Puget Sound Counties Interactive April Update

It’s time for our regularly-scheduled check on NWMLS statistics from around the sound. Once again, courtesy Tableau Software, the Around the Sound update is rocking exclusive interactive data visualizations.

As usual, all of the underlying data and the old charts can be downloaded in Excel 2007 (or in Excel 2003 format), so if that’s the format you prefer, you can rest easy. For the rest of you, feel free to poke and prod our fancy new charts to your hearts’ content. To get specific info about a certain point on any graph, float your mouse pointer over the data.

Before we get to the cool stuff, here’s the usual table of YOY stats for each of our seven covered counties as of April 2009.
(Note: The “Sales” data below represents pending sales, not closed sales.)

(Additional Note: Certain NWMLS definitions were modified beginning July 2008 that affect the reported number of active listings and pending sales (and therefore the “months of supply”). The net result of this change is that active listings post 07/08 will appear lower, pending sales higher, and months of supply lower than prior to 07/08. See this post for more details.)

King – Price: -15.3% | Listings: -15.9% | Sales: +14.9% | MOS: 4.5
Snohomish – Price: -14.3% | Listings: -21.9% | Sales: +28.3% | MOS: 4.8
Pierce – Price: -15.0% | Listings: -25.2% | Sales: +23.5% | MOS: 4.8
Kitsap – Price: -11.9% | Listings: -27.9% | Sales: +45.4% | MOS: 4.8
Thurston – Price: -13.3% | Listings: -22.8% | Sales: -4.3% | MOS: 4.7
Island – Price: -9.8% | Listings: -14.1% | Sales: +7.5% | MOS: 9.7
Skagit – Price: -11.9% | Listings: -4.8% | Sales: -11.0% | MOS: 10.0
Whatcom – Price: -7.0% | Listings: -8.3% | Sales: +17.6% | MOS: 6.3

Summary

Hit the jump for the rest of the interactive charts.

The visualization below is comparable to our usual chart of closed sales in each county in April 2008 and April 2009:

Closed Sales

Closed sales once again experienced steep declines across the Sound in April. While “pending sales” have been surging for a couple months now, the boost has yet to be reflected in the actual number of homes sold.

Here’s our comparison of median prices in each county at their respective peaks and in April 2009:

Change from Peak

Island County once again took the top spot, as the median price there rapidly approachs a full third off the peak. Interestingly, the total declines in King, Snohomish, Pierce, and Kitsap all fell within one percentage point of each other, wiping out 100% of the equity of even those peak buyers who put 20% down.

Months of Supply

Unfortunately, this chart is fairly meaningless with the change in “pending” definition by the NWMLS. To give you an idea of how much the MOS data may be skewed by the change, consider the following end-of-month scenario: 10,000 active listings, 500 homes “subject to inspection,” and 1,800 homes “pending sale.” Under the old definitions, that counted as 10,500 “active listings” and 1,800 “pending sales,” resulting in 5.8 MOS. Under the new definition, that same scenario counts as 10,000 “active listings” and 2,300 “pending sales,” resulting in 4.3 MOS. Shifting the definition of 5% of the “active listings” results in an over 25% change in the “months of supply.”

Regardless of the definitions change, the data still seems to indicate a housing market around the sound that is seriously sluggish, with continued downward pressure on pricing.


About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

95 comments:

  1. 1
    jon says:

    “Interestingly, the total declines in King, Snohomish, Pierce, and Kitsap all fell within one percentage point of each other, wiping out 100% of the equity of even those peak buyers who put 20% down.”

    The rate of sales at the low end are much higher than the high end, and that makes the change in median sales price potentially be a lot different from the change in value of particular houses. You have to go by CSI or Zillow to get that. When the median price increases, it will be hard to tell whether that it because of more foreclosures at the higher end or a recovering market.

  2. 2
    DrShort says:

    “While “pending sales” have been surging for a couple months now, the boost has yet to be reflected in the actual number of homes sold.”

    Despite a surge in pending sales in April, I think May’s closings will be flat or only slightly higher than April’s closings. The divergence between closed and pending sales will get even bigger when the MLS releases numbers late next week.

  3. 3
    Greg Perry says:

    “Regardless of the definitions change, the data still seems to indicate a housing market around the sound that is seriously sluggish, with continued downward pressure on pricing.”

    Of course to put this April in perspective to a year ago (for King County), last year’s MOS was 6.8.

    This year’s MOS is 4.5.

    Oh, and last year’s MOS was under the old accounting standard, which means to adjust it to this year we would need to ADD 5% to the 6.8.

    Now when we compare the April’s 4.5 MOS to January, February and March it looks like this: 7.8, 7.75, 5.69 and 4.5. (All computed with the current pending methodology)

    Hmmm, I wonder where May MOS will come in. Weekly MOS have come in like this for the 7 days prior to date:
    5/6=4.1, 5/13=4.0, 5/20= 3.9 5/27=4.5

    So, one could also declare that this is a rapidly improving market. :)

  4. 4
    Greg Perry says:

    By DrShort @ 2:

    “While “pending sales” have been surging for a couple months now, the boost has yet to be reflected in the actual number of homes sold.”

    Despite a surge in pending sales in April, I think May’s closings will be flat or only slightly higher than April’s closings. The divergence between closed and pending sales will get even bigger when the MLS releases numbers late next week.

    You are very correct. The lag is very normal historically. June and July will be a different story. I’ll be tracking these closing weekly.

  5. 5
    seattlerenter says:

    I am confused the table at the top shows increase in sales while the bottom graph shows decline in sales. What am I missing is the first pending or closed? They are both yoy right?

  6. 6
    The Tim says:

    By Greg Perry @ 3:

    Of course to put this April in perspective to a year ago (for King County), last year’s MOS was 6.8.

    This year’s MOS is 4.5.

    Oh, and last year’s MOS was under the old accounting standard, which means to adjust it to this year we would need to ADD 5% to the 6.8.

    Um, no. You’re doing it wrong.

  7. 7
    The Tim says:

    RE: seattlerenter @ 5 – Yes, the table of numbers is “pending sales” while the chart is closed sales.

  8. 8
    Greg Perry says:

    By The Tim @ 6:

    By Greg Perry @ 3:

    Of course to put this April in perspective to a year ago (for King County), last year’s MOS was 6.8.

    This year’s MOS is 4.5.

    Oh, and last year’s MOS was under the old accounting standard, which means to adjust it to this year we would need to ADD 5% to the 6.8.

    Um, no. You’re doing it wrong.

    Yes, you are correct. SUBTRACT 5%. Still improving :)

  9. 9
    Joel says:

    By Greg Perry @ 3:

    Of course to put this April in perspective to a year ago (for King County), last year’s MOS was 6.8.

    This year’s MOS is 4.5.

    Oh, and last year’s MOS was under the old accounting standard, which means to adjust it to this year we would need to ADD 5% to the 6.8.

    I think you got it backwards. The adjustments makes pending higher and inventory lower;. Since MOS is inventory divided by pendings the adjustments would make the MOS look lower than with the old accounting standard.

    Edit: Beaten by others. 5% is some arbitrary number you pulled out of nowhere. For all we know, given the huge gap between pendings and sales, the adjustment may need to be 30% (note I’m am not saying that it is 30%, I’m saying we don’t know and so it could just as easily be 30% as it could be 5%). And that doesn’t even take into account the reduced number of listings.

  10. 10
    The Tim says:

    RE: Greg Perry @ 8 – I don’t know where you’re pulling the 5% figure from. We don’t really have any way of knowing how much lower last year’s MOS would have been using the present system. Could be 5%, could be 25%, could be 40%…

    If just 5% of last April’s 11,424 “active listings” were “active STI,” under the new system the MOS would have been 4.5 (same as this year). If 10% of the 11,424 “active listings” were “active STI” the MOS would have been 3.4. We have no way of knowing.

