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I don't trust those stats as I did not trust the existing home sales.
while not the best graph (no one is like CR) this gives a good idea where prices are:
http://bp3.blogger.com/_OjftCEBUcYQ/RlnVcdlDTEI/AAAAAAAAAgQ/c4ARSGwNvN0/s1600-h/asking_price_levels.PNG
Roubini found he wasn't bearish enough
RGE - Nouriel Roubini's Global EconoMonitor
Dr. Marc Faber:
Irrespective whether one looks at equities, commodities, real estate, art, any kind of useless collectibles or bonds anywhere in the world, prices have soared over the last few years. We are truly in an asset bubble of unprecedented proportions and that these bubbles will eventually end badly
should be clear. Usually, bull markets end with fewer and fewer stocks advancing (the 1970 1989 Japanese bull market ended with just bank stocks rising, and the US equity bull market, which ended in March 2000, was driven at the end by just a few TMT stocks). Therefore, when one or
several bubbles begin to deflate the Warning is on the wall (see Figure 1 - Interest Rates are Rising!).
In fact, the first bubble which recently popped was the US housing market in the summer of 2006 (although shares of homebuilders already peaked in the summer of 2005). Now, the bond market bubble seems also to have run into some strong headwind. Although the US economy has very clearly slowed down considerably, bonds are not rallying but declining as rates on 30-year US treasuries have risen since December 2006 from 4.5% to over 5%. According to David Rosenberg, beginning with last years second quarter,
the sequential pattern of GDP growth look like this: 2.6%, 2.0%. 2.5%, 0.6% and 1.9%. In other words, a string of five quarters of below 3% growth, which has only happened 12 other times in the past 60 years or a trend we have seen less than 10% in the past. But, as I indicated in an earlier report, if inflation was properly accounted for the US would already be in a stagflationary recession (see Figure 2 - Weak Durable Goods Orders).
It is not only durable goods orders which are weak, housing also continues to deteriorate and employment is likely to be far weaker than what the official statistics show (see below). It is true that total new home sales surged 16.2% month-on-month in April to 981,000 units at an annual rate,
but median new home prices declined 10.9% year-on-year, which is the worst deflation in home prices since the 1970 recession. According to David Rosenberg of Merrill Lynch, what might have happened is that the builders cleared out their inventories by cutting aggressively their prices after they found that there were no bids in the first five months of the year. In addition, something rather unusual occurred. From Figure 3, we can see that the existing housing inventory is at a 15-years high (see Figure 3 - Unsold Existing Housing Inventories, 1992 - 2007).
Faber is also too bulish. The surge in new homes ended up being generated in the south. The big jump were homes prices under $200K.
So it was late Katerina new home delivery that made the number of homes look good and pulled down the price lower. that is all.
Couldn't access the link to the purchase-only index by state? Is it just me?
OT question for the local brain trust: Where are 30yr fixed rates heading over the next 6 weeks?
I'm closing on a house on 7/20. I can lock in my 30year fixed rate for free now, but will be stuck with the lock rate if rates drift lower.
For your consulting fee, I'll come back and give "props" to whoever gives me the "correct" answer after closing. (Hey, talk is cheap and so are blogger comments.)
Muchas Gracias,
JLA
http://www.ecssa.biz/credit-card-ratings.php
http://srbenda.net/blogs/buy-lease-car/a
JLA - Economies are strenthening around the world which will put upward pressure on rate. Therefore lock now.
We're experimenting with new ways to measure "true" market prices. The latest is, "Implied Median Size."
http://www.viewfromsiliconvalley.com/id331.html
Other options include:
Average vs. Median:
http://www.viewfromsiliconvalley.com/id328.html
Total Dollars:
http://www.viewfromsiliconvalley.com/id329.html
Number of zip codes up y-o-y:
http://www.viewfromsiliconvalley.com/id325.html
Plus a few others.
Feel free to let us know which you think are the most useful?
Thanks!
Yal,
where can I get these charts for the DC MSA??????
That is total and utter BS.
some more interesting and rather disturbing comments by Faber (aka Dr. Doom)...
