Case-Shiller: Prices Fall Sharply in January
Submitted by
CalculatedRisk on Tue, 03/31/2009 - 5:00am (71 comments)
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This comment thread has been HALO-IZED by CRbot.
http://realize.org/cr/halokit.php?halourl=http://www.haloscan.com/comments/calculatedrisk/7618502166666046372
Drops in housing prices equate to greater affordability for the average citizen.
Unfortunately, just in time for housing price drops, incomes are dropping too due to rising unemployment.
That means housing prices are going to need to drop further.
And so the merry-go-round continues.
I thought we hit bottom a year ago
Free Falling where's my Obama parachute! =-O
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<div class="js-singleCommentText" style="padding-top: 4px; font-size: 12px;"> "Free Falling where's my Obama parachute!"</div>
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<div class="js-singleCommentText" style="padding-top: 4px; font-size: 12px;">The Bush administration took it along with everything the middle class owned that wasn't nailed down...</div>
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If this keeps up, young families may once again be able to buy a small starter house. Quick, that's a crises.
"If this keeps up, young families may once again be able to buy a small starter house."
Assuming a job...
The Latest from Denninger:
Yoo Hoo! Yes, Mr. Cop - Over THERE! (AIG)
This month's data didn't tell anyone anything we didn't already know.
I'm waiting with bated breath for next month, though.
113.69 and 118.96 respectively.
Those are the levels that Phoenix and Las Vegas have to hit to turn the phrase "Half-Off Sale" from cruel joke into reality ... 'twould mark exactly 50% off their respective peaks.
Phoenix (currently at 117.11) is almost a shoo-in to make it next month. Vegas (currently 125.64) would have to fall nearly another 6% - but, as the Feb. C-S numbers represent a composite of the three slowest sales months of the year, that's not out of the realm of possibility. And remember, a 50% decline requires a 100% gain to get back to even! :'(
Look for Miami and San Fran to join the party later in the year - it'll still be rockin' by then, I suspect.
Those are the levels that Phoenix and Las Vegas have to hit to turn the phrase "Half-Off Sale" from cruel joke into reality ... 'twould mark exactly 50% off their respective peaks.
Back in 2005 and 2006 I always used to joke about "50% haircuts" for housing. Secretly I always thought the prediction was a bit pessimistic.
Oh well.
Case-Shilller: Prices Fall Sharply in January
These are the worst year-over-year price declines for the Composite indices since the housing bubble burst started.
That is why Citi and BofA were so profitable in January and February!
It all makes sense now
BTW people watch out for Quarterly Statement Expiration Tuesday.
"I'll have more on house prices including a comparison to the stress test scenarios."
This plan will work! Surely we are on plan? How many more mortgages are underwater with this change? What was our plan B again?
Even if the magic Obama wand made everything semi ok in a year or so the US will be a minefield of exploding house values for years.
Phoenix. 3 years from now Unemployment drops, the economy starts running on 3 cylynders, and you have to sell your house - bang! You lost a leg.
With a divorce rate at 50% it will just be something else to be bitter about.
ova.... you know better than to claim a 50% divorce rate, a false stat...
this is data from january. It is too much lagged. A housing indicator for month T being released in the end on month T+2 is pretty much redundant. We had indicators in FEBRUARY telling the same story.
bad post, CR. As redundant as one can get
Also noteworthy (at least in my initial quick review of these numbers) is that the rate of change inherent in this data isn't exactly conducive to hopes of quick recovery.
Because - although prices are falling everywhere - as recently as August, 7 of C-S's 20 metro areas were actually displaying positive price acceleration (i.e. a slowing rate of decrease).
Last month, it was 4.
This month, it's down to 3 - LA, SD, and Boston.
In fact, in 14 of 20 cities acceleration has picked up to the downside. And in several of these, downside acceleration hit an all-time high in January.
Hang on, kids ... no one seems to be able to find the 'off' switch to this ride!
Best Spring selliing season in years! /SARC
Can Phoenix rise from its ashes? Have they started burning their houses yet?
Mook:
Hang on, kids ... no one seems to be able to find the 'off' switch to this ride!
This is the off switch.
CR writes: I'll have more on house prices including a comparison to the stress test scenarios
I hope Mr. Geithner will read that post
I have to leave for work. Could one of you regs repost this for me later in the day so it gets seen. It's the article on interest rate derivatives..
http://www.moneyandmarkets.com/alarming-news-bank-losses-spreading-32910
I posted it in the last dead thread and a few of you saw it but I think it's a good article and would like the later arrivals to get to see it.
Yee-Haw.....what's 46% of zero?
