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[Over Coffee, (Tea)] Quote: …that doesn’t mean the units are for sale in the market

January 3, 2010 | 10:45 pm | |

After a bout of the flu this morning, I’ve been nursing tea all day and was unable to use my Jets tickets tonight (game time 8:20pm, 17 degrees, 30mph gusts).

I read about the $1.1B Burj Dubai tower, the world’s tallest, that was opened today. It is primarily residential but has 37 floors of commercial occupancy. It is supposedly 75% occupied, its an interesting announcement given Dubai’s credit woes and the fact that prices have fallen 52%.

But the disconnect with how a real estate market functions is best captured with this quote when referring to investors:

“They are people who can hold on to it comfortably for the next five to 10 years,” Downs said. “So even if apartments remain empty and lights switched off at night, that doesn’t mean the units are for sale in the market.”

I think they need to give international investors more credit than that (literally), shouldn’t they?

[In The Media] Bloomberg Radio/TV Housing Recovery May Take 3 to 4 Years

December 18, 2009 | 11:30 pm | | Public |

[click to play]

I was invited this morning to join Tom Keane and Ken Prewitt on their must listen to radio show Bloomberg Surveillance at 8am. I sat in for about 3/4 of an hour. Love this show – avid listener of their podcasts.

This time, they brought in a few cameras for a few minutes, mid-interview and cut in from the Bloomberg TV broadcast to join us. Fun!

Mentions during show
55 Sq Ft Apartment [NY Post]
Gotham: A History of New York City to 1898 [Amazon]

Show links
Listen to the show podcast [Bloomberg]
Watch the TV clip [YouTube]

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[RealtyTrac] Pushing 4M in 2009, November Foreclosure Filings Remain High, Pace Eases

December 10, 2009 | 2:45 pm | |

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RealtyTrac has released their monthly US Foreclosure Market Report today and its a mixed bag of results. In other words, its like unemployment. Its at a high level but the pace of increase seems to be abating. In other words, with 3.9 million notices sent to homeowners in default, it is going to take a while for this inventory to clear out.

Here are the foreclosure metrics by state.

And a news recap:

foreclosure filings — default notices, scheduled foreclosure auctions and bank repossessions — were reported on 306,627 U.S. properties during the month, a decrease of nearly 8 percent from the previous month but still up 18 percent from November 2008. The report also shows one in every 417 U.S. housing units received a foreclosure filing in November.

Phyllis Furman over at The Daily News does a nice NYC-centric analysis of the results.

While foreclosure activity is rising, the percentage of homes at risk here – one in every 1,706 – is small relative to the rest of the country. In November, 306,627 U.S. homes – one in every 417 – received a foreclosure filing. That was up 18.4% from last year, but down 7.7% from October.

And Dan Levy at Bloomberg does a nice US foreclosure recap

Dec. 10 (Bloomberg) — Foreclosure filings in the U.S. will reach a record for the second consecutive year with 3.9 million notices sent to homeowners in default, RealtyTrac Inc. said.

This year’s filings will surpass 2008’s total of 3.2 million as record unemployment and price erosion batter the housing market, the Irvine, California-based company said.

“We are a long way from a recovery,” John Quigley, economics professor at the University of California, Berkeley, said in an interview. “You can’t start to see improvement in the housing market until after unemployment peaks.”:

Statistical nirvana by default (sorry for the pun)

  • One in every 417 U.S. housing units received a foreclosure filing in November
  • Default notices nationwide were down 8 percent from the previous month but still up 22 percent from November 2008
  • Nevada, Florida, California post top state foreclosure rates
  • Nevada foreclosure activity – one in every 119 housing units receiving a foreclosure filing in November — 3.5 times the national average.
  • Four states account for more than 50 percent of national total: For the second month in a row, the same four states accounted for 52 percent of the nation’s total foreclosure activity: California, Florida, Illinois and Michigan
  • Las Vegas drops out of top spot among 10 highest metro foreclosure rates. After four straight months with the nation’s top foreclosure rate among metropolitan areas with a population of at least 200,000, Las Vegas dropped to No. 5 thanks to a 33 percent decrease in foreclosure activity from the previous month. One in every 102 Las Vegas housing units received a foreclosure filing in November — still more than four times the national average.

