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Housing News: October 27, 2009 October 27, 2009

Posted by John Watch in AccuriZ News, AccuriZ Reports, News Feed.
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http://www.calculatedriskblog.com/2009/10/existing-home-sales-more-activity.html?ref=patrick.net

http://www.nytimes.com/2009/10/25/realestate/25mort.html?_r=1&partner=rss&emc=rss

http://www.msnbc.msn.com/id/33491043/ns/business-real_estate/

http://paper-money.blogspot.com/2009/10/existing-home-sales-report-september.html

http://www.biggerpockets.com/renewsblog/2009/10/27/dos-donts-offer-price/

http://www.realtor.org/RMODaily.nsf/pages/News2009102602?OpenDocument&WT.cg_n=RMO&WT.cg_s=RSSDaily

http://www.nytimes.com/2009/10/28/business/economy/28home.html?partner=rssnyt&emc=rss

http://www.credit.com/news/housing-market/2009-10-25/home-buyers-returning-to-the-real-estate-market.html

 

 

Stability for the Manhattan Market in Fruition September 21, 2009

Posted by John Watch in AccuriZ News, News Feed.
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www.bloomberg.com

In a recent New York Times article, fall expectations for the Manhattan real estate market were optimistic as listings show normal levels compared to last year, indicating confidence. Stability is now appearing in the Manhattan market, which was reported in our Manhattan Condo Market article a month ago, as well as the NYC Square Footage Report.

In our Manhattan Condo article, we projected a 4th Quarter of stability after increases in sales activity and property values for the July, August and September months. The recent New York Time article confirmed our predictions. According to the article, 40 percent of new listings in Manhattan after Labor Day were condos while 60 percent were co-ops.

With actual analysis using property data from public records, we indicate the trends accurately and determine the market outlook. While many were concerned with the proposed Shadow Inventory spelling disaster for the Manhattan Market, the numbers projected are now proving otherwise.

Heading into the 4th Quarter, AccuriZ will continue to provide accurate analysis on the market. Hopefully the media outlets like The New York Times will continue to as well.

For additional statistical analysis on Manhattan and other boroughs including property data and valuation, click here.

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How Median Home Prices Can Be Misleading July 20, 2009

Posted by John Watch in AccuriZ Reports, News Feed.
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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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Market Values are Down, Insurance Values are Up? July 15, 2009

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Insurance Value vs. Market Value: With the down turn in property values, are insurance companies lowering the cost to build factors?

 

 

 

 

Public records and property data indexes indicate property values have declined anywhere from 15% to over 40% nationwide.  Understanding that part of the value is in the land and the other part is in the improvements, are insurance costs lower as a result of this decline?

In parts of the country, the answer is no.

South Florida  

Texas

 Logically, one would expect the cost of construction used by insurance companies to be lower, but there appears to be evidence that indicates otherwise.  So are property owners paying more than they should? What do you think?

Ten Ways To Cut the Cost of Your Homeowner’s Insurance

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Economic Crisis: What Have We Learned? July 13, 2009

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We didn’t learn from history.

It can be argued that the current economic crisis was based on a number or separate but tangible factors.  One argument relates to monetary policy over the past decade as being a key contributor to the downturn.   

As interest rates were lowered by the Federal Reserve, borrowed money became increasingly easier to obtain.  This enabled a broad range of economic growth to occur, one of which was new housing

New housing starts are influenced and regulated by local governments who must issue permits for construction.  The lack of checks and balances from local government to police the growth fueled the rapid growth of development.  Some actually argue that local government was more concerned about increasing tax revenue, then being concerned about over development.   

Source: Census Bureau ; News N Economics

Source: Census Bureau ; News N Economics

In the chart above first reported by News N Economics, the housing bubble is clearly identified as beginning in 2003 continuing to 2006, reaching a climax of over 3.3 million housing starts. As interest rates were lowered after September 11 2001, contractors and developers borrowed without many limitations; the focus being to maintain growth, not stabilize it.  New homeowners were able to borrow without the strict regulatory policies of the past and 4 million renters became owners.

