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Housing Market News: 9/25/09 September 25, 2009

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For statistical reports, property data from public records and property valuation click here.

Shadow Market Part II: Banks Avoid Acquiring Foreclosed Homes

Housing In Crisis Report

Especially Bad Housing Numbers and Taxpayers as Mouse Models

Real Estate is: Cyclical, Seasonal and Emotional

Housing Crash to Resume on 7 Million Foreclosures

Mortgage Assistance Program for Homeowners

Seeking Real Estate Bargains? Try Looking at the High End

Square Footage Matters and Median Price Differentials

Investors are Skittish Over Slowing Home Sales

Square Footage Matters: Large Homes Indicate Stable Values

No Sign That Bank Bailout Will Expire at Year’s End

Alphainventions.com

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Case-Shiller Index Faulted by Founder Robert Shiller? September 22, 2009

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As reported in the Taipei Times, Economist and Ph D. Robert Shiller states that faulty models are one of the culprits that led to the lack of forecasting of the financial crisis by economists.   Shiller states these models lack the study of economic bubbles necessary to prevent crashes like our recent crisis one;

“The widespread failure of economists to forecast the financial crisis that erupted last year has much to do with faulty models. This lack of sound models meant that economic policymakers and central bankers received no warning of what was to come…the current financial crisis was driven by speculative bubbles in the housing market, the stock market, energy and other commodities markets. Bubbles are caused by feedback loops: rising speculative prices encourage optimism, which encourages more buying and hence further speculative price increases — until the crash comes.”

Real estate is Cyclical, Seasonal and Emotional, and Dr. Shiller appears to believe this as well. The “faulty models” caused an emotional stir that led to speculative prices until the crash.  The question is; which faulty models is Dr. Shiller referring to exactly?  

Is the Case-Shiller Index included in his broad statements?  Some economists argue that Case-Shiller is one of the faulty models that contributed to the increasing optimism and rising speculative prices in the market; as well as the panic and fear when the markets began to decline.  (Case-Shiller articles).

Developed in the 1980’s, the Case-Shiller Index evaluates trend changes in housing prices on a monthly basis of homes being purchased.  The index appears to be limited in the data it considers and analyzes, disregarding specific property data elements that assessment offices began to collect after its creation. Basic property data collected from public records such as school districts, location factors, square footage, age of home, land area, garages, bathrooms, views, waterfront, public amenities such as water/sewer and other property structures  appear to have limited influence in the calculations of the index.

For example, does the index adjust for the increased average size of a home built after 1995?  Using the same brush from 1980 and repainting over the same picture causes one to have an obscure view of a localized market like real estate.    In recent Index reports, Case-Shiller has inaccurately weighted metro areas suffering more foreclosures, which drag down the overall value of the Index.  Yet, it remains the leading index in the market; unaltered, unaccounted and underperforming during our most recent crashes.  

Dr. Shiller’s Index lacks the very ‘sound’ that he rebukes in his own article.

So can we expect an overhaul of the Case-Shiller Index?  Hindsight is always 20/20, and this article sounds more like a promotional piece promoting his latest books, than an honest challenge to fellow economists to revise models and develop more reliable measurement tools for the future.

When Dr. Shiller sold the Case-Shiller Index in 2001, what were the terms of the sale?  Did the conglomerate he sold to make adjustments to the index?  And the final question, what benefit did the conglomerate gain by having S&P promote the index starting in 2005?

Hopefully Dr. Shiller is taking his own advice and examining the fundamentals of the Case-Shiller Home Price Index and seeking ways to improve on a model, that when developed was the only one of its kind.  Today, many economists and computer technicians have access to so much data, that more complex models offer better solutions with limited influence from corporate rating organizations.

