow surprised that the real estate market is not at all well. They apparently had thought that things were on the upswing, although why they thought that way, I cannot even imagine. Perhaps they posses marijuana of such exceptional quality that it alters their reality to such a degree that they actually believe they are living in a place where business is great, life is wonderful and people are terrific. The Big Rock Candy Mountain, perhaps?
Well, it must just be that I don’t live in the same country they do. My house in Southern California has gone from being appraised at $925,000 to being eight doors down from an REO recently sold for $360,000. When I first heard the news of that sales price I grabbed my chest as said, “Wow, did you feel that? I was like being an elevator that went down real fast.”
We bought our home in 1990 for $340,000, so I shouldn’t be too upset if it’s now going to be worth $360,000 because that means we’ve made a $20,000 profit. You may not think that’s a whole lot, but I’m pretty sure that it’s more than I’ve made netted from the stock market in the last twenty years. I’m not sure about that, but I’m not going to check it by doing the math… because I do not want to know. Besides I stopped opening the statements that come from Merrill Lynch every month like two years ago, and I’m certainly not going to start opening them up again now. Probably just send me over the edge.
So, you want to take a guess at how many new homes over $750,000 sold in this country in June and July? Do you have your guess in mind? Need a little more time to think about it? Well, okay… I’ll come back and ask you again in a few minutes.
The biggest question I have about the real estate market is… why are we all pretending that there’s a real estate market at all. There’s no real estate market in this country, hasn’t been one since July 10, 2007, when the Wall Street banks destroyed then bond market. July 10, 2007 was the day that Standard and Poors and Moody’s downgraded about a thousand bond issues that were backed by sub-prime mortgages, and investors like pension plans dumped the bonds the next day, along with any others that they feared might be downgraded soon.
After that, the mortgage market was doomed. If pension plans won’t buy mortgage-backed securities, well then banks can’t originate loans because they can’t sell them to Wall Street bankers to package into bonds… called mortgage-backed securities.
So, last year, the Federal Reserve stepped up and said it would be purchasing $1.5 trillion in mortgage-backed securities, and I said… well, cool. I don’t know if it’s the right thing to do, but it does seem better than not doing anything, which is what we’re all used to seeing them do. It’s not that they don’t so anything, mind you, it’s just that we don’t get to see much of what they do. I’m sure it’s all above board though… I just don’t know why people don’t trust the Federal Reserve.
The point is that without any investors buying mortgage-backed securities, there’s really not much in the way of mortgages available. There’s Fannie Mae and Freddie Mac… and FHA, of course. They’re all bankrupt, but the government is funding them on an unlimited basis. Yes, the government’s bankrupt too, I realize, but that doesn’t stop them from essentially unrestricted spending on things like mortgages or loans for the unemployed.
Still, there aren’t many loans going on. How do I know? Well, the average credit score for a Fannie Mae loan this year is 758,, with an average loan-to-value (“LTV”) of 69%… that’s the average score and the average LTV. And that’s according to Fannie Mae’s own numbers released by Fannie Mae on May 10, 2010. In 2009, the average credit score for a Fannie Mae loan was 761, and the average LTV was 67%
For the skeptics out there, you can click on the link just above, ot read the folloiwing paragraph taken from Fannie Mae’s own reporting:
For single-family loan acquisitions in the first quarter of 2010, the weighted average original loan-to-value ratio was 69 percent and the weighted average FICO credit score was 758. That was consistent with our 2009 single-family loan acquisitions, which had a weighted average original loan-to-value ratio of 67 percent and a weighted average FICO credit score of 761. The ultimate performance of these and all our loans will be affected by macroeconomic trends, including unemployment, the economy, and home prices.
Just how many people do you suppose there are with credit scores of 760 and 30% down payments? Hmmm… let’s see… minus, 212… plus 11… carry the 3, and… I have no idea but I’m here to say there aren’t that many. And how many are there that want to buy a house right now, is an even better question. I mean… many of the people who bought last year… when it was the BEST TIME TO BUY, according to the National Association of Realtors and other disingenuous cheerleaders for he housing market are probably getting pretty close to being underwater by now, or they will be by the end of this calendar year.
So, when the Fed stopped buying mortgage-backed securities in April, didn’t anyone realize that it would make loans pretty darn scarce this year? I guess not. I even called around to various “experts” and couldn’t get an answer to the question of where the loans would be coming from… and I asked real experts.
I’m sorry to have to say this, but I’ve come to understand that the numbers that come out of the real estate industry are complete fabrications in many instances. They certainly were after the bubble popped so I don’t know its take so long for me to come right out and say it… the numbers are often and largely lies.
You might remember my article last month in which I pointed out that, which the press was looking for something positive to report, new home sales in June were the worst June numbers ever. And that was after May sales were the worst May ever. And by “ever” I mean since 1963 when they started keeping track… that’s 40+ years ago, if I have my math right. So, why July sales were even worse, why did everyone act surprised?
Here’s a consolidated statement form what the Washington Post reported:
“… new homes sold in July plummeted 32.4 percent from a year earlier. That’s the lowest level since 1963 and far worse than what analysts expected. Sales were down 27.2 percent from June, the largest monthly drop since 1968.”
Which analysts were surprised? I want to know. I need names.
Then the Post explained that some industry experts, blame the numbers on the expired tax credits, that expired in April, by the way, and have only been extended for deals already in the works. And whoever it is that thinks that’s the case is absolutely either an idiot or on crack.
Check this out from the Post:
But many economists say the reports show that the weakness in the real estate market cannot be explained solely by the skewed sales generated by the tax-credit program. Deep-rooted fears about the job market and the direction of the broader economy may now be making prospective home buyers more reluctant to pull the trigger on a major purchase.
“There’s clearly something more at play here,” said Mark Vitner, a senior economist at Wells Fargo Securities. “The economy is backsliding a little bit. . . . It seems clear that consumers are holding back on committing to major purchases, such as buying a home.”
See what I mean? What is going on? Does Wells Fargo think people are stupid? “There’s clearly something more at play here?” Is that what Wells Fargo’s trained monkey had to say? I’ll say there’s something going on here… the bank that provides him with bananas won’t stop foreclosing on people’s homes after jerking them around for a year or so. Now he’s studying what’s holding consumers back?
Mark Vitner, Monkey
Hey Marky… over here… you nefarious boob. I’ll fill you in on what’s holding people back.
Well, let’s see… first there’s the people who don’t believe a word you say, and then there’s the rest… and they hate you for other rock solid reasons. Wells Fargo Bank has already made so many enemies that if you parked that stagecoach on the street, someone would strip it by morning for sure. I can’t believe you still have depositors. Backsliding a little bit? Is that what you think, you economist, you?
Marky… the economy is in a deflationary spiral, that was temporarily abated by outrageous amounts of nonproductive government spending, which went mostly into banks… while the foreclosure crisis was allowed to continue… and all because of banks like yours! That’s right you pompous pudgy putz… how much was your bonus last year?
You know what, Mr. Vitner… you and others like you are the problem. You lie constantly, confuse people, and cause them to make bad decisions… and you clearly don’t care, which is the worst aspect of your personality of all. Your bank is one of the worst offenders, and if there’s a God, and I do believe there is, then FASB will soon require your bank to bring the hundreds of billions of off-balance sheet garbage it owns onto its balance sheet. Then you’ll be out of work and the worthless, poorly run, crock-of-crap bank you work for will be in receivership as well.
Okay, I can’t even bring myself to say anything more to that guy. The point is, we’re in the same deflationary spiral that started July 10, 2010. The only double dip around here is Marky.