    Oh, also… Last April King County’s MOS was 6.2, not 6.8.

  11. 11
    masaba says:

    RE: Greg Perry @ 8
    Greg,

    I know that you have replied to several previous blog posts with the weekly number of closed sales in May. From what I recall, the highest week, according to your posts, was around 200 closed sales. If your numbers are correct, then we can infer that, yet again, we will see a huge and rapidly increasing divergence between closed sales and pending sales.

    On another note, I know that several realtors have mentioned that closed sales volume always picks up in the final week of the month. Could someone quantify this a bit? For instance, if there were ~200 closings per week for the first 3 weeks of May, is it likely that the final week of May will have the roughly 1000 – 1500 closings needed to bring the closed sales in May somewhat in line with April pendings?

  12. 12
    Alan says:

    RE: Greg Perry @ 3

    The current market improvements aren’t going to show up in CS for another two or three months.

    Greg, do you have any predictions about how the mortage markets “seizing up” will affect market conditions?

    Any effects from the mortage market won’t be seen in CS for over three months (because changes in the mortgage market may have little effect on deals currently in the pipline).

  13. 13
    Greg Perry says:

    RE: masaba @ 11RE: The Tim @ 10

    Tim, again you are correct. I quickly ran last years active/pend on my calculator. I must have transposed a number, because I re-did the last year’s active / pending and it came out exactly 6.2. At any rate yes there is a difference after July 2008. Last year in May the MOS jumped well over 7. This year inventory is absorbing.

    I dropped the number for last week in yesterday’s interest rate post. The closings for the week were 189. The week before were 217. Last week we had two days missing due to the county closing for the holiday. Pendings for the week were off, as well, 498 vs. 590. Holiday week? New trend? Don’t know yet. Seattle was way off from the week before. Eastside was off, but close. Details here:http://www.workingforyou.typepad.com//realestate/2009/05/king-county-weekly-pendings-dip-holiday-week-or-start-of-a-trend.html

    I chatted with two different escrow companies yesterday and they told me they were slammed with purchase business with lots of June closings. Again, looking at historical charts, the lag is normal. What is not normal about this year is how quickly the the pending counts rose. These pendings will start to come out, soon. I’ll keep an eye on weekly closed.

  14. 14
    Greg Perry says:

    By Alan @ 12:

    RE: Greg Perry @ 3

    The current market improvements aren’t going to show up in CS for another two or three months.

    Greg, do you have any predictions about how the mortage markets “seizing up” will affect market conditions?

    Any effects from the mortage market won’t be seen in CS for over three months (because changes in the mortgage market may have little effect on deals currently in the pipline).

    IMO IF rates settle in as little as 5.5, this will cause many buyers currently in escrow to fall out because their ratios will go out of bounds. There is no provision for rising interest rates in the financing addendum. Perhaps there will be some buyers who choose to walk away from earnest money than accept the higher payment. The higher rate will also hinder those who are able to afford homes in the very bottom of the market.

    Yes, rising rates is a market changer.

  15. 15
    Kary L. Krismer says:

    By jon @ 1:

    “IThe rate of sales at the low end are much higher than the high end, and that makes the change in median sales price potentially be a lot different from the change in value of particular houses. You have to go by CSI or Zillow to get that. t.

    First, anyone who says you have to go by Zillow to determine anything totally loses me. That’s like going to the DNC or RNC to get facts.

    Second, I don’t have the YOY numbers, but from peak C-S and the NWMLS King County median are within 2% of one another (e.g. one’s down about 23% and one 25%), and have been for the past four months. Given the different county issue, that’s fairly close.

    Third, as I recall, the different tiers of C-S don’t show that much of a difference.

    Fourth, the type of change you’re describing would affect the mean a lot more than the median. Just this morning I backed out short sales and REOs from the King County May sales to date, and they only affected the median about $5k, even though the median for REOs and short sales are both much lower than total sales. I didn’t note the mean, but I suspect that would have been affected a lot more.

  16. 16
    patient says:

    RE: Greg Perry @ 13

    “What is not normal about this year is how quickly the the pending counts rose.”
    “looking at historical charts, the lag is normal.”

    Really? I would say the big story this year is the gap between pendings and closed and the lag seems anything but normal. If the difference is short sales that’s the core of the big change this year and it puts us one step closer to the developments in California. Patient as I normally am I can hardly wait for June’s closings to see if a the backlog of pendings really closes or if they just disappears in thin air. It’s interresting for sure.

  17. 17
    dogwood says:

    RE: Alan @ 12
    “The current market improvements aren’t going to show up in CS for another two or three months.”

    Hold on a second. There is NO current market improvement, so stating that it won’t show up in the CS numbers for a few months is irrelevant, as is asking what the effect of mortgage markets seizing up might have on this ‘improvement’. This ridiculous thread got started by Greg Perry with nothing but 1) the wrong data, 2) a mathematical mistake, and 3) some far-fetched unsupported assumptions. That we’re even talking about some kind of market improvement is preposterous.

  18. 18
    One Eyed Man says:

    RE: The Tim @ 10

    Although I don’t think my comment below changes the conclusion you reach, I think your statistical adjustment is not completely accurate. If the pending count each month used in computing MOS is only the number of listings that first changed to pending that month, then the overstatement in pendings caused by counting STI in new pendings is only the total number of STI’s in the first month of the change to the “new” counting system. After the first month, the overcount in pendings caused by the change is really only the number of STI’s that would have terminated without eventually changing to pending .The new system just accelerated when a listing is counted in the pendings. It didn’t increase the number changing category with one exception which is STI’s that go back to Active and fail to go Pending.

    The above is a little hard to explain and I didn’t try running any numbers to check my logic, but I think it’s right although it probably also goes in the who gives a rat’s ass category

    But as you and others have previously discussed there are also two other types of pendings that have probably increased in the last year and affected the calculation of MOS. One is the increasing number of short sales that will have a high failure rate in addition to taking longer to close. The other is the presumably higher rate of financing failures being experienced in the current market. Both of these will make MOS look lower than it really is due to the increasing failure rate of these sales to close.

  19. 19
    The Tim says:

    By One Eyed Man @ 18:

    After the first month, the overcount in pendings caused by the change is really only the number of STI’s that would have terminated without eventually changing to pending .

    I get what you’re saying, and I think you’re right, since the NWMLS claims that each “pending” allegedly only counts once (presumably when it switches from “active” to “STI”).

    Of course, the above-quoted part is really the big unknown variable here. How many “Active STI” listings historically reverted back to just plain “active”? Nobody seems to know.

    Throw in a broader definition of “pending” with a rapid increase in short sales, and the end result is mostly-useless “pending” data, at least if your goal is to compare against any time in the recent past.

  20. 20
    patient says:

    RE: The Tim @ 19

    “Throw in a broader definition of “pending” with a rapid increase in short sales, and the end result is mostly-useless “pending” data, at least if your goal is to compare against any time in the recent past. ”

    This could be an opportunity to switch to the more robust metric of closed sales for your nifty MoS graphs and calculations in all posts. I would guess one reason that you haven’t done it earlier is to stick to the same formula over time for historic comparison reasons. If the definition of the metrics used in formula are no longer the same and/ or becomes exceedingly unreliable the historic comparison accuracy should no longer be a reason not to switch. And when it comes to the one month diff between the closed sales and the current inventory level, isn’t that preferable to a 3-6 month lag with a possible 50% error margin?

  21. 21
    The Tim says:

    By patient @ 20:

    This could be an opportunity to switch to the more robust metric of closed sales for your nifty MoS graphs and calculations in all posts.

    Hey, great idea!