That's right - the same amount - Whew......
r
NEW YORK (AP) - The Sun-Times Media Group, owner of the Chicago Sun-Times and dozens of suburban newspapers, filed for Chapter 11 bankruptcy Tuesday, making it the fifth newspaper publisher to seek protection from creditors in recent months. ¶
The step, brought on by a precipitous decline in advertising revenue, means both of Chicago’s major daily newspapers are operating under bankruptcy protection. Tribune Co., the parent company of the Chicago Tribune, the Los Angeles Times and other newspapers, filed for Chapter 11 in December. ¶
The Sun-Times Media Group, which filed in a Delaware court, said it will continue to operate its print and online properties. The company listed $479 million in assets and $801 million in debt. ¶
It has retained Rothschild Inc. to help with a possible sale of assets. ¶
"We firmly believe that filing for Chapter 11 protection and exploring the potential sale of assets or new investment in the company offers us the best opportunity to protect our respected media properties for the long-term," Jeremy Halbreich, the company’s interim chief executive, said in a statement. ¶
The Latest from Ritholz:
Groundhog Day
In fact, in 14 of 20 cities acceleration has picked up to the downside. And in several of these, downside acceleration hit an all-time high in January.
Hang on, kids ... no one seems to be able to find the 'off' switch to this ride!
Everybody is talking about housing finding a bottom, but housing doesn't exist in a vacuum. So long as the economy is shedding over half a million jobs a month there's no bottom in sight. It just can't happen.
This is why it's so important that we give a bunch of taxpayer money to Bill Gross.
Because financing of residential real estate is on balance is highly leveraged, it's a mistake not to at least show Actual Dollar Declines in the city comparisons. Percentage loss is almost meaningless when no equity was present to begin with.
Lose 90% of a $80k house or 10% of a $700k place puts the owner in the same loss position.
Next time I can pay for tuition a car or go to the grocery and the bill says you owe 1.3097% of your house wake me up. We measure price in dallahs.
At least Phoenix, Las Vegas, and Miami experienced greatly inflated housing prices. But, poor Detroit: Down nearly 40%. And they never had the "benefit" of a bubble. MI looks like a real basket case.
31 March 2009
Baltic Dry Index (BDI) -31 1615
Demand Destruction Continues
.....newspapers are going the way of the typewriter - now THAT'S appropriate!
Can Phoenix rise from its ashes? Have they started burning their houses yet?
I wish I could find the thread from a year or so ago discussing this, but at the time I posited that the Phoenix exurbs were #1 on my list of candidate areas to never again return to their price peaks. Not next year, not in 5 years, not in 10 years ... never.
I figure that by the time house prices stage any meaningful recovery in those parts - which are already off 60-70% in price - gas will be too expensive and/or water too scarce to ever make further development in places like Anthem and Cave Creek viable. They'll be crumbling monuments to the excesses of this bubble era that people will be able to show their grandkids.
Of course, that's just my opinion.
For what it's worth I got a new 30 day Zillow Home Report this morning and it has my place near Albuquerque, NM up 1.2%.
O/T-
"Now that I was spending more time on the floor, I wondered why the men’s room always stank. Then one afternoon at three, when I was in there taking a leak, I discovered the hideous truth. Traders had a contest. Coming in at eight, they never left their desks all day, eating and drinking while working. Then, at three o’clock, they marched into the men’s room and stood at the wall opposite the urinals. Dropping their pants, they bet $100 on who could train his stream the longest on the urinals across the lavatory. As their hydraulic pressure waned, the three traders waddled, pants at their ankles, across the floor, desperately trying to keep their pee on target. This is what $2 million of bonus can do to grown men."
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p style="margin: 0in 0in 0pt;">Case-Shiller Composite-20:
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BISMARCK, N.D. (AP) - The government says the nation’s corn crop is expected to drop for the second straight year, largely due to lower anticipated production outside the traditional corn belt. ¶
The Agriculture Department said Tuesday lower prices and the unstable cost of fertilizer are discouraging some farmers from growing corn this year. The crop is expected to total 85 million acres, down 1 percent from a year ago. ¶
USDA says farmers in major corn-producing states such as Iowa intend to plant a slightly larger crop this year. Total U.S. acreage still would be the third-largest in the last 60 years. ¶
The soybean crop is expected to be up slightly, to a record 76 million acres. ¶
Wheat and cotton plantings are forecast to be down 7 percent from last year. ¶
Don't worry everyone. It can drop 28% each month forever.
