Posted by Jonathan J. Miller -Friday, April 28, 2006, 12:05 AM
Posted by Jonathan J. Miller -Friday, April 28, 2006, 12:01 AM
In Bill Virgin’s column How to rein in housing prices? It’s simple [SeattlePI], he draws a comparison between keeping gas prices down and housing prices.
The first reaction to gasoline prices over $3 per gallon to many is to control prices, yet that limits expenditures on new drilling and refining ventures. With the reduced affordability of housing, the author speculates tongue in cheek what would happen if housing prices were controlled.
If gouging the motorist is wrong, so is gouging the prospective home buyer — or so this line of thinking goes. The solution is simple. Make it a crime to sell your house for more than you bought it.
How else do we stop the exodus of the middle class from new urban areas, sprawl and longer commute times?
Sarcasm aside, neither gasoline nor housing prices lend themselves to easy fixes or palatable remedies. Gasoline is going to be more volatile and, on average, more expensive as worldwide demand for petroleum grows and supplies tighten — unless you’re willing to allow drilling anywhere, set prices for every step in exploration, production, refining and marketing, or take everyone’s car away.
With smart growth initiatives, new urbanism, zoning and other restrictions the very things that make certain areas more appealing to buyers, are constricting supply and development of new housing, a solution to affordability has to be underneath another stone that needs to be “un-turned.” Its hard to believe that current property owners, who are sitting on a windfall of homequity gains, would be willing to give that up to sell their homes for what they paid for it.
And by the way, aren’t we in a free market system?
Posted by Jonathan J. Miller -Thursday, April 27, 2006, 3:47 PM
I was a bit tardy getting these posted online, but here are the PDF versions of our two latest market reports that I write for Prudential Douglas Elliman [PDE].
In addition, you can see the methodology that went into the reports including the neighborhood boundaries and the type of content we have available. You can also build your own custom data tables here [aggregate data for 1Q 2006 will be available online early next week in this data section):
1Q 2006 Manhattan Market Overview [pdf]
A quarterly survey of more than 2,000 Manhattan co-op and condo sales.
Although the three price indicators showed growth over the prior year quarter and the prior quarter, price per square foot best characterizes market conditions for the current quarter since it is least impacted by the shift in unit mix toward larger apartments this quarter. The average price per square foot of $1,004 was the highest ever recorded in this study but was essentially unchanged from the prior quarter result of $1,002 for a 0.2% increase. The average sales price and median sales price jumped 9.6% and 8.6% respectively over the prior quarter. The average sales price was one of the highest on record at $1,300,928, second only to the second quarter of 2005 when the average sales price set an all-time record of $1,317,528. This indicator was 7.1% above the prior year quarter average sales price of $1,214,379. Median sales price saw a similar pattern, setting a record at $825,000 in the current quarter, up 17% over the prior year quarter median sales price of $705,000. The contradiction in the average price per square foot compared to these indicators was due to a shift in the mix of apartments to larger units that sold for the quarterâ€¦
Manhattan Market Report 1996-2005 [pdf]
More than 80,000 co-op and condo sales transactions from more than 6,400 buildings over the last ten years were analyzed. Each of the 53 different market areas was analyzed with data tables and charts as well as a summary matrix with prior year and prior decade comparisons.
The Manhattan market saw record prices in all major price categories: Average sales price, average price per square foot and median sales price. All categories saw year-over-year gains in excess of 20%. Average sales price remained above $1,000,000 and set a record of $1,221,265, increasing 21.6% over the price year average of $1,004,232. Average price per square foot set a record at $965, increasing 25.8% over the prior year average price per square foot of $767. Median sales price set a record at $750,000, increasing 23.8% over the prior year median sales price of $605,859.With all three price indicators showing similar percentage gains, there were broad-based price increases across most market categories. One of the distinctive characteristics of the market in 2005 was the decline in the number of transactions. A modest increase in mortgage rates and double-digit price gains have reduced affordability. Mortgage rates were above the prior year but are still below levels seen ten years ago. Analysts expect fixed and adjustable rates to increase slightly in the first half of 2006 as the economy continues to improve but the shift in the housing market to more modest price gains may keep further near term rate gains in checkâ€¦
Posted by Jonathan J. Miller -Thursday, April 27, 2006, 7:37 AM
The Federal Reserve [released its Beige Book yesterday [NYT]]((http://www.nytimes.com/reuters/business/business-economy-fed-beigebook.html?_r=1&oref=slogin), which provides an anecdotal commentary of economic conditions in each of the Fed’s regional banks.