    Seriously though, when I developed SAAS, I wasn’t thinking it would replace MOS, but you’re right. MOS is now useless for historical comparisons, so why not just switch to SAAS or something similar. I’ll definitely be spending some more time looking into the matter, to see how I can refine and improve the SAAS algorithm even more.

  22. 22
    Scotsman says:

    RE: Greg Perry @ 3

    “So, one could also declare that this is a rapidly improving market. :) ”

    One could also say that when Thelma and Louise drove their Thunderbird over the cliff the old bird finally learned to fly. But such a statement wouldn’t really capture the entirety of the situatiuon, would it? Ditto your declaration. ;-)

  23. 23
    Alan says:

    RE: dogwood @ 17

    There is NO current market improvement

    I don’t know about that. There are enough real estate agents talking about how busy they are that I am leaning towards there really being more activity than an errors in data or intentional prevarication.

    The market improves every spring. Even in a falling market, I would not be surprised to see prices rise in the spring. I would be surprised if there is a larger increase in prices than the historical average, and I still expect prices to fall even further this fall and winter.

  24. 24
    Greg Perry says:

    By patient @ 16:

    RE: Greg Perry @ 13

    “What is not normal about this year is how quickly the the pending counts rose.”
    “looking at historical charts, the lag is normal.”

    Really? I would say the big story this year is the gap between pendings and closed and the lag seems anything but normal. If the difference is short sales that’s the core of the big change this year and it puts us one step closer to the developments in California. Patient as I normally am I can hardly wait for June’s closings to see if a the backlog of pendings really closes or if they just disappears in thin air. It’s interresting for sure.

    Well, yes of course. The spring lag between pending and closed is normal. The way the market switched “ON” and the spike in pendings is not normal. THEREFORE it created an abnormally large gap. If you care to see what this looks like:

    http://www.workingforyou.typepad.com//.a/6a00d83451cc6269e20115708aee0f970b-popup
    The spike will be even more pronounced after May’s pending sales are plotted.
    and
    http://www.workingforyou.typepad.com//.a/6a00d83451cc6269e20115708af219970b-popup

    The rest of it has been debated to death in the last 3 weeks. At this point time will tell how much and how quickly the lag catches up.

  25. 25
    Alan says:

    RE: patient @ 20

    This could be an opportunity to switch to the more robust metric of closed sales for your nifty MoS graphs and calculations in all posts.

    There is a trade off between accuracy and timliness of data. Pendings have always been less accurate than closings, but you get the data sooner. The Case-Schiller index is even more accurate, but that data is three months stale by the time you get it. A weekly trend line doesn’t tell you much at all, but you get it very quickly (and one might still get useful information out of it).

  26. 26
    Greg Perry says:

    By Scotsman @ 22:

    RE: Greg Perry @ 3

    “So, one could also declare that this is a rapidly improving market. :) ”

    One could also say that when Thelma and Louise drove their Thunderbird over the cliff the old bird finally learned to fly. But such a statement wouldn’t really capture the entirety of the situatiuon, would it? Ditto your declaration. ;-)

    Why not? The facts support a rapidly improving market. Just like the facts were there there in 2007 when the market was regressing.

    If the market stops tomorrow, I’ll tell you that, too.

  27. 27
    patient says:

    RE: Alan @ 25 – You can still look at pendings but to use it in metrics as MoS makes MoS of very little value. It supposed to give you a picture of how long it will take to absorb current inventory at current sales pace. If the sales do not close or close 6m from now when the inventory could be very different the value becomes very questionable.

  28. 28
    Greg Perry says:

    By patient @ 27:

    RE: Alan @ 25 – You can still look at pendings but to use it in metrics as MoS makes MoS of very little value. It supposed to give you a picture of how long it will take to absorb current inventory at current sales pace. If the sales do not close or close 6m from now when the inventory could be very different the value becomes very questionable.

    Well, I bet if you were looking to purchase a home in August 2007, armed only with C/S and median price information, you would appreciate current MOS information that showed the market had been regressing dramatically. All your C/S and median information in that time would show the market going straight up, because you would be looking at June and July data charts..

    However, August MOS information based and sales ratios, showed the market had entered deep doo doo territory. It took awhile for medians to catch up.

  29. 29
    dogwood says:

    RE: Alan @ 23

    “There are enough real estate agents talking about how busy they are that I am leaning towards there really being more activity than an errors in data or intentional prevarication.”

    I would hardly define an ‘improving market’ as one in which real estate agents talk about how busy they are. That’s worse than defining it as ‘increased traffic at open houses’. And why the kid gloves? Is there something wrong with asserting that real estate ‘professionals’ can and often do misrepresent the facts? The NAR has been doing this for years.

    What matters is an increase in YOY prices (not some vaguely defined notion of ‘activity’). YOY price increases are happening NOWHERE. I’m not arguing that MOM increases don’t happen in spring. You can point to that as an ‘improving market’ if you’d like, but prices are still down YOY EVERYWHERE according to CS numbers. In the best markets all we’re seeing a decrease in the rate of YOY decline. That is not an improvement, even if it makes agents 50% busier than they were last year at this time.

    It’s a bit like saying that the lifeboat is leaking slower than it was, but I’m bailing harder than ever, so the situation must be improving. It says nothing at all about whether that boat is going to sink or not.

  30. 30
    The Tim says:

    RE: Greg Perry @ 28 – I don’t think your example really works…

    In August 2007, the latest MOS data (July) for King Co. SFH was 4.1, up only about a point or so from the 3s in January through June, and 2.6 the year prior.

    The latest Case-Shiller data at the time showed a clear downward trend in the YOY data. Same goes for the median price data.

    What does “4.1 MOS up from 2.6 a year ago” tell a buyer that “9.1% YOY price growth down from 17.4% a year ago” doesn’t? Both are still apparent seller’s markets, but clearly heading rapidly toward a buyer’s market.

  31. 31
    patient says:

    RE: Greg Perry @ 28 – Tell me how you would use C/S to calculate MoS? The same way as you made up a historic lag of 60-90 days between pendings and closings? C/S do not state volume which is neccssary to calculate MoS, go back and check The Tim’s 1 month offset graph between pendigs and closings and you will see that your definition of normal lag is not supported by data.

  32. 32
    patient says:

    RE: dogwood @ 29

    “And why the kid gloves?”

    Good question. This housing bubble will make almost everyones life harder and get the US into all kinds of problems as reduced independence and a weaker political and probably security position as well. With wealth comes power and we are broke. Yes, it was the banks who provided the pumps for the bubble but the real estate agents cranked them as hard as they could. You would expect a certain apologetic and humble approach but instead it’s full speed ahead to try to upheld and re-inflate the bubble with the same arrogant cheerleading and if someone gives them a tackle it’s often commented on as “give them a break, they are only doing their job”. I think when people really start to suffer and figure out what and who contributed to their pain it is more the lack of remorse and taking responsibility that will hurt the real estate industry than what they actually did during the bubble.

  33. 33
    Greg Perry says:

    RE: The Tim @ 30

    Tim I was referring to the tiered index chart, which shows the market peak in the July 2007 area. Median price charts showed the same general information.

    Here is what the MOS heat maps looked like at the time:
    http://blog.seattlepi.com/realestate/archives/124285.asp July had already turned from a map completely dominated by red to yellow.

    The ratios between active and pendings are a very simple ratio of current supply and demand and from this we can compute MOS. From these we can see instantly if the market is regressing or improving. In addition, we can see what is happening within various areas, zip codes, etc. In the above chart, you’ll see the ratios vary greatly between locations, and the general trends are there to see instantly.

    So, now we’re in a year where we went from an historic low pending number at 748 in December, followed by 874, 990, then a jump to 1372 March and then to 2009 pending sales in April 2009. (From Trendgraphix) May will be much stronger than April (+ or – 500 area). By watching the active/pending sales ratios, we don’t have to wait for 1-3 months to know what the market is doing. Without following the activity and trends, everybody is in the dark until someone makes a report, followed by an month of arguments until the next report comes out.

