Matrix Blog

Posts Tagged ‘Case-Shiller’

My Bloomberg View Column: Housing Data Is Old and Moldy

July 31, 2014 | 11:32 am | BloombergViewlogoGray | Columns |

BVlogo

After being pummeled with confusing sound bits after the release of Monday’s Pending Home SalesIndex by the NAR and the S&P/Case Shiller Index, I thought it was time to set the record straight on the applicability of this research.

This is my second column for Bloomberg View: Housing Data Is Old and Moldy


My Bloomberg View RSS feed.

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Bloomberg Surveillance TV – Guest Host 6-25-14

June 25, 2014 | 8:30 am | bloomberg_news_logo | Videos |


UPDATE: above clip just added – expanded conversation.

Got to guest host an hour (6am to 7am) of Bloomberg Television’s Surveillance with Tom Keene, Scarlett Fu and Adam Johnson to talk housing. The above is just a couple of minutes of the hour (yes, you’re spared). We spoke about Case Shiller, New Home Sales, biting in World Cup Soccer, my fireman son using a GoPro in fires and LeBron/Carmelo’s real worth among other things. Like I said, we did talk housing.

Adam brought up a great point – while the economy is always characterized as 70% consumer driven, 16% of that is actually health care spending so the overall number is really 54%.

Very smart conversations (the topic of biting included). Always fun to join them.

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Time-Shifted Case Shiller: Dallas, Denver Crushing it, Polar Vortex a Non-Issue ‘Cause It’s Still December

June 24, 2014 | 5:29 pm | Charts |

matrixCSI-6-24-14 [click to expand]

The above chart is a generic trend line for the seasonally and non-seasonally adjusted 20-City Case Shiller Index released today using the data from the release.

And here’s the same index that I time-shifted backwards by 6 months to reflect the “meeting of the minds” of buyers and sellers. More specific methodology is embedded in the following charts. By moving the index back 6 months, the changes in the direction of the index are in sync with economic events (reality). In my view this index has a 6 month (5-7) month lag rendering it basically worthless to consumers but perhaps a useful tool for academic research where timing may not be as critical. I’m just grasping here.

matrixCSI-6-24-14INDEXshift

[click to expand]

And here’s a time-shifted trend line for the year-over-year change in the 20 city index. You can see that the pace of year-over-year price growth began to cool at the end of last year. Talk about the weather is still premature since the polar vortex occurred after the new year.

matrixCSI-6-24-14YOYshift

And here is the ranking by year-over-year changes for each city as well as the 10 and 20 city index. Dallas and Denver are no longer under water and Las Vegas, despite recent good news has a long way to go to get to the artificial credit induced high it reached in 2006.

matrixcsi6-2014ranking

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Pulling the Case-Shiller Index Back by 6 Months to Reflect Actual Buyer/Seller Behavior

May 27, 2014 | 10:45 pm | Charts |

matrixCSIshift-5-27-14
[click to expand]

The Case Shiller Index was released today and it continued to confuse consumers, pundits, economists etc…and for good reason. It’s 6 months late.

I wondered what would happen if their index result was pulled back by 6 months to see how it lined up with a couple of significant housing milestones (purple vertical lines). The most recent housing milestone was last year’s Bernanke speech that resulted in the spike in mortgage rates in May-June of 2013.

In the modified trend line (dotted blue) housing prices surge up until mortgage rates spike. This is clearly more logical than the actual index showing housing prices surging for six months after the mortgage rate spike.

In the earlier milestone in April 2010, the adjusted index (dotted blue line) immediately begins to slide after the April 2010 signed contract deadline passed to qualify for the federal homeowner tax credit as part of the stimulus plan. Yes, that’s exactly what happened on the front lines.

I’m going to call this new methodology “time-shifting a housing index.” From an historical perspective, this is a much more useful and reliable trend line. For the near term, it places the CS HP 6 months behind the market without any relevance to current conditions. Then again, the S&P/Case Shiller Home Price Index was never meant to be a monthly housing indicator for consumers as it is currently used by the media. It was originally created to enable Wall Street to hedge housing but never caught on because of the long time lag and therefore the eventual ability of investors to accurately predict the results.


The top chart is fairly self-explanatory but here’s the math again:

  • May 2014 Report Publication Date
  • March 2014 Data (Jan, Feb, March Closings – February is midpoint)
  • January 2014 Contracts (Nov, Dec, Jan Contracts – December is midpoint)

Contracts Assumes 90 days between closing date and “meeting of minds” between buyer and seller i.e. 75 days from contract to close +15 days to signed contract from “meeting of minds.”

“Meeting of Minds” Moment when buyer and seller agree on basic price and terms, usually a few weeks before contract is actually signed i.e. May 2014 Case Shiller Report = December 2013. The optimal moment to measure housing.

