Review of February Releases from NAR, FNMA, and Case-Schiller

There have been several big releases over the last few days.  Let’s take a look at each and what figures are most important to those managing real estate businesses today.

I tend to focus on NAR‘s closed data while ignoring their forecasts (I’ll lean on Fannie Mae for that).  Because of the way they pull their data, I’m not a big fan of the S&P/Case-Schiller national figures but I do track the local stats just for trends.

There are two major themes we can pull from the releases: (a) as if it wasn’t tough enough, in all regions but the West, January was one of the toughest months on record in the last decade, and (b) the forecasts indicate that the average residential broker will likely be under continued pressure this year and next.  For many brokers, the revenue levels that were reached last year, as difficult as that was for most, may not be reached again until 2011.

NAR’s January Existing Home Sales


January’s transactions (or “sides”) of 257,000 were 8{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than January ’08.  Mean average sales price continues to fall at double-digit rates; it is now at $212,900, which is 13{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than a year ago and 23{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} off the June ’07 peak.  Inventory, which had come down for two straight months, climbed up to 9.6 months.

January’s monthly sales volume (total sides multiplied by mean average sales price) was the lowest national figure recorded since February 2001.  The trailing twelve months’ (“LTM”) sales volume is now 21{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than it was a year ago and 38{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than the peak reached in March ’06.


Having previously suffered far less than the three other regions, the Northeast is now being challenged more than ever.  January’s sides were down 22{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} from a year ago while price dropped 12{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} (the rate of decline has accelerated over the past few months).  As measured in sales volume, January was the worst month for the average Northeast broker in exactly nine years.  LTM sales volume is now 29{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} off peak (March ’06).


The Midwest fall continues: sides are down 16{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} from January ’08 while price is down 7{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} over the same period.  According to the Case-Schiller data, Chicago’s prices are down 14{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} from a year ago but the rate of decline is increasing especially over the past three months (in other words, price declines are picking up pace).  The Midwest’s sales volume in January was lower than any month recorded in the last ten years.


This region’s woes did not improve in January, unfortunately.  Sides are down 17{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} from a year ago; price, 8{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c}.  LTM sales volume is now $388 billion (down 23{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} in just one year and 39{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} off peak).  In some southern markets, however, there may be some support that a price bottom is near or has been reached.  The reduction in the average sales price to get to this point has clearly been severe.  For example, according to Case-Schiller, Miami’s prices are down 41{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} from peak but the rate of decline seems to have stayed the same recently.


The trends in the West continue as they have for the past half-year:  price sharply down, sides sharply up.  For this reason, LTM sales volume has held fairly steady for seven months running (and, in fact, January’s sales volume was higher than January ’08).  Although the trends are clearly not what the average homeowner wants, this is a necessary stage on the road to recovery and we should expect that the rate of price declines will soon decrease and eventually level as inventory is burned off.  San Diego, in particular, may be experiencing this.  All indications are that the West will be the first region to feel the real effects of a turnaround.

Fannie Mae’s February 2009 Housing Forecast

With this week’s release, FNMA once again brought down their forecasts for both 2009 and 2010.  Whereas a month ago they projected 2009 median average price to be 7.4{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than 2008, it has now been put at $181,500 (or 8.6{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} less than 2008).  Sides were also revised downwards by a notch (from 4.75 million to 4.73 million).  From the average broker’s perspective, the combination would result in an 11{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} sales volume drop.  The nadir for most brokers should be hit sometime this year but the climb back up will be slow; very few will see 2010 sales volume reach even 2008 levels.  This is because FNMA is projecting sides to level out sometime in the fourth quarter of this year while prices will continue to drop through 2010.

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