What’s that loud Pop Pop Popping sound I am hearing?
No, it’s not corks popping over home sales.
It’s the sound of bubbles bursting everywhere.
Buyers have gone on strike.

The New York Times is reporting sellers are Hoping for Best.

Many buyers, having heard that the real estate market is a bubble in danger of popping, are refusing to offer the asking price on a house, convinced that it will soon drop. But many sellers are not blinking either, thinking that offers will improve when the weather does and biding their time until then.

As a result, the housing market is now in a deeply confusing state, with average prices still rising even though homes are taking much longer to sell and the number on the market has soared. Sometime soon — probably in the spring, the peak sales season — one side or the other will have to capitulate, many economists and industry executives predict.

“In my opinion, the jury on housing is still out,” said Antonio B. Mon, the chief executive of Technical Olympic USA, a home builder. “The period from now until May will tell the tale.”

Many real estate agents argue that the current slowdown is merely a pause, pointing out that interest rates remain low and that Americans still seem convinced that houses are a great investment. Buyers, on the other hand, are hoping that the rising number of unsold homes is a signal that a slump is coming.

Once again we see optimism in the face of reality.
The jury is not still out. Here is the reality: It’s Over.
By the way, one side or the other does not have to capitulate.
Who does not have a house that wants one and can afford one?
Transactions are likely to off the cliff here even if sellers dramatically lower prices.

Central Valley California

Action news is reporting the Central Valley housing boom is over.

The median price of an existing home in the Central Valley in January of this year was $347,000. That’s a 13% jump from the same time last year, when the average price was $307,000.

Valley home prices have been going up so fast, your home is still worth more than it was a year ago.

But when Action News broke down the numbers, we found that in the past couple months, the bubble appears to be bursting. To realtors, it’s a market adjustment. But to some analysts, it’s a full-on correction.

Local housing prices have come tumbling down over the last two months, erasing months of drastic increases.

Just two months ago, the median sale price for homes in Clovis’ 93611 zip code was $439,000. But in just 60 days, those homes plummeted $51,000, to $388,000.

“You can drive through any brand new subdivision. You will see just as many for sale signs and for rent signs as you see people living in the homes,” said Joan Jolly, from the Fresno Association of Realtors.

Realtors say the adjustment is great news for buyers, who are all of the sudden paying a lot less for the same homes.

Great news for buyers huh?
Why is it there is “never a better time to buy”?
Here’s more reality. Even though some prices are down dramatically over the last 6 months, affordability is still near all time lows. Rolling back the last 6 months of price increases will not cut it. We have 2-3 years of home price rises to roll back.
That might be the optimistic view.

California Population Growth

The Sacramento Bee is reporting Region, state experiencing slowing growth rates.

Lately, Sacramento County can hardly replace residents as fast as it loses them.

Last year, the county’s population grew at a slow pace not seen since the late 1990s, according to estimates released Thursday by the Demographic Research Unit of the state Department of Finance.

The trend hit most surrounding counties and the rest of the state, too.

As of July 1, 2005, 1.38 million people lived in Sacramento County, up 1.6 percent from the previous year. That’s the slowest rate of growth since 1998, state figures show.

The biggest drop came in domestic migration: The number of people leaving for other parts of the United States almost matched the number who came here. International migration remained steady and births continued to outpace deaths.

Even Placer County, which is growing faster than almost every other county in the state, saw its growth rate slip last year.

Ditto for California as a whole – lower domestic migration brought down the growth rate. California lost slightly more people to other states than it drew last year.

It was the fourth year in a row that growth had slowed in Sacramento County, and the fifth consecutive year in a row growth had slowed statewide.

The San Diego Union Tribune is also reporting slow population growth last year.

California’s population growth last year continued to slow as more people exited the state than moved here, fueled in part by the steady rise in already high housing prices.

San Diego County posted its slowest rate of population growth in a decade while its neighbor, Riverside County, recorded the fastest rate of increase in the state, growing by 4.41 percent, according to a report released yesterday by the state Department of Finance.

By comparison, San Diego County’s population grew at a rate of just under 1 percent – a gain of 29,297 people – between July 2004 and July 2005, the Finance Department reported. The county’s population now stands at 3,057,000.

Most of the county’s growth was due to births, along with a continued influx of immigrants that compensated for the smaller number of people moving here from other parts of the state and elsewhere in the country.

State demographers found that domestically, 12,389 more people left the county than moved in last year, compared with 7,165 a year earlier. Immigration numbers in the county, however, remained relatively unchanged.

“I think the rose is off of California as the land of opportunity,” said Shaffer, senior demographer with the San Diego Association of Governments. “The state is experiencing some of the same problems that older areas in the country are experiencing. We’ve got infrastructure problems, we’re starting to fill up, we don’t have enough roads, not enough sewer capacity.

Gee what happened to the mantra “Everyone wants to live in California?”
Here is more reality: Home prices simply can not forever rise beyond people’s ability to pay for them. “The number of people leaving for other parts of the United States almost matched the number who came here.” California is growing only because of favorable birth rates. How much of that growth can be attributed to children of illegal aliens?

Massachusetts house sales plummet

The Boston Herald is reporting Roof Collapses on Housing Boom

Massachusetts house sales plummeted 21 percent last month, stoking fears that the housing bubble may have burst and could send shock waves across the economy. It was the biggest year-over-year sales drop in almost 11 years – as Realtors recorded the slowest January since 1996. What’s more, one of the worst fears of homeowners appears to be coming true: House values have dropped nearly 8 percent since August.

