Realty Check

Published: Tuesday, 26 May 2009 | 12:09 PM ET

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Casey Serin For Sale By Owner

The last week of every month is always the most data-rich, with new and existing home sale reports, price reports from S&P Case Shiller and the FHFA government price index. This month will be particularly interesting, since the jambalaya will include the quarterly delinquency survey from the Mortgage Bankers Association this Thursday.

The street is predicting existing home sales to increase, based largely on the sales surge of distressed properties. No question, the bottom feeders are back in the game, as are first time home buyers.

But these sales are not the type of sales necessary for meaningful recovery in housing. Don’t get me wrong, we need to unload the foreclosure inventory, but without real “organic” sales, that is move-up home buyers and sellers, there is no way to put a bottom on home prices.

I know there is a common perception that foreclosures and distressed sales are really only happening in the big boom-to-bust states, i.e. California, Florida, Nevada and Arizona. California makes up roughly 10 percent of the U.S. population and very roughly ten percent of the nation’s total housing units.

In April, California single family home sales made up 12.8 percent of total U.S. single family home sales. So, while slightly higher, it’s not as if California sales are wildly out of whack from what normal demographics would suggest.

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That said, with jumbo loans still a lot tougher and more expensive to obtain, and buyer incentives really favoring the lower-priced starter homes, my concern lies in sales above the median home price (and remember that’s half the nation’s housing market). The quarterly delinquency survey looks back to Q1 of this year, so not the most timely, but that’s when we really started to see job losses surge.

While there’s obviously going to be a lag time between when a homeowner loses his/her job and when they get into trouble on their mortgage, I think we’re really going to see the meaningful impact of job losses in this report, especially on prime, non-exotic loans. These are the homes that the bottom feeders and the first time buyers are still priced out of.

So before anyone starts calling a bottom to this housing market, if only in sales and not prices, keep an eye on the numbers this week. Foreclosures are the key, and if this new breed of distressed loans starts to grow in size, we may be looking at another bump in the road to recovery.

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