July Existing Home Sales Crumple Like Empty Cans

When the cruel, hard numbers on housing were published by the National Association of Realtors on Tuesday, they were cruel and hard indeed: home sales contracted 27.2 percent nationwide in July compared with June.

August 25, 2010
Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user DaveBleasdale

Was anyone expecting anything else from the post-tax credit housing market? Still, when the cruel, hard numbers on housing were published by the National Association of Realtors on Tuesday, they were cruel and hard indeed: home sales contracted 27.2 percent nationwide in July compared with June.

Sales of existing homes during the month were at an annualized rate of 3.83 million, 25.5 percent lower than during July 2009. In fact, it’s the lowest annualized rate since the NAR started tracking existing home sales in 1999.

Lawrence Yun, the put-on-a-happy-face chief economist of NAR, posited a silver lining this way in a statement: “A pause period for home sales is likely to last through September,” he said. “However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.”

REIT Execs Managed to Prosper in ’09

Among real estate owners, REITs have done better than most other ownership structures during the recent tough years. One indication of their relative prosperity is the fact that total compensation levels within the REIT industry increased in 2009 by a median of 3 percent to 15 percent, according to a new survey by FTI Schonbraun McCann Group (SMG), the real estate advisory arm of FTI Consulting Inc.

In particular, the SMG survey found that the healthiest increases in compensation could be chalked up to rebounds in stock prices–REIT stock prices generally started bouncing back in 2009–and companies implementing performance-based equity programs. Mostly upper management has benefited from trends in stock prices. Because their compensation is more heavily weighted towards base salary and moderate cash bonuses, lower-level employees, including middle management and other professional staff members, have typically experienced more moderate pay increases.

Time-based restricted stock continues to be the equity compensation vehicle of choice for REITs; about 80 percent of REITs grant such shares, notes the SMG survey. But stock options (used by 34 percent of REITs) and performance-based restricted stock (used by 31 percent of REITS) are catching up in popularity as ways to reward the big cheeses among REIT management.

CBO Offers Good News, Not-So-Good News

The nonpartisan Congressional Budget Office said on Tuesday that the federal government’s stimulus plan resulted in the employment of between 1.4 million and 3.3 million people during the second quarter of 2010. The U.S. unemployment rate is as much as 1.8 percent lower than it would have been without the stimulus, the CBO said.

Positive news, especially for the Obama administration. On the other hand, the CBO also reported on Tuesday that the federal budget deficit for 2010 will exceed $1.3 trillion, a little less ($27 billion) than previously forecast, but still the second largest deficit since World War II at 9.1 percent of U.S. GDP (2009 was the largest at 9.9 percent of GDP).

Wall Street had a predictable panic attack on Tuesday about the predictable news on housing sales. The Dow Jones Industrial Average sank 133.96 percent, or 1.32 percent, while the S&P 500 was off 1.45 percent and the Nasdaq lost 1.66 percent.