Home Price Index Shows 3.4% Drop in Twin Cities

One of the closely watched metrics tracking home prices is the Case-Shiller Home Price Index from Standard & Poors.  Detailed description of methodology here, but essentially the index tracks sales prices by using a 10 and 20 city composite.  The just published index from July shows the biggest year-over year drop in 16 years.

Understanding that national stats may not have much bearing on our local market, the following table, via WSJ, shows that the Twin Cities has seen a 3.4% drop in price, year over year.

This data, though only a snapshot, should not surprise anybody who's been paying attention.  Nor does it mean we are in for some sort of real estate price depreciation disaster in the Twin Cities - this is just regression toward the mean (5-6% annual appreciation over the last 30 years or so) after years of above average appreciation.
Case-Shiller Price Index Tumbles [WSJ]
S&P/Case-Shiller Index [PDF via S&P]

09/25/07 at 12:24 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Bubble?, Industry News, Market Stats, Minneapolis, National & Abroad, Reports & Research, Twin Cities

MN Realtor Association Delivers Tough Love Beat Down to Members

As a follow up to his seminal Oct 2006 Piece "Is it Time to Consider a Career Change," the Minnesota Association of Realtors Senior VP Chris Galler has delivered another Tough Love opus to its members, encouraging the membership to embrace a career change.  Spelling it out bleakly:

Until the industry sheds excess agent/broker inventory, agent productivity will continue to fall. How many is too many? In my humble opinion, we're about 40% heavy...unless the median agent is closing 9 transactions a year, it is difficult to understand how you can be considered a "professional" possessing some special skill or knowledge about the real estate transaction...If you take my "9 transactions a year" and calculate out the annual earnings you will be very close to the state's median hourly wage. Do you think a consumer believes a person earning $35,000 a year is a "professional"?

Leaving aside the fact that there might be a few professionals who'd take umbrage to the definition posed above, I can't disagree entirely.  The entire real estate market suffers from excess capacity, and the residential mortgage lending business could stand a similar bloodletting, we've opined.

But we can't let the association off that easy, so here's the Irony Angle™ (emphasis ours):

Homes are not ATM machines and some of these owners thought that price inflation would continue to support their spending habits

Where or where in the whole wide world would homeowners ever get such a crazy idea that homes would always appreciate?  Oh, that's right, the National Association of Realtors, who had assured us (via national media campaigns and talking points) that continued appreciation was a virtual sure thing. Funny that.
Tough Love [mnrealtor.org]

09/13/07 at 05:49 PM Permalink | Comments (4) | TrackBack (0)
Filed Under: Bubble?, Industry News, Twin Cities

Existing Home Sales Stink Up the Joint

Lot's of chatter all over the place on the widely expected poor showing for existing home sales.  We are on the fly today so cannot drill down too far into the data, but have posted some relevant links below.  BUT.. before we get all worked up over these figures, remember that:
1.  This is just a one month snapshot.
2.  Though this is the first YOY drop in existing sales since 1995, our guess is (haven't the time to dig this up today) we would not need to go back very far before these numbers the current median sales price and overall sales would have been record setting.  2001? 2002? 
3. Was this a surprise to anyone?  Really?
4. A 1.7% Price Decline is not what a "popping bubble" looks like (though the landing may be a little bumpy.)

Linkage:
Home Prices Drop for the First Time in 11 Years [cnn/money]
Real Estate Sales Slump Generating Ugly Press [bigpicture]
Welcome Correction or Burst Bubble? [WSJ]
Home Prices Hit Wall [Chicago Tribune]

09/26/06 at 10:27 AM Permalink | Comments (3) | TrackBack (0)
Filed Under: Bubble?, Industry News, Market Stats, National & Abroad

Waiting for the Wall (and Ducking)

Way back in November 2005, we predicted the emergence of a buyers market in 2006, and it appears that it is now in full bloom.  Case in point, this tidbit from the Strib, which unpacks the latest metrics from our local realtor associations.

New listings of 11,419 homes in the 13-county metro area were a record high for the 10th consecutive month. Closed sales fell to 5,039, more than 9 percent below the 5,553 sales in May 2005. Pending sales -- deals not yet closed -- were down 14.5 percent to 5,749

Not a pretty picture for the sellers out there - buyers, sensing blood in the water, are now inclined to wait for steep price reductions before moving in for the kill.  In better news, we are still noting that well priced homes in the first time buyer bracket - roughly $150-250K - are moving fairly quickly.
· Metro Market Awash in Homes for Sale [startribune.com]

06/13/06 at 03:56 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Bubble?, Market Stats, Twin Cities

Area Housing Cools, Doghouse Market Tanks

Validation from the Pioneer Press today on something we've covered for a while here: The housing market locally has been cooling, with total sales, permits, and appreciation rates all having slowed in 2005. From the article:

• The number of houses, condos and town homes sold in the 13-county metro area last year dropped about 1.6 percent from 2004.
• The region's median sales price grew just 6 percent, compared with 8 percent in 2004.
• New permits issued to build residential buildings dropped nearly 7 percent last year.

To be sure, this is no bubble popping.  What we have is a return to a normal market - a sentiment nicely summarized in this quote from the article, which had us snorting:

"Our max was a couple years ago. We're calling it kind of back to normal," said K.C. Chermak owner of Pillar Homes in Wayzata and treasurer of the builders association. "There was a while where you could put up a doghouse and the thing would sell."

