Friday, November 18, 2005
Urban Institute Report: 'Housing in the Nation's Capitol'
The Urban Institute released a major report detailing the housing situation in Washington, DC . Basically, affordable housing is disappearing as prices soar. Gentrification is a contributing factor to this major trend. The reports has reccomendations.
New Mortgage Related Blog
Over at Another F*CKED Borrower Blog there is some wonderful information about the mortgage easy credit practices. Here is a great post:
I'll be watching this blog. Keep up the solid reporting.This bwr had a car payment of almost $800 a month...and only made about $28,000 last year. Wanted to buy a 400k home...but would look at a condo "if they had too". Somehow I don't think that spending 34% of ones gross income on a car payment is the best thing to do...but what do I know. That USED to be the rule when buying a house. Oh how times have changed. There is no way I was going to help this guy get a loan...but I'm sure somebody out there will "state" his income so that he will "qualify". This bwr has all the makings of AFB...but maybe they will be lucky...let's hope so.
Inventory Rising in Washington,DC
While driving around the District today, I came across these two for sale signs right next to each other. ( image was taken on my camera phone ) This occurence would have been very rare one year ago. In the District, listings are up 62 percent from October of 2004 ( Washington Post 11/11.
We Need a Protest at NAR
We need a citizen's protest at the National Association of Realtors in Washington, DC. They need to be called to task for their lousy, deceitful, cheerleading propaganda. See my post on NAR's anti bubble housing reports .
Thursday, November 17, 2005
Wednesday, November 16, 2005
Sacramento Housing Market
There are some great statistics and graphs over at Lyon Real Estate for the Saramento area housing market. Check it out.
Thanks to poster Happy Renter for finding this information. :-)
NAR's Housing Market Reports
The National Association of Realtors just posted a link to their 'Market-by-Market Home Price Analysis Reports' on their homepage. In a August letter to Realtors, David Lereah writes of the upcoming anti bubble reports:
The NAR did not allocate the necessary resources to properly write local housing reports. Instead, they presumably used a shoddy computer program to do a 'program and paste' job to 'write' these very similar reports. Some of the holes found in their research include:
This project is incredibly labor intensive. My staff is working overtime to provide you with the necessary information (reports) to respond to the irresponsible bubble accusations made by your local media and local academics. Please be patient and you can expect to begin receiving the first batch of these reports just after Labor day.
The NAR did not allocate the necessary resources to properly write local housing reports. Instead, they presumably used a shoddy computer program to do a 'program and paste' job to 'write' these very similar reports. Some of the holes found in their research include:
- The conclusion for every market is the same. In the executive summary the reports conclude "With home prices rising strongly in most parts of the country, there has been widespread media coverage on the possibility of a housing market bust. A thorough analysis of the
metro market, as detailed below, reveals that there is very little danger of this." ( Thanks Felix who posted over at Calculated Risk)
- Even markets that are regarded as the most over-priced and are already experiencing contraction, such as Boston and San Diego, say "A thorough analysis of the Boston-Cambridge-Quincy metro market, as detailed below, reveals that there is very little danger of this." ( Thanks to poster Felix who posted over at Calculated Risk)
- So shameless is their cut-and-paste work that the data sometimes contradicts the text! For example, the Philadelphia analysis says "jobs are being created and ... suggest potential for further price gains.". However, the Philly numbers - right above this comment - contradict this statement and shows negative 3 year job growth (-0.2%, compared to 7.2% for the top 20 metros) and negative net migration of -4,800 over the past three years! The job situation is called "unfavorable". ( Thanks to poster Felix who posted over at Calculated Risk)
- One thing I noticed in looking at the anti-bubble report is that the price-income ratio seemed extremely low. Well, if you look at the table footnotes, the definition of income is "per capita income multiplied by the average number of people per home"!!! Logically, this means that a family with 4 kids is able to afford more house than a DINKY couple. Laughable at best.. ( Thanks to poster John Laws Ghost )
- In each market the NAR puts the housing market under a 'stress test.' In the Philadelphia market "The local housing market will experience a price decline of 5% only under extreme unlikely scenarios. For example, mortgage rates rising to 12.5% in combination with 114,000 job losses could lead to a price decline." If mortgage rates really hit 12.5%, and 114,000 jobs were lost a much greater decline would occur. What is NAR's formula for these stress tests?