In my little town of Sebastopol (western sonoma County CA) we have two Mansions for sale with different but equivalent views.One is a brand new spec house,4000 Sq FT on 8 acres with 4 acres planted in grapes at $2.95MM,the other a 6000 SQ Ft "Antebellum" mansion in pristine condition on 13 acres with a creek and 5 acres planted in grapes at $1.8MM.The neighborhoods are equivalent in amenities and services however the more expensive place has a good deal of street noise.The high end correction has begun here.
Bad news for the Chinese economy.
What happened to stickiness? Seriously, everyone's model used to include stickiness and we've seen absolutely none in the data. If anything the data are indicative of slipperiness when factoring in all the efforts to slow the decline; moratoria, stretched default periods, assistance, workouts, etc.
Dawg, you're a total ass to continue talking about slippery vs. sticky. Get a job, douche!
Dawg, every time you "introduce" the debate that prices are sticky vs. slippery, for like the THOUSANTH time here, you come off like a total ass. Prices have been falling for three years now. Is it possible in that amazing mind of yours to conceive that either viewpoint has merit? Are there any other Einsteinian moments of analysis you'd like to provide us from here on out? Because I think I sort of got this one. Thanks so much.
The extra "L" is for lower.
How does this bode for the performance of "temporarily impaired" bundled mortgage instruments? Charlie Gasparino, come tell me how it's all just a problem with panic in the markeplacet.
This is the only housing metric worth looking at, as it compares apple to apples on a YEAR OVER YEAR basis. Everything else is just statistical noise. With Los Angeles off close to 40%, it will be interesting to see how the Westside fares this summer since it currently is off only 15%. A lot of catching up to do.
MSM loves to pum,p up the "Housing Recovery" angle though. What a crock of @#$%&!*
http://www.westsideremeltdown.blogspot.com
http://www.santamonicameltdownthe90402.blogspot.com
I will also state that wishing prices in the $600k to $1mm segment are completely irrational and the asking price does not seem to have ANY relationship to the quality of the property.Sellers and agents clearly have NO CLUE AT ALL about what market prices are.A 40% difference for similar homes in the same neighborhood is common...
Well, my family is going to do its part to arrest the housing decline.
We are going to buy a backcountry home in Maine, and stock it with grub, gold, guns, and goats.
If all is well, it will be a nice summer vacation home (my wife's view). If we come to Financial Armageddon, it will be our Bat Cave (my view).
The New York Times has an interesting piece on how banks are giving up on obtaining possession of foreclosed houses: http://www.nytimes.com/2009/03/30/us/30walkaway.html?_r=4&th&emc=th . A Marxist suggestion to former homeowners would be: just steal your house back from the banksters...
r
I've never heard of the Levy-Kalecki formula but my gut says spot-on.
"To understand this scary effect, an obscure but well-regarded model of economic behavior called the Levy-Kalecki formula has begun to gain favor in some circles in part because, since its creation 70 years ago, it has done an unusually good job of forecasting how high levels of saving and a decline in borrowing can lead to the devastation of profits.
Plugging current U.S. output figures into a classic version of the Levy-Kalecki formula shows that if households save as little as 7% of their incomes over the next year, the S&P 500 Index ($INX) could plunge as low as 550, which would amount to a 21% decline in value from the current level. The equivalent for the Dow Jones industrials ($INDU) would be about 5,300."
http://articles.moneycentral.msn.com/Investing/SuperModels/how-savers-could-doom-the-economy.aspx?page=1
"At the other end of the spectrum, prices in Charlotte and Dallas are off about 11% from the peak. Prices have declined by double digits everywhere."
Things are just getting rolling in Charlotte. All the issues at BoA and Wachovia will wreak havoc in that market.
We're in the Triangle Area of NC, and we're just now seeing prices starting to move down significantly. We tend to lag the major markets, but people moving here can't sell their houses in CA or the NorthEast or wherever. And the inventory is starting to grow a lot (especially above $500K). So even if some markets bounce off the bottom, I expect others will lag behind by 6 months, a year or even longer.
I don't see housing permits, construction, inventory, sales or price as a leading indicator. Not this time.
Why doesn't Shiller include Houston, TX in his index? Its the 4th or 5t biggest city in the US. Coincidentally, prices are flat since the peak.
New Thread: House Prices: Tracking More Adverse Stress Test Scenario
http://www.calculatedriskblog.com/2009/03/house-prices-tracking-more-adverse.html ( 1 comments )
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Business conditions in the Chicago region deteriorated in March at the worst pace since 1980, according to the NAPM-Chicago's business barometer released Tuesday. The index fell to 31.4% in March from 34.2% in February. That's the lowest since July 1980. The new orders index was roughly flat at 30.9%. The employment index improved by about three points to 28.1%. Readings under 50% indicate that more firms say business is getting worse than say business is getting better
>>
That's the bottom!