Here’s a regular chart that has a longer timeline, with and without seasonal adjustments (you can see that seasonal adjustments are essentially meaningless.)

matrixCSI-5-27-14

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[Leverage] Calculating Your Home Investment Return Realistically

March 16, 2014 | 9:00 am | Infographics |

leverageinfographic
[click to expand]

I think many, if not most people calculate the return on their home as an investment as this CNN/Money calculator does. After seeing this, I whipped up a theoretical infographic illustrating how the use of leverage in a home purchase factors in to your return. It’s super simplistic, not factoring in opportunity cost, use and enjoyment, tax deductions, improvements and other factors because I wanted to show the power of leverage.

Forget about price indices like Case Shiller or similar. I can’t tell you how many times I have seen a home price index paired up against a stock price index as a way to determine which investment is better. Apples and oranges.

Measure your ROI using what you invested (down payment) and what your home equity expanded (or contracted) to.

The CNN/Money rate of return calculator is really only a measurement of home price appreciation compared to the same period for stocks and bonds as an opportunity cost – comparing different asset types side by side – yet that’s not how the majority of homebuyers interact with their home as an investment.

It’s most often about leverage.

UPDATE
An appraisal colleague and friend of mine pointed out that in my original version, I incorrectly used the word “profit” within the infographic rather than what I was actually talking about: “equity” ie return on investment (ROI) – how much the original down payment gained over time. The numbers all remained unchanged.

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Bloomberg View’s Super Cool Visual: Bubble to Bust to Recovery

February 25, 2014 | 2:09 pm | bloomberg_news_logo |

Screen Shot 2014-02-25 at 1.52.41 PM
[Click to view presentation]

Matthew C. Klein does an amazing presentation on the housing cycle (h/t Barry Ritholtz) – think of it as a Kahn Academy presentation on visual steroids.

Bloomberg View’s “Bubble to Bust to Recovery.”

Required viewing.

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[Video] Talking Housing on CNBC TV’s Street Signs 9-25-13

September 25, 2013 | 7:29 pm | trdlogo | Videos |

I’m not quite ready to use the word “haunted” in my housing language, but I had a nice chat with Brian Sullivan and Mandy Drury of CNBC TV’s ‘Street Signs’ – 30 Rock is always quick walk from my office to do the remote. Although my firm’s name was announced backwards on air (It’s really “Miller Samuel” I swear), I think my logic was forward (sorry).

Fun. Plus Mandy gives The Real Deal Magazine a shout out.

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[Video] Talking Housing on Bloomberg TV’s Surveillance 9-24-13

September 24, 2013 | 12:10 pm | bloomberg_news_logo | Videos |

Always fun (and refreshing) to talk housing with Tom Keene, Sara Eisen and Scarlet Fu on Bloomberg TV’s Surveillance. I always watch or listen to the show on their apps as part of my morning routine. Got to meet and hear great insights from Jim O’Neill, Bloomberg View columnist and former chairman of Goldman Sachs Asset Management as well.

Did I tell you I am still the mayor of the Bloomberg Cafeteria on Foursquare?

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[Video] Talking Housing, Case Shiller, on Bloomberg TV’s Surveillance 8-28-13

August 28, 2013 | 11:13 am | bloomberg_news_logo | Videos |

I had a nice discussion with Tom Keene, Sara Eisen and Alix Steel, along with guest host Byron Wien, vice chairman of Blackstone Group LP’s advisory services on the state of US housing and the latest Case Shiller numbers.

More importantly, I’m still the mayor of Bloomberg TV’s Green Room on Foursquare.

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Talking Case Shiller on Bloomberg TV’s ‘Street Smart” with Betty Liu/Adam Johnson

May 29, 2013 | 11:57 am | bloomberg_news_logo | Public |

Yesterday’s release of the Case Shiller Index prompted a flurry of coverage given the 20-cities’ highest YoY increase in 7-years. I did a three way split interview from a remote location in CT (see studio set up below). I was a guest along with Vincent Reinhart, chief US economist at Morgan Stanley and Stan Humphries, chief economist at Zillow Inc. Betty Liu and Adam Johnson kept the conversation going.

I especially liked Stan’s modification of the Case Shiller Index results which excluded foreclosures and his research on low and negative equity (my explanation for low inventory right now). The drop in foreclosure activity over the past year caused significant skew to the mix. According to Stan the index would show roughly a 5% increase YoY rather than an 10.9% increase. A huge difference and yet another reason why this index does more harm than good to our understanding of the housing market.

Vincent’s observation that seasonality is considered in Case Shiller is basically wrong – not technically wrong because the data is seasonally adjusted. However the methodology of a repeat sales index washes out seasonality. If you look at the Case Shiller chart, there hasn’t been “seasons” in housing since 1987. That’s simply not true. The Case Shiller Index does not reflect annual housing cycles.

Since Case Shiller Index lags the signing of contracts by 5-7 months, expect to see much higher YoY results this summer.

How the sausage is made

Bloomberg TV is always great to work with – they arranged for me to use a remote studio in CT through a third party. Here is what the studio looks like. Amazingly primitive but it works!

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