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Picture of the Day
From Barry Ritholtz
Real Estate Sales and House Prices
- Uncertainty Builds: Utah Builders Face Changes As The Market Slows (Deseret Morning News, Nov. 15th): "MetroStudy research firm: Despite a strong economy and a housing market in far better shape than most other states, Utah's homebuilders are entering uncertain times... Along the Wasatch Front, the inventory of newly constructed finished vacant homes is around 32% [where] 20-25% is typically considered healthy... Wells Fargo VP and economist Kelly Matthews: The market could see home prices decline about 7% by the middle of next year as builders feel pressure from debt on unsold inventory: Matthews: "The number of home building permits may decline as much as 50% in the coming year as builders adjust to the changing market."
- Inland Home Sales, Prices Take Another Dip (Press Enterprise, Nov. 14th): "DataQuick: Home sales plummeted almost 55% in San Bernardino County last month, [from] October 2006... The rest of Southern California averaged a 45% drop. Sales in Riverside County were off 44%... the slowest October since 1996... The median price of homes sold in Riverside County in October slipped to $350,000... down 15% from October 2006 and the biggest year-over-year drop in Southern California. It was also the lowest median home price Riverside County had seen since November 2004. In San Bernardino County the median price of homes sold in October was $330,000, down almost 10% from October 2006."
- Arkansas Home Sales Fall 22 Percent In September (Arkansas News Bureau, Nov. 14th): "Arkansas Realtors Association: September homes sells in Arkansas were 22.5% lower than Sept. 2006, while the average price rose 3.9%. The average price of a home in September was $155,621, compared to $149,761 in September 2006... Through September, 22,622 homes had been sold in Arkansas, down 8.47% from last year, which is on record as the year with the second-highest number of home sales... Through the first nine months of the year, homes averaged $154,175, up 1.57% compared to the first nine months in 2006."
- Index Of Pending Home Sales Tumbles In Sept. (MarketWatch, Nov. 13th): "The National Association of Realtors: The overall pending home sales index hit 85.7 in September, a steep drop from the year-ago reading of 107.6 but up from the prior month's level of 85.5... September's reading was up 0.2% from the prior month, while Wall Street analysts were looking for a slight decline... September's "pause in the plunge" does not change the pending sales trend, wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics. He added that pending sales fell at a 42.1% annualized rate during Q3 -- "easily the worst performance" since the data were first recorded in 2001."
- Maui Home Prices Drop 10%, Sales Up (Pacific Business News, Nov. 13th): "Realtors Association of Maui: The median price of a single-family home in Maui County dropped 10% [to $585,000] last month [from $650,000 in] October 2006... The median price of a condominium rose 8% to $555,000, up from $515,000 during October 2006. The number of single-family home sales last month (75) was down 13% [from] 86 sales during October 2006. Condo sales were up 16% (108 units) in October... compared to 93 units sold during October 2006. Year-to-date... the median price of a single-family home in Maui County was $625,505, down 13% from .$715,000 [during] the same period last year."
- Shiller: Housing Market Is Nowhere Near Bottom (Judith Levy in Seeking Alpha, Nov. 13th): "Yale University economist Robert Shiller, co-developer of the S&P/Case-Shiller Home Price Indices: Not only are forecasts of a housing market bottom in 2008 probably wrong, but 2008 could see a decline even worse than that of 2007. "There is a probability of a continuing decline for a period of years, bringing prices in many cities down in the 10s of percent. [A bottom] could be [in] five or 10 years too... Based on the futures market for the S&P Case-Shiller Composite Index, we are looking at home prices down another 5% in 2008," Shiller said."
- Case-Shiller Home Price Index Digs Deeper (Index Universe in Seeking Alpha, Nov. 13th): "Standard & Poor's has expanded the S&P/Case-Shiller Home Price Indexes to include subindexes for low-, mid- and high-price homes... For example, the Cleveland metro area index is down 4.2% from its July 2006 peak. However, Cleveland's low-price subindex is down 10.0% from the peak it reached in September 2005. The mid-price subindex, is down 4.6% from its June 2006 high, and the high-price subindex is down just 3.2% from its August 2005 high. Obviously, low-price homes have been more affected by the declines in the housing market, while high-price homes have had an easier time maintaining their values."
- Home Prices Here Flatten To 3.5 Year Low (Sign On San Diego, Nov. 13th): "DataQucik Information Systems: The overall median for San Diego home prices in October stood at $460,000, down $10,000 from September and 6.1% lower than October 2006's $490,000. [That's] an 11.1% decline from the peak of $517,500, reached in November 2005. The last time the median was this low was in April 2004... October sales totaled 2,327, up from September's 2,152 despite the lull in activity surrounding the spate of fires that struck the county starting Oct. 20... The pace of sales was still 32.5% lower than year-ago levels, and marked the 41st consecutive month of year-over-year declines."