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Real Estate is Local: How is your housing market fairing? August 17, 2009

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Daily real estate reports have been released, speculating on the housing market and when it will reach a bottom in values. Some reports declare a bottom in the near future, while others see a much more prolonged recovery in real estate due to foreclosure and unemployment. But real estate remains local, as well as cyclical, seasonal and emotional. The economic crisis has hit some markets harder than others. With this in mind, how can one predict a home values bottom for the entire housing market? Property data analysis must reflect macro and micro real estate trends, like this New York City Real Estate Report.

Coupled with public records, (as well as the Northeastern Queens Report), this report found that NYC home values as a whole were affected by the real estate crisis. Also, the city saw a diminished level of sales activity so far this year, well below the peaks of previous years. But when analyzed deeper, Manhattan two-family buildings and buildings with a residential unit and stores are in demand with increasing values. So is the real estate crisis affecting this market the same way that it’s affecting others?

The same can be said for many different markets of the country. While tools like median sale price are essential, painting the market with broad brush blurs the deeper analysis. Startifying the data with price per square foot analysis gives a more comprehensive view of the market.

What does your market look like? What does your location say about the housing market? How is your property holding up?

For property search on records, ownership, sales data  for insurance underwiritng, fraud investigations and valuation, CLICK HERE.

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Bad Data, Bad Analysis, Inept Real Estate Broker and Misinformed Seller are All to Blame. August 11, 2009

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The following commentary is in repsone to a recent Crain’s New York Business article titled “Shadow units cast pall” by Amanda Fung. The article discussed a glut of “shadow inventory” in New York City, particularly in Williamsbug and Manhattan. Sources claimed that Manhattan had more than 10,000 unsold condos. Based on my findings, the data and information being presented in the article proved to be misleading, if not out right false. Here is the response. Remember, real estate is three things: Cyclical, Seasonal and Emotional.

Amanda

I had the opportunity to read your article regarding Shadow Inventory in the Crain’s Online Publication.  My initial reaction was there are always two sides to every story. But as I reviewed the data that was being quoted, I became concerned with some of the facts and data provided to you.  My focus of concern is the condominium market and discussions related to Shadow Inventory, and more importantly data provided by the real estate sources referenced. 

In the 25 years that I have been valuing and analyzing real estate, the term “Shadow Inventory” has never been presented before.  What I gather is that this is a buzz word used to discuss inventory that has been built, is under construction or just coming on the market.  This has never been called Shadow Inventory, but pending inventory

Because the property data being presented in the article contradicts reports I have prepared and published, I started to review the information by outside sources that was provided to you in more detail.  The 18 month supply issue baffles me because I simply cannot determine where this comes from.  Also, the “glut” of Williamsburg has me confused.  Analysis of construction activity, public records and sales activity clearly indicate that Manhattan alone absorbs about 9,000 new condo units a year.  For 2009, sales activity and public records indicate an annualized absorption of about 6,000 units.  This would be 3,000 off the peak, so again how does 3,000 fewer units sales compute to 10,000 unsold units.  Also, the 7,000 plus units coming on line in 2010 will be absorbed into the market based on Historical Sales and building Activity.

Yes, there has been a decline in sales activity since the peak of 2007, but new construction has not exceeded demand in population growth and affordable housing.  The key word is affordable.  The fact that a developer lists a property too high relative to the market does not indicate a collapse, but a misinformed seller.

Your article is an amazing coincidence for me, because hours before I read it, I completed an in-depth analysis of Williamsburg/Greenpoint condo market for a client.  What I discovered was not a “glut” of housing, but incorrectly priced housing.  My clients project was listed by a real estate agent with unit values $100,000 above the market and incorrectly stated square footage.  My firm has been arguing this point for years, it is all about the property data.  Based on the recommendations provided, the client relisted the units at the prevailing price per square foot rate for walk-up condo units of $550 psf.  He has already received four inquiries, with one being a serious buyer.  He did not receive a single call on the building in the past three months.  My analysis does not indicate that this community is in a “bust stage”. 

Bad data, bad analysis, inept Real Estate Broker and misinformed seller are all to blame.  What is most disturbing is bad data and bad analysis. 

