July 2008 Real Estate and Housing Statistics Report

It’s that time again!  Real Estate Market Statistics for July are here!

It looks like the housing supply is still pretty high, which is of course pushing the declining home prices in many of the nations markets; however, listings have actually dropped in many of the areas markets that matter.

These stats aren’t a big change from last month, but do go to support the fact that there are some great buys out there right now because of the high supply of single family homes out there.   With all of the foreclosures still piling up, it doesn’t look like the housing supply "problem" will balance out anytime soon.

Here are the real estate market stats for July 2008 as reported by our friends at John Burns Real Estate Consulting.

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Listings Are No Longer Rising

In the markets that matter, listings are now running relatively flat year over year. Each month, we painstakingly compile listings in the major markets of the country. As shown in the green and dotted line in the chart below, listings are now approximately the same as they were one year ago. They tend to be declining in the worst markets in the country (like Florida and California, where they are declining from very high levels) and rising in the recently distressed areas such as Texas and the Carolinas.

The NAR data, which presumably covers the entire country although they don’t share their sample size, showed a slight decline in May following a sharp increase in April. Our data does not cover the same exact geography as the NAR data, but we are confident that our trends are indicative of what is happening with resale supply in major metros across the country.

Economic Growth………………………………………………………………….C-
The economic growth indicators were mixed, but continue to perform at below-average levels. The employment sector continued to weaken this month, and non-farm payroll job growth is now negative, year-over-year for the first time since 2003. The unemployment rate remained at 5.5% in June, just slightly below its historical average, and mass layoffs rose sharply to 1,626 reported events. Final reports on first-quarter GDP growth show that economic growth was slightly better than earlier suggested, but remained slow at a 1% annual rate. Worker productivity rose unexpectedly in the first quarter to 2.6% year-over-year, which is above its historic average, and personal income growth also rose slightly in April to 4.8%. On a positive note, retail sales growth improved to 3% year-over-year, and personal income growth also improved, rising 6.4% in the last year. Core CPI – a key gauge of inflation – stayed flat in May at 2.3%.

Leading Indicators…………………………………………………………………D
The leading indicators continue to perform poorly, which suggests that economic conditions are not likely to improve in the near future. The stock market took a dive in June, with each of the major indices we track losing 8%-10% for the month. Homebuilding stocks continue to decline, as evidenced by the 50% year-over-year drop in the S&P Super Homebuilding Index. Oil prices continue to set record highs against the sinking dollar, the impact of which is being felt in consumers’ wallets. The Leading Economic Index improved, but remains negative year-over-year, suggesting further weakness in the economy. The Purchasing Managers Index rose slightly into expansion territory, but a declining Non-Manufacturing Index suggests contraction in this sector. Residential investment continues to decrease as a percentage of overall GDP, falling to 3.8%, which is its lowest share in more than 16 years.

Mortgage Rates…………………………………………………………………….B
Mortgage rates rose for the month, and spreads widened. The 30-year fixed rate rose to 6.45% by month-end, while the one-year adjustable rate rose to 5.27%. The spread of 118 basis points was the highest in nearly 3 years. The Fed Funds rate remained at 2.0% after the Federal Reserve resolved to hold rates flat. The Mortgage Bankers Association reported that the share of ARM applications continued to decrease to a very low 8.5% of all loans originated during the last week of June. The performance of subprime loans issued in the first half of 2006 continues to weaken, as measured by the ABX 06-2 BBB- series index, which has declined 92% in the last year.

Consumer Behavior……………………………………………………………….D
Consumer behavior weakened significantly in June. Consumer confidence fell to 50.4 for the month, which is approximately half of its long-term average. The University of Michigan’s Consumer Sentiment Index also continues its downward trend, dropping to its lowest level since early 1980. The Consumer Comfort Index improved slightly, but remains near its historical low. While the dollar volume of equity per owned home is quite high, the debt percentage of home value (LTV) is currently at its worst level in history.

Existing Home Market……………………………………………………………D
The existing home market continues to weaken. The annualized existing home sales volume improved slightly to just under 5 million transactions, but is down 16% in the last year and down 31% from the peak. The pending home sales index fell below expectations, which means further declines in sales activity. The increase in sales activity and a slight shrinking in the inventory of homes for sale to 4.5 million homes caused the supply to fall to 10.8 months of inventory. Prices in the resale market have fallen more than 7% year-over-year to a median of $206,700, according to the National Association of Realtors .

New Home Market…………………………………………………………………F
The new home market continued to decline, as all indicators weakened for the month. The NAHB’s Housing Market Index, which measures sales and traffic, fell in June matching its historical low of 18. New home sales activity fell to 512,000 annualized transactions, remaining 40% below the sales volume one year ago and 63% below its peak volume in July 2005. The level of unsold new homes rose to a near-record 10.9 months of supply, including approximately 4.4 months of unsold completed new homes alone. The Census Bureau reported that the median new home sales price of $231,000 represented a 7% decline over the last year.

Housing Supply…………………………………………………………………….F
The supply of housing continues to earn a grade of "F." The annual volume of new home completions rose to 1.13 million. Following an improvement in starts in April, both single-family and multifamily starts decreased in May, falling to 301,000 units and 674,000 units, respectively. Single-family permit volume fell 4% sequentially to 623,000 permits issued in the last year, while annual multifamily permits rose 4% for the month to 346,000 units. Total seasonally adjusted permit activity has fallen 36% year-over-year and remains below 1 million permit

As you see from the table above, a bunch of this month’s stats are really pretty darn negative.  What you can deduce from some of these stats is that:

1. New single family construction is in the dumps
2. Homes are still being sold at a decent clip… but with foreclosures and the glut of new homes still on the market… the overall market is still soft

All in all, I think the real estate market isn’t as bad as everyone thinks.  The only one’s it is bad for is sub division new home builders, people who carrying 2 mortgages and can’t sell their first home, and banks who now own properties worth less than the amount they loaned on.

For investors and the everyday American who doesn’t need to sell their home in the next 12-36 months… the real estate market is different.

For investors this is a great market (great market!).  For homeowners who don’t need to sell anytime soon… this is just a dip in the overall uptrend of their homes value.  Hold on for the ride and you’re good to go.