Real Estate Investment
- Google’s Android and Mobile Real Estate (Future of Real Estate Marketing, Nov. 12th): "Google just released the SDK for its new mobile phone platform, Android... This thing definitely looks promising for real estate technology developers. I especially liked the integration with Google Maps and StreetView. One could envision a mobile real estate search tool that could pull up listings, display them on a map and give you a virtual preview of the neighborhood, and then give you instant directions on how to get there. One thing’s for sure, with the iPhone SDK coming in February as well, the next frontier for Real Estate 2.0 is surely going to be mobile."
Foreclosure Data
- Foreclosures Hit a Snag for Lenders (Times Daily, Nov. 14th) Cleveland: "Federal Judge Christopher A. Boyko... dismissed 14 foreclosure cases brought on behalf of Deutsche Bank National Trust Company [mortgage investors], ruling that they had failed to prove that they owned the properties they were trying to seize... The complex structure and disparate ownership of mortgage securities have made it harder for borrowers to work out troubled loans.... The Ohio ruling indicates that the intricacies of the mortgage pools are starting to create problems for lenders as well. Lawyers for troubled homeowners are expected to seize upon the district judge’s opinion as a way to impede foreclosures across the country or force investors to settle with homeowners."
- In Re Foreclosure Cases (Calculated Risk, Nov. 14th): "Footnote 3 of Judge Boyko's Decision (See previous - Ed.): "Financial institutions or successors/assignees rush to foreclose, obtain a default judgment and then sit on the deed... while reaping the financial benefits of interest running on a judgment... Counsel's []argument] for the institutions... fall woefully short of justifying their premature filings, and utterly fail to satisfy their standing and jurisdictional burdens. The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, their weak legal arguments compel the Court to stop them at the gate."
- California, Ohio, Florida Cities Lead in Foreclosures (Bloomberg, Nov. 14th): "Research firm RealtyTrac: California, Florida and Ohio accounted for more than two-thirds of the 25 metropolitan areas in the U.S. with the highest foreclosure rates as subprime borrowers and property speculators fell behind on adjustable- rate mortgages. Seventy-seven of the 100 largest metro areas had more foreclosure filings in Q3 than in the previous three months. California locations accounted for seven of the top 25 foreclosures rates, and Florida and Ohio each had five."
- Mortgage Meltdown Now Washing Across Whole Communities (Central Valley Business Times, Nov. 13th): "Center for Responsible Lending: The “spillover effect” [from foreclosures] is impacting 44.5 million homes across the country... Homeowners living near foreclosed properties will see their property values decrease $5,000 on average. A foreclosure on a home lowered the price of other nearby single-family homes, on average, by 0.9%... Each additional foreclosure on the block lowered values an additional 0.9%... The total decline in house values and tax base from nearby foreclosures will be $223 billion,” CRL says. Twenty-four states and 42 counties will experience declines of over $1B each in local house prices and tax bases."
Macro Impact, And Will The Housing Slump Cause A Recession?
- Retail Sales Up 0.2 Percent in October (Yahoo! Finance, Nov. 14th): "Commerce Dept.: Retail sales last month posted the weakest showing since August -- a tiny 0.2% increase -- as consumers struggled with the continuing housing slump and tighter credit conditions. Inflation at the wholesale level was quite tame, however... In addition to [a] big drop in department store sales, sales at furniture stores were down a hefty 0.9% after an even bigger 1.3% drop in September. Sales of furniture and other housing-related items have been severely hurt by the slump in home sales."
- Lumber’s Price Tumble Axes 50,000 Mill Jobs (OC Register, Nov. 13th): "To see serious economic fallout from the national housing slump, look at lumber prices and wood mill job counts... The Random Lengths framing lumber composite price index... is down 18% since June, -33% since start of 2006 [and] -45% since recent cyclical peak in May ‘04. Shawn Church, Random Lengths editor: On an inflation-adjusted basis lumber prices are at lows last seen during the early 1980s lumber industry debacle... In the past 18 months, federal job stats show 50,000 less wood-factory workers nationwide, a 9% cut. U.S. wood mills employ 517,000 as of October, the smallest workforce in 14 years."
- Percent Owner Occupied Households With Mortgages (Calculated Risk, Nov. 13th): "Bloomberg quote: "The Federal Reserve's Flow of Funds recent report: At the end of Q2 owners' equity was $18.85 trillion. That's still almost $40 billion more than at the end of 2006 and $1.56T more than 2004." First, a typo correction: [Actually], the value of household real estate was $20,997.75B (line 4, table B.100) at the end of Q2, and total household mortgages were $10,145.9B (line 32). This gives total household equity of $10,851.85B- not $18.85T... Though the percent of homeowner equity was at a record low of 51.7% at the end of Q2'07... [Still,] about 1/3 of all owner occupied households have no mortgage debt."
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