(Another) Crash Alert….September Sacramento CA Home Sales Data Reveal a Full-Blown Sales Volume Collapse Taking Place
Note, this note goes well with the previous post…10-9 Housing…”Recovery” Theme Inconsistencies Abound
In our effort to scour the country in search for data that either confirm or deny the consensus opinion of a “durable recovery” with “escape velocity” I bring to you today Sacramento CA, which like Phoenix and Las Vegas is in the midst of a sales demand collapse. A supply/demand paralysis if you will. This type of volatility is not consistent with a full-blown recovery; the back side of a full-blown short squeeze perhaps.
Like many other “recovery” regions I have highlighted in the past few months — that led the crash in 2006; the first bounce in 2009; the double-dip in 2011; and the latest stimulus-induced bounce in 2012 — Sacramento is in the midst of a demand void / hard landing that will not make for pretty headlines for the remainder of the year through September 2013 at least.
Bottom line: The greatest stimulus ever to hit housing — rates going from 5% to 3.5% YoY and the artificial lack of supply created through millions of high-risk loan modifications and the servicer settlement foreclosure abatement — is creating the greatest hangover to ever hit housing into 2013.
1) Sept Pendings DOWN 32% YoY and at record lows. This is not consistent with “durability” or “escape velocity”.
Bottom line, in September housing crashed very similar to when the tax-credit stimulus ended in July 2010.
2) Sept Home Sales back at 2010 post tax-credit expiration lows. However, this is from August Pendings. October Sales will follow September Pendings to lows.
Into 2013 — when the servicer settlement is fulfilled and high-risk mortgage mods redefault at ever-increasing frequency — I think sales volume will level out but at the expense of prices, which will also start going negative YoY making for some real fun in headlines.
Number of days in the month misnomer: You will hear arguments there were fewer days in September, which is why sales crashed in many regions. Of course, this has some impact but not as much as most think. In reality, fewer days in the subject month when it comes to ‘Existing Home Sales’ specifically sales does not matter as much as fewer days does to ‘New Home Sales’ for example. That’s because Existing Sales are generally contracted a month or so prior and there is a large percentage of buyers and sellers who benefit by closing as near to month end as possible for a number of reasons.
Bottom line: Fewer days in a particular month as it relates to Existing Home Sales ‘closings’ specifically means people that work to close these escrows have more to close each day of the short month going into month end. By contrast, builders selling ‘New Homes’ — which are counted at contract not closing — physically have fewer days in which to get buyers into contract, which has more of a direct impact on sales counts.