The economy is expanding modestly but concern is growing that higher energy prices will create more cost pressures but so far, not all businesses have been successfull passing along these costs to their customers.
Meanwhile, the pace of housing market activity was said to be cooling or moderating in many Fed districts, although commercial real estate activity was firming, the Fed’s report said.
In general, year-on-year price appreciation seems to be lower than in quarters past,” the Fed said.
To read the Beige Book (I find it easy to read and informative about regional economic conditions) and conditions in each of the districts (regions) go here [FRB]
US Fed beige book says economic activity increased [Reuters]
Reading Ben Bernanke For Clues About ‘Near’ [WSJ]
Economically Speaking, Its Beige [Matrix]
Posted by Jonathan J. Miller -Thursday, April 27, 2006, 7:20 AM
James Hagerty in his article Housing Strength Shifts to New Markets [WSJ] notes:
As home sales cool on the East and West coasts, some cities that missed out on the real-estate boom are becoming the strongest markets.
Metropolitan areas whose housing markets look less healthy, at least in the short term, include Boston, Los Angeles, Miami, Minneapolis, New York, Philadelphia and San Francisco. All of them have growing inventories of homes and relatively weak job growth. As a result, houses that a year or two ago might have sold in hours now are languishing on the market for months, and some sellers are cutting prices.
Houston, Dallas and Atlanta appear to be postioned for future appreciation because of strong employment prospects and relatively tight inventory. These markets have been largely dormant while other metro areas are cooling, especially on the east and west coasts. New Jersey is expected to remain flat, per a NJ appraiser that I respect, but at the upper end, there is a 3-year supply.
The WSJ study says that Boston is among the worst right now. Another study I posted a few days ago indicated that Washington DC was also marginal because of the rampant speculation. On a trip to San Diego a few months ago, I was struck by how many condo sales offices there were downtown, yet their employment situation is strong which may mitigate some of the problems.
I thought it was especially interesting that a realtor in Miami indicated that the surge in inventory (up 236% over the past year) would be absorbed by population growth within 12-18 months. Thats gotta be something in the order of 10,000 to 15,000 condo sales sold over this period. I find that very hard to believe.
Actually, now that I think of it, this study seemed to single out a few cities as being promising, but most of the cities on the list seem to have problems and the premise of the story isn’t really proved.
Posted by Jonathan J. Miller -Wednesday, April 26, 2006, 3:36 PM
Its Wednesday, so its that time of the week to provide my Three Cents Worth, as a post for Curbed, your long lost niece of a real estate web log.
Curbed: Three Cents Worth: Wavy 5-Year Price Cycles
Previous posts can be found here.
Posted by Jonathan J. Miller -Wednesday, April 26, 2006, 9:43 AM
GasBuddy via BigPicture
For full sized chart [GasBuddy]
What does higher gas prices mean to the housing market?
Mortgage News daily presented the following points in their commentary: The Effects Of High Gas Prices On The Housing Market [MND]:
- Could revitalize urban areas as the cost of commuting outpaces the higher cost of housing in city centers.
- Will place more pressure on city workforce housing issues.
- Will cause the Fed to continue to raise the federal funds rate, tempering prices further as mortgage rates rise.
- Will increase cost of construction materials and labor. These are already stressed due to the high demand and inadequate supply situation the market is currently experiencing.
In the post Who’s afraid of $3 gasoline? [econobrowser] there is the possibility that Americans will be shocked with the discovery that more expensive oil is here to stay and decide that significant changes in lifestyle are immediately called for. If as a result, consumers make sudden changes in plans for spending on such things as cars, durable goods, and vacations, vendors of those products may find themselves left in the lurch. This does not bode well for housing, especially investor and second home markets.
Why $75 Oil Does Not Mean Recession [Rutledge] In Washington today Senator Specter earned his 15 minutes on TV by calling for windfall profits taxes on oil.
That would be the single dumbest thing we could do in a world where oil is scarcer by the day. It would decrease investment in energy and mark one more example of our “capitalism when convenient” school of policy.
But why is the US economy still growing when oil is above $70 per barrel? One reason people cite: it would take $95 oil to be as high as it was in 1981 relative to other prices.
