Pending Sales of Existing Homes in U.S. Increased a Record 10% in October

[Godhumor]

Source: Bloomberg

Dec. 2 (Bloomberg) -- More Americans unexpectedly signed contracts to buy previously owned homes in October, easing concern that the absence of government support is destabilizing the housing market.

The index of pending home resales jumped a record 10 percent after dropping 1.8 percent in September, the National Association of Realtors said today in Washington. The median forecast in a Bloomberg News survey called for a 1 percent decrease. The group’s data go back to 2001.

Low borrowing costs and reduced prices may attract some buyers, helping housing regain its footing after the end of a tax credit caused demand to slump. Even so, rising foreclosures and unemployment near 10 percent indicate the industry at the center of the last recession will take years to rebound.

“The fundamentals that are driving home sales are low mortgage rates combined with job and income growth and that’s why housing should be expected to grow in coming months,” said Dean Maki, chief economist at Barclays Capital Inc. in New York. “Housing activity will still look low relative to the boom years, but we expect a solid growth rate to occur.”



Read more: http://noir.bloomberg.com/apps/news?pid=20601087&sid=aFVgUrVh74jI&pos=1

---

Good sign.

Edited to add the actual PHS chart:

http://www.realtor.org/wps/wcm/connect/0c39430044e35f038229c25d6aeab3b5/PHS1010.pdf?MOD=AJPERES&CACHEID=0c39430044e35f038229c25d6aeab3b5

100 is equal to activity in 2001 when the chart was first created. We're still down compared to Oct of last year when we hit our peak in pending sales of people trying to get in before the initial November 2009 deadline for the tax credit.

[Uncle Joe]

1. Kicked and recommended.

Thanks for the thread, Godhumor.

[still_one]

2. This is coming from maki, barclays capital. Why should I believe him?

and even though sales have increased, so have forclosures

http://money.cnn.com/2010/12/02/news/economy/initial_claims/index.htm?section=money_mostpopular

[pattmarty]

3. Could this be "investors" buying up homes to rent OR hold for..........

..........sale in the near future when prices rise? Just sounds a little fucking "fishy" to me. If the unemployment rate is "steady" at around 9.5% who in the fuck is buying these homes? A little more insight is needed before I would get any hopes up.

[Godhumor]

5. The index measures the following

Directly from the chart's website (http://www.realtor.org/research/research/phsdata)

"The index measures housing contract activity. It is based on signed real estate contracts for existing single-family homes, condos and co-ops. A signed contract is not counted as a sale until the transaction closes. Modeling for the PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years."

Investors traditionally make up less than 20% of buyers in exisiting home sales, which continued in the 3Q of 2010. First time home buyers have accounted for over 30% of sales through the 3Q.

Honestly, why would you be surprised? Rates are so low right now that people who can buy, are. It has also led to a massive refi boom that has been sustained for well over a year.

[pattmarty]

7. So you are saying that a "refi" is included in this data? And, I am..........

..........surprised BECAUSE the unemployment rate is unchanged and am wondering WHO the fuck is buying these homes. I also understand about the rates. My wife and I are considering moving and we are in our 60's, BUT have "some" money. It just doesn't make sense with other economic stats I have recently read. One other thing (and I am not being a smartass), how does one know if a buyer is an investor and not just purchasing the home to live in?

[Godhumor]

9. Refis are not included in PHS. I mentioned it because rates are also driving refi business

As far as investor versus primary resident, property has to be "flagged" as investment when purchased.

[Steerpike]

10. I've heard people brag

about how they got around the (and the loopholes involved) "investor/primary residence" rules...I've listened to reps from national realtors orgs and they tend to lie and skew numbers. overall stats from these organizations are questionable at best...to me anyways

[pattmarty]

11. Well, therein lies the rub. What EXACTLY do you mean by "flagged"?.......

.......Is it just a "box to check" on a mortgage agreement? Or is it just a casual question? Just me looking around my area, I STILL find this extremely hard to believe.

Are you a realtor or involved in the real estate/mortgage business?

[Godhumor]

12. Not a box to check, but a lot of legalese

If you buy a 1-4 unit residential property with the intent to live in at least one unit, it is considered a residential property, regardless of whether you rent the other units (Anything 5 units or over is automatically considered commercial). Intent is proven through declaration of primary residency and can go through a fairly complex procedure for confirmation. Banks are actually very good about verifying intent of residency as lending requirements change drastically between an investment and residential loan.

