July 8, 2010: June Housing Data Stinks

The monthly real estate results are in, and the Credit Suisse Monthly Survey Of Real Estate for institutional investors (my favorite professionally adjudicated document because of its boots on the ground approach and demonstrated predictive accuracy) tells a simple tale. Economic concerns + a tax credit hangover = plunging traffic and a deepening fiasco in the single family home market.

Nationally, the home traffic index dropped to a level not seen since the credit crises during the latter months of 2008. This drop is more serious, as it is compounding the initial plunge reported for May, after the tax credit expiration.

According to CSFB, another round of declining home prices is inevitable because of high inventory coupled with limited traffic. Real estate professionals report that sellers are capitulating on prices in most markets. Inventory is expected to increase significantly with increasing foreclosures flooding markets again. The time needed to sell a home increased by almost 20% in June compared to May, which was a bad month in itself.

Dallas, Orlando, Southern California and Las Vegas slowed the most of the fifty nationwide markets in the survey. Every one of the twenty largest real estate markets slowed.

Builders, as predicted in this survey in prior months, are in a state of desperation, with land impairment charges in the cards for builders in the third and fourth quarters of this year. CSFB believes that stocks of builders may be attractive at that time, but only if the economy pulls out of the doldrums.

Here are some headline takeaways from several large markets followed in the survey:

Atlanta,GA:"No stability following tax credit expiration".
Austin, Tx: "Traffic continues to slip. Buyers anxious over the economy."
Charlotte, NC:"Weakness continues. Traffic takes another step lower."
Chicago,IL:"Where are the buyers, on tax credit vacation?"
Dallas,TX:"Traffic falls off a cliff."
Denver,CO: "No more rebates, no more buyers."
Jacksonville, FL:"Traffic falls on further economic concerns."
Las Vegas, NV:"Buyers lack confidence."
Los Angeles, CA:"State tax credit has little impact."
Miami, FL:"Weak entry level demand, Appraisals low."
Minneapolis, MN:"No first time buyers left."
New York Metro:"There is no confidence, no tax credit, no money, no jobs."
Orlando, FL:"Worse than expected traffic in June."
Phoenix, AZ:"Price does not meet income." Another bubble is apparent, from investors.
Seattle, WA:"Many agents have had contracts fail even after buyer was pre-approved."
Tampa, FL:"Prices show signs of cracking as demand continues to slip."
Washington, D.C.Metro:"Traffic continues to weaken as buyers lack motivation."

A few areas, such as Ft, Meyers, FL, are experiencing an uptick as investors buy property at a fraction of the price point a few months ago.

I do not take pleasure reporting on the current real estate downward spiral. Many involved in the housing industry are getting sucker-punched on a regular basis.