Matrix Blog

Statistics, Metrics & Data

[Vortex] Straight from MacCrate: When Will Real Estate Prices Stabilize in the New York Metropolitan Area?

May 17, 2009 | 10:14 pm | |

Guest Appraiser Columnist:
Jim MacCrate, MAI, CRE, ASA
MacCrate Associates
Appraisal & Valuation Issues Blog

Jim has worn many hats including a Director at PricewaterhouseCoopers in New York City and Chief Appraiser at European American Bank. He is a prolific writer on valuation issues and teaches a number of the real estate appraisal classes through the Appraisal Institute and New York University. I have had the pleasure of taking a number of courses taught by Jim.
…Jonathan Miller

Many so called real estate experts have been predicting the bottom to the real estate market will occur in late 2009 or early 2010. No one can predict with any degree of accuracy the future, much less the bottom of the real estate market in any metropolitan area. It is important for real estate professionals to remember that real estate markets vary by location. Some markets will do well while others are doing poorly. For example, the Detroit real estate market was depressed long before the recession was declared official by the federal government and the beginning of the decline in the New York real estate market. The real estate market in the New York metropolitan area has been driven low interest rates and by the growth of the financial, insurance, and real estate sectors of the economy which began in earnest in first quarter of 2004 as indicated in the following chart:

Total employment is now falling with the FIRE and construction sectors of economy taking a big hit in employment beginning with the collapse of Lehman Brothers. Real estate salespeople, brokers, and appraisers must stop listening to the noise from Washington, D.C., politicians, and others who have mislead us in the past. What we are witnessing, the economists and politicians have witnessed this before during the late 1920’s, the late 1950’s and early 1970’s. In order to properly value real estate, one must cut out all the outside noise and analyze carefully what the local real estate market data is telling you.

On a Macro Basis the Indicators are all Negative

The recent indicators reported by the government suggest that the economy is improving because the rate of unemployment is declining, consumer confidence is improving, the rate of decline in manufacturing is subsiding, etc. All of the above and other statistics still suggests that economy is not improving and real estate values will not begin to rebound until the economy turns over and employment begins to increase with an increasing payroll income and wealth. That is not bound to happen for awhile.

In the New York Metropolitan area, the leading indicators for increasing real property values are all declining, including the following:

  • Population is stabilized or falling
  • Number of households has stabilized or is declining
  • Total employment is declining
  • Total payroll/income is declining
  • Consumer confidence is negative
  • Businesses are still contracting including manufacturing, retail and the financial services sectors of the economy.

The results of the 2010 Census should be interesting nationwide. Listen to what the leading indicators are telling you about the macro market.

Now, on a Micro Basis

Real estate is fixed and immobile. The value of real property is driven by local indicators which impact the demand for real estate in a specific location. All the macro indicators referred to above are also negative in the New York Metropolitan area. In order to determine if the real estate market is rebounding versus stabilizing at a much lower level of activity and prices, the following factors should be analyzed carefully in addition to the factors that generate demand:

  • Sale price trends
  • Increase/decrease in the number of sales
  • Increase/decrease in the number of listings for sale
  • Increase/decrease in the number of days on market
  • Increase/decrease in sales concessions
  • Response to for sale or for lease advertisements
  • Increase/decrease in the number of foreclosures
  • Increase/decrease in the number of loan defaults.

These trends are extremely important to watch, but the trends will not reverse until consumer confidence is positive and total payroll/income, employment and the number of households is increasing. It must be remembered that real estate prices remained depressed for several years after the recessions of the 1970’s and 1980’s. Why should this time be any different, and, in fact, it is already worse in many markets.


Tags: , , , , , ,


[Pretty Vacant] Shoots of Green Are Blossoming In The Metaphor Business

April 13, 2009 | 12:57 am | |

The weather is improving and I’m feeling the “this time of year optimism” where we get out of our log cabins after a long cold winter and admire the greenery around us.

The first thing you notice is that 1 in 9 houses in the US are currently pretty vacant:

According to an article today in USAToday, census numbers show:

  • More than 14 million housing units are vacant. That number does not include an estimated 4.8 million seasonal or vacation homes, most of which are occupied part of the year. The combined vacancy rate of almost 15% is higher than during previous recessions: 11% in 1991 and 9.4% in 1984.
  • About 3% of owned homes are vacant. In normal times, “maybe 1% should be vacant,” Myers says.
  • More than 9% of homes built since 2000 are vacant compared with about 2% for older homes.
  • Homes priced at $500,000 or more are just as likely to be empty as homes that cost less than $100,000.