The PHS chart is for single units only, so there is much less wiggle room for definition changes--either you live there or you don't. If you live there, you're not an investor (even if you take on a roommate or rent out a room); if you don't live there then you are a landlord, aka investor.

And for disclosure purposes, I am not a loan originator, underwriter or processor (i.e. those who directly deal with the mortgage business), but part of my job is to follow mortgage industry trends.

[quakerboy]

32. Ah, but I would submit

that a lot of investment buying is cash purchase. In which case they do not have to fill out loan paperwork of any type, nor indicate what their purpose is. I know that over the year and a half that my wife and I were searching, we got beat by cash offers on the first dozen or so places we had made offers on. Someone was buying anything on the low end of price, even at the worst of the mess, and I know for a fact that most of them were investors by the "for rent" signs that later popped up.

[Godhumor]

36. It tracks all pending cash sales

No all pending cash sales were investors, though I'm sure a lot of the pending sales are all cash. Investors have risen 5% from 10-2009 compared to 10-2010. Definitely more this year, but it is not an unbalancing, at least not yet. If investors creast the 25% point, then we're talking consolidation.

[David Zephyr]

13. Your antennae is a good one. Many of these homes are cash buys.

A greater part of America's housing (not aparment) stock will become rentals.

[pattmarty]

15. That was the real strong feeling that I was getting. With the high..........

........unemployment expected (as called by most economists) to continue for at least a few years, and shrinking incomes for middle/working class families, and the folks losing holmes, ya hafta figure, people gotta live somewhere.

[Godhumor]

17. Accounts for less than 1/5 of purchases this past month, just like in the trailing 12 months

The data is not rigged--people are buying more homes, investors are buying more property, but they're still less than 20% of all single family residential sales. Most of the investor properties are also condos, which makes sense, as well.

[pattmarty]

21. Well let me give you my opinion; the "legalese" you spoke of..............

..........is probably masking who is really purchasing a lot of these homes. I have purchased four homes in my life and NEVER had to disclose if I was purchasing for income property AND you can LIE on these forms as has been PROVEN with the housing collapse. So I'll continue to believe my "lyin eyes" over your "data" from a real estate website.

[Godhumor]

22. OK, let's talk about lying

Lying about whether a property is income or residency is a massive detail. The customer might only see the legal forms, but for the banks this is serious business. If a bank underwrites a loan that proves to be a misrepresentation of reality, and claiming a property as primary residency instead of income is a pretty massive misrepresentation, than the servicer or security holder can force the bank to repurchase the loan.

In other words, Freddie Mac turns around, tells the bank that it lied about meeting agency guidelines, and can create a legal showdown where the bank has to reabsorb the mortgage and loses the government-backed peace of mind if it goes belly up.

The banks have massive incentive to make sure loans are exactly what they are supposed to be, and they keep in-house Risk/QC groups whose entire function is to make sure there is no cheating that would lead to misrepresentation.

Secondly, the data comes directly from MLS (If you've ever bought a house, you can search by MLS number on any of the realty sites) collected information--or, to put it another way, the actual listed out facts behind the sale. It is not a biased number.

Thirdly, lying on mortgage forms did not lead to the housing collapse.

Finally, yes, some people do game the system and get away with lying, as is the case with any transaction involving disclosure. But the number of people who do get away with it is miniscule and would certainly not translate into a massive enough number to unfairly skew the pending and existing sales charts.

All that said, investors have taken advantage of the climate and abundance of distressed properties just like everyone else who has the means and desire to own a home. However, they don't represent a majority of business--they never have in any month.

[pattmarty]

23. You really are not serious, right? Man, you oughta be on FBN......

.......MLS, get fucking real.

[Godhumor]

24. Yes, MLS is used as a data source for the data table

And, yes, realtor.org is the Realtor website. Yes, new housing starts come from the NAHB or the National Association of Home Builders. Industry numbers comes from the industry. MLS numbers are the facts of the home sale and are devoid of commentary.

So tell me what percentage of people do you think are lying on their mortgages, to the bank financing those mortgages and then the agencies or servicers who ultimately end up working with the mortgage?

[pattmarty]

33. So, you really aren't serious. You just are putting out industry propaganda........

.......Well, thanks for your time and your wasted use of my time. I'm done, I don't "argue" with a fucking commercial, I just ignore them.