"Therefore, it is likely that the next bubble to burst could be excessive US consumption, which would obviously have dire consequences for the entire economy and specifically for retailers and other consumer related discretionary spending sectors. In this respect the following should be of interest. Same-store sales were down 2.4% year-over-year in April, according to the International Council of Shopping Centers the biggest drop since the trade-group began tracking the data in 1970. A record 80% of retailers missed their sales targets double the norm of 42%. Also, had banks not eased lending standards for credit cards it is likely that consumption in April would have been even worse (see Figure 6 - Easier Lending Standards for Credit Cards!). One really has to wonder about the sanity of easing credit conditions for credit cards at a time when the consumer is already badly stretched ..The tightening of other consumer credit lending standards reflects harder to borrow conditions for home equity loans.
Since interest rates on credit card balances are the highest, we should conclude that a large number of consumers are in a financially rather desperate situation and that once they realize that home prices will not
recover any time soon while food, energy prices and other prices continue to increase, their spending is likely to be curbed rather significantly. In fact, year-to-date, the US Specialty Store Index has been one of the worst performers dropping 3.2% (see Figure 7). Given specialty stores premium valuation compared to the S&P 500 and specialty stores elevated earnings, we would advise to avoid the sector as well as other retailers, which derive a high percentage of their sales from consumer discretionary items."
vfsv,
I have told you few times:
Your exccessive stats make no sense, show no clear trend and in general SV is not the place from which to learn on the economy. It is the lagging of all lagging indicators.
Outsider, the state link is fixed.
Best to all.
We're experimenting with new ways to measure "true" market prices. The latest is, "Implied Median Size."
http://www.viewfromsiliconvalley....com/ id331.html
Thanks, interesting way to look at the numbers.
RE prices decline very slowly based on historical models. What both Shiller and the Gov't models do not show is the high level of UNSOLD homes on the market and the large number of unprocessed bank REO's that have yet to hit the market or even be marked to market.
I would also expect both Shiller and the gov't models going forward to continue to show either small negative appreciation growth or slight appreciation based on the current RE SFH buyer pool which is driven by location rather then price. basically a higher income buyer pool.
Lock Now....I'll make up any difference
Sorry to thread jack...but
We are here at the moment
http://www.belowthecrowd.com/photos/ackman.jpg?ref=patrick.net
I fail to see how the OFHEO index is at all useful for large portions of California. In my county, San Mateo, a shack in a bad neighborhood is $600K. If their data are limited houses under $417K, then they have eliminated all real estate in the county. How do they even publish a number?
JLA- lock it, and hope the broker/banker doesn't f with your application after rates go up. We're pretty good at the crap. "it's stuck in UW, the processor's sick, it's in loan committee, you didn't sign the right form, we never got it, the fax is down".
Also carefully review your GFE, TIL and especially your note at the CLOSING because you could (surprise!) be signing a 10/1 I/O loan instead of that nice 30 yr FRM. Good luck.
June of 08 is deadly months for sure
so is November 07 I have relatives that bought at peak who are screwed come sept..I have tried to no avail to warn them...but they just don't listen.
2 of them IO-ARM Explosions
Your exccessive stats make no sense, show no clear trend and in general SV is not the place from which to learn on the economy. It is the lagging of all lagging indicators.
Yal | Homepage | 05.31.07 - 12:12 pm
YA: I do disagree, Calif home owners have been the driving force behind price increases in Wa, Or, NV and AZ the past 5 years. Basically they either sell their current home and take the excess equity and pay cash in cheaper markets or take the equity and become fippers, or a combination of both.
The slower rate of growth in appreciation and the significant slowdown in home sales in SV is typical of what is happening in Calif which has and and will significantly effect many other RE markets out West.
JLA, lock now.
Ron,
Ca. yes of course.
But SV ? no way. this is not a market to learn from. it is the lagging of all lagging indicators.
Joe Mortgage:
I'm working with a pretty good credit union that my family has used for years and skipping the mortgage broker, so hopefully I'll be okay. My realtor commented that the credit union I am using and its wholly owned settlement company can be slow, but I'll take a slow (read: "not working on commission") loan officer before taking my chances with a mortgage broker with a set of incentives that are not always consistent with the borrower's.
P.S.: I just called and locked the rate. Some quick research on Bloomberg, combined with the comments here, made a good enough case for me.
YA:
SV is the center of HI-Tech employment, period. SV drives the entire Bay Area economy and therefore affects not only Ca but the USA as well. I would not dismiss SV as a critical financial area to monitor going forward.
JLA: good move working with the Credit Union. Always best to work with local money if you can. Stay on top of them, because some CU's don't process in-house; they may outsource the process to a third party, but your chances of getting f'd are definitely lower with a CU. What rate did you get and for what loan amount? any points?
Interesting to compare the two indexes since the beginning of 2006:
OFHEO quarterly for California:
CA 2006-1 278.69\t
CA 2006-2 282.56 - peak\t
CA 2006-3 279.45\t
CA 2006-4 273.97\t
CA 2007-1 270.85 - down 4.1%
Case-Shiller monthly for Los Angeles:
Jan-06\t265.92
Feb-06\t267.75
Mar-06\t268.23
Apr-06\t270.44
May-06\t272.12
Jun-06\t273.22
Jul-06\t273.85
Aug-06\t273.80
Sep-06\t273.94 - peak
Oct-06\t273.66
Nov-06\t273.05
Dec-06\t270.03
Jan-07\t268.68
Feb-07\t266.63
Mar-07\t264.58 - down 3.4%
SV is fed by selling goods mostly to other businesses. As such, it's usually the
last to feel the impact from a consumer driven downturn.
That's why, in 2000, the business investment downturn hit SV hard and fast...that's SV's immediate customer base.
RP - hasn't SV made at least a partial migration away from high tech B2B and into stuff like bio-med? That's the buzz we get in places like Minneapolis & Boston...
If so wouldn't SV be a little more insulated than say 2000 & dot.bomb?
dryfly,
I can speak to SV's migration away from "high tech", since I and virtually everyone I know have worked in engineering in the Valley for years. I decided to move out of electronics for good last year after once again losing a job due to a plant shutdown (they were bought out and moved to China). Among my coworkers who were laid off at the same time, I would say about a third moved (as I did) to medical devices, about a third to Alternative Energy (solar), and the remainder moved out of the area or scattered to various other fields. Clearly any mass-produced commoditized widgets will no longer be manufactured in SV, but there are still many start-ups focusing on hot areas (specialized software applications, software security, wireless, specialty manufacturing and test equipment, medical, biotech, etc.)
Today's OFHEO release was most interesting, as it (1) showed "purchase only" home price indexes by state; and (2) showed tables implying that the "coverage" of the OFHEO dataset for the purchase market was very low in some states. The "OFHEO BIAS" -- the difference between the growth in the S&P/Case-Shiller (SPCS) index and the OFHEO index -- remained high over the last year, with really big differentials in LA, Miami, Tampa, etc.
Home Price Index: % Change, Q1/06 Q1/07
OFHEO
\t SPCS\tOFHEO Bias
Phoenix \t-3.0%\t4.5%\t7.5%
Los Angeles\t-1.4%\t4.8%\t6.2%
San Diego\t-6.0%\t-1.9%\t4.0%
San Francisco\t-2.3%\t1.3%\t3.6%
Denver\t -2.0%\t1.1%\t3.1%
Washington\t-4.8%\t3.7%\t8.4%
Miami\t 1.0%\t11.4%\t10.4%
Tampa \t -3.0%\t5.1%\t8.1%
Atlanta -2.0%\t4.0%\t2.0%
Chicago \t 1.3%\t5.1%\t3.8%
Boston\t -4.9%\t-1.3%\t3.5%
Detroit \t-8.4%\t-3.0%\t5.4%
Minneapolis \t-1.9%\t1.7%\t3.6%
Charlotte \t 7.4%\t8.5%\t1.0%
Las Vegas\t-1.6%\t1.7%\t3.3%
New York\t-1.1%\t3.9%\t5.0%
Cleveland \t-2.4%\t-0.3%\t2.1%
Portland \t 7.0%\t11.0%\t4.0%
Dallas \t 1.6%\t3.7%\t2.1%
Seattle \t10.0%\t12.6%\t2.5%
\t\t\t
US\t -1.4%\t4.0%\t5.4%
The huge drop in the Fannie/Freddie share of the purchase market in many areas, and the dominance over the two quarters of cash-out refinance transactions in the construction of the OFHEO index (48% of transactions used in the last two quarters were cash-out refinance transactions!), make the OFHEO national and regional home price indexes extremely poor measures of the behavior of home prices.
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