The screeching slowdown “has ramifications far beyond the real estate market,” said John Bitner, chief economist at Boston-based Eastern Bank.

The Massachusetts Association of Realtors reported yesterday that only 2,345 houses changed hands last month.

That’s down more than 20 percent from January 2005’s volume and an even steeper 34.4 percent from December levels.

Wellesley College economist Karl Case said the latest figures show “evidence of a bubble, but housing-market bubbles don’t unwind the way stock-market bubbles do.”

Case said house prices rarely “pop.” Rather, he said would-be sellers often take properties off of the market rather than accept low-ball offers.

Bitner noted that “cash-out” refinancings and other hallmarks of the recent housing boom gave consumers plenty of money to spend.

But now, the economist warned, a pullback could “really (hurt) consumer spending and that accounts for 70 percent of our economy.”

The above article is unique for attempting face up to reality.
Here is the key point: The screeching slowdown “has ramifications far beyond the real estate market.”

Is the real estate market normal?

Harold Bubil at the Herald Tribune is asking So this is ‘normal?’

Is the real estate market really “normal,” as a Realtor was quoted as saying in the newspaper the other day?

A look at the sales and listings statistics leads me to believe that a market that was unusually tight a year ago is now unusually loose. A year ago, there were few houses for sale and panicked buyers grabbed them immediately.

Now there are a high number of houses for sale and so few buyers that there’s a 20-month supply on hand in Sarasota, according to figures from the Sarasota MLS.

Economist John Tuccillo says a balanced market has a six-month supply.

The situation is similar in Manatee County. In January 2005, 776 houses were listed and 223 sold (28.74 percent). In January 2006, 2,627 houses were listed and 166 sold (6.32 percent).

“That’s a 15.8-month supply,” said Michael Saunders & Company Realtor Ruth Lawler, who has sold Manatee County real estate for decades. “What we are seeing on a daily basis is more and more supply.

“Normal is what you are used to,” she said, adding, “I’ve never seen the market change so rapidly in such a short period of time.”

Now, at the current rate of sales, it would take almost two years to clear the boards — if no other listings came on the market in the meantime.

“We are having price reductions every single day, and we’re talking tremendous amounts, as many price reductions as we have homes on the market,” said Lawler. “It’s got to affect the price.”

But, you say, the headline in the paper said, “Prices up.” Just because the median sales price goes up, that doesn’t mean home values are appreciating across the board. It just means that the houses that actually sold were more expensive than the houses that sold last year at this time. The number is skewed by expensive new homes that are selling. There just aren’t many cheap houses on the market.

But Tuccillo, a Sarasotan who is former chief economist of the National Association of Realtors, says the housing market remains on strong footing.

“There’s no way you can’t interpret this as a slowing down of the market,” he said. “But no market goes to pot unless the underlying economy goes to pot, and that’s not happening here. We’re going through a cycle. This is a marginal change downward and the market will stabilize.”

“We’re going through a cycle. This is a marginal change downward and the market will stabilize.”

I have three news headlines for you Mr. Tuccillo:

  1. This is NOT a “marginal change down”. This is a bubble busting change.
  2. Yes, housing is cyclical. But it should be obvious to everyone that it has peaked. It is a long long way down from here.
  3. The underlying economy is going to go to pot, led by a slowdown in housing.

Foreclosures in Ohio

The Dayton Business Journal is reporting Montgomery County foreclosures most since 1997.

The highest monthly number of foreclosures on record since 1997 were filed in February in the Montgomery County Common Please Court.

Montgomery County Clerk of Courts Dan Foley announced Tuesday that 411 mortgage foreclosures were filed during the month. That’s the highest number filed since a computerized case management system was implemented in 1997.

In 2005, the county had 4,050 foreclosures, up 207 percent from 1997.

Northern Virginia, Maryland, DC

The Northern Virginia MarketWatch is reporting Listing Inventory Soars.

The number of available homes on the market in Northern Virginia has jumped significantly, with triple the number of homes on the market now as this time last year. Here’s an interesting tidbit: there were more condos on the market at the end of January 2006 than there were properties of all types at the end of January 2005!

So that means the good times are over for sellers, right? Nope, there’s no reason for sellers to panic. The jump in inventory, while significant when compared to 2002-2005, is still well below the typical number of homes throughout the 1990s and into the early part of the current sellers’ market.

The overall supply of homes on the market at the end of January was 3.0 months, which is four times the supply of last January.

Again, there is no doubt that the market has softened in many respects. But a 3 month supply is still considered to be indicative of a modest sellers’ market. When viewed in any historical context, this is still low supply. Most major metropolitan areas would envy the current state of our market.

The bullish commentary is from a mortgage broker.
The charts however speak for themselves.
Here are two of them:

As more homes come on the market faster than they are being sold, let’s watch that months supply going forward. The high end market (over $1 million) has already gone from 3.65 months of inventory to over 9 months of inventory. If sales volume drops while inventory is added (both seem likely) expect those inventory numbers to skyrocket from the top down.

The pool of greater fools has finally exhausted itself.
The result is a Buyer’s Strike.

Mike Shedlock / Mish/