Tuesday, November 15, 2005
NAR: 3Q Median Sales Prices
NAR Third Quarter Median Sales Prices werereleased this morning. Link. Median Sales Price of Existing Single-Family Homes for Metropolitan Areas.
Here is a list of those metropolitan areas where the price median sales price fell in the 3rd quarter 2005 compared to the 2Q 2005:
Here is a list of those metropolitan areas where the price median sales price fell in the 3rd quarter 2005 compared to the 2Q 2005:
- Albuquerque, NM
- Charleston, WV
- Colorado Springs, CO
- Decatuar, IL
- Dallas-FtWorth, TX
- Edison, NJ
- Green Bay, WI
- Kankakee, IL
- Memphis, TN
- Minneapolis-Saint Paul, MN
- Rockford, IL
- Sarasota-Bradenton-Venice, FL
- Southbend, IN
- Souix Falls, SD
- San Francisco-Oakland-Fremont, CA
- Pittsfield, MA
The 4th Quarter, NAR reports will show many more housing markets experiencing price declines. Despite NAR's anti housing bubble propaganda the bubble will pop.
NAR: Market-by-Market Home Price Analysis Reports
Check out NAR's Market-by-Market Home Price Analysis Reports. The really funny thing is they even use the url something ... pages/anti-bubblereports with the words 'anti-bubblereports.'
Much more to come on NAR's anti housing bubble reports. I have started to go through these reports. The housing bubble bloggers and readers must go through these misleading reports and point out the truth. The truth will prevail. Let freedom ring.
Note: Check out Detroit's report. LOL!
Much more to come on NAR's anti housing bubble reports. I have started to go through these reports. The housing bubble bloggers and readers must go through these misleading reports and point out the truth. The truth will prevail. Let freedom ring.
Note: Check out Detroit's report. LOL!
NAR: Anti Bubble Q&A
Check out the National Association of Realtors Questions & Answers page regarding the housing bubble. It attempts to dispute the housing bubble theory. It is a great read:
Housing Bubble Prospects Q&A
What is a housing bubble?
As broadly interpreted, a housing bubble refers to an unsustainable gain in home prices. The premise is that a price bubble is at risk of “popping,” resulting in a loss of equity.
Has there ever been a national housing price bubble?
No, not since good recordkeeping began in 1968. There was a national decline in the 1930s during the Great Depression; however, home prices were not a prime concern in that era. The greatest issues were essentials such as food, clothing, employment and shelter of any kind. Declining home prices were a natural result of a general economic collapse caused by the stock market crash in 1929.
What is the “normal” rate of home price growth over time?
Since 1968, the national median existing-home price has increased an average of 6.4 percent per year. However, that includes a period of high inflation. A better frame of reference is in relation to the overall rate of inflation. Home prices typically have increased 1.5 percentage points faster than the rate of inflation, as measured by the Consumer Price Index.
What are the biggest factors that drive home prices?
In simple terms, it gets down to supply and demand. The inventory of homes available for sale has been historically low since 2001, which is why home prices have been rising at above normal rates.In a balanced market between home buyers and sellers, there typically is a six-month supply of homes on the market. Over the last four years, the supply has hovered around 4.5 months. By contrast, in the recessionary period of 1990-1991, there was in excess of a 9-month supply.
What conditions are necessary for home prices to soften or decline?
Generally, two conditions are necessary for price softness in a given area: an oversupply of homes available for sale, and adverse economic conditions – generally a weak local job market. Sometimes these conditions occur against a backdrop of overall economic weakness, recession or high interest rates.
Where and when have home prices declined in the past? What were the general market conditions?
Most metropolitan areas, especially in the Midwest and South, have not experienced price declines in the era of modern recordkeeping. In the period from the mid-1980s though the early 1990s, many metros in the Northeast and on the West coast saw localized declines. Typically, this occurred in large population centers with very little capacity for growth. When housing shortages developed during a period of high demand, prices grew at sharp double-digit rates – often over 20 percent per year – for several consecutive years.After local economic conditions declined in those areas, home sales stalled and the inventory of unsold homes rose, which eventually led to price softness or decline.
