Thursday, April 24, 2008

Existing Home Sales plunge in March 2008

The Commerce Department released the data for new home sales in March and the results are disappointing. New single-family homes sales activity fell 8.5 percent last month to a seasonally-adjusted annual rate of 526,000 — a much stronger drop than economists had been expecting. The median price for a new home keeps plunging, down 13.3 percent year-on-year. That is not surprising given the large inventory overhang that is plaguing the housing market since the bursting of the subprime bubble.

New home inventories are actually declining, down 1.1 percent below February's inventory level and nearly 15 percent below a year-ago estimates. There are about 40000 new homes per month available for sale. On the surface that seems good news but considering the slow sales base due to new standards in mortgage origination and securitization the inventory overhang seems more dramatic. An excellent chart from the Calculated Risk blog highlights the dilemma. Inventory levels have now reached recessionary peaks and are close to all time highs.

Despite discouraging news HousingWire sees encouraging trends emerging in existing subprime and Alt-A deals. The secondary mortgage market remains closed with just $7.7 billion in mortgages securitized by private conduits in Q1 2008.

Although delinquencies continued to rise during March across both credit categories and key vintages, roll rates actually declined and cure rates leveled. For those that aren’t familiar, roll rates refer to the percentage of troubled mortgages that move from one delinquency state to another (i.e., 30-day DQs to 60-day DQs); decreasing roll rates, therefore, mean that fewer borrowers transitioned down the default pipeline during March. Cure rates refer to the percentage of troubled loans that were successfully worked out, or cured.

Subprime roll rates declined across all vintages tracked — 2002 through 2007 — while cure rates decreased slightly across all but the 2002 vintage, Clayton said. For Alt-A, in all but the 2005 vintage, first lien roll rates are down between one and three percent month over month, while first lien cure rates rose in all but the 2005 vintage during March.

"Super-bull" Art Nunes gives three - shall we call it - reasons, why he thinks that the housing market is close to recovery:
Supply and demand conditions in the housing market are ripe for recovery. The long term population growth--based on that trendline growth sales should be above 80k homes per month They are about 40k.

Housing inventories are actually shrinking : 8 months for existing home sales

Supply of homes coming to the market has just plummented by over 65% in last two years.

He has one tiny little setback:
"The problem has been lending"

Haynes squeezes "super-bull" Art Nunes
if you must

U.S. Census Bureau

source: In Battered Secondary Mortgage Market, Some Encouraging Trends May Be Emerging

source: Housing Recovery?
There might be a light at the end of the housing tunnel, with Art Nunes, IMS Capital Management; CNBC's Diana Olick & Rick Santelli

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