Friday, May 22, 2009

Radar Logic: Slowing price declines

According to Radar Logic, home price declines are slowing—but not in DC:
There’s more evidence this morning that the house-price free fall has slowed: A composite index of 25 metro markets across the country declined by just 0.3% in March from the previous month, matching a similar January-to-February decline, according to a monthly report by Radar Logic. ...

While the numbers don’t show a bottom in housing, the seasonal strength in pricing shows that some level of stability has returned. ...

Washington, D.C., posted the largest monthly decline, with prices falling 7.5% on a price-per-square foot basis.

Boston led the 25 cities in price increases in March, with a 6% monthly gain, followed by Denver, where prices jumped 5.7%.
These are month-to-month numbers, which tend to be unreliable. Prices normally increase during the spring and fall in autumn, for example.

According to the Case-Shiller numbers, inflation-adjusted housing prices since 1997 have been making a very nice bell shaped curve. As we get closer to the bottom, price declines should start slowing. I would have expected the inflection point to be at the half-way mark, but by my estimates the nation as a whole is about two-thirds of the way down.


  1. Is that like the song "radar love"?
    Great post.

  2. In my area (Chapel Hill ,NC), which thought it was "immune" to to price declines - they have suddenly exploded. A huge amount of unsold inventory and overbuilding is causing sellers into a sudden race to get out now.
    The spring sales were a washout and sellers are starting to panic.

  3. Barron's had a great article saying that we are in the eye of the storm at the moment. They predict that the next plunge in housing prices is nearly at hand -- seems many lenders have been stalling foreclosure and keeping inventory off the market. That will soon end. The Federal programs to stem the tide will not suffice, I'm afraid. Programs large enough to really make a difference would cost trillions. Just don't see anything like that coming for housing.

    Look out below.

  4. Anons are back, huh? Not much traffic w/o them? I knew it...

    I can confirm that Denver is improving a little.

    Godd bloogging!

  5. "Barron's had a great article saying that we are in the eye of the storm at the moment. They predict that the next plunge in housing prices is nearly at hand -- seems many lenders have been stalling foreclosure and keeping inventory off the market. That will soon end."

    People who want to buy can only hope!

  6. We have spent the weekend at the Delaware seashore. This place is odd - there are homes here that in the mid 90's sold for 300K - now they go for 1.5M. For many of these homes the weekly rental market is keeping the prices propped up (but only for homes within walking distance of the ocean). In past years you could have gotten 3-5K$/week, but the homes generally sleep something like 10 people. This year the rental market is rather soft - people are taking shorter conversations, or finding less expensive lodgings. I can't help but wonder if investors bought the homes, and used rental income to help pay the 1M$ mortgages. If the mortgages are ARMs of some sort, the owners could be facing being squeezed from two directions.

    Yesterday there was an auction of a mansion that overlooked the ocean. It had been on the market for a couple of years and hadn't sold. The listing price was 6.5M. It sold yesterday for 4M.,Rehoboth-Beach,DE-19971

  7. I think that the type of market where we see price declines is about to shift. First, the prime and Alt-A areas are starting to drop for a very simple reason: no job, no mortgage payment. The price of these can't be high, because nobody can get a jumbo loan. All the prime borrowers were in houses that require a jumbo: either you have alot of equity that you can still pull out of your house, a whole lot of cash on the sidelines, or you can't swing the loan. That HAS to have a downward influence on prices.

    Second, interest rates are about to be under tremendous pressure to rise. Any idiot looking at the bond market could tell that, but the government pledging loudly in the papers today and yesterday to keep interest rates at zero tells me that I'm right. The yield on long treasuries is growing: how long before mortgage rates come up? There have been NO jumbos that weren't government loans written in such a long time: the government only has so much money to put into the project of zero interest.

    Finally, we're hitting the point where the places bought for college kids during the boom are about to come on the market. It reached a point where lots of parents bought their kids a condo as an investment. The kids getting out in 2009 were kids whose parents, presumably, bought in 2005 and 2006. Can people afford to hold those places? Did the kids get a job in the towns where they went to college?

    I think that these forces explain the Boston and DC numbers to some extent.

    I'm waiting on the other shoe.

  8. I take back part of what I said yesterday regarding the mansion that went up for auction. My wife tells me that the auctioneer was trying to start the bidding, and was calling out "7, 6, 5, 4", and then said "thank you very much", which implied that they weren't willing to even start the bidding at any price below 4.

  9. JackRussell - I've been looking at the DE waterfront prices too... they still haven't dropped enough for me. Waterfront or near water/beach just hasn't moved much there.

  10. The term "bell shaped curve" is used to describe the normal distribution in statistics, it is a histogram. A time series graph is never a bell shaped curve.

  11. I think that many of the parents that had acquired properties for their college kids are now seeling these properties in order to avoid foreclosure on their own homes