Posted by Jonathan J. Miller -Wednesday, October 28, 2009, 9:50 AM Comments Off
The August 2009 S&P/Case-Shiller Home Price Indices report showed continued month over month improvement while the decline from the prior year same period continues to ease. Reporting on this report has been decidedly positive over the past 6 months, cited by many as evidence that housing has bottomed. The report shows that prices are at 2003 levels, which is consistent with my personal experiences with the systemic breakdown of the mortgage process. Back in 2003, the pressure came on the appraisal industry full bore to keep the pipeline full as underwriting restrictions became seemingly non-existent.
My friend Barry Ritholtz over at Big Picture does a very interesting analysis on the high end of the market showing that it now only represents 10% of sales over $500k, a staggeringly small percentage. Barry and I are speaking on a panel today at The Realty Alliance.
Since CSI index is value weighted, the shift in the mix and surge in lower priced foreclosures will likely turn CSI negative in the near future, as early as next month.
In fact, the CSI press release suggest this and feels like our expectations are being managed a tad:
Once again, however, we do want to remind people of the upcoming expiration of the Federal First-Time Buyerâ€™s Tax Credit in November and anticipated higher unemployment rates through year-end. Both may have a dampening effect on home prices.
Since residential housing indices trail the current market by about 4-5 months from “meeting of the minds” to actual reporting of the index (contract date => closing date => recording date => index reporting date) the people that work with this data already have a fairly strong impression of where the index will be next year and even the subsequent month.
If we can’t take the indices at face value when they show a decline, then perhaps the same ought to be true when the indices go positive? The take away here is there is no single barometer of the state of housing.
Here’s the 20-city index breakdown.
As I like to say: “The trend is your friend until it ends.”
Posted by Jonathan J. Miller -Wednesday, October 28, 2009, 12:20 AM 2 Comments
This quarterly market report is provided by Dr. Kevin Gillen, an economist and Research Fellow at the University of Pennsylvania’s Institute for Urban Research. He analyzes the Philadelphia real estate market using the city’s real estate database through Econsult, an economics consulting firm based in Philadelphia PA that provides statistical & econometric analysis in support of litigation as well as business and public policy decision-makers. His results are published in a research paper called Philadelphia House Price Indices each quarter as a public service to the Philadelphia real estate community. Here’s his methodology.
Kevin does a great job parsing out the market and it is a pleasure to share his results on Matrix â€”Jonathan Miller
The most recent home sales figures suggest a slowing in the momentum of the housing marketâ€™s attempt to recover from its current slump.
Following the first quarterly increase in citywide house prices after two years of falling prices, the typical Philadelphia home rose in value by a scant 0.2% on a qualityâ€”and seasonallyâ€” adjusted basis this past summer, according to the latest analysis by Econsult economist Kevin Gillen. Following on the heels of a robust increase of 6.8% this past spring, Philadelphia house values appear to still be struggling to regain the value they lost over the past two years. With these losses in value netted against these two recent increases, the typical Philadelphia home has lost 8% of its value since the bursting of the national housing bubble over two years ago.
After experiencing the first increase in region-wide house prices in nearly two years this past spring, the Greater Philadelphia region slowed in the rate of appreciation this past summer. (November 11, 2009)
An amendment was added late Wednesday Oct. 21 to the Consumer Financial Protection Act of 2009 that
would sunset the HVCC, allow appraisals to be ordered by mortgage brokers again and would make a new
Negotiated Rulemaking Committee responsible for creating one set of appraisal independence requirements
across all the federal agencies.
Mortgage brokers were targeted by HVCC as providing undue pressure on appraisers for overvaluation. Systemically, thats absolutely true – of course there are always exceptions. But you can’t rely on the honor system for a financial system structure – thats what where we just came from.
Mortgage brokers get paid when the transaction closes. Guess what kind of appraiser thrived in this kind of environment? Form-fillers.
However, removing mortgage brokers from the process enabled AMC’s which are even more problematic, providing low biased appraisals. Simplistic assessments of the removal of HVCC as a good thing for appraisers is short sighted.
How about the public getting a lending system that has a neutral appraisal environment so the parties getting paid don’t game the system? That means that appraisers shouldn’t be getting assignments from individuals whose commission depends on the outcome. If HVCC is removed and we revert to the prior way of doing business, its a missed opportunity to give consumers fair valuations.
Posted by Jonathan J. Miller -Monday, October 26, 2009, 11:57 PM Comments Off
Source: Google Earth
Back in 2005, I did a fun exercise for New York Magazine – I was asked to value Central Park (just for fun) in about 3 minutes. It was within an article that ranked the reasons to love New York and was item number 3.
The New York Observer recently asked me to update this calculation using the same methodology (in 3 minutes and just for fun) and I came up with $363,538,692,000 which is a far cry from $528,783,552,000. The same disclaimers apply as the original effort, seriously.
