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Housing Market May Not Recover Until 2009! Our Predictions!
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The information in this article is merely an opinion on the real estate market. It uses U.S. Census Bureau data on New Home Sales (not existing homes or non single family homes) to derive a proprietary thesis. No statement within this article should be viewed as a suggestion or statement to buy or sell real estate for investment purposes or any other purpose! The data was garnered from sources believed to be accurate but is not guaranteed. The 2008/2009 real estate recovery prediction is a forward looking document which is only an opinion.
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Data from the U.S. Census Bureau has revised previous numbers down and may now point to a recovery that is delayed into 2009.
The following data and charts reflects new home sales only unless otherwise stated.
Data and associated graph from the New Houses Sold, by Sales Price report from the U.S. Census Bureau (broken out by quarters - totals have been rounded) (uses non-seasonally adjusted figures) (Some figures are preliminary and most figures are revised by Commerce in the months following the initial report) [Thousands of houses. Components may not add to total because of rounding.]
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Our Analysis: Data reflects new home sales data only from the U.S. Department of Commerce. Seasonally adjusted July figures were up 2.4% over the revised June figures, but still down 35.3% from the year ago number. Median sales price in July was $230,700, roughly the same as last month. Non-seasonally adjusted data shows a different picture. Previous months figures were revised down and the July non-seasonally adjusted figure came in lower than the two previous months, even after being revised down. So it is only the seasonal adjustment that is done by Commerce that provides a small increase over last month. Median prices were flat for a second month after a significant decline two months ago and a significant increase the month before. This latest report is extremely troubling in our opinion. The downwardly revised numbers now put the second quarter numbers of this year below the fourth quarter numbers for 2007. You may recall that we said that a failure to show an increase above the fourth quarter of last year could indicate a second dip in the housing market in terms of new home sales. You can judge for yourself by seeing the New Home Sales Graph which does not use seasonally adjusted figures. Note that since 2003 the second quarter numbers have been significantly higher than the first quarter numbers, followed by relatively significant declines in the third and fourth quarters. But this year the newly revised numbers show a second quarter that is just barely above the first quarter numbers. If we get the significant decline in real numbers going into the third quarter then we may indeed be entering a second period of declines after peaking in March and April of this year. So the real question is whether this will be a short lived decline and allow for a second and more sustained recovery to occur in the late fourth quarter of this year and going into 2009. Although this report deals exclusively with new home sales it is worth mentioning that existing home sales were up 3.1% over last month on a seasonally adjusted basis. We further think that it is significant that median prices bounced around earlier in the year but have now shown two months of relative stability. If prices remain stable in the new home market then we think sales will in fact decrease substantially. It remains to be seen if the existing home sale market can provide some support to the overall housing market this year. We now believe that we will suffer a secondary decline in the housing market. We can make no predictions at this time as to whether it will be a small decline followed by sustained recovery or a much more significant decline. We believe that if a significant recovery does occur after another small decline then that recovery will probably not take place before the fourth quarter of this year or the first quarter of next year at best. (Don't know the difference between median and average? click here) Take a close look at the graph above. Note that going back to 2003 the third quarter numbers were less than the second quarter numbers. So lets presume that trend continues in 2008. If the third quarter numbers of units sold for New Homes is going to be down, how much is too far down and how much is down 'just enough?' In 2007 there was an 11.7% drop in units sold going from the second quarter to the third quarter. There was a further 11.7 percent drop from the third quarter into the fourth. If current second quarter numbers drop a similar amount this year then the third quarter would finish out below our previously stated threshold for safety. As such we believe a secondary and significant decline in the new home sales market would occur. Since we use quarterly data we cannot run that data through our proprietary algorithms until the third quarter numbers are in sometime in late October. However it does now seem likely that a sustained recovery may not occur until the early second quarter of 2009. The next report from Commerce is scheduled for Thursday September 25th, 2008 and will be a Minor Update . We utilized a proprietary Data Choices algorithm to analyze this data. We are ignoring existing home sales for this report. |
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As with all real estate market predictions they are subject to being wrong and are only opinions. Nevertheless, just as with our Strong Dollar Project, we will continue to monitor and update the situation. If we are right about the bottom we will certainly indicate that in future reports. And if we are wrong then the whole world will know! Analyzing real estate data is much like analyzing any form of demographic data - data which can be vital to your career! And at Data Choices we love to analyze data and give you choices!
As always we stand on integrity and hard work.
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This article will continue to be updated as we analyze the pricing data and attempt to garner further information about a possible recovery in the housing market.
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The National Association of Realtors has released its Metropolitan Area Existing Single Family Home Sales report on July 14th 2008. We found the differences between the national data and the Spokane Washington and Coeur d'Alene Idaho home sales data to be quite interesting!
Final 2007 data for the Coeur d'Alene/Kootenai County housing market can be found in this 2007 Home Sales Report.
For Spokane Washington Median Prices are reported by NAR as follows in thousands of dollars:
Preliminary first quarter figures show a significant rise in prices for existing home sales over the first quarter of 2007! Compare that to the National picture for home sales:
What a remarkable difference! Nationally the annual reported change in Metro Existing Home Sale prices is down in the first quarter of this year versus the first quarter of 2007. Meanwhile in Spokane a first quarter year over year price increase was recorded, at least in the preliminary report.
This continues to show the underlying resilience of the North Idaho and Spokane area markets despite the overall housing drag on a national basis!
This Data Choices prediction is based upon New Home Sales data only and utilizes a proprietary algorithm, that, as far as we know, is not used anywhere else! Make sure to add your name to the email update list so you will know when this page changes! Real Estate predictions are great - but so is our blog!
See the Blog for recent news on Countrywide and how mortgage defaults affected them!
Information in this report is deemed to be reliable but is not guaranteed.
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