But the spring metaphor favorite is Shoots of Green or simply Green Shoots.

Here are some warnings about its use:

Caroline Baum at Bloomberg, one of my favorite economic columnists said in her Wall Street Swaps Zegna for Denim, Tool Belts piece:

Like crocuses poking their heads through the soil, straining toward the sun, the U.S. economy is sending out the slenderest of shoots.

Justin Lahart at WSJ, in his Fed Chairman Chauncey Gardiner: You Must Believe In Spring

The combination of signs that the economy may have begun to recover and the arrival of spring has led to the overuse of a metaphor that could use a little pruning. We’re talking about those “green shoots” (sometimes “shoots of green”) that keep showing up in policymakers’ speeches, economists’ notes and, unfortunately, reporters’ stories.

But more mundane, weed-like uses on the presentation of economic news are more like these (no offense meant to the authors):

Manufacturing, Retail Reports May Disappoint:

As economy-watchers everywhere continue their desperate search for green shoots — little signs that the recession won’t last too much longer — this week could bring some sobering news.

The shoots of recovery look pale green at best:

We have former Tory Chancellor Norman Lamont to thank for the term “green shoots” to describe the first signs of a post-recession return to growth. In the depths of the last downturn, in December 1991, he told a Tory party conference: “The green shoots of economic recovery are appearing once again” – only to be greeted with ridicule and contempt.

Dallas Fed chief points to ‘green shoots’: A few signs of life are sprouting in the U.S. economy, but it’s too soon to say whether these “green shoots” will lead to a sustained recovery, said Richard W. Fisher, president and chief executive of the Federal Reserve Bank of Dallas.

Green shoots and tea leaves

One is that even in the Great Depression, things didn’t head down all the time. The chart above, from Eichengreen and O’Rourke, shows world industrial production in months from the previous peak, in the Depression and in the current crisis. Notice that there were several upturns along the way; each of those could have been — and was! — heralded as the beginning of recovery.

I’m thinking a Green Jacket is even better than a Green Shoot – or shooting on the Green is better than being green with a regular jacket on.

Shoot!


Tags: ,


[Bracket This] Optimism Gains A Foothold Against Skepticism, But Not Against Madness

March 19, 2009 | 2:52 pm | |

One of the most useless housing metrics ever debated has been new home sales released by the Commerce Department. The data doesn’t consider contract recisions and has a wildly high margin of error.

Privately-owned housing starts in February were at a seasonally adjusted annual rate of 583,000. This is 22.2 percent (±13.8%) above the revised January estimate of 477,000, but is 47.3 percent (±5.3%) below the revised February 2008 rate of 1,107,000.

Housing starts were up 22% over the prior month plus or minus 13%. Crazy. Yet it’s widely covered.

Every year at this time the metric is always discussed in the context of its prior month change rather than the prior year result. It’s March and this metric is based on February data. Housing starts nearly always rise starting at the beginning of the year. In all the press coverage, little or no attention was placed on the fact that starts are 47% below last year at this time, providing an illusion to the uninformed that construction is booming.

So my initial takeaway from this announcement and the ensuing buzz was, predictably, skeptical.

Last week the Dow jumped, and even though it has no direct correlation with the housing market, people were noticeably upbeat about the improvement in the stock market. This week – more of the same.

My initial takeaway was again, predictably, skeptical.

Madoff pleads guilty and goes to jail.

This provided some closure (not to the victims) on this horrendous financial situation. Nothing to be skeptical about.

The AIG $165M bonus debacle became the next event to focus on. It certainly appears that these bonus payments were enabled by Congress and Treasury from the beginning and feeble attempts were made to say “gee, contracts were signed and therefore we need to honor them.”

The public isn’t that stupid and responded in outrage and now suddenly every government servant from the president on down now suffers from a case of righteous indignation. The AIG audacity of paying these bonuses, along with Thain’s bathroom renovation, is clearly the symptom of a larger reality distortion and one of the reasons we are in this mess. Yet if this is a crisis of confidence and the $165M represents peanuts relative to the trillions at play, its symbolism is far more important – at least for now. Merrill Lynch bonuses are next on the radar.

Bernanke announces that he sees the recession over by the end of this year and recovery beginning in 2010. By now, skepticism reigns with the Fed chief’s intentions since the Fed was so slow in reacting to the crises in 2007 and 2008, chimed in with Paulson’s panic message last summer and Ben has clearly radiated optimism in between bleak assessments.