Unless you are making a killing in doghouse sales, there is nothing to fear.
· Area Housing Cooled in '05 [PiPress]

01/12/06 at 09:18 AM Permalink | Comments (1) | TrackBack (0)
Filed Under: Bubble?, Market Stats, Minneapolis, St. Paul, Twin Cities

Twin Cities Real Estate Overvalued, but Less So

According to a recent study by National City Mortgage, Mpls/St. Paul real estate is 24% over-valued, down from 27% in the last study (30% overvalued is considered 'significantly risky'.) Good for 84th place out of 299 markets studied.  As we've noted before, though interesting, these studies use a fairly complicated predictive model, based on a number of subjective factors, to arrive at guess where prices should be, so your mileage may vary.
· Most Overvalued Housing Markets [cnn.money.com]

01/10/06 at 06:12 AM Permalink | Comments (3) | TrackBack (0)
Filed Under: Bubble?, Market Stats, Twin Cities

Hear Bubble, See Bubble, but Don't Speak Bubble

Interesting survey from real estate publisher/website ThinkGlink.com, which surveyed 4,000 consumers (of which 475 responded) and found that:

• 66% Think There is a bubble
• 58% Think it will burst next year
• 41% Think the bubble will persist beyond next year

But the best part of the survey is this howler: More than half of those who believe in the Bubble said that just talking about the bubble will cause it to happen - so keep that bubble chatter to yourself, if we don't talk about it, it will go away. lalalalalalalalalalalalalalala we're not listening.
Think Glink Housing Bubble Survey [thinkglink.com]

12/05/05 at 04:48 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Bubble?

The Globe and Mail: Gloom surrounds U.S. housing

Good article from The Globe and Mail (of all places) culling together and summarizing the major factors pointing to a potential slowdown in our national real estate market.  Definitely worth the read, but we've bulletized the key points below:

1. Demand is now being driven largely by speculation and second homes.
2. Home ownership rates are creeping downward while new-home sales are surging, which may indicate the last phase of the boom.
3. Housing affordability is at a 14-year low.
4. The inventory of unsold houses is at its highest level since 1986.
5. Delinquency rates are rising, especially in the sub-prime market.
6. The number of months it takes for a house to sell has risen to the highest level in at least a year.

But it's not ALL gloom and doom at the Globe and Mail - The upshot, though mostly hopeful speculative ruminations from various smarties:

1. "The market is moderating; whether it is going to burst is another story," Mr. Grassino said. He thinks there could be corrections, "but it won't be a countrywide thing, by any means."
2. "Improving labor markets and the recent pullback in mortgage rates could turn this into the slowest of soft landings," said Michael Gregory.

Again, two key points as we fret the B-word: 1) Real estate does not crash nationally, but locally [we're likely OK] and 2) It is not a foregone conclusion that rates will continue to rise, and stable to falling rates will make difficult any real "crash" in real estate.
·The Globe and Mail: Gloom surrounds U.S. housing.

12/02/05 at 10:22 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Bubble?

2nd Home Sales Spike: More Than One-Third of Annual Sales

Throw another log on the fire. In case you missed it, second home sales in 2005 accounted for more than 30% of all residential real estate sales.  Fueled by the confluence of a red-hot real estate market, retiring baby boomers, and record low interest rates, these figures have apparently suprised even the NAR.  There's also this, which we bubble watchers might find worrisome:

...the percentages don't tell the whole story: Though baby boomers make up a large part of the second-home market, a growing number of foreign buyers are in it, taking advantage of a weaker dollar. And the opposite is true, too: Many U.S. buyers are finding the dollar purchases more in foreign markets, especially Latin America and Eastern Europe.

This real estate boom is global folks, which provides a good segue for the following chart from the OECD's recent global real estate report via infectious greed/Paul Kedrosky - "This time, it's ominously different"

Once again - Bubble? Or Not? 

2nd Home Sales Surged in 2005 [knight-ridder]
This Time, It's (Ominously) Different [infectious greed]

12/01/05 at 02:34 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Bubble?, National & Abroad, Reports & Research

McSecond Thoughts: Canary in the Coal Mine?

[Forgive us, again, for the light posting lately.  The culprit this time around was a trip to visit the In-Laws on Dataw Island near Beaufort, South Carolina.]

The Strib Recently ran an article on the buyers remorse now emerging among some who, having built 5,000 square foot suburban cathedrals, are realizing that the cost to heat, clean, mow, etc. is more than they anticipated, in both time and money. 

But our take away from the article, though it did not make this point, is this sobering thought:  Real Estate and the consumer, (whose spending has been fueled largely by low rates and the easy access to cash the real estate boom has provided,) have been the two most significant factors in keeping our economy churning over the past several years.  In fact, one might argue that it is exactly this McMansion demographic (high earning, high spending, highly leveraged) doing most of the spending, and supporting the economy.

Now, with energy costs and interest rates spiking, and signs that homeowners are thinking (maybe, finally?) "cut back" instead of "borrow/earn more" could a slowdown in consumer spending and real estate appreciation be headed our way?  If so, this is NOT good news for the economy.  A tiring, over-extended consumer, faced with negative real wage growth, inflation, rising interest rates, and less-ready access to home equity cash, is not a recipe for a strong economy - the Mcmansion set may very well be our canary in the economic coal mine.
Living Large and Paying Big [strib]

11/07/05 at 12:03 PM Permalink | Comments (2) | TrackBack (0)
Filed Under: Bubble?, Economy