[Tax Credit] Existing Home Sales Up 10.1% M-O-M, 23.5% Y-O-Y

November 23, 2009 | 4:01 pm | |

The National Association of Realtors released their October 2009 Existing Home Sale Report and the news was positive and kind of weird.

Driven by the first-time buyer tax credit, existing-home sales showed another big gain in October with a strong uptrend established over the past seven months, while inventories continue to decline.

It looks like the uptick in sales last month has been eliminated with the downward revision this month.

Existing-home sales

Existing-home sales – including single-family, townhomes, condominiums and co-ops – surged 10.1 percent to a seasonally adjusted annual rate1 of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.

The number of sales was up 23.5% over the same period last year and up 10.1% from August. Both saw unusually sharp increases, caused by the expiration of the tax credit (and then renewal and expansion), falling mortgage rates, rising foreclosures (falling prices) and improved affordability.

If you remove the seasonality adjustment, the number of sales was up 20.8% over the same period last year and up 6.6% from August, still significant.

“It’s an impressive increase and shows a lot of pent-up demand for housing,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Buyers have enough confidence to take the plunge. The housing market recovery will be a durable one.

I’m not clear how the recovery is durable since it is solely dependent on artificially depressed mortgage rates, federal agency bailouts and tax credits.

Median existing home price

Prices continued to fall as there remained a large market share of foreclosures and lower priced properties and condos receive the most interest from buyers.

The national median existing-home price for all housing types was $173,100 in October, down 7.1 percent from October 2008. Distressed properties, which accounted for 30 percent of sales in October, continue to downwardly distort the median price because they usually sell at a discount relative to traditional homes in the same area.

Listing inventory continues to decline.

Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, which represents a 7.0-month supply2 at the current sales pace, down from an 8.0-month supply in September. Unsold inventory totals are 14.9 percent below a year ago.

Whats kind of weird about all of this good news, is that prices are falling,low end sales activity surged, market share of foreclosure sales remains high and high end housing market segments are the weak.

The NAR press release seems to couch readers in their anticipated sharp decline in sales over the winter.

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[In The Media] Bloomberg TV New York’s Jobless Reflected in Rentals Drop

October 9, 2009 | 10:41 pm | | Public |

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A little late in posting this clip from Wednesday as I work on next week’s market report releases. Can’t get it to play on my mac, only on windows. Never quite comfortable with news headlines that use your name.

I got up at 4:30am to make it to the 6:45am interview. Thank goodness they have a Fig Newton laced, cranberry juice loaded, entirely free cafeteria.


[REIS Report] US Apartment Vacancy Rate 7.8%, 23 Year High

October 7, 2009 | 10:56 pm | |

[click to expand] source: Calculated Risk

On Thursday (in about an hour) we are releasing our 3Q 2009 Manhattan Rental Market Overview. In the meantime, the REIS report is a wake up call to the economic realities of the apartment market in New York and the US.

The U.S. vacancy rate reached 7.8%, a 23-year high, according to Reis Inc., a New York real-estate research firm that tracks vacancies and rents in the top 79 U.S. markets. The rate is expected to climb further in the fall and winter, when rental demand is weaker, pushing vacancies to the highest levels since Reis began its count in 1980.

This is the seventh straight quarter where less space has been rented. Net effective rents (face rent less concessions like free rent and payment of commissions) has fallen sharply since the Lehman bankruptcy. REIS sees vacancy rates peaking in a year and rents declining through 2011.

Why? Rising unemployment and 7.2M jobs lost in the recession so far.

New York vacancies jumped to 11.4 percent in the third quarter from 6.6 percent a year earlier, and the city’s effective rents tumbled 18.5 percent, Reis said.

The drop in rents is about twice the decline New York experienced in 2002, following the Sept. 11, 2001, terrorist attacks. Rents fell 9.3 percent that year, Calanog said.

That’s why landlords are aggressively focused on tenant retention. The New York balcony BBQ conversation is dominated by “how much the landlord knocked off the rent to get me to renew.”

