More Real Estate Nonsense UPDATED

The Natl Association of Realtors gushes Big Rebound in Existing-Home Sales Shows First-Time Buyer Momentum. In fact, sales DROPPED in September despite the rush to cash in on Clash4McMansions (the home buyer credit that expires shortly). Chart from Calculated Risk, as modified by The Big Picture. Barry Ritzhold says this of NAR:

I am honestly unsure of whether the folks at the NAR are dumb as lawn furniture and make these misrepresentations honestly — or whether are just another group of disgusting spin doctors, willfully peddling lies because it helps their own agenda.

The NAR report relies on seasonally-adjusted data. Actual sales dropped 5% from the prior month. This is less than the normal drop from August to Sept, hence the gushy headline, but then again normally there aren't Cash4Gimmicks incentives skewing things. Distressed sales also made up 29% of the results. In a followup at Calculated Risk, Existing Home Sales: More Activity, Little Achievement, the distressed sales are distorting the results but are a necessary step forward - getting rid of the past overhang. As I noted in a recent post, however, that overhang is increasing pretty fast for Prime loans even as we work through the subprime disaster from the last few years. 

UPDATE 10/24: Barry Ritholz dives into why this year's seasonal adjustment is so misleading: for the past ten years the seasonal drop ranges broadly from 10% to 29%, and this year's fall was 5%. Adjusting by the average drop (17%) to say this was actually 10% growth and calling it a "surge" in home sales without taking into account the aberrations such as the incentives for first time buyers is simply knowingly misleading. As he puts it, "this was not an ordinary seasonal adjustment - it was highly misrepresentative."

Mark Hanson does a pretty devastating analysis of the gimmickry. When the first-time buyer incentive expires in a month, the same sort of drop-off we are seeing in auto sales after Cash4Clunkers should shock & awe. 

UPDATE 10/24: Mark's deeper update notes that inventory declined for three reasons that are not baked into seasonal adjustments, and hence caused the spurious NAR adjusted growth number: 

1. HAMP kept foreclosure inventory off the market even though foreclosure-ready inventory is way up
2. Poor market kept at start of school year led more-than-normal for-sale houses to be unlisted
3. Negative equity kept many trade-up buyers out of listing their homes

Rather than declare premature victory and rely on short-term gimmicks, we need to let the market work through the overhang. Only after that can housing return to normal. Sadly, pushing gimmicks to incent new purchases by people of marginal credit only sets in motion a new overhang when they get into trouble. 

Comments

[Michael Locker]

I am not sure if we are going to have an "imminent crash" as I put it earlier. I am looking for a big (greater than 40%) downside move in most markets but it may take days or even a month. Like the brown bear, I am not inherently attuned to keep my positions despite contrary evidence (the definition of insanity as someone once put it).

I am interested in the pattern of spikes in the image posted above and wonder if they might symbolize the pain that many who have been caught on the wrong side of the bull have felt.

The bull (symbolizing those looking for moves to higher levels) may just have his day! We shall see.

I am not a blind Precther follower but I will admit that he was right in 87!
My god was he right!!!

He has been wrong almost always since but, again, even if you are down 99% by following his advice you might just have a chance to make it up if you invest wisely etc.

[Account Deleted]

Since I am a Canadian, I figure I might want to share this interesting opportunity. For bears who are stuck with the stock market going nowhere, I believe this is a better opportunity:

Speculative Canadian Dollar Longs Indicate Extreme

Latest CFTC Release Dated October 20, 2009:

The COT Index is the percentile of the difference between net speculative positioning and net commercial positioning measured over a specific number of weeks (either 52 or 13). A reading close to 0 suggests that a bottom is forming and a reading close to 100 suggests that a top is forming. The readings are for the actual currency, not the currency pair. For example, a reading of 100 on the Canadian Dollar suggests that the Canadian Dollar is close to a top (USDCAD close to a bottom).

....

http://www.dailyfx.com/forex/technical/article/cot/2009-10-23-2300-Speculative_Canadian_Dollar_Longs_Indicate.html

[Mamma Boom Boom]

What would be especially devastating to the real estate market, would be another cashforhouses program and sales going down in spite of it. That would show that, once again, the government has lost control.

[Account Deleted]

A couple more great opportunities for Elliott Wave fans. See the following article for hourly charts for Gold and Crude Oil:

http://www.dailyfx.com/forex/fundamental/forecast/daily/2009-10-23-2322-Gold_Ends_the_Week_in.html

You can see both are probably forming a triangle, after a steady rise that was most likely a 3rd wave. The triangles will probably be completed on Monday or Tuesday for Gold, and around Tuesday for Oil. Gold is further along in the triangle pattern, but Oil triangle waves are shorter. So it is possible both will complete around the same day next week.

What happens afterwards is probably a 5th wave thrust for both to make new highs (record high for Gold). This will probably accompany the spike down in USD, and help USD to complete all its outstanding waves. If you look at daily charts for Gold and Oil, you will see such a thrust can nicely complete all their outstanding waves too.

On USD - the frustrating thing about EURUSD wave pattern is that it can be counted as complete right now, on multiple degrees of the downtrend. Yet Euro takes its time to map its final 5th wave up, showing no impulse wave in the opposite direction at all. So it seems Euro is patiently waiting for Gold and Crude to complete their wave patterns. The problem here is that this wait cannot be too long, or Euro wave count will start looking strange.

In summary, if this count is correct, early next week will mark blowoffs in Gold and Crude, spike down in USD, which are all terminal waves in their current trends.

In terms of stock market, I am not sure how it will respond, as stocks are not as strongly correlated with USD as commodities recently. Plus the stock market wave patterns drive me crazy anyway. So no comments there. :)

[Philadelphia Pennsylvania Real Estate]

I recently came across your blog and have been reading about buying a new home. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.