There’s only one more thing I want to say about the real estate non-market. If you’re already at risk of foreclosure, you already know what I’m about to say, but if you’re not then listen up…
You’re going down with the rest of us on this sinking ship. We can’t fix the problem because you still haven’t figured out that it wasn’t the borrowers who caused this nightmare, and while you’re against helping homeowners in trouble, you’re driving around looking to steal a foreclosure because you’re a greedy piece of garbage. Keep it up, Mr. and Mrs. Real Estate Market. You’re on your way to becoming the next wave of foreclosures, and we’ll see you in the soup lines soon enough.
So, do you know the answer? How many NEW homes sold over $750,000 in June and July nationwide? Michael “Mish” Shedlock of Global Economic Analysis does, and I love him for knowing:
None. That’s right boys and girls… none. Nary a one.
Ooooh boy… things are really looking up, aren’t they? I say we keep the foreclosure crisis going as long as possible. It’s working out fabulously… just frigging fabulously. Anyone want to venture a guess now as to what August home sales numbers are going to look like?
Not me. I like surprises.
Mandelman out.
um...not sure where you got your numbers from.
The Northern Ohio Regional Muliple Listing Service shows 27 sales for homes over 750k during June and July of 2010. Those are actual closed sales, not "pending contracts".
XpressOH... For source to stat: Click the last link for Global Economic Analysis, where I say "Mish Shedlock does". It will take you to his page on housing stats.
However, you are correct in that for the first 11 hours that this post was up, the stat was missing its qualifier "NEW" homes sold. It's not like Mike "Mish" Shedlock to omit a qualifier like that, but it can happen, albeit rarely.
I posted the clarification at the very top of the article as soon as I got the information, however, having reviewed the article... all of my points remained the same, and all other statistics are properly sourced with links provided.
Sorry about that, thank you for pointing it out. It's the second mistake I've had in about 18 months. The first was when I referred to Massachusetts as a "judicial foreclosure state," when apparently it's a "non-judicial" state. I corrected that one very quickly as well with a statement at the top of the page.
I hate missing anything, but will always correct anything misstated prominently as soon as I find anything stated improperly.
No sweat, Martin.
You quick response and update is much appreciated. Keep fighting the good fight, hopefully someday enough people are willing to listen!
I am a Realtor in Florida, think I might move to Ohio!
One point the government keeps missing. Not every homebuyer is a first time homebuyer. What is missing from this market is the move up buyer. You can't sell and buy another if you have no equity in your present home. I said in the beginning they should have given every citizen $100,000 (or more) of the bailout money that got wasted. Then the people would have been consuming or maybe paying down their mortgage so they had some equity. But that is not politically correct!
One point the government keeps missing. Not every homebuyer is a first time homebuyer. What is missing from this market is the move up buyer. You can't sell and buy another if you have no equity in your present home. I said in the beginning they should have given every citizen $100,000 (or more) of the bailout money that got wasted. Then the people would have been consuming or maybe paying down their mortgage so they had some equity. But that is not politically correct!
Hi Broker Sue...
For the trillions we've pumped into bankrupt banks, we could have paid off God knows what, but that wasn't really necessary. All they needed to do was open the credit line so people could get loans. When they let it freeze up it started the snowball downhill and now it's too late to stop it. Mandelman
In so calif there were 30 new homes over 750k that sold in those two months, priced from 820k to 4.2M. This proclamation is BS.
scottee10... Do you have a source for your assertion that the "proclamation" as you call it, is "BS". Let me know your source and I'll forward it to Mish Shedlock at Global Economic Analysis so we can see which is correct.
Mandelman
According to the Multi-Regional Multiple Listing Service (MRMLS) that spans accross Southern California, there were 38 SFR's built in 2010 that closed between 820k - 4,250k. That is just one part of one state that had new homes sell, so I don't know how you can really believe that there were no new homes sold nationwide.
I'll send your data to Global Economic Analysis and let's see what comes back. Mandelman
Government sources and realtors associations always provide highly spun and skewed measures. You are wrong about luxury houses. I fly helicopters in the area between Santa Barbara and Malibu. Right now there are in excess of 30 mega houses under construction. These are not visible from any road. They are mostly beautiful hilltop estates on about 5 acres. There is about the same number of ordinary homes under construction in the same area. There are a vast number of failed or dormant housing construction projects waiting for the next big housing bubble.