It seems to me that the majority of economist do not believe the recovery will begin in 2010 so I’m skeptical.

The Federal Reserve is directing $1T at credit to alleviate the log jam which is met with euphoria (financially speaking of course). Now there are signs that liquidity is starting to return to the credit markets.

But I must say I am skeptical of the President with the confidence in his decisions on the Madness. I am picking UConn to beat North Carolina in the final and he is going with the Tar Heels.

Tags: , ,


TED’s Excellent Adventure

February 13, 2009 | 3:23 pm | |

Link to Bloomberg Chart

Ok, so this is my second Bill & Ted reference this week, but hey, Keanu Reeves starred, Matrix, etc.

I was having lunch with a good friend (other than the grief I regularly get about my bright shirt colors) the other day and he suggested I follow the TED spread more closely. While I have followed it, I’ve not been as fanatical about as many economists are. Perhaps I should be since, like the Fed’s Senior Loan Office survey, TED provides useful insight into the lending environment beyond mortgage rates.

I watched the CNBC special last night House of Cards, which was very good – not too much I hadn’t heard before but it did provide more clarity to the sequence of events and expanded my understanding of the roles Fannie/Freddie, Greenspan, CDOs and the rating agencies played in the risk/reward disconnect.

I also learned that the word Credit is derived from the Latin for Trust.

The TED spread (Treasury Eurodollar) for the uninitiated is the rate spread between treasury bills and and LIBOR.

Treasury bills are thought to represent risk free lending because there is the assumption that the US government will stand behind them. LIBOR represents the rate at which banks will lend to each other.

the difference in the two rates represents the “risk premium” of lending to a bank instead of to the U.S. government.

When the TED spread is low, banks are likely in good shape because banks feel nearly as confident lending to each other as if it were backed US government (The US has recently proved we’ll back pretty much back anything).

The spread is usually below 100 basis points (“1” on the chart). It reached a recent low of 20 basis points in early 2007, which in my view, shows a disconnect in the pricing risk since the subprime mortgage boom began to unravel in early 2006.

The spread spiked in in mid 2007 at the onset of the credit crunch (that was a summer to remember) and later spiked to 460 on October 10, 2008 as the wheels came off the financial system and became the new milestone or “tipping point” for the new housing market.

The spread has been contracting which is perhaps a sign that banks are starting to feel less panicked about each other. I think lending conditions will improve over the next few years, but there is a long way to go as measured by years rather than quarters.

Note: Another TED worth noting. A great resource for the intersection of Technology, Entertainment and Design.


Tags: , , ,


Higher Mean Temperatures Mean Affordable Housing

February 12, 2009 | 2:07 am | |

It was close to 60 degrees in Manhattan yesterday which reminded me I neglected to post Ed Glaeser’s fascinating commentary in the Economix Blog of the New York Times called Revenge of the Rust Belt.

It also brought to mind a Steven Wright favorite of mine:

It doesn’t matter what temperature the room is, it’s always room temperature.

But I digress

Glaeser correlates population trends with January mean temperature. As a nation, the sun belt continues to see population growth and the midwest continues to see population contractions.

Pittsburgh has its Steelers because high transport costs made it costly to move coal. Prodigious amounts of energy were needed to work the metals, like iron and steel, which were the hard core of the Industrial Revolution. Since moving vast amounts of coke or coal was expensive, Andrew Carnegie’s steel factories were close to Henry Frick’s coking furnaces, which were close to Pittsburgh’s vast coal seam.

Over the course of the 20th century, transport costs plummeted. The real cost of moving a ton of goods a mile by rail declined by more than 90 percent. Manufacturing left cities, the Rust Belt and America altogether. Every one of the old industrial cities declined greatly. The city of Pittsburgh’s population fell from 677,000 in 1950 (its peak) to 334,000 as of the last census, and apparently less than 300,000 today.

The advantage a market like Phoenix has in the long run, despite the sharp declines in housing, is the potential for more affordable housing because of the unrestricted capacity to build and expand.


Tags: ,


[Contrarian Move] Staying Put

December 22, 2008 | 10:56 pm |

I am not one for mushy demographic survey stats, but this one intrigued me because it incorporates Census findings and overlaps with housing sales. “Who Moves? Who Stays Put? Where’s Home?”

As a nation, the United States is often portrayed as restless and rootless. Census data, though, indicate that Americans are settling down. Only 13% of Americans changed residences between 2006 and 2007, the smallest share since the government began tracking this trend in the late 1940s.

