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Statistics, Metrics & Data

This Just In From The Census Bureau: New Home Sales Stats Tell Us Absolutely Nothing

May 25, 2006 | 12:01 am | |

Every month the Census Bureau and HUD release stats on new residential one family home sales. This month the abstract from the release was as follows:

Sales of new one-family houses in April 2006 were at a seasonally adjusted annual rate of 1,198,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.9 percent (±11.5%)* above the revised March rate of 1,142,000, but is 5.7 percent (±9.8%)* below the revised April 2005 estimate of 1,270,000. The median sales price of new houses sold in April 2006 was $238,500; the average sales price was $298,300. The seasonally adjusted estimate of new houses for sale at the end of April was 565,000. This represents a supply of 5.8 months at the current sales rate.

Download the full release [pdf].

Listen to Professor Robert Shiller discuss the current real estate market. [see audio section – Bloomberg]

Economists were projecting a 6% decline from March to April but the final stats showed a 4.9% increase [Bloomberg], sending bond yields up today over inflation concerns.

But here’s why these stats from Census are essentially meaningless. Apparently I am not alone on this.

  • The historical data is constantly revised (significantly) – Amazingly, the prior 5 months of data was just revised [BW] and while the number of homes available grew 27% over the prior year and prices were up 1%.

  • The margin of error is greater than the stat – According to the press release, the 4.9% increase is actually somewhere between 16.4% above to 6.6% [Lanser OCR] below the revised March rate of 1,142,000, but is somewhere between 15.5% below to 4.1% above the revised April 2005 estimate of 1,270,000.

  • It doesn’t consider the breakdown of investor unitsHow many of the new home sales [TMR] are classified as second homes or investment properties? A deeper look into the numbers reveals that the South and West regions represented 960,000, or 80.1%, of the new homes on which paper was written. These regions host more than a few retirees, snowbirds, and also harbor plenty of vacation spots. If the sales figures represent second homes and investments to the home buyers in those regions, then we can infer that there are still plenty of speculators in the market.

  • Its a small data set and it doesn’t apply to local markets – The number of transactions is about one-seventh that of existing home sales. Since these are national stats, they are not appropriate to rely on for local market analysis.


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[Getting Graphic] The Joy Of Heavy Lifting REDUX: Census Releases Real Population Trends

April 21, 2006 | 12:01 am | |

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

In our post yesterday The Joy Of Heavy Lifting: U-Haul From The Closing, U-Haul’s PR department took a joy ride with their stats (but it was kinda fun while it lasted).

Some noticeable trends are the large exodus from New York (200,000+/Year from 2000-2004) but there was a population gain due to the increase in immigration [WCBS/AP]. The 1990’s exodus to other states from California and from the Northeast appears to have eased since 2000, but not in metropolitan New York [NYT], a Census Bureau analysis says.

Massachusetts was second on the list while there was a significant gain in Nevada, Arizona and Florida.

Click here for full graphic [BG]

Source: Boston Globe


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February New Housing Sales: Can’t Blame The Weather

March 27, 2006 | 12:01 am |

Peter Coy in his post Big Drop in New-Home Sales [Hot Property] says:

Don’t blame it on the big snowstorm that hit the Northeast, giving New York’s Central Park a record snowfall: sales actually rose in the Northeast. (over prior month, not prior year -ed)

Census Bureau: New Residential Sales In February 2006 [pdf]

Existing home sales positive results were explained by unusually mild winter weather, why doesn’t this apply to new home sales?

New home sales fell further than expected an inventory levels are higher than any time in the past 10 years. The median sales price dropped to $230,400 from $237,300 a year ago. The seasonally adjusted estimate of new houses for sale at the end of the month was 548,000, representing 6.3 months of supply at the current sales rate, the highest month’s supply number in 10 years. [TheStreet.com]

Here we have another month with the 1-2 punch. Existing home sales are released the day before new home sales and more often than not, the results are not in sync. The surge in existing home sales is attributable to the unusually warm weather in January. Yet new home sales for February were down.

Why have the results been so different?

The market is changing. NAR’s existing home sales lag because they are based on closed sales. New home sales stats by the Census Bureau are supposedly current because they represent new contracts and we should see new home sales as a more reliable indicator. Right?

Here are some problems with this logic.

  • New home sales represent a small fraction of existing home sales (1M versus 7M) so they can be more volatile.

