Tuesday, June 26, 2007

Prices Falling In Many Metro Areas

According to Standard and Poor's Case-Schiller home price index, home prices in 10 metropolitan areas declined at the fastest rate in 16 years. The figures reflect home prices during a 12-month period ending in April. "

The report said that home values fell 2.7 percent in April from the same period in the previous year. It is the fourth consecutive decline in the index, since 2001.

Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. said in a Bloomberg news report, "There's no end in sight to price declines in housing until supply and demand get back in line and inventories come down." Adding, "We don't expect the correction to end any time soon.''

The report indicated that price appreciation has been decreasing for 17 straight months, while home prices have doubled since 2000, across the U.S. "No region is immune to weakening price returns," said Robert Shiller, chief economist for MacroMarkets LLC and the co-creator of the index, CBS MarketWatch reports.

Fourteen of twenty metropolitan areas sampled revealed dropping prices in the last year. That list is lead by Detroit, which is 9.3 percent lower, San Diego, lower by 6.7 percent, and Washington, down by 5.7 percent. (All Headline News 6/26/07 )

Chec out Paper Money on Case - Schiller Index who has lovely graphs. :-)

Monday, June 25, 2007

Inventory Explodes; Price Falling in New Orleans

New Orleans has its share of housing froth. But now, that froth is dissapearing as inventory has exploded and prices have fallen. The Times Picayune reports

After years of skyrocketing home prices, an oversupply of homes for sale in the New Orleans area -- nearing levels not seen since the oil bust -- is pushing overall prices down by thousands of dollars and all but erasing the giant gains in appreciation homeowners have seen during the past seven years.

On the east bank of New Orleans, there were 3,134 homes on the market through June 18, compared with 2,893 during the same time in 2006 and 2,073 in 2005.

Sterbcow said there is a 14-month supply of homes priced between $350,000 to $400,000, meaning that the number of homes in that price range would take 14 months to sell out at the current pace. In a market where supply and demand are fairly balanced, there should be only a five-month inventory of homes for sale, he said.

New Orleans like many other metropolitan areas, across the US, are facing a declining housing market.

Wednesday, June 20, 2007

Back to 2004 Or 2003 Inflation Adjusted Prices on Condos

In many parts of the Washington, DC metro area, inflation adjusted prices for condos have rolled back to 2004 or 2003. Take this example:

The condo located at 8201 Grubb Road Silver Spring, MD #G-102 is for sale at 259K. It is located near downtown Silver Spring, MD. Its MLS # MC6447225. Using the BLS Inflation Calculator, that 259K for sale price would be 235K in 2004 dollars (inflation adjusted dollar). However, the very same condo unit sold for 245K on 05/26/2004. Thus, its 2007 real dollar price is less then its 2004 price. That is, adjusted for inflation (by the CPI), the condo unit is selling for less today then what is sold for in the middle of 2004.

This condo unit, Courtesy of Northern Virginia Housing Bubble Fallout


List Price: $275,000 Listing Date: 04/29/07

Prior Sale: $308,900 10/21/2004

Prices are rolling back on condos in the Washington, DC area. The real dollar price gains of 2005 have disappeared. In most areas in the Washington, DC metro area, inflation adjusted condo prices are back to 2004 or late 2003.

Sunday, June 17, 2007

Interest Rates for Mortgages Rise Signifcantly

Interest rates on mortgages are up sharply in the past month. Other things being equal as interest rates rise prices will fall. Higher interest lowers what potential buyer's can afford to pay.
Responding to action in the bond market, lenders have pushed up interest rates on many types of loans, including the 30-year fixed variety that's favored by so many borrowers.

"Fixed mortgage rates have risen by more than half a percentage point in the last month," said Greg McBride, senior financial analyst at rate-tracker Bankrate.com.

For a person seeking a $300,000 fixed mortgage, a half-point hike adds about $100 to the monthly payment. (AZCentral June 17th)
The rising interest rates are just another hit to the already declining housing market

Wednesday, June 13, 2007

Spring Season A Bust

Spring is the busiest season for real estate and typically when prices rise the most. Some real estate agents are /were hoping that a spring boom will reverse the current price declines that are occurring in most bubble markets. The hope is that with the spring season a large amount of buyers will swoop in, raise demand, clear inventory and bid up prices.

In most bubble markets, the spring selling season has been a disappointment for the real estate industrial complex (REIC).

Even with Bernanke's optimistic outlook, the Fed chairman did make clear once again that the painful residential real-estate bust, which started last year, "appears likely to remain a drag on economic growth for somewhat longer than previously expected,"

Inventory continues to increase in the overwhelming of the bubble markets as prices are either declining slightly or remaining flat. According to Housing Tracker inventory has increased in these metropolitan areas in the past 3 months and compared to a year ago.

  • Baltimore: 31% (3 month) 30% (1 yr)
  • Boise: 23% (3 month) 84% (1 yr)
  • Detroit: 15% (3 month) 13% (1 yr)
  • New York City: 15% (3 month) 2% (1 yr)
  • Sacramento: 30% (3 month) 11% (1 yr)
  • Washington: 44% (3 month) 7% (1 yr)

For example, in metro Sacramento on March 20th there were 11,560 properties which increased by 2001 (16.9%) to 13,521 on May 6th [about 1.5 months]. Meanwhile, if we compare the year over year (YoY) for sold inventory we see 2,489 properties sold in metro Sacramento in March 2006 down 7.7% from 2,965 in March 2005.

Foreclosures are also rising significantly. The Central Valley Business Times reports that "There were 176,137 foreclosure filings -- default notices, auction sale notices and bank repossessions – nationwide last month, nearly 90 percent from May 2006 and up 19 percent from the previous month, according to a monthly report from Irvine-based RealtyTrac Inc., an online marketplace for foreclosure properties."

Inventory has increased significantly this spring. With the spring coming to a close, inventories remain high in the bubble markets.

The false hope of the 'spring boom' is being shattered by the harsh reality of a declining housing market. A spring boom is a mere fantasy .

Thursday, June 07, 2007

Realtors: Home Sales Projected to Fluctuate Narrowly With a Gradual Upturn

The National Association of Realtors (NAR) is once again predicting better times soon.

Lawrence Yun, NAR senior economist, said the market is relatively soft. “Overall housing levels are historically strong, but sales remain sluggish compared to the recent boom,” he said. “Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year. It’s important to keep in mind that all real estate is local, and many markets are expected to have higher sales and strengthening prices during the second half of this year.”
The NAR is sounding like a broken record, constantly predicting that better times are just around the corner. Remember their chief economist calling the bottom at least four times. The National Association of Realtors (NAR) cannot and should not be trusted as they have lost their credibility. They are the representatives of the largest number of real estate agents. The housing declines are long and in most bubble markets we are not even two years from the peak. In most bubble markets one can expect further price declines for at least a couple of years.

Tuesday, June 05, 2007

Bernanke: Economy Will Rebound This Year

"Federal Reserve Chairman Ben Bernanke predicted Tuesday the economy will rebound from an anemic performance at the start of the year even if the housing slump continues."

"Economic growth in the first three months of this year nearly stalled, logging just a 0.6 percent pace. It was the worst quarterly showing in more than four years."

"Even with Bernanke's hopeful outlook, the Fed chief did make clear once again that the painful residential real-estate bust, which started last year, "appears likely to remain a drag on economic growth for somewhat longer than previously expected," he said." (AP News)

Technical Problems Resolved

During the end of last week, my blog had been locked as it was suspected of being a spam blog (splog). Full access has been restored to my blog. Posts will be coming shortly.