The following is a summary of my analysis that was provided to the client:

Since 2000, the following construction activity has occurred in the City based on the 2009/10 New York City Department of Finance Records:

Single Family Homes       9,012 new units

Two Family                         25,974 new units

Three Family                      6,157 new units

Tax Class I condos            719 new units

Tax Class II condos           26,699 new units

“454 sales have occurred in Williamsburg/Greenpoint market in the past year.  There are 192 sales classified as walk-up condominium projects with an average sppsf of $570.86 and Median of $569.17.  Given the location of your property, I recommend listing at $550 psf for 1 Bedroom Units and be prepared to accept 10% less.  Development around your complex will draw buyers, but there is a correlation to subway proximity and value.  Hence the 10% lower acceptance.  The number of new units coming on the market is meeting the demand of residents from the Lower Eastside, notably NYU students who cannot afford to rent or buy in Manhattan.  Over the past 10 years, NYU has acquired many housing units south of 23rd which has driven up housing costs.  After 9/11 Williamsburg/Greenpoint experienced a revitalization effort that has brought a new wave of construction and demand for the area.  Current market conditions mean that you have to price correctly, the prior listings could have potentially hurt your efforts, creating a distress situation perception in the market.”

Amanda, some questions about the data provided to you!

According to your article, Jonathan Miller states that there are 10,445 unsold condo units in Manhattan, plus another 7,000 coming on-line.  He calls these shadow units.  According to the New York City Department of Finance, for Manhattan there are:

Class I Condos:                  198  total units

Class II Condos:                 100,173 total units

Public records show a total of 26,699 units were constructed since 2000.  This represents over 25% of all condominium units.  Mr. Miller is stating that 10% of all condos are vacant or unsold?  And by unsold, does that mean there is a current owner who wants to sell or can’t sell?

Based on Mr. Millers comments, 10% of all condo’s are on the market in Manhattan, with another 7% coming on.  This just does not factor correctly and here is why:

Since 2003 there has been no more than 10,000 valid sale transfers per year of condominium units in Manhattan. (See table below).  Mr. Miller states that there are 10,445 unsold units in inventory which appears to be a normalized number, so what is the point.  This isn’t of much significance given the history of sales for condominium units.  As a matter of fact, all units constructed since 2000 have been absorbed into the market within a very finite time (less than 6 months).  Following is more information to support our data points:

Since August of 2008 there have been 10,076 condo sales in Manhattan.  This represents 10% of all properties.  When only usable sales are considered, (indicated square footage over 200, valid sale price over $10,000), the number is reduced to 5,407 sales or 5.4% of all condo properties with an indicated Average Sales Price of $1,805,328 and Median of $1,089,527.  The variance is rather significant.  Analysis of 2009 Sales Only shows 1,764 valid sales with a Average sale price of $1,656,783 and Median of $1,025,000.  Perhaps the use of the Average and Median Sale price is confusing some, because the Sale Price Per Square Foot provides a totally different view of the market.

Average Sales Price Per Square Foot      

  • $1,229 (7/2008 to 7/20009)          
  • $1,180 (’09 Only)

Median Sales Price Per Square Foot       

  • $1,145 (7/2008 to 7/2009)          
  • $1,070 (’09 Only)

Square Footage has a significant impact on the values, with less than a 7% variance between Mean and Median, and property values from 2008 to 2009 are only down 4%, not the 30% levels being reported by some.  And we cannot just rely on the Average and Median Sale Price alone.

Further Analysis by Sales per Year since 2003 indicates the following (Click To View)

Bad Data Big Text 174 

 Total Sales are all recorded instruments with the New York City Department of Finance and County Clerk (http://www.nyc.gov/html/dof/html/home/home.shtml )

Useable Sales are defined as sales greater than $10,000, greater than $100 per square foot and having a valid square footage greater than 200 feet (minimum required for living space).