With an analysis of natural population growth statistics from public records and property data, housing starts were severely imbalanced, causing an influx of new construction that did not taper off until 2007.  

So the question remains, did standards get lowered so the excess housing stock could be absorbed?  There is antidotal evidence to support this claim and perhaps the simple answer is an analysis of the current foreclosure market.  The current level of foreclosure is comprised of many of the first time home buyers and mostly in homes built in the past seven years.  

Had this been regulated, would the economic crisis be as bad as it is? If housing construction was controlled and home ownership more tightly regulated, foreclosures, vacancies, distressed mortgages etc. might have been easier to absorb.

Fraud and bad debt were the offsets of a lenient monetary policy, but we believe that if one variable – the boom in housing starts – was controlled significantly, the economic bust would not have been as severe.

The question now is how do we learn from this continuing cycle, and prevent it from occurring once again in future? While interest rates were low at the start of the housing boom, mortgages rates have presently been at record lows. When the excess construction has been absorbed and values have hit bottom, what will be the outcome be?

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Causes of the Housing Bust Part III: Conclusion July 9, 2009

Posted by John Watch in AccuriZ Reports.
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housing-market-crisis

How does one create additional supply when the population is not growing? 

The answer was to lower the ownership standards and permit those who could not afford home ownership the ability to do so with No-doc, No Asset verification loans.   Home ownership is based on decades of proven lending standards since the Great Depression.  So, did we lower standards to meet demand or were standards lowered to create demand?  In either case, the result is the same:

Did analysts conclude that a loan made to an unqualified buyer at a lower loan amount would be offset by a quality loan from a qualified owner?   Did 3.5 million new home buyers in the market cause a “bubble”?  Did developers, who needed new home buyers to stimulate the housing market ignore supply and demand factors out of greed or just bad analysis?  And finally were new communities in warmer climates, notably Florida developed to attract  those preparing  for retirement or did an influx in migration cause development?

According to public records and property data, there is no less than 4 million excess residential units in the United States, of this over 70% are single family properties.  Given current population growth estimates and natural building activity needs, an absorption cycle of no less than three years will be needed before the housing industry experiences a significant increase in housing starts and achieves development of over 1 million units per annum.

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Does it add up? Metro reports NYC property values down nearly 25% July 9, 2009

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  “The real estate crisis that’s slammed the rest of the country is finally catching up to New York, with home prices dropping by nearly 25 percent.”

Price plunge
Manhattan: Down 19% to $1.3M
Queens: Down 13% to $403,000
Brooklyn: Down 12% to $503,000
Staten Island: Down 10% to $388,000
Bronx: Down 9% to $356,000

Above reported by: NYC Metro Newspaper

For starters, according to the price plunge graph above, the only borough that has property values down anywhere in the vicinity of 25% is Manhattan with 19%. And since Manhattan “usually bolsters the citywide average” as the article states, it shouldn’t be cited as the true indicator for all of NYC.

The problem that continues to persist in today’s market analyses is the complete neglect of property data reporting on a micro level. Based on our findings in recent reports and public records, property value declines affect some units differently than others, based on price per square footage.

So does it add up? It depends on the sector of the market that is being analyzed. Based on price per square footage, some units have flat property values while others suffer declines. But the findings in most of today’s reports DO NOT qualify as legitamate observations for the entire market. They just don’t. Because whenever you compare apples to oranges, you never can get a complete understanding of what’s really go on.

So if the newspapers and the media can’t get it right, who can you trust?

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Causes of Housing Bust Part II: Housing Affordability July 8, 2009

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Reported from: Housing In Crisis

Housing Affordability factors have been key in the progression of the economic downturn, according to the latest report by AccuriZ entitled ‘Housing In Crisis.’