    The ratios are best used WOW and MOM when working with clients and determining market trends. YOY have little relevance to actual buyers or sellers except for market perspective. I think C/S and most time lagged reporting are best used for perspective, as well. There is no way for them to tell us anything until weeks after the activity has past. Perspective IS important. I use it all when working with a client.

  34. 34
    Greg Perry says:

    By patient @ 31:

    RE: Greg Perry @ 28 – Tell me how you would use C/S to calculate MoS? The same way as you made up a historic lag of 60-90 days between pendings and closings? C/S do not state volume which is neccssary to calculate MoS, go back and check The Tim’s 1 month offset graph between pendigs and closings and you will see that your definition of normal lag is not supported by data.

    ????? I can’t figure out what you’re trying to say here. Do you know how MOS is calculated?

    And yes, there is an historic lag between spring pending sales and closed sales which exceed the pending later in the year.

  35. 35
    Alan says:

    RE: dogwood @ 29

    What matters is an increase in YOY prices (not some vaguely defined notion of ‘activity’). YOY price increases are happening NOWHERE.

    That is true. However we can see MOM price increases. MOM price increases can occur because inventory is being absorbed. We see seasonal increases in sales every year, and it is happening this year. It isn’t a surprise.
    Look at the $/sf charts by zip code on redfin. There are areas where prices are currently increasing over the past few months. I don’t expect it to last past spring.

  36. 36
    patient says:

    RE: Greg Perry @ 34 – Greg, I think you managed to confuse me by mixing C/S into the MoS conversation. It’s a separate issue and I got the impression that you made a reference to using C/S in calculating MoS. My bad. Back to MoS. With pendings not painting a current picture of permanent sales but in the best case a couple of months out sales it does not give an accurate MoS since you don,t know the inventory 2-3 months from now. In worat case the sales number is off 50% and gives a huge error margin. If you use closed sales your are only off one month but with 100% accuracy on the volume. Use your pendings to see how many offers are accepted but it’s not a good measure on how many homes really sell. Not anymore.

  37. 37
    Greg Perry says:

    Here is an interesting question:

    I show the following for KC SFH pendngs from NWMLS:

    Active / Pending / MOS

    December 8707 / 911/ 9.5MOS
    January 9231 / 1159 / 7.9MOS
    February 9525 / 1264 / 7.5 MOS
    March 9588 / 1683 / 5.7 MOS
    April 9608 / 2114 / 4.5 MOS

    The following weekly pending counts( 7 days prior to date): 5/06 = 545, 05/13 = 561, 05/20 = 590, 05/27 = 498

    In a nutshell MOS is 1/2. Inventory is stable. Pending sales have more than doubled.

    Who thinks the market has rapidly improved?

    Who thinks this is just “normal” spring activity?

    And who does not the market has improved?

    STATS COMPLIED FROM BUT NOT VERIFIED OR PUBLISHED BY NWMLS

  38. 38
    Greg Perry says:

    By patient @ 36:

    RE: Greg Perry @ 34 – Greg, I think you managed to confuse me by mixing C/S into the MoS conversation. It’s a separate issue and I got the impression that you made a reference to using C/S in calculating MoS. My bad. Back to MoS. With pendings not painting a current picture of permanent sales but in the best case a couple of months out sales it does not give an accurate MoS since you don,t know the inventory 2-3 months from now. In worat case the sales number is off 50% and gives a huge error margin. If you use closed sales your are only off one month but with 100% accuracy on the volume. Use your pendings to see how many offers are accepted but it’s not a good measure on how many homes really sell. Not anymore.

    Thanks for clearing that up. I was wondering :)

    The ratios have been and always will be a simple ratio to indicate market strength or weakness and the ability to spot trends. Everybody tries to make them too complicated. But, they remain the best leading indicator IMO. Depending on the time of the month, the lag could be up to 6 weeks on solds. Market times will fluctuate on present supply and demand ratios in real time.

    Yes, MOS can be computed on solds. You are correct that pendings and solds are not a 1-1 relationship.

    However, when a pending slides out, it simply goes back into supply OR leaves the market. The ratio will be the ratio at on whatever day it is checked to give us MOS at that time.

    In the end, I don’t really care if you like solds better. Its OK by me. I will say, you don’t have the benefit of seeing the depth of information both from an historical perspective (several years worth) and these ratios broken down by price points in every KC MLS like I see.

  39. 39
    Adam says:

    I’ve been in the market as a potential buyer for about 4 months now and I, along with everyone else it seems, am constantly adjusting my parameters for “normal”. One thing that has struck me, albeit as an untrained outsider (from Portland, OR) is that people are just refusing to list their houses. This was supposed to be selling season and I’m lucky to see more than 3 houses come on in our range in our target area.
    Looking at those numbers it strikes me that almost as many houses came on in February as did in April. Surely that can’t be normal. If what I’m seeing in May is any indication of a broader scheme then there won’t be a huge jump.

  40. 40
    Kary L. Krismer says:

    RE: dogwood @ 29 – I’ve been saying for months that volume is the more important issue, and volume is improving (although not at your YOY standard). C-S hardly touches on that at all. But Paulson knocked the volume down to incredibly low levels, and they are improving from there.

  41. 41
    Kary L. Krismer says:

    RE: dogwood @ 29 – BTW, if YOY is your only standard, an you’re using C-S to determine that, you won’t know the market has improved until 1 year, 3 months after it has.

  42. 42
    patient says:

    RE: Adam @ 39
    Adam, I fully agree. Besides the descrepancy between pendings and closed sales and the possibility of a huge jump in short sales as percentage of total pendings the lack of new listings is the big news this spring. I see the same thing, in hoods where there were 10 listings last springs there is now 1. Looks like the famous standoff phase that is resolved only by short sales and reos, bringing prices down even faster.

  43. 43
    Kary L. Krismer says:

    RE: Adam @ 39 – I think it just depends on what area you’re talking about. Some areas have significant new inventory. And I suspect the NWMLS number for actives will be much higher, but that’s not something I track.

  44. 44
    One Eyed Man says:

    RE: Adam @ 39

    I don’t have any data to back this up, but my take on the low listing issue is that most owners who would normally consider selling now are would be move up buyers who choose not to sell into this market because they can’t generate the amount of equity they would like to have to purchase the new home they desire. I know, I have a keen sense for the obvious, but that’s all I’ve got.

  45. 45
    One Eyed Man says:

    RE: Kary L. Krismer @ 40

    Kary, I think your right on the money as to the relationship between volume and the formation of a market bottom. Rising volume will preceed the stabilization of prices and any rise in prices.

  46. 46
    The Tim says:

    RE: Greg Perry @ 33 – Which of these do you think makes the direction of the market most obvious to the hypothetical home buyer shopping in August 2007 with the latest data available?

    For me, it’s the third, which shows a smooth, clear trend heading steadily toward zero. Both the median and the MOS are quite noisy, especially so when you look at even shorter time periods like MOM and WOW.

  47. 47
    Kary L. Krismer says:

    On the volume issue, May will be an improvement over April (King County SFR), where last year May was not an improvement over April–it was down slightly. And the median last year fell by 8k from April to May, and that shouldn’t happen this year. So in those two regards, the market is improving.

    But if you look at YOY, the volume will be down almost 30%, and the prices down about 15 percent. So in those two regards, the market is declining.

    And finally, if you look from the recent lows, the volume is up over 50%, and the prices are up about 4%. Again improvement, but you’d expect that due to seasonal factors (but not the over 50%).

  48. 48
    Kary L. Krismer says:

    RE: One Eyed Man @ 45 – The question though is whether the increase in volume can be sustained. How much of it is the 8k tax credit? How much of it is low interest rates?

    On the other hand, how much of the low volume was Paulson? And will the recession really end this year?

  49. 49
    The Tim says:

    By One Eyed Man @ 44:

    …most owners who would normally consider selling now are would be move up buyers who choose not to sell into this market because they can’t generate the amount of equity they would like to have to purchase the new home they desire.

    From a recent San Francisco Chronicle article:

    No “move-up” buyers. In a normal real estate market, about 80 percent of buyers are “moving up” or “moving across” – people who sell one home before buying another, said Mark Hanson, principal of Walnut Creek’s the Field Check Group, a mortgage consultant. Remaining purchasers are split between first-time buyers and investors.

    In today’s market, about half of buyers are first-timers and a third are investors, leaving just 15 percent of what he calls “organic” buyers. Those first-timers and investors all troll for bargain-basement foreclosures – leaving few buyers who are interested in the homes being sold by “Ma and Pa Homeowner.” That, in turn, leaves Ma and Pa unable to move up to a nicer home. “The organic seller is left out in the cold,” he said.

    It also could impact supply down the road, when all those pent-up sellers finally decide to put their homes on the market.

    Hmm, pent-up supply. What a concept. Now where have I heard that idea before… ;^)

  50. 50
    Kary L. Krismer says:

    People are tending to sell before they move up, so that’s another “lag” in the market compared to prior years. And again, that’s probably more the result of volume rather than price.

  51. 51
    One Eyed Man says:

    RE: Kary L. Krismer @ 48

    I again agree, but I think there are people in the discussion who think that volume is irrelevant. IMHO its extremely likely that a “seasonally adjusted” increase in volume is a necessary component to the bottoming process. The increase in volume doesn’t insure formation of a bottom but it is a leading indicator for the potential formation of a bottom. That’s why I think some of the short term volume information that Greg provides has some relevance even though some of the bears write him off as a market cheerleader.

  52. 52
    One Eyed Man says:

    RE: The Tim @ 49

    But don’t forget Tim, each would be move up buyer is also pent up demand at a higher price tier.

  53. 53
    Scotsman says:

    I’ll be so glad when the spring bounce is over and we can get back to our regularly scheduled economic collapse. Not because I want anyone to suffer, but because I want to prevent them from suffering. Despite trillions of dollars of lost equity folks are still so conditioned to buy houses that the slightest uptick in volume or price triggers some sort of mass delusion that all is well. All is not well. Nothing has “recovered”. In fact, nothing fundamental has even stabilized. We’re headed over a cliff, and it’s a long ways down. Just because we’re temporarily stuck on the “spring bounce” branch jutting from the canyon wall doesn’t mean we aren’t going to continue the fall. Yes, I know this for certain. If we sat down together for a day or two, and you already had some familiarity with macro economics and specifically interest rate determinants, I could prove it to you. And you would believe, with certainty, just as you do 2+2=4.

    If you buy a median or higher priced home now in the greater Seattle area you will lose hundreds of thousands of dollars of future opportunities. Yes, really. If you really think you need to buy something, and that I don’t have a clue about anything, how about a compromise? Make yourself wait until at least November of this year- homes are always cheaper in the fall, and this year won’t be any different. But you may learn something important by then that will affect your decision making process. Say “uh huh!”

    Kary and Greg- ……. ah, what’s the point.

  54. 54
    One Eyed Man says:

    RE: Scotsman @ 53

    Uh huh.

  55. 55

    By One Eyed Man @ 45:

    RE: Kary L. Krismer @ 40

    Kary, I think your right on the money as to the relationship between volume and the formation of a market bottom. Rising volume will preceed the stabilization of prices and any rise in prices.

    Yes but it’s not exactly easy to predict the when that will happen. In late 2005, early ’06, volume started dropping, and inventory started climbing. I was sure the top in prices was about to happen, but the top didn’t happen until July 2007.

  56. 56
    David Losh says:

    I’m pretty tired of this MOS, MOM, WOW tracking.

    My Broker just sent me the MOS and in city, my area of interest, is at 2.9 MOS, while King and whatever is at 4.5.

    Who would possibly care? It makes absolutely no difference to the deal YOU want to do today.

    Whatever the deal is that will get YOU to buy something is way off the charts YOU are looking at. YOU want a deal. So looking at the statistics is about a quarter, to one mile, radius around the deal YOU want.

    Are you a buyer, or a seller? That’s it. YOU are the only person that matters in the deal you want today.

    If YOU want to live in down town Seattle why do YOU really care what the MOS, MOM, YOY, WOW, is in White Center?

    This is all sales gimmick stuff.

    Real Estate is about YOU.

  57. 57
    Softwarengineer says:

    SCOTSMAN IS MY KIND OF ECONOMIST

    He’s no lapdog feconomist for the banksters.

    To add to his great take, I’d add that we’ve also got slightly less unemployment increase to date. Big deal, its still getting worse. Part of Scotsman’s Spring Branch and proves no bottom, just proves its chronically getting worse with no end in sight.

  58. 58
    Tejas says:

    Scotsman,

    When you deciede to teach that seminar, I will buy a seat.

    I don’t need to be convinced where we are headed or even some of the why’s; but I would love to see the math for someone more educated on the subject than myself. That detail level is one of the things I miss over at the market ticker. However, I realize KD must keep things in layman’s terms to educate his audience and the public at large. (like myself)

  59. 59
    Greg Perry says:

    By Scotsman @ 53:

    Kary and Greg- ……. ah, what’s the point.

    The point as I see is that this is a discussion about the current real estate market.

    I understand and agree with some of your points and concerns. Tomorrow’s market will reflect the coming pot holes.

  60. 60
    Greg Perry says:

    By Ira Sacharoff @ 55:

    Yes but it’s not exactly easy to predict the when that will happen. In late 2005, early ’06, volume started dropping, and inventory started climbing. I was sure the top in prices was about to happen, but the top didn’t happen until July 2007.

    There is always a lag, or down.

  61. 61
    Greg Perry says:

    By One Eyed Man @ 51:

    RE: Kary L. Krismer @ 48

    I again agree, but I think there are people in the discussion who think that volume is irrelevant. IMHO its extremely likely that a “seasonally adjusted” increase in volume is a necessary component to the bottoming process. The increase in volume doesn’t insure formation of a bottom but it is a leading indicator for the potential formation of a bottom. That’s why I think some of the short term volume information that Greg provides has some relevance even though some of the bears write him off as a market cheerleader.

    Only the numbers, my friend Only the numbers. Now granted, right now I believe the numbers have shifted and inventory is rapidly absorbing. Funny, nobody accused me of being a bear when I was posting numbers as the market was regressing. When it shifts again, I plan on being on the leading edge.

  62. 62
    patient says:

    RE: Greg Perry @ 61
    Greg, it’s not your data, it’s your conclusions and predictions. You know, the smoking hot 2000 closings leading to a bottom that leads to a sustainable appreciation in the low tier thing. We don’t buy it, at least I’m not so we challenge it. Imo opinion you are not looking at the big picture but at a narrow segment with blinds for the state of the economy. There it is, it’s not your data so you can stop saying that it is. I believe your data is correct but not the relevance you arttribute it with.

  63. 63
    David Losh says:

    RE: Softwarengineer @ 57RE: Scotsman @ 53

    The government is already hiring. It will continue through the Census and subside in 2011.

    I’ll say it again, house values never change. Rents, CPI, and the cost of goods are all that matter and they don’t matter that much.

    I am kind of cranky today.

    Let’s just put the trillions of dollars of equity to bed right now. This is the same as talking about paper profits. It means as much as talking about how many properties traded hands today.

