by G. Sax
I read this blog's comments. Most are interesting and expand upon the conversation. In yesterday's post about porches, there was a comment from a reader named "Bubble_Up" about local housing prices.
The comment didn't have anything to do with porches, but it was cool to see something about Case-Shiller. We have an informed community here, which is good for those of us who like to contribute to the conversation.
So I thought I'd shelve my quirky, neighborhoody banter this week in favor of a chat about the S&P/Case-Shiller Index, the de facto national housing report that reporters flock to.
I'm not interested in debunking Case-Shiller, which some real estatees try to do, including the National Association of REALTORS®. Case-Shiller isn't the real estate devil. It provides a decent snapshot of the American housing market.
The indices were developed by economists Karl Case and Robert Shiller. The 20 largest metro areas are measured using a repeat sales pricing technique to create data pairs; data is collected on single-family home re-sales. The report is produced by Fiserv Lending Services, and many of the indices are managed by Standard & Poor's. (click here to view them)
The Twin Cities took a media beating because of Case-Shiller yesterday. Bubble_Up brought this to our attention with a quote from the St. Paul Pioneer Press: "The report found that home prices in the [Twin Cities] metro area plunged 6.1 percent between February and March, falling back to a level not seen locally since September 2000, according to Case-Shiller." (read full article)
I work in real estate PR, so I took a bunch of calls on Case-Shiller yesterday. The report got the basics right…prices are down here, there and everywhere.
But the increase in Twin Cities foreclosure and short sales activity over the last year wasn't really noted in the first wave of media reports. As the day wore on, we were given a chance to explain our "record decline." More than half of all home sales in the Twin Cities in the first quarter of 2009 involved banks. In April, banks were still in on 46 percent of sales activity, often at deep discounts in already-low price ranges. This drags regional median prices down.
We're backtracking on price, but you're not likely to get a traditional home sale (one with a real person behind the sale and not a bank) at 2000 or even 2002 prices. We're still in tricky waters, for sure, but the situation is more complicated and more localized than Case-Shiller covers.
Foreclosures are selling rapidly and inventory is shrinking. Next year at this time, Case-Shiller may be reporting that we've had record month-over-month increases. And we may be explaining that the increases are statistical anomalies.
In closing, I'm a big fan of porches. I look forward to many summer nights on my front porch listening to Twins games on the radio, waving at neighbors, and watching the sunset wash the Cathedral in shiny orange pinks. All in screened-in luxury!
Twitter
Flickr
LinkedIn
Facebook
RSS
Posterous
Email
FourSquare
Yelp
SlideShare
OnlineShoppingWorld provides Online Shopping and best price comparison features exclusively for – Computer Hardware, Software, Electronics, Digital Camera, Camcorder, Camcorder Accessories, Computer Cables and Accessories, DVD Player, Cellphone Accessories, GPS, GPS Accessories, Video Recorder, Notebook Accessories, Flash Memory & Readers, Motherboard Accessories. You find the best deals, Daily Deals and stock clearance products out of it.
I think I can explain the price decrease stats.
I have been watching the foreclosed homes in the St Paul area that fall in the $30K-$50K range since January of this year. There are now less than half as many of those homes as there was earlier this year. In January there were about 250 in that price range and less than half those were vacant building category 2. Now there are less than 100 for sale and at least 60% of those are category 2 vacant.
I’d argue that there are several investors sweeping up the lowest valued homes as rental properties.
Bubble_Up:
Does Case-Schiller take into account the final cost to make the home livable, or only the sale price?
In prior years of the index for most sales, the sale price was the move-in ready price. With the more recent sales, much more money must be invested before the home could be lived-in. Just a thought.
The sfgate.com story posted by Bubble_Up is certainly interesting and well-researched. I’m especially intrigued by the notion of “shadow inventory,” a term used to describe homes in bank books that are already in foreclosure or should be but haven’t been listed yet.
Teresa has cranked openly on this blog about the lack of opportunities for move-up buyers. Based on her woman-on-the-street reports, I do sense that we’re still in for some housing bumpiness and that our overall consumer confidence may never be the same as relates to real estate. An end to foreclosure moratoriums, the spectre of option ARM resets next summer, Alt-A delinquencies, unemployment…yeah, there’s still some work to be done.
I know that it’s not wise to permanently try to separate the notion of two separate markets: lender-mediated vs. traditional. But it’s useful right now as people in the Twin Cities worry over why the median sales price has dropped from $222K to $153K in two short years. In St. Paul alone, we’ve gone from an average sales price of $224K in April 2007 to $128K in April 2009. It would be irresponsible of me to just throw my hands in the air and say, “That’s some wacky market we got there, ain’t it? Get out there and get a deal while the gettin’ is good!”
Yes, there are “deals.” But we’re not talking about Queen Annes on Summit Avenue dropping into the hands of the great unwashed. The deals look more like $9,500 fixer-uppers in Frogtown with no copper and caved-in porches out back (to stay on theme).
Thanks for the thoughts, Mr. Sax, but in doing your public relations work, please be careful not to invest your credibility too heavily in the notion that the foreclosure market somehow is separate from the ‘traditional’ market: after all, most buyers ultimately care more about price than about whether it is a bank or an individual signing off on the purchase agreement. More importantly, there are several reasons to believe that the higher-end ‘traditional’ market is about to look an awful lot like the lower-end market:
Whoops — with link now fixed:
Another issue is that so many homeowners are somewhat negative equity right now.
Even if appreciation restarts and they get back to breakeven price, there is still the matter of transaction costs.
Even if appreciation and principal payments get them to breakeven INCLUDING transaction costs, there is the problem of the next downpayment – where will it come from?
Even if zero-down loans come back, there will be the question of whether someone will want to go from one zero-equity position to another, higher debt zero-equity position.
It was rapid appreciation (and the myth that it was sustainable) that was the motivating force behind many home purchases.
Housing is finally proving to most everyone that it is every bit an EXPENSE as much as it is an investment.
Sooner or later, the price of owner-occupied homes will have to meet reality.
Your question isn’t very clear. Sounds like you were already sued for nonpayment. If your case is dismissed, they can try suing you again, but that’s about it. And if the case was dismissed, they probably won’t try again unless they really think they can win.
Prices are expected to continue declining in the Twin Cities market, an increase in prices in the next year year is highly unlikely and here is why. The mortgage foreclosure moratorium that lasted from October 2008 to April 2009 put Fannie Mae and Freddie Mac WAY BEHIND on getting foreclosures done. Therefore we have seen a corresponding drop in the number of bank owned homes on the market and a HUGE increase in foreclosure sales beginning in April of this year. Most of these foreclosed properties will begin going on the market after the six month redemption period ends. So starting in October of this year we are going to see an explosion in the number of bank owned homes being listed for sale. I am anticipating that the price slides will be fast and hard, similar to the beginning of 2007.
Your situation reminds me very much of what we went through here in Arizona a couple of years ago. I hope that things in your market don’t continue the way ours did. We’re finally seeing daylight.
Once the $8k tax incentive expires in November it will be interesting to see what happens. Although I understand the government has another “goodies” for potential home purchasers in the nature of a $15k tax credit for all purchasers regardless of income limits. I hear they are trying to keep it quiet so that current demand is not affected. So Mr. James may be sitting pretty come 2010 getting the last laugh. And I will be laughing along side of him buying at the true bottom!