Housing Affordability

Housing Affordability

             CLICK to MAXIMIZE

Based on AccuriZ property data and public records, historical trends of the median sale price of homes and the median income of owners has fallen slightly under 3. In the recent decade however, the rate is slightly above 4. “Many housing analysts site this factor for justification of further declines in the overall value of housing. There is sufficient evidence from the banking industry that can be used to counter this argument,” as stated in the report.

When home ownership standards were lightened, there was a surge. “Beginning in the late 90’s the percentage of home ownership began to increase, reaching a peak of approximately 71.8% in late 2006 early 2007. This represented an increase in ownership of approximately 3.5 million housing units for individuals who previously rented, ” the report said. This is all while renter levels remained stable. People who previously weren’t qualified for mortgages now had the ability to own, and they did.

So the question is, which came first? Was there an initial oversupply of housing? And because of these circumstances, mortgage standards were relieved to fulfill the overwhelming vacancy? Or were the mortgage standards relaxed, and because of this new surge in housing demand, home construction rapidly increased? We have reason to be believe that it was the former. But whatever the case is, these two critical pieces of information; oversupply and ownership surge played a pivotal part in the boom and the bust of this recent economic cycle.

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PMI Expects Lower Housing Prices in 2011 July 7, 2009

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Reported from: HousingWire.com

“Home prices will be lower in two years compared to Q109 for much of the country’s metropolitan statistical areas, (MSAs) according to an economic trends report released by PMI Mortgage Insurance Co.”

I would hope so. Hopefully this means that homes over 30 years old will not have the same values as newly constructed properties.

The MSAs most likely to see decreased prices are the Riverside-San Bernardino-Ontario, California, Miami-Miami Beach-Kendall, Florida, and Los Angeles-Long Beach-Glendale, CA regions.

The irony… These are most of the pockets that fuled the housing in crisis because of an oversupply.

Maybe the “recovery” that everyone is sitting on their hands for, is what we are in right now. Hmm.. What’s better? A boom, a bust, or stability? Depends on who you talk to…

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Manhattan Home Prices…Plunge? CNNMoney.Com July 7, 2009

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1210_14_23---Manhattan-Skyline-New-York-City_web

Report from CNNMoney.com.

A couple of things I wanted to point out in this article.

NEW YORK (CNNMoney.com) — “The housing bust has finally clobbered super-pricey Manhattan home prices.”

I’ve never heard the word ‘Clobbered’ used for real estate.

 

“Prices fell between 13% and 19% compared with the same quarter last year.”

That doesn’t sound like much of a “Plunge” to me. Decline maybe. Especially when only compared to LAST YEAR.

“Driving the increase were sales of studio apartments and one-bedrooms, both of which gained market share,”

Shouldn’t these properties be evaluated on their own criteria and standards then? Or is it just me…

“It’s value-based shopping,” said Pam Liebman, chief executive of the brokerage Corcoran Group. “People are coming back into the market, but nobody is going to overpay.”

That’s right, so why compile high-value and low-value property data and public records?

Of course, in Manhattan “value” means studio prices that go for a median of $400,000 and one-bedrooms that fetch $650,000.

That’s “high-value” in most cities.

“There are still risks to the economy, both national and local,” Greg Heym said. “But job losses have slowed, consumer confidence is higher and the stock market returned more than 30% during the quarter.”

The only risk is repeating the same process that got us into the mess

“But people shouldn’t think that a bottoming out means a quick rebound,” he said.

Right.

“The entry level market did not fall as far as the high end,” Miller said. “The difference was a jumbo versus a conforming mortgage.”

So seperate the data for the entry level vs. the high end. “Jumbo data vs. Real data”  I guess…

Once the economy recovers, the prospects for the Manhattan housing market are good. The market could quickly tighten again. There’s little new building going on. As a matter of fact, not a single building permit was filed in all of February, according to Heym.

Not so good for builders and contractors. But good for a possible “recovery.” We already have an oversupply.

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