    You keep talking about going over a cliff, but that already happened. It’s over, done, finished, all that’s left is the whining and crying.

    It started in 1998 with the beginning of the end of the technology bubble. That money went into Real Estate. The building boom converted tech stock into securities.

    Now it’s all over, so what? You need to think of something else to do. There are so many ways to make money. There are so many things to do, so many countries with economies.

    If the government choses to pay back debt, they do it. There’s no money in it, but they can do it.

    The only people whining right now are the ones who feel they never got their fair share.

    Whatever happens is an opportunity.

  64. 64
    Greg Perry says:

    By patient @ 62:

    RE: Greg Perry @ 61
    Greg, it’s not your data, it’s your conclusions and predictions. You know, the smoking hot 2000 closings leading to a bottom that leads to a sustainable appreciation in the low tier thing. We don’t buy it, at least I’m not so we challenge it. Imo opinion you are not looking at the big picture but at a narrow segment with blinds for the state of the economy. There it is, it’s not your data so you can stop saying that it is. I believe your data is correct but not the relevance you arttribute it with.

    Ya shore, of course there are a few educated conclusions based on my experience working with the way I organize my data set and the numbers I see. I am basing what I see on the numbers that are churning.

    We all had a hand in predicting closings…… and YES! I still believe we’ll see 2000+ in a month in 2009. You? Did you go on record? Man, we’ll have over 6000 pends come in over a 3 month period with just a fraction spitting out so far in closed. Whooooo weeee, Unless the market turns “OFF” immediately (and that could happen, and if does, I’ll let you know), I think they’ll be a’comin!

    And you are very correct. IF the market continues at this pace, I see the <$500k local price ranges starting to shed market time and see prices in this category first stabilizing, then starting to rise. Of course I also see the high end sucking lemons.

    As for the economy? Yup, the market will change again. But it is, what it is, for today.

    And as far as the relevance you attribute to the data I present, you can form your own conclusions based on your working marking experience! I betcha you don’t remember the upcoming market issues I see coming (and have commented on many times, such compression, lack of move up buyers, concerns about giving the tax credit up as a down payment, et al.)…..all issues I foresee based on the numbers I follow.

    But at the end of the day, we’ll see how it plays out, won’t we? What was your closing/month prediction again? Say it again…. I want to see it

    Signing off for today……

  65. 65
    dogwood says:

    RE: Kary L. Krismer @ 41
    “BTW, if YOY is your only standard, an you’re using C-S to determine that, you won’t know the market has improved until 1 year, 3 months after it has. ”

    I see what you’re getting at, but for it to make much of a difference, we’d have to assume that we’re going to see a pronounced reversal, like we might see in the stock market (and unlike what happened in the still ongoing Japanese real estate bust). If this (the former) were the case, there would be a bottom that we would have missed, but certainly not by a year.

    Say the index was at 100 now, but it goes down at it’s current monthly YOY rate for Seattle. Then in six months it bottoms in absolute terms and goes back up at the same rate to be at 0% YOY one year from now. In that case we see that it was back at zero 3 months after that or 15 months from the start. But the bottom happened only 9 months prior to that date that we saw it was back at zero, not 15 months prior. If the monthly YOY increase happened at the same rate as the current decline (highly doubtful it would be that fast), then another 3 months later we’d be at +4% YOY, give or take. That means we’d be 4% above the actual market bottom that happend a year prior.

    In this case, we would have waited 3 months past the point that the CS numbers showed retroactively that the bottom had happened, but we would have only have missed the bottom by 4%. I would much rather buy on a uptrend, having missed the bottom by 4% than have tried to anticipate the bottom and caught a falling knife, with no clear idea where the bottom might be.

    Maybe I lack imagination, but I just don’t see a catalyst that is going to make the market turn sharply upward any time soon. If it moved sideways for a year, then we’d see a the CS number at about 0% for a year. I don’t think this is unlikely at all. The stock market may look to the future, but home prices are going to depend on what banks are willing to lend, what rates they charge (likely to go up in ’80s Reagan-esque fashion), and unemployment (still rising). I don’t think people are going to run out and buy houses (or be approved to do so) just because somebody forecasts that GDP will stop contracting 6 months from now.

    I’m curious what you think is going to turn price declines around.

  66. 66
    shawn says:

    I agree with Greg, it is a rapidly improving market, for buyers.

  67. 67
    Scotsman says:

    Heh, look at this- wages are down about the same amount as houses. Weird.

    “TrimTabs real-time data indicates that net take-home pay, which is defined as after-tax wages and salaries plus income tax refunds plus government tax credits and tax rebates, is down a staggering 16.3 percentage points y-o-y so far in May, compared to a decline of 4.3 percentage points y-o-y in the period of February through April 2009.

    “Real-time data leaves little doubt the economy continues to contract at a rapid clip,” said Biderman. “Widespread expectations that the economy will recover in late 2009 are going to be dashed.””

    Additionally:

    “On Monday, June 1, the Bureau of Economic Analysis (BEA) will likely revise its estimates of wages and salaries and the personal savings rate substantially downward for the last quarter of 2008 and the first quarter of 2009”

    Hmmm, could it be… deflation!?!

  68. 68
    David Losh says:

    RE: Greg Perry @ 64

    This year, like any year, people trade houses to get into a school, or change careers, or get rid of something, or buy something.

    The difference is the shortened season. The buying and selling cycle starts in January. Corporate transfers and people spending year end bonuses usually start off the high end. February and March are Mom, Dad, and the kids time to buy. Last November and December should have had bargains.

    Here we are at the end of May talking about prices going up based on two months of selling season.

    I think the volitility in mortgage rates was the stupidest thing investors could have done. In my opinion it shook any dream of buying a good deal into the reality of what a shakey market place we are in.

    Sellers who want to sell need to do it now. Whatever price hit you take today will be nothing compared to next year. Next year the Fed will be talking inflation. Next year the Fed will be looking for reasons to raise rates.

    The economy for the next 18 months will be looking pretty good while the price of property continues to decline.

    Think of what a little rattle of mortgage rates did. What will happen when they go up from historic lows?

    You have to admitt this is a very delicately balanced market place of low rates, lots of inventory, $8000 credit.

    When all that goes away the market is left with price.

  69. 69
    Kary L. Krismer says:

    By Ira Sacharoff @ 55:

    By One Eyed Man @ 45:

    RE: Kary L. Krismer @ 40

    Kary, I think your right on the money as to the relationship between volume and the formation of a market bottom. Rising volume will preceed the stabilization of prices and any rise in prices.

    Yes but it’s not exactly easy to predict the when that will happen. In late 2005, early ’06, volume started dropping, and inventory started climbing. I was sure the top in prices was about to happen, but the top didn’t happen until July 2007.

    And then it was arguably as a result of an external event that had nothing to do with the prior market action.

  70. 70
    Kary L. Krismer says:

    RE: dogwood @ 65 – I don’t really have any strong disagreement with anything you said, and I’m not saying the market will turn around. I was just trying to point out that YOY isn’t the only way to determine the market has turned around. And I’d add, once it has turned it might turn again, and then yet again. The future is uncertain.

  71. 71
    Pegasus says:

    It’s all good guys! Surely there is a pony in those figures somewhere? Refusing to compare negative YOY comparisons in just another way to distort the truth for finding “green shoots” that don’t exist. Meanwhile back to reality brings this unsettling exposure……..

    http://subsidyscope.com/projects/bailout/fhlb/

  72. 72
    Kary L. Krismer says:

    RE: Pegasus @ 71 – Who’s refusing to recognize anything? I use the comparison from the peak, which is even a larger drop than YOY. But if I waited for that comparison to turn positive, I’d be the last person here to see the turnaround.