Gas heats Up [Moneyblog] And why won’t reductions in U.S. consumption in oil and gas do much to affect the global price of oil? Because the Indians and the Chinese are just beginning to drive, in their millions.
Its tough to strike a balance in commentary on this issue. The real estate brokerage industry tends to be fairly optomistic about the future, while economists are often writing the market’s epitaph.
Its hard to judge. Coastal markets appear vulnerable while the midwest and southwest are seeing appreciation.
Much of the control of gasoline prices appears to be out of our hands now and OPEC is likely at full capacity, unable to pump out more to ease price increases. We can get it out of the ground but we don’t have enough refining capacity. Conservation efforts won’t have the same impact as it did in the 1970’s because China and India are just getting started on the high consumption track.
Prices are rising at the fuel pump as the weather gets warmer and prices, adjusted for inflation are still well below the price spikes seen in the early 1970’s.
Nevertheless, this week’s obsession with rising fuel prices has reinvigerated concerns over inflation. Inflation means higher interest rates, which means higher mortgage rates, whose impact means many different things in various real estate markets across the country. Clearly, rising gas prices are not good for housing in the long run. The short-term effect will likely vary across the country: ranging from significant price reductions to modest appreciation.
Posted by Jonathan J. Miller -Wednesday, April 26, 2006, 12:01 AM
The National Association of Realtors has gotten into the blog business with their launch of NAR in the News to look at how the news media covers NAR and our top issues.
News coverage shapes perceptions of people, organizations and entire industries.
Yet few of us understand what goes into the making of a news story. â€œNAR in the Newsâ€ will give its readers a peek behind the scenes into how journalists cover the nationâ€™s largest trade association and the 1.2 million REALTORSÂ® it represents.
For those who are excited about receiving unique insight from NAR, you may have to wait. The blog is being run by NARâ€™s Public Affairs Division (ie public relations) and appears to be largely an effort to stave off their recent weak public relations image. However, I am hopeful that more clarity and openess will result from this effort.
The blogosphere has created a number of public relations problems for NAR over the past year since the data and comments that are released, seemingly every day, are dissected and analyzed by hundreds of blogs (including Matrix). Up until the emergence of the blogosphere, NAR’s take on market conditions had usually been accepted at face value. However, their PR efforts during the change in the market over the past year has been largely a series of missteps, using strange market descriptors like housing expansion for the post-boom period to Balloons Not Bubbles! because they don’t pop, to their current favorite: high plateau.
Since the blog will be run by their PR group (where’s the cool name with the tell-tale trademark symbol the use after every instance of Realtor?).
I hope NAR does not squander this great opportunity to sell their expertise as real estate professionals. Perhaps they need a non-pr vehicle (blog) to do this.
How about “The Realtor”?
Posted by Jonathan J. Miller -Tuesday, April 25, 2006, 7:39 AM
In a post I made a few days ago: Foreclose Already So We Can Get Back To Normal, RealtyTrac’s blog: foreclosurepulse, the people that bring you national foreclosure statistics every month, shed some light on the correlation between exotic mortgages (option-arm, interest only, etc.) and foreclosure rates in their post ARM’d and Dangerous? [ForeclosurePulse].
I had questioned why the Midwest seemed to have more foreclosure activity than the east and west coasts where more price appreciation has occured, and specifically the west coast, where there are higher loan to value ratios on average and greater use of exotic mortgages.
RealtyTrac says theres more to it than that.
The common assumption (aka mine)
a popular bias these days towards directly linking the rising foreclosure rates to default ratesÂ on some of the higher risk loans that have become increasingly popular – ARMs, interest only, negative amortization, etc. There’s undoubtedly some truth to that: high risk loans are more likely to be defaulted on than traditional loans
What is likely happening
we’d probably look at the Midwest rates and chalk them up to higher-than-average unemployment rates (a very strong predictor of foreclosure rates) and lower-than-average house appreciation rates coupled with weak housing demand. That’s a pretty reliable formula for high foreclosures: No job + no equity + no homebuyer = distressed homeowner.
We should be concerned with the looming re-sets next year to the tune of $1B and keep our eyes on California due to the loan volume, high housing prices and heavy use of exotic loans.
I’ll look to RealtyTrac’s ForeclosurePulse to keep me informed on this topic in the future.
Home Foreclosure Rates Soar [NYP]
Which End Is Down? The Problem With Foreclosure Stats [Matrix]
Next Page »