My friend Les Christie covers the month over month change which is the fundamental message of all CS releases.
They seasonally adjust so the fact that this really reflects January activity and that tends to see an uptick was therefore not a factor. This shows how useless the index is. The declines through December (their May release) reflect the tax-credit aftermath where the market was artificially depressed after being artificially inflated in early 2010.
Emphasis was placed on the year over year comparison, which ordinarily I’d agree with but since early 2010 house market was artificially pushed higher by the federal home buyer tax credit, it really isn’t.
The headline really should say closed housing prices in February, March, April in 20 U.S. Cities Fell 4%.
Here’s some sage insight in the piece:
“Home prices are still easing but the declines are not dramatic any more,” said Harm Bandholz, chief U.S. economist at Unicredit Group in New York, who correctly predicted the year- over-year drop. While month to month changes show “prices have basically bottomed and are moving sideways,” he said “we’re a long way away from significant increases in house prices.”
Two approaches to the same release and both are correct for different reasons and because of the 6 month data lag, we have no better understanding of the state of housing this month.
Posted by Jonathan J. Miller -Monday, June 20, 2011, 10:52 AM Comments Off
The Council on Foreign Relations published their quarterly update from the Center for Geoeconomic Studies, always a good resource, called: The Economic Recovery in Historical Context. The charts look at various metrics since the end of each recession. FYI, the recession was dubbed “over” in June 2009.
GDP is growing, but below the average post-war pace but not slower than the 1980-81 double dip.
Housing continues to fall – it is well below both the average and low end of the post-war range. Of course that’s because housing/credit was the cause of the crash itself.
It’s hard to see the economy moving forward appreciably until housing improves or at least it’s being more consistent with historic norms during an economic recovery. I like these graphics because they provide tangible perspective to the state of the economy and housing.
Posted by Jonathan J. Miller -Wednesday, March 30, 2011, 10:27 PM 2 Comments
I’ve been slammed as of late and Matrix has been dark for a week and a half – good grief – it pains me – what better way to come back to blogging than to have an energetic interview with Tom. Always fun.
BTW, I’m now the mayor of the Bloomberg HQ cafeteria on Foursquare.
Posted by Jonathan J. Miller -Sunday, December 5, 2010, 10:40 PM Comments Off
According to NYT/Floyd Norris’ analysis of the Case Shiller numbers, “during the great housing bubble, it was the least expensive homes whose prices went up the most. And now it is those homes [least expensive] that are suffering the most.”
[click to expand to it's full glory]
And a similar pattern is seen in NAR’s existing home sales data. There has been more of a decline in the market share of activity at the lower end of the market.
Posted by Jonathan J. Miller -Thursday, October 28, 2010, 1:53 PM 6 Comments
We all understand that when one has “skin in the game”, they are incentivized to minimize or control exposure or risk. Stories of no money down borrowers walking away from homes as strategic defaulters are common fodder in today’s news cycle.
However, in Spain, mortgage defaulters remain on the hook for their obligations yet that didn’t prevent them from getting swept up in the euphoria of the credit boom in In Spain, Homes Are Taken but Debt Stays [NYT]
So the argument that homeowners without “skin in the game” were morally bankrupt is a one dimensional viewpoint since Spain had the same shoddy lending practices we did. In other words, the fact that people would have to pay the loans back didn’t dampen the credit frenzy of the times. Moral hazard, the idea that someone will help you if you get into trouble without significant penalty, is the default explanation for a lot of the credit mess.
In the US, lenders AND borrowers AND TAXPAYERS are paying for the error of their ways but in Spain, the borrower seems to have much more of the burden. In theory that makes perfect sense – they borrowed money and can’t pay it back. However the big question is whether or not deceptive or predatory lending practices were commonplace in Spain during the boom like in the US.
The point in my ramblings dialog here is that even with an embedded payback requirement in the mindset of the spanish borrowers, they still took risks that they didn’t comprehend. This therefore suggests a larger structure economic phenomenon that drove so many people to make poor credit decisions.
Moral hazard isn’t the easy explanation many seem to think it is.
Posted by Jonathan J. Miller -Monday, September 13, 2010, 7:13 PM 2 Comments
Well, a tongue in cheek interpretation of their September 6, 2010 cover -hat tip to Business Insider who beat me to the punch(line)during this back to school, holidays every other day period of the year.
There’s that old joke, if it’s on the cover of Time Magazine, then it already happened… (I must admit that I feel guilty repeating this joke since I like the author’s work and have been an avid follower of their Curious Capitalist blog). Still it makes for an interesting message.