    The FHLB news is old news, at least as to the Seattle entity, and it’s based on the difficultly valuing these things. Just last week there was another story relating to that about how Chase is showing huge gains off some of the stuff they bought from WAMU. I suspect that’s just the result of refinancing activity, and the losses will show up at the end. But whatever. These things are difficult to value and that leads to all sorts of uncertainty and also some potential for profit.

  73. 73
    deejayoh says:

    By Kary L. Krismer @ 72:

    RE: Pegasus @ 71 – Just last week there was another story relating to that about how Chase is showing huge gains off some of the stuff they bought from WAMU. I suspect that’s just the result of refinancing activity, and the losses will show up at the end. But whatever. These things are difficult to value and that leads to all sorts of uncertainty and also some potential for profit.

    I am going to guess you don’t have much accounting/finance background. Here’s how it works:

    Step 1) government gives JPM a bank with >$30B in book value for less than $2B
    Step 2) Taking advantage of purchase accounting rules – JPM writes down the value of WAMU loans by $31B at time of purchase, even though they are probably worth more
    Step 3) As those loans pay back, JPM gets a steady earnings boost thanks to government asset seizure.

    See also: Bank of America + Merrill Lynch; Wells Fargo + Wachovia

  74. 74
    Kary L. Krismer says:

    RE: deejayoh @ 73 – First, I have a degree in accounting.

    Second, when I said that I suspect the gains are the result of refinance activity, I basically said the same thing you just did, without the explanation. These things were bought at X% of their face value and more right now are getting refinanced than getting foreclosed. That leads to gains. If rates stay low, eventually all that will be left will be junk, and the net losses will start occurring at that point.

  75. 75
    Softwarengineer says:

    RE: David Losh @ 63

    HI DAVID

    Cheer up, stop being grumpy, you think unemployment/underemployment massing up doesn’t matter for RE. Be happy, smile.

    Also, don’t get into a Scotsman and Softwarengineer are just Dr. Dooms “name calling scenario” with no freedom of speech like you appear to think only your opinion enjoys, as, assuming that’s the case, I’m the opposite of you and Scotsman appears that way too….we welcome a disagreement thesis with facts and figures against our viewpoints, not just “don’t ‘cha know” pipe dreams ignoring unemployment chronically massing up. Perhaps you like the Chinese and Indian GDP growth model with half its “excess population” chronically living in cardboard shacks and hungry the last 50 years? America’s economy is just fine and improving, as long as the upper employed 50% keep adequately employed and Bernanke keeps infusing the Sucker’s Stock Market with debt cash [that’s likely about to end next month, the federal stimulus cash for that apparently ran out per Yahoo Finance News yesterday].

    Its my humble opinion that when the bottom 50% of America’s economy is destroyed [it is], similar to the Chinese/India model, RE prices [i.e., first time home buyers collapse] are going way down and concurrent with wage deterioration to global slave salaries [i.e., Mexican homes with their slave wages today sell for about $10,000] and the future debt to keep status quo going will inevitably fail due to a starvation investment pool [who’s got money anymore?] with simulaneous plummetting consumer spending….thus driving home interest rates up in my opinion, at sky-rocketing levels too. When this happens soon, in my opinion; where will home prices go?

    Or, you can be a “Dickens’ Bankster Scrooge” type and lament, “send all the excess population to poor houses or let them starve”….God help us if that current global direction is pleasing to most Americans [I don’t think it is at all to date].

    P.S. if you’re switching to foreign automobile purchases due to bankruptcy of American automobile production, heed my advice; put off your Toyota, VW purchase until 2010/2011, when they go bankrupt soon too, in my opinion. You may get that new Prius for like $10-15K then when they close all their dealers. Its simply supply and demand. As far as new 35 mpg cars costing more, LOL, that’s a joke and a blatant lie, they should clearly cost way less; and bear in my,opinion, Americans mostly want $10-15K cars anyway, with their current reduced wages, not $20-30K pipe dream ones. The conundrum is: a $10-15K Cobalt/Corolla type high milage car only supports like a $10-15/hr wage….ask Toyota who contract temporaries at that low wage rate.

  76. 76
    Scotsman says:

    RE: Kary L. Krismer @ 74

    Kary, it has nothing to do with refinance activity. As ongoing operations, the banks continue to lose big time. Karl has a good summary and references to the source articles. Read at least the first third of the page- it will take two minutes and clear the whole thing up. Then you’ll be informed, and can pass the good news along to others!

    http://market-ticker.org/archives/1067-The-Curtains-Are-On-Fire.html

  77. 77
    deejayoh says:

    By Kary L. Krismer @ 74:

    RE: deejayoh @ 73 – First, I have a degree in accounting.

    Second, when I said that I suspect the gains are the result of refinance activity, I basically said the same thing you just did, without the explanation. These things were bought at X% of their face value and more right now are getting refinanced than getting foreclosed. That leads to gains. If rates stay low, eventually all that will be left will be junk, and the net losses will start occurring at that point.

    Well, I guess we share that dismal bit of background then.

    I am quibbling with your refinancing assumption. They took performing loans and wrote them down like they were non-performing – with no negative impact on the balance sheet – now they show a lot of profit from that loan when it pays back. And given the fire-sale price that JPM got WAMU for, they were able to write down a LOT of currently performing loans below their basis.

    Here is what was published by bloomberg about JPM earnings (emphasis added):

    When JPMorgan bought WaMu out of receivership last September for $1.9 billion, the New York-based bank used purchase accounting, which allows it to record impaired loans at fair value, marking down $118.2 billion of assets by 25 percent. Now, as borrowers pay their debts, the bank says it may gain $29.1 billion over the life of the loans in income before taxes and expenses.

    JPMorgan said first-quarter gains from the WaMu loans resulted in $1.26 billion in interest income and left the bank with an accretable-yield balance that could result in additional income of $29.1 billion.

    The words “pay back” and “interest income” do not suggest refinancing is a major source of profits to me. Do they to you?

    Of course the loans could still go bad in the long run, but for now it is simply the purchase accounting balance sheet treatment and normal loan performance that is driving profits. No need for refinancing or workouts.

  78. 78
    Kary L. Krismer says:

    RE: deejayoh @ 77 – I think that we have a terminology issue. When I say refinancing activity, I mean the bank getting paid off on an old loan as a result of the owner refinancing. The bank making the new loan might not even be Chase.

    I think you (and maybe Scotsman) were assuming I mean profit from making new loans. I was addressing only the assets they got from WAMU. not new loans they might make after buying WAMU.

    This is very similar to the way I view the government’s attempts to hold down interest rates. By encouraging refinancing they’re doing an end around on Congress when Congress blocked them buying toxic assets. There the refinancing also benefits the entities holding the old loans, because they have a bit more certainty what their loans are worth, but as they go, what they have left will be more and more certain junk.

  79. 79
    deejayoh says:

    RE: Kary L. Krismer @ 78 – never wrong, only misunderstood…

  80. 80
    Kary L. Krismer says:

    By Kary L. Krismer @ 74:

    RE: deejayoh @ 73 Second, when I said that I suspect the gains are the result of refinance activity, I basically said the same thing you just did, without the explanation. These things were bought at X% of their face value and more right now are getting refinanced than getting foreclosed. That leads to gains. If rates stay low, eventually all that will be left will be junk, and the net losses will start occurring at that point.

    Well, when you look at this I have a hard time seeing you you could misunderstand. Even the first thing you responded to:

    Just last week there was another story relating to that about how Chase is showing huge gains off some of the stuff they bought from WAMU. I suspect that’s just the result of refinancing activity, and the losses will show up at the end.

    When I’m talking about gains on assets bought from WAMU being the result of refinancing activity, I didn’t consider anyone would take your interpretation. Perhaps it would have been clearer if I’d said “refinancing and resale activity.”