  • New home sales are more heavily weighted with focus on higher end construction and that is currently one of the weaker market segments. The February existing home sale median sales price was $209,000 and the new home median sales price was $230,400, a 10.2% spread.

So which is the better indicator? Really, neither is better. But they are the best we have at the moment. I try not to get too worked up about either indicator when they are released.

One other thought. The coverage and the press releases focus on the the seasonally adjusted and annualized results rather than actual.

I don’t mean to sound cycnical but I guess thats sort of like a real estate broker on the day of a huge closing/commission. $$$ x 5 days x 52 weeks = Annual Commissions. Perhaps thats the problem.

I’d love to see more analysis with the raw numbers.

February Existing Housing Under High Pressure (And Partly Sunny) [Matrix]


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It Kinda Grows On You: Population, Home Ownership Rates And Demographics

February 21, 2006 | 12:01 am | |

There has been a lot of discussion of homeownership rates and demographics lately. It has been of even more concern as the recent housing boom makes the transition to a more balanced market, and then we ask, whats next? The idea is that the mix of the population that is growing is more indicative of future housing needs than an overall growth rate or totals. Here’s a lot of info to digest but its good reading.

Homeownership Rates
In Berson’s Weekly Commentary Homeownership rates this decade are up most for the youngest age groups [Fannie Mae]. Warning: Berson’s link lasts one week. For an acrhive of stories including this one go here.

While homeownership rates remained flat in 2005, homeownership rates have increased substantially over the past five years. According to the U.S. Census Bureau, the national homeownership rate was 68.9 percent in 2005 — up from 67.4 percent in 2000. The small drop in the overall homeownership rate to 68.9 percent in 2005 from 69.0 percent in 2004 was well within the margin of error for sampling variability. The increase in homeownership this decade was not consistent among all age groups. While older households saw negligible increases in homeownership (and even declines in the last year), younger households saw large increases in their homeownership rates.

Younger Generations Expect Higher Income
Last summer’s article A simple model of the housing market by the Federal Reserve Bank of San Francisco looked at age distribution of homeownership and the elasticity of demand.

Even as discussion of the current run-up in house prices points to the extremely favorable demographic conditions for demand, little has been said (lately) about what will happen once these demand conditions ebb. The worst-case scenario for house price declines depends on three factors: an inelastic demand for housing, a fair degree of myopia when forming expectations, and an inelastic supply function. However, recent research in urban economics suggests that two of these factors—expectations formation and the supply response—are probably more flexible than once thought.

Basically the study concluded that:

The effect of the exiting baby boomers on house prices would be gradual, and the overall magnitude of price changes would not be great.

Furthermore, a negative demand shock like the aging and exiting of baby boomers is only one of many factors to consider in anticipating the future of house prices. The productivity gains in the 1990s can be viewed as a positive demand shock. To the extent that younger generations now expect higher permanent income, this increase in expected wealth should help support house prices.





Age And Mix Of Population More Important Than Total Growth
In this 10 year old USC School of Urban Planning and Development article Real Demographics of Housing Demand in the United States population growth has always been recognized as a primary force driving demand, but the new recognition has centered on the ages of potential home buyers–not simply their numbers. Ethnicity, family type, and immigrant or native-born status are also factors to consider, but the age of the population remains the single most important aspect of demographics.

NYC Forecasts Surge In Population
In fact, city planners in NYC expect the population to continue to rise by another one million people over the next 20 years [NYT]. With the suburbs at capacity, urban areas are not at the same competitive disadvantage as in years past.

Click here for full graphic [NYTimes]

Source: NYTimes

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A Ho Hum Year Ahead – Shaken But Not Stirred

February 7, 2006 | 12:01 am | |

In Berson’s Weekly Commentary Total home sales for 2005: another record year [Fannie Mae]. 2005 was all about breaking records when looking at the annual numbers.

According to the National Association of Realtors, total existing home sales were up by 4.2 percent to 7.07 million units. Condo and co-op sales were up by 9.3 percent, while single-family sales were up by 3.6 percent. The Census Bureau reported that new home sales were up by 6.6 percent to 1.28 million units.

Fannie Mae Projects:
* Total home sales will decline from last year’s record, falling by around 8.0 percent to 7.71 million units — mostly as investor and second home demand decline.
* December marked the third consecutive monthly decline in total existing home sales, so the trend may already be beginning.

Even with the projected decrease in total home sales, 2006 should still be the third-strongest year ever. You have to remember that Fannie Mae is biased towards a robust housing market like NAR is, but Berson makes a good point.

