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Posts Tagged ‘Stan Humphries’

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

May 29, 2013 | 11:57 am | bloomberglogo | 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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Low Housing Inventory Is NOT A Sign of Housing Recovery

July 9, 2012 | 10:49 am | wsjlogo |

I wrote “The Decline In Inventory Right Now is NOT a Good Sign” back in February, but there has been a more refined discussion about low inventory recently. Back then my orientation was more about the “robo-signing” scandal causing a drop in distressed listings as servicers held back supply – as well as the lack of confidence by sellers over whether they can achieve their price.

Stan Humphries, chief economist of Zillow has been a guest on my podcast and penned a great piece about it a few weeks ago called “The Connection Between Negative Equity, Inventory Shortage and Increasing Home Values: Why the Bottom Won’t Be as Boring as We Expected” tackling the impact of negative equity on inventory.

CoreLogic reported (via Nick Timiraos/WSJ) that the supply of homes for sale declines as negative equity increases.

David Rosenberg, chief economist as Gluskin-Sheff, and whom I had the pleasure of meeting with for dinner a few months ago, presented a great series of charts in his newsletter (via ZeroHedge).

It basically presents the idea that “upside-downers” ie those with negative equity, can’t list their homes for sale because they don’t have equity (or enough equity) for the next one.

Here’s the most compelling excerpt:

According to data cited by the USA Today, the supply backlog where over half of homeowners are “upside down” on their mortgage is at 4.7 months’; in areas where “upside down” borrowers make up less than 10% of the market, the listed inventory is closer to 8.3 months’ supply.

In other words, in markets with unusually tight inventory, prices are being “goosed” higher, not because the housing market is improving, but because there are fewer houses in the game. Low mortgage rates are artificially creating excess demand, with those buyers fighting over the slim pickings of sellers who can actually sell.

That, my friends, is NOT a housing recovery.

More visuals:



The Decline In Inventory Right Now is NOT a Good Sign [Matrix]
David Rosenberg Explains The Housing “Recovery” [Zero Hedge]
The Connection Between Negative Equity, Inventory Shortage and Increasing Home Values: Why the Bottom Won’t Be as Boring as We Expected [Zillow Real Estate Research]
Why Aren’t There More Homes for Sale? [WSJ Developments Blog/Nick Timiraos]

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