  81. 81
    deejayoh says:

    Read what the bank said. I’ll repeat my question, which you did not answer.

    The words “pay back” and “interest income” do not suggest refinancing is a major source of profits to me. Do they to you?

    Now you say I misinterpret a plain statement “I suspect that’s just the result of refinancing activity”

    I completely understand what refinancing is. I also understand that it is different that people making payments on their loan. What the banks says is that they are making money from payments on their loan.

    but it is amusing how dogged your need to be right is. Most people would say, “yeah – thats a good way to put it”. I am guessing you were quite good at negotiating contracts as a lawyer. or at least at standing your ground on terms. Probably lots of them never got signed :^)

  82. 82
    Kary L. Krismer says:

    I didn’t say what I wrote wasn’t ambiguous, just that I didn’t expect that interpretation.

    BTW, I seldom drafted contracts or wills. I considered them to be malpractice time-bombs that you set off afloat and hope for years nothing really bad ever comes of them. The longer you do it, the better you get, but the more you have to worry about.

  83. 83
    Scotsman says:

    RE: deejayoh @ 79

    Amen. I could never do business with Kary, fearing that his ego or whatever the controlling issue is would filter honest and corrective communication. How would I know if I was getting the truth or the CYA? The inability to admit error, apologize, and move forward, prioritizing truth and reality would be a real handicap. Good luck!

  84. 84
    One Eyed Man says:

    RE: Kary L. Krismer @ 82

    I wrote hundreds, probably thousands if you total all the contracts and wills. I finally concluded I couldn’t get enough coverage without going back to a middle or large size firm and the headaches that entails. Once we had a significant net worth, the risks just weren’t worth it anymore because we were a bigger deep pocket than my coverage limits. A million per occurance doesn’t go very far if the deal is a purchase of an appartment complex for 10 mil. I had never had a claim or a bar complaint but the commercial carriers wouldn’t write me more than 1 mil per occurance, 2 mil total as long as I was doing real estate and lending work as a solo.

  85. 85
    Jonness says:

    Here’s an interesting local view on the current state of area foreclosures. This supplements the most recent loan reset chart I linked in my post about Tacoma foreclosures (I looked at some $700K homes selling for $300K. I physically inspected the homes and found them to be in good shape. However, a home I didn’t link sold a few days after I looked at it and found it to have major structural problems. It was on a great piece of land and had a massive swimming pool, so that’s what sold the home):

    http://seattle.bizjournals.com/seattle/

    click on “Home tenders are booming as banks take more area property”

    It’s difficult for me to believe some people are acting like we’ve hit botom and are on the verge of Ving straight up. I think many of these people do not understand that the stimulus is bound to make things appear better. Think of it like running up your credit card. While you’re spending the money, you feel rich. The real problems appear when you max out your credit and have to pay back the money.

    Right now the govt. is attempting to prop up house prices by borrowing money. The bad news is this transfers money from the young to the old. What’s in store for our nation’s youth when the picture turns stag-hyperinflationary? Of course, there are those that believe the govt. will pull all the money from the system when it gets infationary. My question for those in the know is, why would it do that when doing so will decrease it’s ability to pay back the massive debt liability?

  86. 86
    Kary L. Krismer says:

    RE: Scotsman @ 83 – How about we have this discussion about my having committed an error, or refusing to admit a mistake after I commit an error? Just because you two didn’t understand what I was talking about doesn’t mean I was wrong or have something to admit, other than having been ambiguous.

    Or if you prefer, find some other example of something I was wrong on where I didn’t admit I was wrong. I say a lot here, so if I have such a problem in this area it should be easy for you to find something.

    Either way is fine with me. But I tend to be very careful about what I say, and if I’m not sure of something I’ll say “I think” or attribute the source. So happy hunting.

  87. 87
    Kary L. Krismer says:

    RE: One Eyed Man @ 84 – And with the claims made type policies, you almost need to periodically get tail coverage so that they can’t just cancel you out on all the prior incidents.

    My situation in bankruptcy was slightly different. It wasn’t necessarily a high risk area, but you were dealing with what I called Monopoly Money. High dollar claims on which little would be collected. It required that I carry much higher limits than necessary.

  88. 88
    LUC says:

    RE: Scotsman @ 53

    Spot on!

  89. 89
    One Eyed Man says:

    RE: Kary L. Krismer @ 87

    Every company I was ever with had a deal where they would give you free tail coverage after 5 yrs. But every time I got close to 5 yrs they seemed to stop writing the coverage I needed. In the end I had changed companies the year prior to closing my practice and had to pay 3yrs premiums to get tail coverage.

  90. 90
    Kary L. Krismer says:

    I’d never heard of the 5 year rule. I do know someone, however, who purchased a tail (3x annual cost as you mention) and then within a month got a letter from their carrier about how they were in financial distress, etc.

  91. 91
    b says:

    Is there any data to back up this “low end volume picking up with no high end volume means bottom forming”? From what I have read on other sites, such as CR, metros in more advanced bubble areas (Cali, Nevada and Florida) the volume in the low end began increasing significantly YoY last spring and has continued to increase from then on. This has not seemed to stop prices from continuing to decline significantly during that time period. I believe we talked about this a few threads ago, but if you Google News search for any metro area and “increasing sales” or similar for last year, you will find a ton of articles about it (along with pontification from RE folk that this means bottom and buybuybuy).

  92. 92
    bellinghamREnter says:

    The Tim – thanks for posting info on whatcom county!

  93. 93
    One Eyed Man says:

    RE: deejayoh @ 77

    deejayoh, I acknowledge that the J P Morgan Chase Q1 earnings benefited from WAMU loan portfolio write downs but the increase in revenue the write down caused for the quarter was just under 1.3 billion. Net of that amount they still posted a profit from operations. There Q1 profit was closer to 2 billion and that was after an 8.5 billion addition to loan loss reserves for the quarter. I think you’ve got to agree, the real issue isn’t the revenue coming from the WAMU purchase price allocation but whether the 8.5 billion being allocated to cover loan losses will be enough.

    Their estimate of future loan losses on the WAMU loan portfolio supposedly took into account an additional 10% drop in the real estate market and I think they raised some additional capital immediately after the WAMU purchase to hedge against a drop in real estate prices beyond the 10% they had estimated. Obviously, they’ve probably eaten up the 10% additional decrease in the real estate market from Sept to now but the WAMU loan portfolio still out performed by 1.29 billion for the quarter. Go figure? I know , I know, Scottsman, Sniglet, you and a lot of others are saying they can’t out run the bear and the pee shooters wheeled by Treasury and the Fed don’t have the stopping power to bring the bad boy down.

    The whole WAMU loan portfolio was valued at 206 billion. At 8.5 billion per quarter, they are writing off over 15% per year of the WAMU portfolio, but that doesn’t leave any loss reserve for their own loan portfolio and looser investments. Is 6 or 7 percent per year enough of a loss reserve on the WAMU loans? It is if the WAMU portfolio keeps outperforming so the 1.29 billion is actually good news if you hope to beat the bear. But I wouldn’t count on the 1.29 billion being there in future quarters.

  94. 94
    Kary L. Krismer says:

    RE: b @ 91 – The problem with comparing what other cities have done is they’re affected by the same news as us at the same time as us. So whatever they were doing in August of 2008, if they then fell, that’s what you’d expect because there was very bad news in September of 2008.

    To use an analogy, a stock might have a strong support level at $35.00 per share and be falling to that point. You’d generally expect it to bounce off that point, but it probably wouldn’t if it reached that point the day Sec. Paulson announced the economy might be nearing systemic collapse.

  95. 95
    patient says:

    RE: Greg Perry @ 64

    “But at the end of the day, we’ll see how it plays out, won’t we? What was your closing/month prediction again? Say it again…. I want to see it”

    1450 in July.

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