The big kahuna yet to really drop is Manhattan in particular and the New York Metro area in general. Down only 16% from the peak so far, but given the job losses and exodus of people that's going on it should catch up really quickly from here. Oh, and not to mention the dozens of newly completed or still under construction condo towers in Manhattan.
Back in December a girl here at work was so happy to be buying a house in the ritzier part of Tampa. Another person who lives in the area told her she was getting a fabulous deal. I told her to wait, what was "fabulous" now wont be in 6 months. Oh well. She can kiss her equity bye bye.
In the DC metro area maybe sales prices are off about 30%, but outside of quick sale foreclosures, asking prices aren't. Most have maybe reduced prices 5-10% from the bubble peak.
I think a lot of people list the houses at the inflated price and hope for a miracle. What happens is the house just sits. I have a neighbor whose house has been on the market for a year and is asking a bubble price. The price has been lowered a couple fo times. I never see anyone even look at the house.
Where I have seen decent price drops are in estate homes with 2 or more acres and had a peak price of around $1Mil. Many of these homes are now listing around $700k. I think the motivation to sell is the property taxes. The annual taxes are $8,000 and up. The taxes alone wouls scare me away from buying a large estate. You can pay off a mortgage, but the taxes hit every year and only go up.
You're wrong, Charlie. I've been tracking Capitol Hill and Northwest properties for almost three years. Based on CMAs for many different subsegments within these two general areas of DC, list prices are down 20-25% from the peak, which was in the summer of 2007, and sale prices are routinely 5-10% off list. We're about to make an offer of 740k for a property listing at 779k that was worth over 1.5MM at the peak. This is in Friendship Heights.
"DECLINE IS ACCELERATING"
Yes.
That's what this coarser graph implied -
http://www.chartoftheday.com/20090327.gif
Looks like housing prices are headed back to the start up the upcycle, 1982.
I feel better about ditching my house and 401K every day.
You have to wonder how long it'll be before the guys in the sand states start to extract the oxidation equity in these houses.
It seems that the graph correlates well with illegal alien population...NO?
It could be 50% in Texas. Last time I checked, Texas had twice the divorce rate that we do here (Massachusetts). Of course, our rate is one of the lowest in the nation...damn us liberals
[What happened to stickiness]
Ahhh yes! We'll be talking about stickiness... to the upside!
r
What happened to stickiness? Seriously, everyone's model used to include stickiness and we've seen absolutely none in the data.
The scary part is ... this could be the sticky period.
Granted, I don't live in a bubble area, but I haven't seen any signs of real 'panic selling' - not even anecdotally. Certainly nothing comparable to some of the behavior at the market bottom of 2002-03.
People still aren't making gallows jokes about Zillow, or about how "my home has more negative equity than your home!" the way they did about their Ameritrade accounts then. HR professionals aren't telling people being relocated "don't buy now, prices in this area still have another 25% to fall." Realtors on TV are still assuring us it's a great time to buy. Etc.
Maybe we'll never see that sort of behavior. But it's kind of scary that we've gotten to 1/3 off the peak already without any signs of it thus far. Doesn't bode well.
You can only have a divorce rate if they get married to start with.
"The big kahuna yet to really drop is Manhattan in particular "
I agree Turbo, but what is shocking is rents. Market rents are dropping 15-20% for renewal leases, and I am now seeing for rent signs in older, established buildings on the West Side. I'm guessing that with layoffs on Wall Street and among big law firms, many new grads are not getting job offers and will not be moving to the City...and the laid-off who exhaust their benefits may be moving out. The number of empty retail storefronts is scary.
I wish I could find the thread from a year or so ago discussing this, but at the time I posited that the Phoenix exurbs were #1 on my list of candidate areas to never again return to their price peaks. Not next year, not in 5 years, not in 10 years ... never.
Mook,
Back in '06(?) I made the statement on HBB that prices would never again reach their price peaks in real (not nominal) terms, the latter qualification JIC of Weimar-style hyperinflation of course. Ben Jones made my statement into a post for debate. Oh, and I wasn't just talking about Phoenix, either.
Why get married if you're just going to divorce the person in two years?<br/><br/>We marry late, but we stay married.
But you nearly go blind in the process
I am watching Fritz from GM on Bloomberg and wondering if I would buy a used car from this man. He hasn't missied one cliche yet.
I think realtors and sellers are on delusional side of reality. There is strong denial of the structural changes of our financial machine and how this has impacted prices. The requirement for 20%- 30% percent downpayment, high caliber credit and layoffs reduce the pool of qualified buyers. The housing market will not return to business as usual.
Baltimore. How do I look up Baltimore on this list???
Any have any info on my beloved Charm City?