A new Pew Social & Demographic Trends survey finds that most Americans have moved to a new community at least once in their lives, although a notable number—nearly four-in-ten—have never left the place in which they were born.1 Asked why they live where they do, movers most often cite the pull of economic opportunity. Stayers most often cite the tug of family and connections.

On the surface, this seems to contradict the surge in sales activity in 2004, 2005 and 2006 during the housing boom. However, NAR indicated that roughly 36% of all sales in 2004 were investor or vacation home sales. I interpret this as a surge of secondary housing, not primary, which is one of the reasons the surplus housing stock is going to be difficult to absorb over the next several years. Although I can’t find an updated version of those numbers (likely because they would not be rosy enough), I suspect they are nearly a non-factor now.

Exercise: try counting the number of times you have moved in your entire life, including higher education if applicable. I moved roughly every 4 years before I left for college, then every year of college (2x) and every 2 years until I owned my first house. After that I averaged once every 6 years. 8 states. I am sick of moving.

The findings that interested me most:

  • Most adults (57%) have not lived outside their current home state in the U.S. At the opposite end of the spectrum, 15% have lived in four or more states.
  • More than one-in-five U.S.-born adults (23%) say the place they consider home in their heart isn’t where they’re living now. And among those who have lived in two or more communities, fully 38% say they aren’t living in their “heart home” now.
  • The Midwest is the most rooted region: 46% of adult residents there say they have spent their entire life in one community. The least rooted is the West, where only 30% of adult residents have stayed in their hometown. Residents of the South (36%) and East (38%) fall in between.
  • College education is a key marker of the likelihood to move: Three-quarters of college graduates (77%) have changed communities at least once, compared with just over half (56%) of those with a high school diploma or less. College graduates also are more likely to have lived in multiple states.
  • Movers are more likely than stayers to say there is a good chance that they will move in the next five years. Not surprisingly, only a third of those who rate their current communities highly predict they’ll move within five years, compared with half of those who give their current communities a poor rating.


Tags: , , ,


[Community Reinvestment Act Reconsidered] Quantity Before Quality

December 12, 2008 | 2:16 am | |

There was an interesting Op-Ed piece in the New York Times this week written by Howard Husock of the Manhattan Institute called Housing Goals We Can’t Afford.

The article points out that with all the housing and mortgage woes across the country, it’s pretty easy to point fingers. However, it gets more difficult when you point them at groups that tried to do the right thing.

The Community Reinvestment Act was passed in 1977 when bank competition was sharply limited by law and lenders had little incentive to seek out business in lower-income neighborhoods. But in 1995 the Clinton administration added tough new regulations. The federal government required banks that wanted “outstanding” ratings under the act to demonstrate, numerically, that they were lending both in poor neighborhoods and to lower-income households.

Banks were now being judged not on how their loans performed but on how many such loans they made. This undermined the regulatory emphasis on safety and soundness. A compliance officer for a New Jersey bank wrote in a letter last month to American Banker that “loans were originated simply for the purpose of earning C.R.A. recognition and the supporting C.R.A. scoring credit.” The officer added, “In effect, a lender placed C.R.A. scoring credit, and irresponsible mortgage lending, ahead of safe and sound underwriting.”

I remember at one point, quite a while ago, before digitally delivered appraisals, lenders were calling us to get the census tract number the property was located in. We soon discovered that the standardized binder that held the appraisal and other mortgage documents, required two holes punched at the top of the form. One of the holes covered the census tract number. This number was used to credit the bank with originations in lower-income neighborhoods. It struck home (no pun intended) how important it was for them to cover all the markets.

CRA is a noble endeavor. The solution to uneven lending missed a basic economic fact: banks were pressed to lend in areas with lower home ownership and therefore had to lower their underwriting standards to get enough volume to make the regulators happy.

The result? Higher default rates are experienced in these markets. Mandating quantity creates an environment of weaker quality.

If the Community Reinvestment Act must stay in force, then regulators should take loan performance, not just the number of loans made, into account. We have seen the dangers of too much money chasing risky borrowers.

An argument can be made here for encouraging renting when ownership is not affordable or simply creates too high of an investment risk. You can look around and see what happened when lending practices were not reflective of market forces. Bedlam – good intentions or not.

UPDATE: I got an generic but informative email from the Center for Responsible Lending, likely as a result of this post that contained the header: “Bashing CRA Doesn’t Help.” It provides tangible talking points that are informative. The sensitivity is very elevated over this topic and I wasn’t bashing – I just have a concern over the transfer of risk to lenders – it’s a brave new world out there and interpretation of risk has changed overnight.