How long have home prices declined in the past?
Although there are exceptions to any general finding, most metro areas that experienced price declines were relatively short lived (several years). Most homeowners who went through such downturns -- but stayed in their home for a normal period of homeownership -- still netted healthy gains when they sold. People view homeownership as a long-term investment as opposed to the kind of quick-in, quick out investment that Wall Street is fond of. Unlike stocks, homeowners don’t panic sell simply because a home down the street sold for less. Home prices tend to be sticky on the downside -- usually a single digit decline in any given year following a sustained period of double digit gains. Very few people buy at the top of a market and then sell in a short timeframe. After several years, home prices level and return to normal appreciation patterns.
Should we be concerned that home prices are rising faster than family income?
No. There are three components to housing affordability: home prices, income, and financing costs – the latter are historically low. During the last four-and-a-half years of record home sales, there has been a shortage of homes available for sale. As a result, home prices during this period have risen faster than family income. However, in much of the 1980s and 1990s, the reverse was true – incomes rose faster than home prices.On a national basis, according to the Housing Affordability Index published by the National Association of Realtors, a median income family who purchases a median-priced existing home is spending a little over 20 percent of gross income for the mortgage principal and interest payment. In the early 1990s, a typical mortgage payment was in the low 20s as a percent of income, and in the early 1980s it was as high as 36 percent. Overall housing affordability remains favorable in historic terms.
What are the prospects of a housing bubble?
There is virtually no risk of a national housing price bubble, based on the fundamental demand for housing and predictable economic factors. It is possible for local bubbles to surface under the right circumstances, but that also is unlikely in the current environment. There are tight supplies of homes available for sale in most of the country, and labor markets have been improving. In other words, the two conditions necessary for price softness do not exist in most of the country.The strong underlying demand for homes results from the simple fact that the population is growing faster than the supply of homes. In addition, it is highly unlikely that the cost of construction will decline. In fact, construction material shortages are expected to continue and the cost of building and development is trending up. Baby boomers remain in their peak earning years. Echo boomers – the children of the baby boom generation – are just entering the period of life in which people typically buy their first home. The echo boom is the second largest generation in U.S. history. Considering the median age of a first-time buyer is 32, echo-boomers will be a big factor over the next decade. In addition, immigration has been strong for many years. Census data shows that immigrants eventually achieve homeownership rates higher than do native born Americans – this also will be a strong factor in housing demand in the future. Also, minority ownership rates have been trending up. All this means the demand for housing is historically high and is one of the reasons 2005 will be the fifth consecutive year of record home sales. Even in an economic downturn, the demand remains.
If conditions become unfavorable, home buying may be postponed, but a general price decline remains highly unlikely.What is likely to happen with home prices?
The forecast is for mortgage interest rates to rise slowly over the next year, which will have a minor breaking effect on home sales. The good news is that will help inventory levels to recover and allow the market to come into a closer balance between buyers and sellers.In other words, a general slowing in the rate of price growth can be expected, but in many areas inventory shortages will persist and home prices are likely to continue to rise above historic norms.
Housing Bubble Prospects Q&A
What is a housing bubble?
As broadly interpreted, a housing bubble refers to an unsustainable gain in home prices. The premise is that a price bubble is at risk of “popping,” resulting in a loss of equity.
Has there ever been a national housing price bubble?
No, not since good recordkeeping began in 1968. There was a national decline in the 1930s during the Great Depression; however, home prices were not a prime concern in that era. The greatest issues were essentials such as food, clothing, employment and shelter of any kind. Declining home prices were a natural result of a general economic collapse caused by the stock market crash in 1929.
What is the “normal” rate of home price growth over time?
Since 1968, the national median existing-home price has increased an average of 6.4 percent per year. However, that includes a period of high inflation. A better frame of reference is in relation to the overall rate of inflation. Home prices typically have increased 1.5 percentage points faster than the rate of inflation, as measured by the Consumer Price Index.
What are the biggest factors that drive home prices?