Pessimists will look to the last quarter of 2005 and say that the market is weakening and use the lower numbers that we may see in 2006, in terms of prices and number of sales compared to 2005 as evidence of a declining market. I agree.

Optimists will look at the annual figures of 2005 as a record and say that any comparison to a record year will show a decline and misrepresents the current market. I agree.

I think its a little of both. The record year in 2005 will skew any meaningful comparisons to the current year as excessively negative. However, recent trends, namely the second half of 2005 showed a downshift in the real estate market and that cannot be ignored.

In other words, its been good, it might be good, but not as good as before.


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When Is A House Not A Home?

February 6, 2006 | 12:02 am | |

Residential real estate is all about homes and housing, but the terms house and home are often used interchangeably and they can mean or imply different things.

In the copywriting article The seven irrefutable laws of sizzling sales copy [SiteTube] a number of examples are provided:

“Cost” versus “investment;”
“Beautiful teeth” versus “beautiful smiles;”
“Skinny” versus “slim” or “slender;”
“Products” or “services” versus “solutions;”
“Cost-effective” versus “return on investment;”
And “house” versus “home.”

Again, words are not messages in themselves. They have different meanings to each of us and can be interpreted differently. While many words can be used to communicate a single message, the words you choose can dramatically alter its emotional impact. In copywriting, it is not so much the message that’s important but the meaning behind it that is.

I used a definition of each to illustrate the subtle difference between them. Their use is not mutually exclusive but its important to be aware of their differences.

  • Home – A place where one lives; a residence. (Interpretation: There is more of an emotional component to this word and it is more often used when incorporated into selling a property.)

  • House – A structure serving as a dwelling for one or more persons, especially for a family. (Interpretation: This is a more clinical description of a physical unit that provides shelter.)

Ever wonder why the NAR uses the word “home” in all their stats like Existing Home Sales and the Census Bureau uses “house” in their stats like the New Residential Sales Index (pdf) does?


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Tuesday Night Stat-Link Fest

February 1, 2006 | 12:05 am | |

Its been a busy day…here are a few stat links of interest:


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These Days, Expect The Unexpected, Rather Than Existing

January 30, 2006 | 12:01 am | |

The Commerce Department released their new home sale data on Friday and it showed an unexpected increase of 2.9% [TheStreet.com]. This was unexpected because December existing home sales information released by the NAR the day before had shown a 5.7% decline over the prior month.

However, existing home sales data is 45-60 days behind the market since it is based on closed sales data and new home data is based on units currently under contract. The December existing market data was influenced by rising mortgage rates, the effects of the two hurricanes, rising gasoline prices among other negative economic conditions back in October, and is not necessarily reflective of the current market.

It seems like every month these two statistical releases contradict each other, but perhaps that largley because they are based on different points in time and the market is in transition.

NAR Existing Home Sales [pdf]
Commerce Department New Home Sales [pdf]


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A Realty Van Go: The US Migration Patterns Of Home Owners

January 9, 2006 | 12:01 am | Public |

United Van Lines has been publishing a report on traffic patterns of the moves [United Van Lines] that are ordered within the moving company each year. This report has been published annually since 1977.

Methodology: “For 2005, the accounting is based on the 226,353 interstate household moves handled by United among the 48 contiguous states, as well as Washington, D.C. In its study, United classifies each state in one of three categories — “high inbound” (55% or more of moves going into a state); “high outbound” (55% or more of moves coming out of a state); or “balanced.” Although the majority of states were in the “balanced” category last year, several showed more substantial population shifts.”

Inbound

  • While Florida (54.2%) has been inbound since the survey commenced, this year marked the lowest number of relocations to the state since 2000.
  • Texas (53.9%) continued inbound movement since 1989 and saw slightly (1.3%) more people move in as compared to last year.
  • As compared with 2004, Washington (53.4%) became the destination for 2.7% more residents.

Outbound

  • California (55.7%) – 2005 marks the first time the state has seen a high outbound number since 1995.
  • Louisiana (57.9%) – With many difficult challenges throughout the year, the state saw 4.5% more outgoing moves after being classified as a balanced state for the past four years.
  • North Dakota (67.8%) – This year marked the highest outbound migration since 2001 for the state.
  • Michigan (63.9%) – From the inception of the study, Michigan has been an outbound state.