Usable sales historically represent about 60% of all sales.  Since July of 2008, this figure has dropped to 54% and for all sales in 2009 it is at 46%.  2009 is projected to have the lowest useable sales on record since 2003.

CURRENT value indicators clearly show that on a rate per square foot basis the Manhattan Condominium Market is off in value by less than 4%.  (all data used in this analysis is obtained from the NYC Department of Finance and is 100% verifiable).

You have quoted many individuals and their opinions in the article, but they appear to be lacking the data like the statistics being presented above.  It concerns me when I believe reporters receive information from sources that appear to have a hidden agenda.  The developments coming on line can easily be absorbed into the market. 

Again I will state, Bad data, bad analysis, inept Real Estate Broker and misinformed seller are all to blame for listing properties to high.  Analysis of actual data and using accepted and appropriate statistical analysis yields results that are explainable and defensible.  Quoting individuals without verification from noted and verifiable sources impinges the creditability of the article.

John Watch, President & CEO

http://www.accuriz.com

718-461-1310

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Afternoon Real Estate News: 8/11/09 August 11, 2009

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Housing In Crisis

Cash-strapped Homeowners are finding Short-Sales Hard to Come By

Research on Homeownership Rate through 2030

Real Estate is: Cyclical, Seasonal and Emotional

Real Estate Outlook: Growth Mode

Home Prices Down in 13 Major Markets

Square Footage Matters

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Square Footage Matters! Home Sizes Scaled Down for Frugal First-Time Buyers August 7, 2009

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Taking note of the current economic downturn, some builders are modifying their plans to suit the budgets of the demanding first-time buyer market; Homes are being built smaller with fewer frills.

One of the most notable trends during the recent housing boom was the rapid increase in square footage of new homes. The increase was an important factor in the variance of average to median sale price growing from 6% to 22%, as stated in the Housing in Crisis Report.

“Since 1960 the median house size has increased from around 1,400 square feet to 1,769. During the recent construction boom, many areas of the country experienced development with homes exceeding 2,200 square feet, with additional improvements such as garages, central air conditioning and two or more bathrooms.”

As the economy works towards recovery, borrowers – especially first-time buyers capitalizing off of the 8,000 tax credit incentive – are reluctant to spend more than what is necessary. Public records on property data, and builders’ statistics from this Bloomberg.com article show smaller homes involved in a large percentage of transactions and median prices declining due to a smaller average in size.

Square Footage Matters.

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Staten Island Square Footage and Median Price Differentials August 7, 2009

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A new AccuriZ report titled “Square Footage and Median Price Differentials,” highlights the property data and  sales activity of New York City and the differnces between median sale price and price per square foot. Below is an excerpt from the Staten Island section of the report. To see the full Staten Island report, as well as the additional boroughs, CLICK HERE.
 
Real Estate is like a set of Russian Nesting Dolls.  Analysts tend to focus on the entire market, with minimal effort given to the underlying components.  As you examine various segments of the markets, different pattern emerge. Generally in real estate there are three rules:  Location, Location and Location.   And in the current market, if you do not have to sell you don’t.
 
It is comprised of three elements:  Cyclical, Seasonal and Emotional. . The present market comprises of all three, which is extremely rare.
 
Change by Property Type Staten Island

 Public records show that Staten Island is experiencing the slowest value decline of all of the Boroughs at -5.17%.  In complete opposite of the other Boroughs, Staten Island is experiencing a greater decline in the Single Family market, but showing increases in two to three family units, as well as properties with a residential unit and commercial unit. 

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NYC Square Footage and Median Price Differentials: Brooklyn August 6, 2009

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A new AccuriZ report titled “Square Footage and Median Price Differentials,” highlights the property data and  sales activity of New York City and the differnces between median sale price and price per square foot. Below is an excerpt from the Brooklyn section of the report. To see the full Brooklyn report, as well as the additional boroughs, CLICK HERE

Real Estate is like a set of Russian Nesting Dolls.  Analysts tend to focus on the entire market, with minimal effort given to the underlying components.  As you examine various segments of the markets, different pattern emerge. Generally in real estate there are three rules:  Location, Location and Location.   And in the current market, if you do not have to sell you don’t.