In simple terms, it gets down to supply and demand. The inventory of homes available for sale has been historically low since 2001, which is why home prices have been rising at above normal rates.In a balanced market between home buyers and sellers, there typically is a six-month supply of homes on the market. Over the last four years, the supply has hovered around 4.5 months. By contrast, in the recessionary period of 1990-1991, there was in excess of a 9-month supply.
What conditions are necessary for home prices to soften or decline?
Generally, two conditions are necessary for price softness in a given area: an oversupply of homes available for sale, and adverse economic conditions – generally a weak local job market. Sometimes these conditions occur against a backdrop of overall economic weakness, recession or high interest rates.
Where and when have home prices declined in the past? What were the general market conditions?
Most metropolitan areas, especially in the Midwest and South, have not experienced price declines in the era of modern recordkeeping. In the period from the mid-1980s though the early 1990s, many metros in the Northeast and on the West coast saw localized declines. Typically, this occurred in large population centers with very little capacity for growth. When housing shortages developed during a period of high demand, prices grew at sharp double-digit rates – often over 20 percent per year – for several consecutive years.After local economic conditions declined in those areas, home sales stalled and the inventory of unsold homes rose, which eventually led to price softness or decline.
How long have home prices declined in the past?
Although there are exceptions to any general finding, most metro areas that experienced price declines were relatively short lived (several years). Most homeowners who went through such downturns -- but stayed in their home for a normal period of homeownership -- still netted healthy gains when they sold. People view homeownership as a long-term investment as opposed to the kind of quick-in, quick out investment that Wall Street is fond of. Unlike stocks, homeowners don’t panic sell simply because a home down the street sold for less. Home prices tend to be sticky on the downside -- usually a single digit decline in any given year following a sustained period of double digit gains. Very few people buy at the top of a market and then sell in a short timeframe. After several years, home prices level and return to normal appreciation patterns.
Should we be concerned that home prices are rising faster than family income?
No. There are three components to housing affordability: home prices, income, and financing costs – the latter are historically low. During the last four-and-a-half years of record home sales, there has been a shortage of homes available for sale. As a result, home prices during this period have risen faster than family income. However, in much of the 1980s and 1990s, the reverse was true – incomes rose faster than home prices.On a national basis, according to the Housing Affordability Index published by the National Association of Realtors, a median income family who purchases a median-priced existing home is spending a little over 20 percent of gross income for the mortgage principal and interest payment. In the early 1990s, a typical mortgage payment was in the low 20s as a percent of income, and in the early 1980s it was as high as 36 percent. Overall housing affordability remains favorable in historic terms.
What are the prospects of a housing bubble?
There is virtually no risk of a national housing price bubble, based on the fundamental demand for housing and predictable economic factors. It is possible for local bubbles to surface under the right circumstances, but that also is unlikely in the current environment. There are tight supplies of homes available for sale in most of the country, and labor markets have been improving. In other words, the two conditions necessary for price softness do not exist in most of the country.The strong underlying demand for homes results from the simple fact that the population is growing faster than the supply of homes. In addition, it is highly unlikely that the cost of construction will decline. In fact, construction material shortages are expected to continue and the cost of building and development is trending up. Baby boomers remain in their peak earning years. Echo boomers – the children of the baby boom generation – are just entering the period of life in which people typically buy their first home. The echo boom is the second largest generation in U.S. history. Considering the median age of a first-time buyer is 32, echo-boomers will be a big factor over the next decade. In addition, immigration has been strong for many years. Census data shows that immigrants eventually achieve homeownership rates higher than do native born Americans – this also will be a strong factor in housing demand in the future. Also, minority ownership rates have been trending up. All this means the demand for housing is historically high and is one of the reasons 2005 will be the fifth consecutive year of record home sales. Even in an economic downturn, the demand remains.
If conditions become unfavorable, home buying may be postponed, but a general price decline remains highly unlikely.What is likely to happen with home prices?
The forecast is for mortgage interest rates to rise slowly over the next year, which will have a minor breaking effect on home sales. The good news is that will help inventory levels to recover and allow the market to come into a closer balance between buyers and sellers.In other words, a general slowing in the rate of price growth can be expected, but in many areas inventory shortages will persist and home prices are likely to continue to rise above historic norms.
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