The top chart compares the Case Shiller Home Price Index with the RadarLogic Home Price Index. Rarely do you see two indices such as these that use different methodologies to measure complex phenomena track so closely. The bottom chart is a closeup look at the RadarLogic index. What both indices show is what looks to me like a bottoming process that has been taking place over the past two years. Yes, prices are still slipping on a year over year basis, but how much more do they have to fall to clear the market if real home prices are already 39% below their peak, and mortgage rates are at historically low levels? Not much more, is my guess.
All of these charts suggest deflation, not inflation.
ReplyDeleteIf there is impending inflation, it sure is not showing up in real estate prices.
Anecdotal evidence... in my zip
ReplyDeletecode there were 43 foreclosed homes for sale on February 14th today there are 18. In the dreaded
89031 (North Las Vegas) there was 3,219 foreclosed homes for sale on
February 14th...today there are 2,518.
Some time back, Grannis asked if his readers would support Ron Paul. I like much about Ron Paul.
ReplyDeleteHowever...
"Ron Paul worries Fort Knox gold is gone
Ron Paul introduced a bill that would require the Fed to manually audit every U.S.-owned gold bar.
WASHINGTON (CNNMoney) -- With the price of gold at record highs, presidential candidate Rep. Ron Paul wants to make sure the U.S. gold bars at Fort Knox are really there.
Paul called a congressional hearing Thursday to grill federal officials about his bill to audit and inventory all of the gold reserves at Fort Knox, Ky., West Point, N.Y., and Denver, even though Treasury officials insist that the gold is audited annually and is all there."
Ron Paul also believes he saw flying saucers deposit Bernanke outside the Fed.
Is there another party I can vote for?
Buying opportunity of a life time!
ReplyDeleteI don't know scott, eventually the bottom will be hit. However, one very serious problem is that Government today accounts for nearly 80% of all new mortgages. Private sector has no appetite.
ReplyDeleteAs for the foreclosure stats, by Brodero, please. Banks have stopped foreclosing because they cannot get lawyers to perjure themselves anymore with Robosigning documentation.
At any rate we appear to be closer to the bottom, maybe another 5/10% to go at the very worse. Big issue is the price growth going forward. if American no longer see housing as an "investment" but rather a place to live, they may take the view that renting is not such a bad option!
Scott,
ReplyDeleteDo you think long term demographic trends are already accounted for in home prices. With baby boomers retiring and selling homes and fewer new families due to declining birth rates, is real estate a good long term investment?
Thanks,
Todd
The bottoming process in real estate is clear. Price action remains choppy and sentiment is highly skeptical. Starts are highly irregular, allowing for absorption of inventory. Localized areas, like Las Vegas, Arizona, and Florida, will remain stressed.
ReplyDeleteTodd,
ReplyDeleteI've read some demographic reports which suggest we could be in for a housing boom around 2015 as the next generation moves out of their parents' homes and needs housing of their own. It may be more multi-family than single family housing that leads the way, but I think it will eventually turn. Consruction spending was above trend about $300 billion prior to the crash. It's now $1.7 trillion below trend. At some point we should see quite a booom since our population is still growing and will need new structures eventually.
I think it's all about affordability and valuation - assuming stable inflation. I doubt that either of these will be getting much more attractive.
ReplyDeleteBill,
ReplyDeleteThanks for the comment. I saw Harry Dent talking about a coming demographic winter and since then I've been trying to understand demographic trends. I think Dent is a bit alarmist, but he did get me thinking about things. His point was that as baby boomers age and start moving into apartments or senior communities there will be a glut of single family homes growing in the coming decades. I bought my house to be a home not an investment, but I don't want to lose money in it over the next 20 year either. So I'll look into the trend you mentioned. Thanks.
Finance rates could rise if the economy is strengthening and / or inflation were to rise, which would mean a greater demand for housing. In addition, strong demand for housing in the next few years also likely collision with the lack of new housing, creating intense pressure on prices to rise in housing.
ReplyDeletebuild on your own lot