Looks like an outrageous and false claim used to generate more fear and terror among the masses with no basis in fact whatsoever. Thank your maker for the 1st amendment.....I'm pissed that people post this kind crap and get away with it....
Once you have achieved mass readership in a public forum and have a following, you are held to a higher standard. Please post quality content in your column and not made up drivel......It's unbecoming....
Once you have achieved mass readership in a public forum and have a following, you are held to a higher standard. Please post quality content in your column and not made up drivel......It's unbecoming....
Okay "scottee10" and others...
Obviously, this topic is upsetting to you and others who continue to be in denial about the future of the real estate and mortgage industries. It's understandable, if you are in either of those fields you have much to be concerned about, as the future looks bleak. BUT MY POST IS NOT "CRAP," it's accurate.
While I do thank this country's Founding Fathers for the First Amendment to the U.S. Constitution, I find no need to invoke it in this instance.
First of all, the intentionally inflammatory quote about no new homes over $750k selling comes from a report written by David Rosenberg, Chief Economist & Strategist at Gluskin Sheff. The following comes from that firm's Website:
"Mr. Rosenberg received both a Bachelor of Arts and Masters of Arts degree in Economics from the University of Toronto. Prior to joining Gluskin Sheff in 2009, Mr. Rosenberg was Chief North American Economist at Bank of America-Merrill Lynch in New York and prior thereto, he was a Senior Economist at BMO Nesbitt Burns and Bank of Nova Scotia. From 2001 to 2008, Mr. Rosenberg was ranked first in economics in the Brendan Wood International Survey for Canada, ranked second overall in the 2008 Institutional Investors Survey for the U.S., and was on the Institutional Investor All American All Star Team from 2005-2008. Mr. Rosenberg also ranked 4th out of 104 economists in the 2009 Thomson-Extel survey of global portfolio managers. Mr. Rosenberg also ranked 4th out of 104 economists in the 2009 Thomson-Extel survey of global portfolio managers."
Here's the relevant excerpt from David's report:
"The high-end market, in particular, is under tremendous pressure. In fact, it is becoming non-existent. Guess how many homes prices above $750k managed to sell in July. Answer — zero, nada, rien; and for the second month in a row. Only 1,000 units priced above 500,000 moved last month. That’s it! Over 80% of the homes that the builders managed to sell were priced for under $300,000. Just another sign of how this remains a full-fledged buyers’ market — at least for the ones that can either afford to put down a downpayment or are creditworthy enough to secure a mortgage loan (keeping in mind that 25% of the household sector does have a sub-600 FICO score)."
I contacted Mish Shedlock at Global Economic Analysis, and he provided the following:
How Many is Zero?
There are a couple of issues here.
1. New home sales are recorded at contract signing. So recent closings at a higher rate do not count. Nor do existing home sales. Many of those complaining are looking at closing data or existing home sales.
2. The other factor is rounding error. David Rosenberg was quoting from the U.S. Census Bureau New Home Sales Spreadsheet. And quoting from the Census Bureau New Home Sales Spreadsheet it says:
Table 2 - $750K home sold
"(Zero) Less than 500 units or less than 0.5 percent."
So, as Mish also suggested... what if we were to phrase it this way:
"In June and July of this year, there was a statistically irrelevant number of new home sales above $750K, somewhere between zero and 500".
Would that phraseology make you happier, scottee10? Instead of "none" we'll go with "a statistically irrelevant number"? Would that headline fit within your definition of "being held to a higher standard?" I certainly wouldn't want to post anything that was, in your entirely baseless and uninformed opinion, "unbecoming".
Does the use of the phrase "a statistically irrelevant number" of new home sales over $750k change the message of the article in some way, in your mind? It shouldn't. My point remains unchanged in its entirety.
