Thursday, June 23, 2011

Housing price trends


Everyone knows that housing prices are falling, right? This chart, however, is intriguing because it suggests that's not necessarily true. The chart comes from the RadarLogic survey of prices in 25 metropolitan areas, and, like the Case Shiller home price index, it has a substantial built-in lag of about 3 months. The price reflects the average cost per square foot of homes sold (not seasonally adjusted), and the most recent price comes from the average of sales in the 28-day period ending April 21st. There is some seasonality in the data (prices tend to rise in the second quarter of every year), so the best way to compare the trend in home prices is using a year over year comparison. On that basis, home prices are down about 5%. Compared to two years ago, however, prices are down only 3%. The comparable Case Shiller price index shows prices down only 1.4% in the two years ending March '11.

8 comments:

Benjamin said...

This is an interesting chart, and I really like that they go on a per square foot basis.

Most people in housing markets say the bottom has been reached, or is past (in better markets).

Housing, which has been an anchor for a long time, appears to be getting slowly better. As Scot Grannis has said, really there is nowhere but up at this time, for prices, sales and construction.

We can hope something will spark and aggressive recovery, but most people say it will be a long grind up.

TradingStrategyLetter - Weekly Summary said...

You only need to look at the S&L values at the bottom on the 90's to see the once-in-a-lifetime opportunity this is. (Actually second-in-a-lifetime if u include the 90's)

septizoniom said...

insufferable optimism

Benjamin said...

Trading-

I have been wondering about your comment, and have had fleeting thoughts along the same lines.

If we have a robust, or even a mild but sustained recovery, many assets will look cheap, including real estate and stocks.

Corporate earnings are already very strong, and we are barely climbing out of the pit. Imagine what earnings will be after three -five years of growth. If you add some multiple expansion to the picture, you get 18,000 on the DJIA easy.

If, if, if.

Christian S. Herzeca, Esq. said...

the home builders market has a very interesting distribution of many small local operators (pops and sons) and a few regional and national public firms. geuss who gets clobbered worse in the recent environment? guess who can make a profit even in this environment? (check out lennar).

a very interesting investment at this point (imho) is ITB. i see the publicly financed home builders gaining market share in the next rebound (god knows when that will be) as the local competition gets wiped out; plus many of the large public home builders have been able to buy land (relatively) cheaply. i see ITB as the best bet, unless you think the feces is really going to hit the fan...

brodero said...

There is a usual seasonal weakness
that comes every November to February.....BUT this is also the
lowest amount of homes sold...
I wish they could do a volumne weighted price index to give further understanding of the
price index.

TradingStrategyLetter - Weekly Summary said...

If we are about to enter a true inflationary period (and we will) real estate is one of the best hedges against rising costs.

TradingStrategyLetter - Weekly Summary said...

As soon as people hate real estate as much as they loved it at the top - we will have hit a bottom.Within 10% IMO.