Here’s their email text:

According to John Dugan, Comptroller of the Currency, “It is not the culprit.”

Federal Reserve Governor Randall Kroszner says, “It’s hard to imagine.”

They are talking about the wrong but persistent rumors that the Community Reinvestment Act, a longstanding rule to encourage banks to lend to all parts of the communities they serve, is the reason behind for the surge in reckless subprime lending.

First, CRA was passed into law in 1977, well before the development of the subprime market. The majority of lenders who originated subprime loans were finance companies, not banks, and thus not even subject to CRA requirements.

A recent study by the Federal Reserve points out that 94% of high-cost loans made during the subprime frenzy had nothing to do with Community Reinvestment Act goals.

A lump of coal to the media who perpetuate this myth. The sooner we stop finger-pointing and focus on real solutions, the better.


Tags: , , ,


Urban Housing Trends Aren’t A Crime

August 20, 2008 | 11:58 am | |

In an analysis done of census data pre-housing boom (1990s), The Brookings Institute in their recent report Where Workers Go, Do Jobs Follow? found that:

  • Roughly 65 percent of all residents and nearly 60 percent of all jobs are now located in the suburbs, with over a third of each in the higher-income suburbs.
  • Population grew strongly during the 1990s in the lower-income suburbs, while job growth was particularly strong in the higher-income suburbs

And then comes the 2000s
The New Urbanism movement, bolstered by the housing boom’s creation of new luxury housing stock and redevelopment of underutilized commercial districts, has seemingly reversed the long term migration to the suburbs. The decline in serious crime levels in urban markets have also played a major role in boosting demand (and may in turn further influenced the decline)

Will the current economic downturn undo urban housing trends in many US cities?

Based on the St. Lousi Fed research paper City Business Cycles and Crime by Thomas A. Garrett and Lesli S. Ott , perhaps not:

We find weak evidence across U.S. cities that changes in economic conditions significantly influence short-run changes in crime. This suggests that short- run changes in economic conditions do not induce individuals to commit crimes…we do find that short-run changes in economic conditions influence property [versus violent] crimes in a greater number of cities.

I have always seen crime levels and other quality of life issues as long term trends, like steering a super tanker (admittedly, a tired analogy).

And while we are on the subject of research papers…


Tags: ,


[In The Media] Fox Business Interview for 6-17-08

June 17, 2008 | 1:35 pm | TV, Videos |

This morning I was invited to comment on housing starts for Fox Business Network’s Money For Breakfast show hosted by Alexis Glick.

Here’s this morning’s clip.

I wasn’t at my best on this one – no coffee prior to the interview – but it was interesting to see starts fall yet again. The May housing start figures were released by US Commerce just as the interview began at 8:30am.

Privately-owned housing starts in May were at a seasonally adjusted annual rate of 975,000. This is 3.3 percent (±10.7%)* below the revised April estimate of 1,008,000 and is 32.1 percent (±5.1%) below the revised May 2007 rate of 1,436,000. Single-family housing starts in May were at a rate of 674,000; this is 1.0 percent (±9.9%)* below the April figure of 681,000. The May rate for units in buildings with five units or more was 280,000.

April’s rise seems to be an anomaly. Expectations for housing continue to be negative as evidenced not only by these start figures which suggest there is excess inventory, but the record low NAHB/Wells Fargo Builders Confidence Index announced yesterday, was at a record low. In other words, builders, who are some of the biggest risk takers and optimists out there, are not feeling good about the situation.

It’s funny but with all the excess inventory out there, I find it hard to believe that builders continue to build, even at their “half full” output compared to 2006 levels. The decline in housing starts (which are fraught with crazy statistical problems to begin with) would likely be lagging the drop in demand as measured by inventory.

We really need a better national inventory figure.


Tags: , , , ,


[In The Media] Fox Business C-Suite Interview for 5-16-08

May 16, 2008 | 11:09 am | | TV, Videos |

Well this morning, I got up at 4:15am to do a live C-Suite interview on Fox Business News at 6:45am. Always fun and I enjoyed meeting Jenna Lee in person after having known her only via telephone when she was a reporter. I must have done ok since they invited me back next friday morning. 😉

Here’s this morning’s clip.

We talked about both housing starts and my appraisal firm, Miller Samuel. I had thought that the April numbers would show further decline. March was the lowest in 17 years and was down by 2/3 from the January ’06 high. Economists surveyed generally thought starts would be down around 1.4%.

Surprisingly, starts were up.