To put this in perspective, about 9,000 Detroit properties were auctioned (hat tip WalletPop) with opening bids of $500. Only 20% received bids. The total land area of these properties was equivalent to Central Park. If all 9,000 properties received a bid of $500 (which is probably not far off if you assume the 20% that received bids were over $500 and the rest $0), that represents a total value of $4,500,000.
Thats’s not much of a value and these properties also pull down values around them – plus they are off the tax roll placing more financial burden on existing properties.
Not a good sign
Most of the bidders were investors and vacant land in Detroit equals the entire footprint of Boston.
As much as I love my time spent in Michigan and my relatives there, I believe this is called an economic failure spiral.
Posted by Jonathan J. Miller -Monday, October 26, 2009, 11:00 PM Comments Off
Last week we released market reports for both Long Island and Hamptons/North Fork. The week before we released reports for Brooklyn and Queens. I meant to release short podcast recaps on all four reports (combined into pairs) when they were released but alas, was behind schedule.
Posted by Jonathan J. Miller -Friday, October 23, 2009, 11:27 PM 5 Comments
Ok, while I agree with much of the message delivered here and I have been calling this bump in existing home sales more of a false positive than a sign of reaching the bottom, I must admit I am growing weary of Whitney Tilson, the Peter Schiff of real estate.
I am being unfair – you know what they will say before they say it – and that is wearing me out. Or perhaps I am not thrilled about hearing the same message for the next several years while this whole things winds down.
Still, its worth a listen despite the commercials.
including single-family, townhomes, condominiums and co-ops â€“ jumped 9.4 percent to a seasonally adjusted annual rate1 of 5.57 million units in September from a level of 5.10 million in August, and are 9.2 percent higher than the 5.10 million-unit pace in September 2008. Sales activity is at the highest level in over two years, since it hit 5.73 million in July 2007.
The NAR wants the tax credit to be renewed so that the housing market can experience a self-sustaining recovery.
Sales of existing homes surged in September as buyers raced to take advantage of the tax credit for first-time home buyers before it expires next month.
Nationwide, sales of previously owned homes jumped 9.4% in September to a seasonally adjusted annual rate of 5.6 million from a downwardly revised 5.1 million in August, the National Assn. of Realtors reported Friday.
A long time friend of mine in suburban Chicagoland, who is a successful real estate agent told me that three quarters of his business was prompted by the tax credit. If its not renewed, sales will fall sharply.
In other words, the take away from this report seems to be a bit of a false positive. The surge in sales was a release of pent-up demand from a stalled market in the beginning of the year. Everyone’s chiming in about how important the tax credit is to restore housing market activity.
Charts that contain the 3Q 2009 data are now available.
…Listing inventory expanded 21.5% to 2,419 units from 1,991 units in the prior year quarter and 5.8% higher than the 2,286 units in the prior quarter. The jump in the number of sales over the summer prompted many sellers to return their listings to the market. There were 459 sales in the third quarter, 49.5% more than the 307 sales of the prior quarter and 29.3% more than the 355 sales in the prior year quarter. The number of sales was the highest quarterly total since the second quarter of 2008, when there were 541 sales, but was 56.4% below the record high water mark of 1,052 sales in the second quarter of 2004. Monthly absorption, the number of months it would take to sell existing inventory at the current pace of sales, peaked in the first quarter of 2009 at 34.2 months. The absorption rate fell in the second quarter to 22.3 months and fell in the third quarter to 15.8 months or roughly half the rate of peak, indicating that the pace of sales activity has been faster than new inventory being added to the market…
…There were 5,603 sales in the third quarter, 41.6% higher than the 3,956 sales of the second quarter and 5.9% higher than the same period last year. This was the first time in the past year the number of sales increased over the prior year quarter and only the second time since the beginning of 2007. The increase in the number of sales resulted in a decline in listing inventory. There were 22,170 listings, 5.6% below the 24,485 listings in the prior quarter and 10.1% below the 24,672 listings in the same period last year. The increase in the number of sales and the corresponding decline in listing inventory played a role in the stabilization of the price indicators over the summer…
Posted by Jonathan J. Miller -Tuesday, October 20, 2009, 12:33 AM Comments Off
PMI sees a U or a W rather than a V
When David Berson, PMI Chief Economist and Strategist came over from Fannie Mae, I became interested PMI’s insights. However, I haven’t written much about the PMI’s The Housing & Mortgage Market Review, monthly survey that covers housing and the economic factors that influence it. I plan on covering it more often going forward, namely because I like their charts (but can someone at PMI deal with the crazy java interface for the report?)
One of the key trends seen in this report is that home prices will continue to fall but not at the pace we have seen and this may continue for several years. This is based on the idea that we are still well above trend even after considering the correction that has occurred over the past several years.
Not ground breaking pronouncements here but pretty good common sense. Here are some of my favorite charts in the report.