I thought it would be neat to try to correlate inbound and outbound traffic to housing demand. The idea that a state with high outbound traffic would have lower appreciation rates than states with higher inbound traffic. However, the census data does not fully correlate with this report. I can only assume that its a factor of the client demographic the moving company works with, or this is a flawed methodology.

Nevertheless, United Van Lines map concept is very cool.

US Census Division Map: Change in House Prices By Region

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In Search Of Affordable Housing, Many Are Moving Away From The Coasts

December 28, 2005 | 12:01 am | |

It is affecting population shifts, congressional representation and housing demand.

_Population Shifts_
In the article People Fleeing Pricey Coastal States for South, West [USAToday] an analysis of the census data halfway through the decade, Americans are shifting away from the coasts toward more affordable locations such as the Southwest, Southeast and the Rocky Mountains.

The quest for affordable housing and jobs is driving Americans from expensive coastal states to more moderately priced parts of the country.

  • At its current rate of growth, Florida will exceed the population of New York in 5 years.

  • Upstate New York population losses more than offset the boom in New York City.

  • California’s gains were more attributable to births than to new residents.

  • Virginia gained more population than 9 northeastern states combined due to employment growth.

_Affordability_
A growing number of people are simply Too Poor for Hot Housing Market, Too Affluent for Buyer Assistance [Washington Post]

Government officials “are scrambling to provide “workforce housing” — price-controlled homes for families with high five- and even six-figure incomes.”

While urban areas like New York have long provided housing assistance for low and middle income residents, areas like Washington, D.C. have focused on low income. As a result, there are a lot of residents simply priced out of the current boom.

The National Association of Realtors released its affordability index Housing Affordability Hits 14-Year Low Higher Prices, Rising Rates Hurt Buyers as Creative Loans Lose Some of Their Punch [WSJ]

“There are signs that the growing costs of homeownership are also beginning to take a toll on the housing market. “There’s a systematic erosion of affordability,” says David Seiders, chief economist of the National Association of Home Builders. That decline is “the main reason … the market is starting to cool.””

Source: WSJ


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Home Owners: Too Big To Fail

December 27, 2005 | 12:01 am | |

If there is one thing that mortgage servicers learned from the last downturn in the housing cycle (1989-1995) was that foreclosure were expensive and had the potential to be a public relations nightmare. In the today’s market, Ken Harney’s article Mortgage Servicers Help Avoid Foreclosures [Washington Post] discusses how mortgage servicers do everything they can to avoid foreclosures.

In the 1990-91 market downturn, lenders had to maintain large in-house departments to manage inventory as well as manage vendors that were needed in the process such as lawyers, brokers and appraisers. As an appraiser, I stood with many a broker and locksmith in the early 1990’s, getting into a foreclosed apartment, only to find the interior was picked clean.

Daniel Gross, in his article Didn’t Pay Your Mortgage? Don’t Worry. Why banks are so afraid to foreclose on you [Slate] he discusses why this is happening. Lightening up on those who fell victim to the hurricanes is understandable and would be a public relations disaster. But what about everyone else?

In the process of raising the percentage of home ownership [Census], the lending industry is trying to avoid the expense of foreclosure. The delinquency rate as of the 2nd quarter, according to the MBA was 4.34%, but less than half of those are in excess fo 90 days. [MBA]

Gross notes that the delinquincy rates of ARM mortgages is 10.04% and subprime loans is 9.06%, which means that the rate for conventional loans is barely on the radar, clearly a pattern related to the pressure to expand the base of customers to those who are a higher risk.

He concludes that when borrowers get behind in their payments, lenders prefer to do workouts and these often can come into the form of another refinance, with the homeowner getting deeper in debt. They have in effect, like lenders 20 years ago, become too big to fail.


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Of Real Estate And Bonuses: Plenty Of Time For The Checks To Clear

December 21, 2005 | 12:01 am | |

Bonus Timing Summary

Source: Under The Counter


Our long admired Under The Counter put together the The Master Chart [UTC] on bonuses by firm with help from Here Is The City.

We usually read about the percent increase of the average bonus over the prior year in a press release from the New York State Comptroller but could only guess when they are paid out. Finally, we can get a sense of the bonus timing instead of generalizations.

The concensus seems to be:

  • Told amount of bonus in mid-December to mid-January.
  • Get paid bonus at end of January to March with a few stragglers.

Of course, the act of physically receiving the check seems to be an afterthought. The driver of the first of the year frenzy seems to be the availability of new listings, not whether the check is in the bank.


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