Pollyanna has moved out.


[Case Shiller 20 City Index] July 2009 Down 13.3% Y-O-Y, Up 1.2% M-O-M

September 29, 2009 | 12:03 pm | |

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Here’s the summary:

The S&P/Case-Shiller 20-city home-price index, a closely watched gauge of U.S. home prices, rose 1.6% in July from June in the third straight monthly increase, but prices remain below year-earlier levels.

For the sixteenth straight month, no area in the 20-city index posted a year-over-year price gain. That put nationwide prices at levels seen in 2003.

“These figures continue to support an indication of stabilization in national real estate values,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s. “But we do need to be cautious in coming months to assess whether the housing market will weather the expiration of the Federal First-Time Buyer’s Tax Credit in November, anticipated higher unemployment rates and a possible increase in foreclosures.”

Whether or not we see a renewal in tax credits, its hard to imagine a housing market recovery with another year of increasing foreclosures. Perhaps the worst is over, but I would think the best we can hope for in the near term is stability.

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[Amherst Securities] 7 Million More Foreclosures To Pressure Housing Market

September 25, 2009 | 11:22 am | |

In a decidedly bleek report on the state of foreclosures, Amherst Securities Group LP issued a report that concluded:

The single largest impediment to a recovery in the housing market is the large number of loans that are either in delinquent status or in foreclosure that are destined to liquidate. This creates a huge shadow inventory. We estimate this housing overhang at 7 million units, 135% of a full year of existing home sales. We look at the impact on a number of local markets, then look to the causes of the overhang: (1) transition rates are high, (2) cure rates are low and (3) loans are taking longer to liquidate. We are concerned that, in light of this housing overhang, the stabilization we have seen in home prices the last few months is temporary.

The key issue is the fact that the number of housing units going into foreclosure is much higher than the amount being disposed. Of course all real estate is local and the report creates a compelling case study using listing data from and the Case-Shiller 20 City Index coordinated with the foreclosure process.

Amherst was the key source for the informative “Mortgage Meltdown” story back in December on 60 Minutes. They teamed up with investment fund manager Whitney Tilson. The 60 Minutes segment is in my earlier post but I also inserted it below.

Watch CBS Videos Online


[Existing Home Sales] Unexpectedly Drop 2.7%

September 24, 2009 | 1:59 pm | |

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After four consecutive months of seasonally adjusted gains, the

NAR existing home sales stats show a decline that was something unexpected happens.

The salient points:

  • July 09 to August 09 sales declined 2.7% (2nd highest total level in the last 23 months)
  • August 08 to August 09 sales up 3.4%
  • August 09 median sales price $177,700 down 2.1% from July 09 and down 12.5% from August 2008.
  • Inventory down 10.8% from July 09 to August 09 and down 16.4% from August 08
  • Months supply was 8.5 in August 09 from 10.6 in August 08

As Lawrence Yun, NAR Chief Economist, who is quite adept at cherry picking the data to show it in the best light (that’s his job).

Some of the give-back in closed sales appears to result from rising numbers of contracts entering the system, with some fallouts and a backlog contributing to a longer closing process….

…actually says something the should resonate with most who follow this stuff:

…but the decline demonstrates we can’t take a housing rebound for granted.

UPDATE: Just a Blip? Why Housing Keeps Bouncing Around

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[FHFA] July 2009 Monthly House Price Index

September 22, 2009 | 4:38 pm | | Radio |

FHFA released its

July 2009 monthly housing price index report today which showed more of the same – month over month price increases (up 0.3% from June) and year over year decreases (down 4.2%).

Since OFHEO (pronounced O-Fay-O), I’ve been wondering how to pronounce FHFA and not be kicked out of Acronym Heaven (aka Washington, DC).

Kathleen Hays of Bloomberg Radio interviewed me today on her new show “The Hays Advantage” M-F 1-3pm EST and dubbed FHFA (Foo-FA). That works for me.

While it is encouraging news that the bottom isn’t falling out of the housing market, this index basically reflects the low to mid layers of the housing market since it is based on data from Fannie Mae and Freddie Mac, who only handle conforming mortgage products. Currently this means mortgages of $417,000 or less in most of the country and $729,750 in the handful of “high priced” housing markets. That is the market that is recovering first since it has a secondary investor market for bamnks to sell their paper too and ifree up their capital.

