Homes sales are up, but have we really turned the corner?

More bad news:

"Delinquency cure rates refer to the percentage of delinquent loans returning to a current payment status each month. Cure rates have declined from an average of 45% during 2000-2006 to the currently level of 6.6%. It is important not only to observe total roll rates, but delinquency cure rates as well, according to Managing Director Roelof Slump.

Now that's nasty.

But where will you see it discussed in the mainstream media?

Nowhere. Nowhere at all.

Yet this sort of problem with "cure rates" means that banks will take hideous losses on their portfolio holdings. A loan that does not cure becomes a loan that is worth only its recovery value, and that value is severely impaired, in some cases by 50% or more.

This is being entirely ignored by the so-called "analysts" and "green shooters" but it is a MAJOR problem across all classifications of mortgages:

In addition to prime cure rates dropping to 6.6%, Alt-A cure rates have dropped to 4.3%, from an average of 30.2%, and subprime is down to 5.3% from an average of 19.4%. 'Whereas prime had previously been distinct for its relatively high level of delinquency recoveries, by this measure prime is no longer significantly outperforming other sectors,' said Slump.

In other words once you fall behind you're almost-certain to ultimately default and saddle the lender with the loss.

The banks sitting on this trash and willfully misreporting its "actual value" must be shut down and their assets liquidated now before they detonate on their own, destroy the FDIC and threaten the solvency of our nation."

I am a prospective first time home buyer, and due to the comments from this blog and others, I've probably saved tens of thousands of dollars already. Until people like me are assured they wont be throwing their money into a pit, the housing market will still sink. Morally, i don't want the tax credit. Its just another redistribution of wealth. I will take the time, save my money, and wait until housing reaches an affordable level. By the way things are going, I will aim for next spring, but if government programs prop up this floundering market, I will be forced to wait longer.

In closing, this market is still on a slide down, and thanks to all the bloggers here for helping me save time and money in the process. I'm sure your advice isn't falling on deaf ears.

I've said it before and I will keep saying it: we have not solved any of the structural problems that have led to the current economic downturn. Those structural problems are too much credit; too much debt; and too much leverage. Add to the mix the rampant fraud, misrepresentation of data and outright lies by politicians, Wall Street and the banking elite and there is just no fundamental reason for a recovery. Trillions in bailouts and incentives can bring about a false recovery and delay the day of reckoning, but eventaully the system must be cleansed so that real growth can resume.

Case Shiller prices fell 15% YOY in June. Oops.

Between a third and two-thirds of sales are distressed, according to NAR and others. Natural transactions are at an all-time low. Because they didn't type that into their press release, reporters didn't type it into their stories. Oops.

FDIC headquarters is no longer letting George Mason U students use its parking lot at night after August 30. Seems like they're going to be too busy with something. Oops.

Banks are suddenly scrambling again to raise more Tier 1 capital. Oops.

Bobby,
Thanks for that info, I don't hear those kind of statistics reported ever. In your data, when you say "delinquent" what is that definition? Two months behind, three months behind? Thanks in advance

Yes this is a bump up - those happen. Google dead cat bounce. Its more than a little overstated though - the year over year data is still wretched.

Sure things went up from the first quarter (ie winter) to the second quarter (ie the spring selling season, busiest time of the year). No surprise to anyone but the media. Thats why year over year is pretty much all that matters.

As a poster above noted, things won't end until the structural issues are done. And now they aren't. Its especially interesting to look at tranches of houses by price point, as a poster to this blog did. Basically and roughly, houses under 150k are selling more, and sales of houses over 150k are down. Bet that's good news for most in Massachusetts...

I can't wait to see how the next 2 quarters of this year are spun. Anyone remember the 45 previous calls of housing bottom? How many of them have been accurate so far?

"have we really turned the corner? According to Lawrence Yun, chief economists for the National Association of Realtors, we have."

When have Yun, Lereah before him, and the NAR not said we have turned the corner? They have been calling the bottom repeatedly since 2006. Why are you even giving them the air of credibility by bothering to quote them?

Interesting on the FDIC parking lot marcus (though no surprise - Friday night has been renamed "FDIC Friday Night") - where did you come across that?

online.wsj.com/article/SB125081143925447971.html?mod=googlenews_wsj

Last week, the WSJ reported that only 10% of all home sales were "unforced or optional." Meaning that 90% were either distressed or forced by changes in personal circumstances. With 90% of sales more-or-less involuntary, if more people are selling their houses, that doesn't indicate a recovery, that indicates that more people are in dire straits and need to sell NOW.

A close look at the data reveals this to be a false premise. If you only read the NAR spin, it’s easy to fall into their web of happy talk. (It’s been said it so many times and it still bears repeating: The National Association of Realtors are a highly misleading news source. Look past what they say to the actual numbers if you seek economic truth).

The Realtors group are spinmeisters. Their actual data has become untrustworthy, their spokesmen mislead and spin for a living, and their “news releases” are little more than misleading junk. Investors who rely on the NAR version of the news do so at their own great financial peril.

With that intro, let’s dig into the actual data to show why the real estate trade group happy talk is misleading bunk. IF YOU ARE INTERESTED IN HOUSING, then you need to thoroughly frisk the NAR data, put it into context, and strip the lipstick off the pig.

Rather than recently improving, we see that January to July 2009 is actually the weakest 7 month period in 5 years — since the market topped in ‘05.

