Existing-Home Sales 'Plunge,' But This Is NOT an 'Implosion' (Updated for New-Home Sales)
From MarketWatch (link requires free registration):
July was dry for the U.S. real estate market, as sales of existing homes plunged 4.1% to a two-year low, prices stagnated and the number of homes on the market soared to a 13-year high, according to a report from the National Association of Realtors released Wednesday.
The report shows a continued implosion in the housing market, with inventories up sharply while prices are softening. Sales are down 11.4% in the past year to a seasonally adjusted annual rate of 6.33 million compared with 6.60 million in June.
OK, not pretty. But in historical context, it simply is not as ugly as indicated:
So we're roughly back to a level between 2003 and 2004. EVERYBODY was saying that the housing market was overheated in 2004 and 2005, and that the sales rates in those years were not sustainable over the long term. Additionally, please, PLEASE note that the median nationwide sales price has NOT dropped.
True, the 2004-2005 market built up expectations for sellers; hence the high inventory number. But this too will pass as expectations align with reality -- perhaps with selling prices that were lower than a year ago by the time it all sorts out, but perhaps not.
The big point is that this is NOT an implosion. I'm not going to sit here and say that an implosion isn't possible, but I'll be dipped if I'm going to let MarketWatch claim that one is happening now when it clearly isn't.
UPDATE: The following exchange took place later this morning --
(from Tom Blumer to Rex Nutting, the article's author)
It (your report) wasn't balanced. If you had shown your readers the 2003-2006 chart that is here and considered it in light of what everyone was saying in 2004-2005 ("this isn't sustainable"), it becomes clear that there is no "implosion" going on:
I posted on your article:
(From Rex to Tom)
Everyone was saying it wasn't sustainable and now we are getting the proof of that.
(From Tom to Rex)
Fine. Then what is happening isn't an "implosion" ("a violent collapse inward").
And I missed where you told readers that 2004-2005 "wasn't sustainable," or that annual sales level are still above what they were before the 2004-2005 boom.
UPDATE 2: Here's the new-home big picture released today (note -- I believe the Y/Y column is miscalculated, and should read -16.2% [-208/1280] and -1.8% [-$2,208/$234,208]):
New-home sales, which are more volatile, are slightly below the 2003 level, again at about the level they were before the unsustainable overheating of 2004 and 2005. The median price is down a little less than 2% from a year ago. Lower new-home sales are surely not good news for the homebuilding industry, whose profits have suffered during the past few quarters. But lower new-home prices aren't hurting prospective homebuyers, who don't suffer from a loss in asset values because ..... they're not homeowners yet.
Nothing in today's new-home information indicates an "implosion," either.
Cross-posted at BizzyBlog.com.