By mid 2005 the housing market was already showing serious problems and this was nothing more than a “pile on” article consistent with everything that was being written at the time. Incidentally this cover pre-dates Matrix which I started on August 1, 2005 with this post.
Posted by Jonathan J. Miller -Monday, September 13, 2010, 8:18 AM 1 Comment
Ok, our vision for the housing market is getting a bit muddy and over the last few weeks and noted journalists and bloggers have been on a creative tear. I feel that the tipping point for this introspection was the moment the July existing home sales numbers were released followed by the next day’s new housing sales numbers and pending home sales the following week.
The great irony here is that the bad housing numbers should not have been a surprise to anyone who follows housing. The tax credit expiration on April 30th simply “moved chairs around in the room.” There is nothing wrong with the idea of homeownership – it’s the financing that got us here today. The problems to be fixed are the economic factors that drive housing demand and that is primarily employment. The idea that a tax credit would jump start the housing market and therefore jump start the economy was born in the old world (2003-2008) when housing was touted as leading the economy.
Fear and self-loathing
As a by-product of this sudden realization that the tax credit did not revive housing (nor could it be expected to), there has been an outpouring prominent discussion pieces about homeownership and what is wrong with it. Most noticably, the New York Times has been on a Page One tear.
The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.
Prices nationally have nearly returned to their long-run trend in terms of price-to-rent and price-to-income ratios. Some segments of some markets may still be overpriced, and I expect prices nationally to edge downward in the months to come, but another plunge seems both unlikely to occur and unlikely to generate a wave of buying…
Where you think the “natural” price of housing is depends on which of these trends you expect to persist, versus which you think will peter out and reverse. Right now my assessment is that things like the amortizing mortgage, increasing land supply, and huge shifts in inflation/interest rates are largely played out.
As we noted yesterday, the raison d’etre of housing subsidizers Fannie Mae and Freddie Mac has changed radically in the past three years. Specifically, the purpose of these two agencies has gone from “making housing affordable” to “keeping houses expensive.”
I think it’s reasonable to argue that house prices today are fairly consistent with incomes and rents. So that equilibrium house price, that bottom in house prices, I think we’re there. And if the prices fall further, that would be, as David said, would be overshooting and, I think, counterproductive.
You have to wonder sometimes what they’re smoking over there at the National Association of Realtors.
This quote really shouldn’t be taken as a slight against NAR, but rather against their chief economist and whomever is enabling him to depict the market this way. Members continually mention to me about being embarrassed by this positive at all costs outlook by “Sunny Yun.”
And that doesn’t mean a gloom and doom depiction of housing would suffice either, but come on – the American consumer is a lot smarter than being given credit for.
The article is essential reading, especially for real estate brokers and agents because it lays out the proper context of the key factors in the current housing market. Understand and embrace it to be successful in today’s economic environment.
Posted by Jonathan J. Miller -Tuesday, August 24, 2010, 9:01 PM 1 Comment
I keep waiting for the day when I will have my fill of books and movies about the financial market meltdown. Although both myself and my colleagues are arguably getting weary of reading and writing about the financial meltdown, it still gnaws at me the scope of greed and stupidity from all parties. And since the housing market has many years of challenges in front of it, directly as a result of the credit meltdown, its not helpful to simply shutdown and tune it all out, no matter how cynical you are.
The focus seems to be wall street only, yet the consumer, lenders, appraisers, mortgage brokers and rating agencies were just as complicit. Of course I haven’t seen the movie yet.
Here’s the movie pitch;
From Academy Award® nominated filmmaker, Charles Ferguson (“No End In Sight”), comes INSIDE JOB, the first film to expose the shocking truth behind the economic crisis of 2008. The global financial meltdown, at a cost of over $20 trillion, resulted in millions of people losing their homes and jobs. Through extensive research and interviews with major financial insiders, politicians and journalists, INSIDE JOB traces the rise of a rogue industry and unveils the corrosive relationships which have corrupted politics, regulation and academia. Narrated by Academy Award® winner Matt Damon, INSIDE JOB was made on location in the United States, Iceland, England, France, Singapore, and China.
The trailer is slickly produced and gets your blood boiling. Since Matt Damon isn’t in the trailer as narrator, I’m guessing they are still wrapping up production.
My friend and business associate Dan Alpert of Westwood Capital is one of “The Cast” members: Founding Managing Director of Westwood Capital with more than 30 years of investment banking experience, and a frequent commentator on economic policy and financial regulation.