Our Worst Fears Are Coming True: California Housing Is Double-Dipping Right Now

Mar. 24, 2010

CA housing is double-dipping right now. After surprisingly strong September through December sales due to the original Nov end date of the stimulus coupled with a sharp drop in mortgage rates in Sept, January and February CA sales have dropped sharply, both coming in below year-ago levels.

February’s 28,111 sales was slightly higher than Jan’s 27,585 but still made for the SECOND straight YoY lower sales comparable. And last Jan & Feb -- coming off of a rotten 2008 -- the global financial markets were imploding, QE was new, prices were still falling and sentiment was terrible. This year with sentiment measurably better across everything lower house sales is remarkable.

Yes, sales usually fall in Jan & Feb, but with rates and tax stimulus at historic levels and most thinking both will end soon, seasonality should be somewhat muted like from Sept to Dec.

Bottom Line - Despite rates being at record lows and stimulus ending soon, sales are not picking up like they did last year three months before the Nov end of the original stimulus. The stimulus driven market hand-off to a normal market has not occurred.
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Home Prices ‘Double Dip’ in 12 Cities, Zillow Says (Update1)

By Hui-yong Yu

March 24 (Bloomberg) -- Twelve U.S. cities, including Boulder, Colorado, and Providence, Rhode Island, are showing extended declines in housing values, reversing signs of a sustained recovery last year, according to Zillow.com.

The number of markets in a “double dip” jumped in January from five in December, data released today by Seattle-based Zillow show. The real estate information provider defines a double dip as five consecutive price drops after at least five straight monthly increases. The gains must have been preceded by a period where values fell in at least 10 of 12 months.

The prospect of rising interest rates may be reducing home prices after the government boosted sales in 2009 with tax credits, increased federal housing agency lending and purchases of mortgage-backed securities by the Federal Reserve, said Stan Humphries, Zillow’s chief economist.
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Double Dip Markets

The double dip in home prices through January also was seen in Colorado Springs and Greeley, Colorado; Augusta, Georgia; Columbus, Ohio; Harrisburg and Lancaster, Pennsylvania; Little Rock, Arkansas; Green Bay, Wisconsin; Greensboro, North Carolina; and Lincoln, Nebraska, according to Zillow.

Ten other markets, including Boston and Denver, “seem poised for a double dip,” the company said.

Zillow still expects home values to bottom out by June, said Humphries.
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Existing-home sales fall for third straight month
'Second surge' needed or U.S. could be vulnerable to double dip: economist

March 23, 2010

By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) -- Resales of U.S. homes and condominiums fell 0.6% in February to a seasonally adjusted annual rate of 5.02 million, the lowest level in eight months, raising doubts about the durability of the housing recovery, the National Association of Realtors reported Tuesday.

Sales of existing homes have thus fallen three consecutive months, after having risen steadily through the fall in response to a federal subsidy for first-time home buyers. The tax credit has been restored and expanded to repeat buyers, but there has been no rebound in sales yet.

"The latest report adds further evidence that the extended home-buyers tax credit has so far failed to stimulate demand," wrote Anna Piretti, an economist for BNP Paribas.

Economists surveyed by MarketWatch had been expecting a larger decline in February, to about 4.93 million on an annualized basis. See our complete economic calendar and consensus forecast.

Sales are up 7% compared with a year ago, the NAR's data showed.

"We need to have a second surge," said Lawrence Yun, chief economist for the real estate lobbying group. However, the jury's still out, he said.

"Has everything in the gas tank been used up?" Yun asked. "Or is this just a pause before the next step up?"

A double-dip recession is a "possibility" if a second surge of buying doesn't occur, he said. He said he was heartened by some "qualitative" data, such as buyers and sellers both showing more interest in the market, but that's not the same as signed sales agreements.
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Home Prices Continue Decline as Economist Sees Accelerated Double Dip

by AUSTIN KILGORE

Tuesday, March 23rd, 2010, 1:41 pm
US house prices declined 0.6% on a seasonally adjusted basis from December to January, according to the Federal Housing Finance Agency (FHFA) monthly house price index. The results come with a warning that the much-feared double-dip in housing prices may be already here.

January’s drop comes after a 2% decline in December, adjusted from an originally projected 1.6%.
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Paul Dales, the US economist at the Toronto office of Capital Economics, said recent increases in excess supply are already weighing on prices and the US housing market is in a double dip, both in activity and prices. While the FHFA index can be volatile from one month to the next, it is a big cause for concern.

“[A] double dip in prices has already begun, and in the space of just two months, it has more than reversed the increases of the previous year,” Dales wrote. “We first predicted a double dip in house prices at the start of February, but even we didn’t think it would come this soon.”
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Is a Double-Dip Recession Written Between the Lines of Housing Reports?

March 24, 2010

The recession started in the housing market, so the recovery underway should include the housing market in some way, right? That makes sense, but hasn't happened yet.

Barclays Capital reported last Friday that the supply of foreclosed homes that banks need to sell is growing again. That overhang will put downward pressure on home prices, mostly in Arizona, California, Florida, Michigan, and Nevada. The supply of foreclosed homes peaked at 845,000 in November 2008, fell all of last year to 617,000 in December, but then rose 4.6% to 646,000 in January. Barclays thinks the figure will keep rising to about 733,000 in April before turning down again.

Tuesday, we learned that existing home sale purchases fell 0.6% to a 5 million annual rate, the third decline in three months and the lowest figure we've seen in eight months. The supply of previously-owned homes on the market spiked up almost 10% to 3.59 million. At the end of January, the supply of homes stood at 7.8 months. Now, it's up to 8.6 months.

This deterioration has fired up those calling for a double dip in the economy. If housing is slipping back into the mud, they contend, so will everything else until another shot of taxpayer-funded stimulus gooses the numbers higher again. Given recent warnings from Moody's and S&P about the possibility of the US losing its triple A credit rating by slipping too far in debt, the choice between a sinking economy and a sinking balance sheet will be a tough one. Well, it would be for anybody but the government, which seems to never find it tough to choose higher spending.
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