And as far as "generating more fear and terror in the masses," clearly what I've written has generated fear and terror alright, but in you, as opposed to in the masses. The facts found on my site are, in all cases, solid and credibly sourced facts... they are most assuredly never baseless.
What is baseless is your accusation that my column ever contains "made up drivel".
I missed one fact last year. I called Massachusetts a judicial foreclosure state, when it's a non-judicial state, and thanks to my readers, I corrected the error within one hour of posting the article. The second fact I missed was to omit the word "NEW" in front of homes in this article. And similarly, that error was corrected within hours of posting.
Considering that I've written and posted just under 350 in-depth articles on Mandelman Matters since its inception in April of 2009, the two errors described and the timeframes in which they were corrected, seems eminently tolerable.
People, and by "people" I obviously mean you, need to hear the truth about the U.S. economy, and not the fantasy recovery nonsense being put forth by the Fed and other agents of the federal government.
The fact is that the bankers of Wall Street fatally damaged the secondary mortgage market by fraudulently packaging and selling mortgage-backed securities, obtaining erroneous ratings from the ratings agencies, and then selling them all over the world in order to bet the other side through the use of derivatives, most notably credit default swaps.
The level of their abuses of the market are only exceeded by the level of their greed, and the outcome of their crimes is an economy in a deflationary spiral from which we won't recover anytime soon. Our bond market is broken, the credit markets are broken, and our government is the lender of first, last, and only resort. There is no real estate market. The only loans are government loans. And mortgage brokers, sad to say, are going the way of the buggy whip.
Those are the facts, and the sooner everyone realizes that it was not homeowners who caused this mess, but rather Wall Street's bankers, and as a result stops blaming brokers and borrowers and places the blame where it lies, the sooner we can stand up and demand that our government stop bailing out the people that caused the crisis, and start meaningful funding of jobs creation and common sense credit standards.
I'm sure my headline was upsetting for you and many others like you. But whether it's "none" or "a statistically insignificant number" is irrelevant.
The point is the same. We're not recovering. Not close.
Looks like I touched a rather serious nerve. You've posted innacuarate and patently false information in your collumn and you've been called on it.
You have your 1st amendment rights to post anything you like as long as you do not infringe upon the rights of others. I have the same right to call you on poorly researched content within your collumn.
Qualifying your missive as statistically meaningless does nothing to remedy the "0 homes sold over $750,000" statement that you've made in a public forum. Please admit the error and move on.
http://www.thinkbigworksmall.com/mypage/archive/1/53091
You have your 1st amendment rights to post anything you like as long as you do not infringe upon the rights of others. I have the same right to call you on poorly researched content within your collumn.
Qualifying your missive as statistically meaningless does nothing to remedy the "0 homes sold over $750,000" statement that you've made in a public forum. Please admit the error and move on.
scottee10... Oh, is that all? No problem. Hereby admitted and moving on. As stated at the top of the article in question:
"NOTE: This article ran for about 11 hours without the qualifier “NEW” in the headline. The Website, Global Economic Analysis, which published the answer to the headline question was not clear as to this distinction, and Hat Tip to reader John Cannon, for correcting it. However, my points in the article, including those based on data from Fannie Mae, remain the unchanged."
Happier now, I trust?
I think that mega-houses would not in general show up as new home sales. These are probably very complex contracts. I would expect payment involves equities and other valuable consideration. For sure none of these go through ordinary realtors.
These might show up as commercial enterprises as there are usually some fruit trees or grazing land.
These wealthy people are apparently not feeling the economic downturn. New mega-houses probably represent 10 percent of all mega-houses in this area. It is a regular boom.
My personal eye in the sky sees actual houses.
This article was dead-on. Foreclosure victims and advocates alike will welcome this article. I have posted it at foreclosurehamlet.org for all to see.
More importantly; however, Americans will finally understand the gravity of the situation and how this affects their homes ,as well. What a mess the banks have caused with all of these clouded titles on homes and the devastation these foreclosures have left in their wake.
Visit foreclosurehamlet.org for additional articles and chat.