Think about it…prices are down sharply YOY; rates are at historic lows; moratoriums and modification initiatives have kept hundreds of thousands of foreclosures off the market; a tax credit is available; and still,YOY sales are flat for all intents and purposes and down 6.5% from weak 2007 levels when pricing was near the peak. Conditions won’t get much better than this in the future — what is it going to take then to sell houses?

This confirms my prior view that there are a lot of federal forces focused mightily to merely maintain housing in a gentle downdraft. But for this extraordinary government intervention, Housing would actually be much much worse. Foreclosures would be driving prices much lower — a good thing IMO, as it would hasten the cleansing of the boom’s excesses.
Recall that as the market topped out in 2005-06, cheaper Condo sales became a disproportionate source of total volume, as struggling buyers ran low on both cash & credit and were forced to move downstream. That is now replaying over again.

Perhaps it’s a sign of tight credit conditions or retiring boomers downsizing. Regardless, the mix of condos to single family homes is especially noteworthy. Remove government interventions, and the housing market collapse would continue unabated.

Finally, look at one last factor: The impact of Foreclosures on Seasonal adjustments. We know that the NAR takes each month’s data, then runs it through their own meat grinder: They annualize the number, they ham-handedly seasonally adjust it, they do whatever they can to accentuate the positive, while ignoring some of the ugly context the data exists in.

charles, CR got the email from somebody. Kind of eerie, what with the Internet rumors of an August/Fall bank holiday. I'm not buying those rumors, at least not as they pertain to the TBTF institutions. Those banks run this country, and they're not giving themselves a holiday.

Thanks marcus - it occurred to me to go hunt on CR after I posted that.

I do think its meaningful and interesting. Bet they are working hard on Corus now. Couple of biggies set to go soon.

Sales volume leads to price discovery, not price increases. I am astonished how few reporters seem to understand this.

For example, sales volume has rebounded in most of the sand state markets: CA, NV, AZ, FL. Yet prices continue to fall faster than anywhere else in the country. This same story will repeat itself as other market segments begin to thaw.

This is a sucker's rally fueled by spin, propaganda, and your tax dollars. Don't be a sucker. Prices are headed MUCH lower.

Wow,
I can't believe you folks don't buy the NAR story and numbers. What a bunch of cynics. You should all be rushing out and mortgaging yourselves to the neck to buy into to this historic opportunity. ...
On the other hand, zip code 92880 shows about 140 houses on the market but around 1400 are in some state of foreclosure. If that is reflective of other markets, then we are only seeing about 10% of the problem in the national numbers. Are the banks sitting on these houses hoping the hype will work? Who is making the interest payment to the investors behind these loans? Why aren't they foreclosing on the ones who sold them the notes? Are they all hoping for some kind of financial miracle?

"...Fall bank holiday. I'm not buying those rumors, at least not as they pertain to the TBTF institutions. Those banks run this country, and they're not giving themselves a holiday."

Well, what if they just did a bank WITHDRAWAL holiday?

As far as the NAR report goes, seriously, why is anyone paying attention to them anymore? Our accountant told us back in 2005 how the real estate crashes of the 80s and 90s played out: prices continued to decline while everyone was calling a bottom and thinking that the next quarter would bring a recovery. Prices kept on decreasing, and eventually those voices died out and no one talked about real estate. THEN there was a recovery.

Anyone buying right now thinking that prices will go up soon is betting that it will be different this time.

Yun is worthless, he and the NAR shouldn't even be quoted in the media period.

...this is really stupid...unemployement rate is still going up.. how the heck the housing has been turned around? it doesn't make any sense...media is fake, government is fake, fed is fake....................whole market is fake!

Our accountant told us back in 2005 how the real estate crashes of the 80s and 90s played out: prices continued to decline while everyone was calling a bottom and thinking that the next quarter would bring a recovery

CR pointed out a couple of days ago: In June of 1991, house prices were increasing at an 11.6% annualized rate--meaning, if you extrapolated that months' results to the whole year, that's the increase you would've gotten.

But prices kept falling for five more years.

Yun is worthless, he and the NAR shouldn't even be quoted in the media period.

I have been very disappointed that this blog has not discussed this issue. It goes to the heart of modern American journalistic practices--reporting everything as "he said, she said," making no effort to verify claims independently, and treating conventional sources deferentially no matter how many times they have been wrong, and no matter how compromised they are by conflicts or hypocrisies.

'Yun is worthless, he and the NAR shouldn't even be quoted in the media period.'

"I have been very disappointed that this blog has not discussed this issue. It goes to the heart of modern American journalistic practices--reporting everything as "he said, she said," making no effort to verify claims independently, and treating conventional sources deferentially no matter how many times they have been wrong, and no matter how compromised they are by conflicts or hypocrisies. "

-My take on this is that it's no big deal for Scott & crew to post "industry" releases as headlines for discussion if they're presented with balanced voices from other points of view (which this particular post has). The problem is the regularity with which they're presented; we have the same discussion every month.

What also bothers me is the, er, framing devices which accompany the summaries and links:
"I hope we’ve turned the corner “decisively” as well, but we’ll just have to see." IMHO, that seems like a sop to a controlling or guiding overseer.

excellent point jchristian, it is pretty obvious these headlines are being "re-positioned" with bullish spin. The NAR and the housing industry in general has always relied upon creating the perception that prices only go up, to keep people buying. If the NAR, ever came out and said, "we think prices will be down or stable over the next 5 years", they could never create any sense of urgency to buy, with the sheeple.