I find it a bit troublesome that, as we hang on the edge of our seats each month, the revisions for prior releases are all over the map. Last month, the month over month was 0.5% (6% annual) which was revised downward to 0.1% (1.2% annual). Still, the news is better than its been.

If you are a believer in trend lines, the following chart suggests we have about 10% more to go until the market reaches the trend broken circa 2001. That means that the sideways motion we are experiencing would have to change for the worse over the next several years. Factors could include more foreclosures, rising mortgage rates, elimination of first time home buyers tax credit, etc. While I am concerned, thats more bad karma than I can process.

Read the report.

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[Weekend At Bernie’s] Madoff House In Montauk Ready For Market

September 1, 2009 | 2:47 pm | | Public |

I had a nice conversation with Deirde Bolton at Bloomberg TV about the Hamptons Housing market and the former Madoff residence in Montauk (had to get up 4:30am to make it in for the 6:45am).

US Marshalls are readying it for market. I heard today that Corcoran was selected as the selling agent for the property.

I also got to catch up with Tom Keene of Bloomberg Surveillance in the Green Room who proceeded to tweet my appearance with a little humor.

Les Christie of CNN/Money does a nice Madoff story on the US Marshall video of the property and invited me to provide some running commentary as I watched it. Fun!

Here’s the US Marshall video. It’s apparent that they want to get as much for the property as they can – no fire sale – so they can get funds to the swindled investors (a drop in the bucket).

All this activity before 10am this morning. I might need to go to the beach and relax this weekend…I know a house…


[Sentiment versus Confidence] Dow Jones Sentiment Index Shows Improvement

August 31, 2009 | 11:20 pm | |

Confidence is more right here and now. Sentiment is more forward looking (it gives a snapshot of whether consumers feel like spending money.)

(a lame appraisal analogy would be estimated market value for a bank appraisal (today) versus anticipated sales price for a relocation appraisal (future))

but I digress…
I continue to be amazed with the types of analysis being done with the subjective nature of what is on the consumer’s mind – or in this case, what journalists are writing about:

The Dow Jones Economic Sentiment Indicator

The ESI, which was first published in April, aims to identify significant turning points in the U.S. economy by analyzing coverage of 15 major daily newspapers in the U.S.

The Dow Jones Economic Sentiment Indicator bottomed last November and has continued to edge higher. Newspaper coverage has become more upbeat about the economy (I assume they assume that consumers are sick of reading about bad news), the number of articles expressing either positive or negative sentiment about the economy has fallen now to approaching a third of the level of its peak in October 2008 following the collapse of Lehman Brothers.

A lot of people are drinking the Kool-aid right now.

I find this particularly ironic since the real estate industry has long blamed “the media” for the making real estate correction worse by “piling on.” However, I find the coverage today to be overly positive from sloppy interpretation of the 4 housing price indices: Case-Shiller Index, NAR Existing Home Sales, Commerce Dept’s New Home Sales and FHFA HPI, showed positive signs.

Actually all indices showed less negative results which were discussed excessively positive.

For example, The Conference Board’s recent Consumer Confidence Index was a little more positive:

Consumers’ assessment of current conditions improved slightly in August. Those claiming business conditions are “bad” decreased to 45.6 percent from 46.5 percent, however, those claiming conditions are “good” decreased to 8.6 percent from 8.9 percent. Consumers’ appraisal of the job market was more favorable this month. Those saying jobs are “hard to get” decreased to 45.1 percent from 48.5 percent, while those claiming jobs are “plentiful” increased to 4.2 percent from 3.7 percent.

While the recent Michigan Sentiment Index showed renewed weakness:

Confidence among U.S. consumers unexpectedly fell in August for a second consecutive month as concern over jobs and wages grew.

The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 63.2, the lowest level since March, from 66 in July. The measure reached a three-decade low of 55.3 in November.

I find the whole thing a bit foggy especially using monthly figures for comparison.

Further reading on this.

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