March Resale Data Rodeo

Submitted by Rich Toscano on April 7, 2008 - 7:03pm

Alrighty... it's time for the monthly resale data roundup. But first, a brief word from our sponsor (that would be me): I just put up a fairly comprehensive list of frequently asked questions over at the website of Pacific Capital Associates, the financial advisory firm I work with, and I thought I’d include a link here for anyone interested in what that’s all about.

OK, onto the business at hand. As I noted on Friday, February's bloodshed in the median-based price indicators was not repeated in March:

For the month, the size adjusted median price was flat for single family homes and down .4% for condos. A volume-weighted aggregate of the two was down .1%. This may not seem great but it's a lot better than last month's whackage of 5.7% for single family homes and 7.7% for condos.

In the comments to the price preview, several folks brought up the idea of the spring bounce. I wanted to note that despite appearances, there was no spring bounce last year. It looks like there was in the above chart, but this was an artifact of the shift towards higher end properties due to the collapse of subprime lending. The Case-Shiller index (which is not subject to that distortion and is displayed two charts down) shows that actual prices never stopped declining last spring. The decline did slow down, however -- a pretty pathetic spring rally but I guess that's par for the course.

While we didn't get one last year, though, the Case-Shiller index shows that we typically got spring rallies during the 1990s downturn. Per a summary I wrote a while back, there was a spring fling every year during that downturn except 1993 (by the way, make sure to scroll down in that article to view the helpful auxiliary graph supplied by user anxvariety).

We also got a spring rally in 2006, after the late-2005 price peak but before the decline really picked up the pace. It was fairly weak by historical standards, though: between February and June of 2006, the HPI rose by .7%.

So a spring rally is certainly possible here, but given the headwinds facing the market the "rally" may just be a temporary deceleration of the decline. We will see.

Alright, let's move on to another couple of data points. The vanilla median was slightly down for single family homes, but up pretty sharply for condos. This measure is now closing in on the size-adjusted median in terms of decline from the peak, for what that's worth.

The estimated Case-Shiller HPI based on a 3-month average of the single family size-adjusted median has also now breached the 25% mark in terms of decline from the peak:

Volume picked up from last month, as you'd expect given the seasonality, but it's still pretty pathetic compared to last year. Overall resale volume is down 33.7% from March 2007.

The inventory situation brightened, however, as inventory remained flat despite the seasonal tendency to rise.

The two factors combined to make for a markedly lower months-of-inventory figure. Judging from the prior two years, however, it looks like this figure typically bottoms out in March so I wouldn't pop those champagne corks just yet. I also believe that the amount of must-sell inventory is more important than the total amount of inventory... if the inventory decline consists of "want to sell" owners pulling their homes off the market then it might not make that much difference.

Below I've broken down months of inventory by property type, which is not too interesting because they are practically identical, but why not use up some more bandwidth:

On the topic of volume, I've heard a lot of buzz that there's been a surge in activity of late. This may involve a mini-rally as people who were waiting for the conforming loan limits to rise jump back in. Or not. Either way, it hadn't showed up in the closed sales numbers as of March. We will see what happens in the months ahead.

In the meantime, I don't see any compelling reason to change the outlook that a combination of continued overvaluation, weak demand, oversupply of must-sell properties, and deteriorating sentiment will continue to put some serious pressure on home prices.

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