- Miller Samuel Real Estate Appraisers & Consultants - https://www.millersamuel.com -

National Housing Prices Slip, Leaving Throats Parched

With all the talk about national housing rebounds [1] lately, reality had to settle in with actual numbers. What’s interesting to me is how the takeaway from the results seem unclear.

NAR [2] is spinning it that prices have hit bottom [3]. I don’t agree but I would guess we are within 2-3 quarters from that point.

Is the glass half empty or is it half full? For much of the coverage on the NAR figures, the glass is not half empty, its simply empty.

Well, I’d say its half empty. With 40 states posting losses in the 4th quarter as compared to the same period last year, it sure looks like the market is continuing to weaken nationwide. That’s logical since inventory levels, while showing signs of stability, are still way too high. Until levels are fully absorbed, I would think the NAR will keep reporting declining numbers for the next 2-3 quarters. Oversupply = more competition = weaker position by sellers to hold to their price.

On the other hand, its not all gloom and doom in every market, and I think this is the sort of impression that one walks away with when reading about this topic today.

CNN/Money presented a link to 149 major metro markets and guess what? The range of price changes ranged from -18% (Sarasota-Bradenton-Venice, FL) to 25.9% (Atlantic City, NJ). The big news angle here is that 71 markets went up and 73 went down, which is more than half of all metro markets. Didn’t everyone see this coming? Is this a new idea?

The drop in median home prices is -2.7% for the country is somewhere in the middle of the 149 metro market price change range. The cities on the positive side seems to show solid local economies with limited speculative markets. Those cities on the negative side are from markets with weak local economies and/or speculative markets. Logical.

In New York, the NAR stats for New York-Northern New Jersey-Long Island show a 2.3% increase and NY: Nassau-Suffolk showed 0.3% in median sales price over the same period (4q 2006 versus 4q 2005).

The Manhattan Market Overview [pdf] [9] we prepared in 4Q 2006 showed a 5.1% increase in median sales price and our Long Island/Queens Market Overview [pdf] [10] showed a -1% drop in median sales price over the same period (4Q 2006 versus 4Q 2005). In other words, real estate is local.

I am fairly confident the national numbers will continue to show similar weakness for the next several quarters and we are not at “housing bottom” nationally. That’s why I think the Fed Chair Bernanke’s comments about the economy [11] actually suggest potential rate cuts and housing is one of the main reasons.

he forecast calls for slightly slower growth in 2007 than the Fed predicted last summer, but still in line with officials’ estimates about the economy’s long-run potential growth rate. The lower growth estimate reflected the sharp downturn in the housing market last year, and an expectation that housing would continue to drag down overall growth in 2007.

With national housing and the auto industry weak, and a lot of speculation that the latest GDP figures are inflated [12], there is a growing argument that we could see the fed cut interest rates in the second half of 2007. This could help prime the housing pump to get the excess inventory off the books.

In fact, there a rising level discussion that interest rates will remain low for the next several years. Housing is one of the reasons. There’s a great article in last week’s issue of Businessweek. [13]

UPDATE: Chart just added to the NY Times article: