Home prices rising in 100 cities

barrons · November 20, 2006, 7:20pm

Down in about 50. Many cities enjoyed double digit gains over 2005 including Seattle, Eugene, Salem, Portland. Mortgage rates hitting lows again.
Resume the sky is falling outlook.

BTW among the weaker markets Boston down 4.3%, Detroit down 10.5%, Washington down 2.2%.

Volume IS down so if you don’t have to sell don’t unless you are in a strong market.

<a href=“http://www.usatoday.com/money/perfi/housing/2006-11-20-home-sales-summer_x.htm[/url]”>http://www.usatoday.com/money/perfi/housing/2006-11-20-home-sales-summer_x.htm</a>

Allmusic · November 20, 2006, 8:46pm

We are down more than 4.3%; it’s like 22%.

Good time NOT to sell in Boston.

emeraldkity4 · November 20, 2006, 9:03pm

great more “equity” that colleges will expect you to tap to pay for tuition.
Doesn’t matter if you can afford to pay it back or not I guess.

1sokkermom · November 20, 2006, 10:08pm

From today’s Boston Globe:

"Monday, November 20, 2006
Mass. home sales fall 23 percent

Greater Boston fared slightly better in the third quarter than many other parts of the state as a “healthy correction” softened housing sales and ushered in one of the strongest buyers’ markets in years, according to a report issued today by the Massachusetts Association of Realtors.

Statewide, the number of third-quarter sales for detached single-family homes fell 23.4 percent, compared to a year ago, and Greater Boston sales decreased 19.5 percent.

The statewide median selling price dropped 4.9 percent to $352,000, compared with 1.9 percent dip to $505,000 for Greater Boston.

Statewide, the number of third-quarter condo sales fell 22.3 percent; the Greater Boston drop was 20.3 percent.

The statewide median selling price for a condo was $275,000, down 2.5 percent.

The Greater Boston median selling price was $337,000, down 2.3 percent."

TheDad · November 20, 2006, 11:02pm

The down volume is going to affect prices–supply and demand, you can’t beat Econ 1.

Dadguy · November 21, 2006, 12:32am

You have to be a born optimist to work in the real estate industry, that’s for sure. I read the article and wonder: how does an economist for the real estate industry medicate himself?

While more individual markets are up than are down, not all markets are created equal so when you weigh them together you get a small overall drop in the median. Some markets got overheated and needed price corrections. No big deal, right?

To me, there are two troubling signs. The number of new housing starts and new housing permits is way down. In the long-run this is necessary (but probably not sufficient in and of itself) in order to correct the market. In the meantime, it demonstrates that builders aniticapte that they will not get the desire price on the new product, so they’re cutting back.

The second troubling aspect is the sharp drop in sales volume. That means that sellers and buyers aren’t getting it done and, specifically, sellers aren’t getting a desirable price. A lot of sellers can hold out in the short-term, but evenutally more of them have got to come back in.

I’m a homeowner in one of those areas where the market is definitely softening. I’d like to see a quick turnaround, but I think things are going to be painful for a while longer.

Dadguy · November 21, 2006, 9:02am

It seems odd to me that the realtor association would make a spokesperson out of an economist. You’re never going to hear someone like that say “this is not a good time to buy a house” even though, given the way housing prices cycle, there are times when you really shouldn’t buy if you don’t have to.

Every see those old magazine ads for cigarettes with a picture of a doctor which says “9 out of 10 doctors recommend Chesterfields for their smooth taste”? Same amount of credibility.

JHS · November 21, 2006, 9:31am

What I’m seeing here (and I have three houses on the market as a fiduciary) is a situation where no one wants to buy at anything like the prices from last year, because they keep reading that the market may be about to collapse and don’t want to feel foolish if it does, and no one wants to sell at 20% below last year because the market hasn’t collapsed yet and they don’t want to feel foolish if it doesn’t. So the transaction volume is really low – only a few very motivated sellers (who have dropped their prices to sell) or very motivated buyers (who are willing to risk overpaying). That averages out to only a mild decrease in reported prices, but on far fewer sales. The real estate agents are starving, and they don’t expect anything to happen until the spring.

newmassdad · November 21, 2006, 9:54am

As I’ve said before, and Barron acknowledged but then proceeded to ignore, Barron’s headline is false and misleading

What should be said is average home prices are rising in 100 markets. What is the difference? The average price is influenced by mix issues: If you build and sell a lot of expensive houses in a particular market, the average will go up even when the value of existing housing is dropping.

A further problem is that a naive comparison of average selling prices, even with no mix changes, does not address the huge sums that existing homeowners have put into their homes. Here’s an example:

Let’s take someone who purchased his house last year for $400,000. They remodeled the kitchen and both baths (oh yea, also put in new carpet…) for a cost of $100,000. Because of a forced transfer, they sold this year. By Barron’s logic, their price went up 25%!

Anyone see the flaw in Barron’s approach to this situation?

For the life of me, I can’t figure out why Barron keeps posting such misleading drivel. He’s a real estate professional and should know better. Maybe there’s some self interest here? dunno. I hope he keeps overbidding based on this rise and helps out (accidently) some poor folks that are otherwise being slammed by this “robust” economy.

barrons · November 21, 2006, 11:56am

You have no proof of that supposition for one. Second this has been the way stats are collected and reported for many years (not by me) and when you get into a HUGE sample all the little variations you worry about tend to even out. For every home that is fixed up there may be another that was lived in by an old lady and never touched. The data are comparable over time just as the unemployment and CPI data are because they use the same info. You might not like the basket of goods in the CPI but at least it is comparable over time and gives a good indication of trends.

Also the data is for EXISTING homes–not NEW homes. So new construction has no impact until resale.

Saying home sales are down 23% is FAR more misleading (See Allmusic). Sales volume is down but prices are down much less–but the public is easily confused and will assume the prices are down 23%.

I can say that homes in my area that generally sell without many upgrades because they are only 5-7 years old are selling at double digit increases which is consistent with the Seattle data. Instead of selling in a week it may take a month.

Also this “misleading drivel” was reported in every major paper in the US.

newmassdad · November 21, 2006, 12:04pm

Au contraire, Barrons. It is YOU that has no proof that the figures you quote are relevant to the true value of homes, a value that any appraiser can determine. It is you who claims “ll the little variations you worry about tend to even out.” What is sad is that such data is collected. It is just ignored by members of the real estate lobby.

Are you a card carrying member of that lobby, or just a co-traveller?

Allmusic · November 21, 2006, 12:10pm

So, Barrons…are you admitting that both volume and sales are down, or are you still crowing about the hot real estate market?

barrons · November 21, 2006, 12:33pm

It is pretty good in 100 out of 150 markets. A few large markets are down including the Boston area but you are not in the majority with strong growth in much of the Southeast and Northwest where there is good job growth. I am not crowing but it is not the doom and gloom some are trying to sell either. Call it offsetting. It IS VERY GOOD in Seattle and Portland so in my world it is good. A HUGE portfolio off office property just sold at a strong premium.

newmass–I’m sorry you don’t like the way things have been done for 50 years. Most people use this info to judge the strength and trends in the market. Feel free to try to go against the conventional wisdom. I hear tulips are ready to POP.

dstark · November 21, 2006, 12:42pm

barrons, isn’t this true, the average price of a home for the last 50 years is up about 4% a year (not including the California coast and the northeast coast)?

Office properties are not the same as residential properties.

Here is a link…

<a href=“Housing prices can go down. - Sep. 19, 2005”>Housing prices can go down. - Sep. 19, 2005;

Just to be fair…

<a href=“http://news.yahoo.com/s/nm/20061121/bs_nm/economy_usa_housing_dc_1[/url]”>http://news.yahoo.com/s/nm/20061121/bs_nm/economy_usa_housing_dc_1</a>

emeraldkity4 · November 21, 2006, 1:04pm

Prices in Seattle have gone up- of course a friend who is a real estate agent and her husband who is a mortgage broker( they also buy falling down houses and fix them up) just moved to Canada- because the market has slowed down so much.

The assessed value of our house is about 5 times what we paid for it 20 years ago.
Since we haven’t updated anything at all that increase might seem pretty impressive.

To actually tap the equity rather than borrow against it- we would have to move to a cheaper place. So how much farther can we downscale from a house that is already less than 1000sq ft?

But this “paper equity” is noted by colleges , even though if you look at income and basic expenses, there isn’t any way we can borrow from equity, even if we only paid interest instead of principal.

But although we have a lot of supposed equity, at least we didn’t try and turn our equity into a bigger, even more expensive house.

<a href=“Billings housing market holding stable amid national downturn”>Billings housing market holding stable amid national downturn;
*‘‘For sale’’ signs are sprouting like weeds in the suburbs of Phoenix and Las Vegas, and foreclosures are way up in Colorado and Georgia.

It’s been a tough year for real estate in much of the country.*

<a href=“http://firstrung.co.uk/articles.asp?pageid=NEWS&articlekey=3384&cat=44-0-0[/url]”>http://firstrung.co.uk/articles.asp?pageid=NEWS&articlekey=3384&cat=44-0-0</a>

*New Jersey repossessions rise 44% says leading foreclosure database

New Jersey’s leading home foreclosure database warned today that a key indicator of housing market instability in the state has jumped substantially from 2005 to 2006 - indicating that the state’s stalled-out housing market may have a rocky road ahead to recovery.

According to statistics compiled by the state’s leading online foreclosure data service, SheriffSalesOnline.com, the number of lis pendens filed in the state of New Jersey has risen 44% – from 2,486 in the third quarter of 2005 to 3,577 in the third quarter of 2006.*

<a href=“http://www.dfw.com/mld/dfw/news/15995536.htm[/url]”>http://www.dfw.com/mld/dfw/news/15995536.htm</a>
In danger of losing it all
Faced with rising default rates on FHA loans, some local lenders are tightening their rules

<a href=“http://www.boston.com/business/globe/articles/2006/11/15/foreclosure_filings_surging_in_state/[/url]”>http://www.boston.com/business/globe/articles/2006/11/15/foreclosure_filings_surging_in_state/</a>
Foreclosure filings against Massachusetts homeowners surged to nearly 13,000 through September, already surpassing 2005’s count, and were prevalent in rural towns in Central and Western Massachusetts and in working-class cities with large minority populations across the state.

<a href=“http://www.palmbeachpost.com/business/content/business/epaper/2006/11/08/a1d_foreclosures1108.html[/url]”>http://www.palmbeachpost.com/business/content/business/epaper/2006/11/08/a1d_foreclosures1108.html</a>

*Florida led the nation in foreclosure activity for the third quarter of this year as adjustable-rate mortgages came home to roost, a RealtyTrac report shows.

In Palm Beach County, one in every 153 households was in foreclosure in the third quarter — more than twice the national rate and up 26 percent over the third quarter of 2005. Compared with the previous quarter, foreclosures rose 38 percent.*

barrons · November 21, 2006, 1:09pm

That is FAR from the doom and gloom forecasts of a few short months ago. Just as the RE industry has self-interests, so do the alternative investment areas of stocks and bonds. They saw the growth in RE investment taking money out of their pockets and there is NOBODY more jealous of keeping the money in their pockets than Wall Street. If they can get their economists to predict doom and gloom in housing they assume it will put money in their pockets.

I think 4% is low unless that is the REAL return adjusted for inflation. Then it could be right. 4% real is not bad.

dstark · November 21, 2006, 1:13pm

barrons, it doesn’t look like gloom and doom to me in most areas either.

It’s 1 to 2% real appreciation a year.

You can look it up. One of my links mentions this, but if you have any other sources with different numbers, I’d like to see them.

newmassdad · November 21, 2006, 1:40pm

I don’t like it, and look forward to the chance to “go against conventional wisdom” In fact, that’s how most good investment strategies work. This is hardly the first example of how ignorant financial markets and their professionals are.

A more common example is mutual fund performance. I’m sure Barron pays close attention to the top performing funds, as published in the WSJ and many other sources quarterly. Barrons probably makes investment decisions based on this performance. And that’s how poor folks like me make money. It turns out there is no correlation between historic fund performance and future performance (a few real dogs that don’t have much in them are the exception), once overall market performance factors are taken into consideration. Yet “conventional wisdom” rules.

FWIW, it is not just in financial markets that “conventional wisdom” often fails. It’s true in health care too. Just look at the story of ulcers over the past 50 years.

So go ahead and shill for your profession, Barrons. Just don’t expect too many of your CC colleagues to fall for it.

barrons · November 21, 2006, 1:59pm

Actually I buy market type funds and just leave them alone. The chancing of beating the market over time are not good.

I am just providing some data that runs counter to the predictions many were making a few months ago. I also predicted that mortgage interest rates would be DOWN this year based on some private info we had and presto–down to very affordable levels which will help the return of the home market in 2007. I am glad the big builders are cutting back. That will speed the absorption of the overhang in some markets. As you said, the conventional wisdom was that housing was dead. Smart people are buying except in a few markets like Boston, Florida, Vegas and parts of California which might lag by a year.

newmassdad · November 21, 2006, 2:45pm

Barrons, glad to see that you’ve learned the secret of mutual funds (hint, index and diversification. Doing so has netted me a return of over 10% for the past 5 years…)

There are a few more markets that you might want to add to your soft list, such as DC and environs. The change in congress will no doubt lead to defense cuts, impacting NoVa especially. And add Arizona, which has another year or two of catch up at least. I’ll post an analysis of the data in your link separately.

Home prices rising in 100 cities

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