Real Estate comprises of three elements:  Cyclical, Seasonal and Emotional. The present market comprises of all three, which is extremely rare.

Source: AccuriZ.com

Source: AccuriZ.com

Public records and statistical analysis show that unlike Queens and the Bronx, Brooklyn appears to be experiencing more of a valuation decline in the two and three family market, as well as properties with residential units with a commercial component.  Single family residences are declining at a lower rate than the Borough as a whole.

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NYC Square Footage and Median Price Differentials: Bronx August 5, 2009

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A new AccuriZ report titled “Square Footage and Median Price Differentials,” highlights the property data and sales activity of New York City and the differnces between median sale price and price per square foot. Below is an excerpt from the Queens section of the report. To see the full Bronx report, as well as the additional boroughs, CLICK HERE

Real Estate is like a set of Russian Nesting Dolls.  Analysts tend to focus on the entire market, with minimal effort given to the underlying components.  As you examine various segments of the markets, different pattern emerge. Generally in real estate there are three rules:  Location, Location and Location.   And in the current market, if you do not have to sell you don’t.

Real Estate comprises of three elements:  Cyclical, Seasonal and Emotional. The present market comprises of all three, which is extremely rare.

Source: AccuriZ.com

Public records show that residential properties in the Bronx are also decreasing and reflect a similar pattern that exists in Queens. One notable difference is that properties that contain a residential unit and commercial unit appear to be declining at a greater rate.

For more Real Estate Reports and detailed statistical analysis, CLICK HERE 

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How Median Home Prices Can Be Misleading July 20, 2009

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Reported from: Investor Centric: How Median Home Prices Can Be Misleading

“The median can be a deceptive statistic when it comes to real estate growth. Often home sellers will point to an increasing median and say that homes prices are increasing, but they can actually be decreasing.” – Investor Centric

This Investor Centric article explains the deception in the median sale price and how it isn’t a true indicator of market stability. What the article does not explain is a clear way to rid the deception; price per square foot.

As shown in the chart above, the median sale price of San Bernardino County has drastically increased. That doesn’t mean that the county’s home values are plummeting necessarily. As the article states, “they just don’t have enough higher price homes to sell.”

That’s why analyzing property data on a price per square foot basis broadens the scope on particular areas of the market. Public records show that higher priced homes have more square footage generally. It can be clearly seen that by analyzing San Bernardino county solely on the median it is not doing do well.

But based on price per square foot, is the San Bernardino County market good or bad?

In a recent report by AccuriZ titled “Square Footage Matters! Large homes indicate stable values” Northeastern Queens values proved not to be declining as significantly as Queen County in its entirety. This is based on price per square footage:

Source: AccuriZ

Source: AccuriZ

 Median Sale Price

 “Analysis of the Queens County single family market have declined 18% from 2008 and 21.3% since 2006. The sub-market of Northeast Queens indicates that property values are down 12.8% since 2006, with most of the decline occurring in 2009.”

Queens Price Per Square Foot

Source: AccuriZ

“A more detailed analysis of the median sale price based on the square footage of the residence indicates an entirely different pattern of price value changes. When the sales data is stratified into the calculated rate per square foot based on sale price, the rate of change for Queens County is -10.58% since 2006 versus -21.3% based on the Median Sale Price. For Northeastern Queens the rate of change is -.37% versus -12.8%. The data clearly indicates that building size represents a significant impact relating to the value of the property.” (For more of the “Square Footage Matters!” report, click here.)

With these statistics we would like to add on to the quote in the beginning, “Often economist and analyst will point to a decreasing median and say that homes prices are decreasing, but they can actually be stable.”

 So realtors, what do you think? Is the median deceptive? Is it used primarily as a selling point? Or is the median a true indicator?

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