Starts jumped 8.2% but that was due to multi-family starts. Single family starts were actually down 1.7%. Overall starts are down 30.6% from the same time last year.

Bad Stats 101

Check out the Census’ press release quote:

Privately-owned housing starts in April were at a seasonally adjusted annual rate of 1,032,000. This is 8.2 percent (±14.5%)* above the revised March estimate of 954,000, but is 30.6 percent (±6.7%) below the revised April 2007 rate of 1,487,000.

Translation of up 8.2 percent (±14.5%): Overall housing starts were anywhere from -6.3% to +22.7%. Seems wildly vague, doesn’t it?

Single-family housing starts in April were at a rate of 692,000; this is 1.7 percent (±11.7%)* below the March figure of 704,000. The April rate for units in buildings with five units or more was 326,000.

Translation of down 1.7 percent (±11.7%): Single-family starts were anywhere from -13.4% to +10%. Seems wildly vague as well.

If you think about it, nothing has really changed since last summer’s credit crunch that would change the direction of the housing market.

  • How can we talk about a bottom yet?
  • What market force is going to get more people to buy right now?
  • What economic force is going to stimulate demand as we approach or are in a recession?

The credit markets are still frozen, mortgage rates have risen, underwriting standards are higher and reduced the buyer power of consumers.

The headline increase in starts means nothing; it is all due to a rebound in the hugely volatile, but essentially trendless, multi-family sector,” said Ian Shepherdson of High Frequency Economics.

Builders have been reluctant to build because demand for new homes has plunged and the supply of unsold property remained high. The latest data show new-home sales, for March, were down 36.6% from a year earlier. On Thursday, the National Association of Home Builders reported its index for sales of new, single-family homes slipped to 19 in May from 20. The gauge is based on a survey of builders asked about prospects for sales.

“The magnitude of the housing bubble was unprecedented, and the corrective process promises to be a long and painful one,” MFR Inc. Joshua Shapiro said of the NAHB data. “Hence, it is hardly surprising that builder sentiment is still languishing very near its all-time low.”

As far as Miller Samuel (my appraisal firm) goes, we have been booming since February. Fox Business inadvertently inserted a text banner during my interview that referred to our now defunct acquisition by RL from last fall. I had terminated the take-over in March.

Our firm is built for a down housing market because lenders as well as other clients actually want to know what the value is and the nuances of housing markets we cover, rather than only the number needed to make the deal. We did not fare as well as others during the housing boom because of the erosion of underwriting standards and the shift of appraisal work from retail lenders to mortgage brokers.

The current lending environment is encouraging, in a contrarian sort of way, by getting back to basics. Hopefully this will permeate the entire lending process.

The housing boom was tough for appraisers who refused to bow to pressure to push values higher than they should have been and the work was given to those who would.

But the world is changing, and like the IRS, we are here to help…




From the:

Who Cares But
It’s Still Cool
Department:

Christine Haughney’s Collateral Foreclosure Damage for Condo Owners in the NYT yesterday that sourced and used us for background, was the most emailed article in the New York Times both yesterday and today. THAT is cool (to me). It was designated to be an A1 story but was bumped for the earthquake in China coverage.


Tags: , , , , ,


Homeownership Rates Slipping, Vary By Region

May 9, 2008 | 12:41 am |

First Quarter 2008: Graph of Homeownership Rates

Interesting how much homeownership rates vary by region. The midwest has the highest rate, yet they saw the least change in price appreciation during the housing boom. Markets in the west and northeast have the lowest rates (and the highest home prices).

Hmmm, let me see…. higher prices = lower affordability = lower home ownership rates = more creative financing.


Tags: ,


[Getting Graphic] Empty And New And More Of Them

May 4, 2008 | 11:25 pm | |

Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related chart(s).

Source: NYT

Click here for full sized graphic.

In the It’s Newer Homes That Stand Empty as Vacancies Rise by Floyd Norris the sharp increase in vacant houses are more heavily weighted toward new construction.

The Census Bureau reported that 2.9 percent of homes intended for owner occupancy were vacant at the end of the first quarter. That figure had begun to rise even during the housing boom, a little-noticed byproduct of the aggressive construction of homes encouraged by easy credit. Before 2006, that figure had never exceeded 2 percent.

The ease of credit combined with limited underwriting resulted in an excessive level of new construction to enter the market. That’s why the rental market is as weak as the sales market in those areas that were characterized by new development. The speculation drove development beyond the level of reasonable absorption causing investor units to enter the market as competitors to existing rentals.


Tags: , , ,