[Godhumor]

35. I kept it civil and backed up my thoughts with data and explanations

But if you're done, you're done.

Very curious, though, how you would expect to get data from outside the industry or government reporting. Existing sales, pending sales, and new home starts have been in universal use since 2000, and every single piece of news you see that talks about sales slowdown or sales increases that comes attached to statistics either comes from Fannie Mae, Freddie Mac (or the other Maes) or the MBA (Mortgage Bankers Association), Realtor.org (Handles pretty much all existing sales) or the NAHB (New housing).

The fact is, we have a very real trend--pending sales cratered after the tax credit let up. In the past 6 months it has been rising steadily as homes have become more affordable. Too many of those being sold are still distressed properties, which will, unfortunately, continue until people stop losing their homes. Investors have taken advantage of this, but still account for less than 1/5 of pending sales. I really don't know what you find to argue in there considering you started the conversation with you were looking as well--people who can are taking advantage of the market.

And if the market pops over the next 3 months or so, I'll be right back on talking about why it is screwed up. I'm not cheerleading, but I am trying to explain why the data shows what it shows.

[No Elephants]

26. Employment rate is not steady at 9.5%. It's back up at 9.8% Obama will be on TV soon to discuss.

[Steerpike]

4. I predicted a while back

That all this would lead to a consolidation of real property into the hands of a neo-landed gentry. In the future less people will own their own homes and property will be held in the hands of an elite cadre of families. This is just the beginning

[Godhumor]

6. How do you go from general pending home sales stats to proof of a property cabal.

Mind expanding on that thought?

[Steerpike]

8. Oh you doubt me?

Well only time will tell if my hunch is correct...

[David Zephyr]

14. You are correct in the trend, Steerpike.

A greater part of America's housing (not aparment) stock will become rentals. A significant part of the purchase of existing homes are full cash buys or near full cash buys by investors.

I could write more on this, but don't have the time right now. Still, there is a consolidation of real property underway right now on a very large scale.

[Godhumor]

16. From the October existing home sales report:

Investors were 19% of the purchasers, up from 14% the same month in 2009

First time buyers were 32% of the purchasers, down from 50% in 2009 (Tax credit surge)

49% were repeat buyers--those who are switching primary residences

All cash purchases were 29%, up from 20% one year ago

Distressed properties were 34% of sales, up from 30% in October 2009


While investors are taking advantage of the environment and all cash deals have increased (Though many are people buying distressed properties for primary residences), I would disagree that a 5% increase in investor purchases points to a consolidation of property into the hands of a few.

Press release: http://www.realtor.org/press_room/news_releases/2010/11/october_retreat

[OlympicBrian]

18. More sales of distressed properties over last year? nt

[Godhumor]

19. Yeah, people are buying up a ton of foreclosures, short sales and REOs

It will be awhile before those numbers go down, unfortunately.

[No Elephants]

27. Bottom feeders are swarming. Over a third of sales were distressed.

[Godhumor]

28. And have been at that level for over a year, unfortunately

People are buying cheap property--no one is happy about it, but it will continue to happen until the distressed market settles. That, right there, is the worrisome part of the current market, as there have been no forecasts showing distressed sales going down any time soon.

[OlympicBrian]

20. No, it's called speculators nt

[Safetykitten]

29. And the correct answer goes to this person.

[No Elephants]

25. Income and job growth? Happy Days Are Here Again.

[Ruperto31]

30. This is just statistical noise.

Don't get excited about it. All commodities, including real estate, are jumpy.

[Godhumor]

31. Not really

The trend has been moving in the right direction since the expected record low in May/June when the tax credit dried up:

May: 77.7 (on the edge of not being able to close in time for tax credit)
June: 75.5 (Too late to buy a house and qualify)
July: 78.9 (First full month post tax credit)
August: 82.4
September: 80.9
October: 89.3

Month to month can easily jump a few points in either direction, but the trend continues to go the right way.

[Ruperto31]

34. We'll see.

This 10 point jump looks like a fluke compared to the other 2-3 point variations that you have helpfully listed. As the article says, "rising foreclosures and unemployment near 10 percent indicate the industry at the center of the last recession will take years to rebound."

[Godhumor]

37. Well, yes

It is a very slow recovery. It wouldn't surprise me at all if we drop back to 87 or so in November. But the trend continues to be a slow rise. Hopefully, we won't hit an extended plateau.