In Floyd Norris’ column this weekend titled After a Bumpy Ride, Back at Square One illustrates how housing prices are back to 2001 after adjusting for inflation.
During the period, the Standard & Poor’s Case-Shiller 20-city composite index of home prices rose almost 21 percent. The Consumer Price Index also rose almost 21 percent.
Now foreclosures are still rising, even as home sales and prices seem to have stabilized. If the worst is over, it will have been a wild ride that ended very close to where it began, but with many people much worse off for the experience.
The takeaway is that home price performance varies significantly by area so the national number doesn’t mean to much to your local market. However, it would appear that because the boom was born out of credit, the housing market may over correct.
Not relevant to post but who cares – aside: How social media are like sex
NYC is not at 2001 prices. Does this mean we have a way to go before bottom or do you think we will avoid the fate of the rest of the country?
Agreed. we seem to be around 2004 levels. In aggregate this article suggests the US index is 2001 and I believe that we are not done – prices are still sliding but it doesn’t necessarily mean we go all the way there. Performance differences are local.
Great analysis, thanks for posting.
I find it interesting that prices right around key economic drivers – like universities and hospitals (e.g., New Haven, Cambridge, Boulder) – generally haven’t dropped nearly as much as the average for the metro, particularly the suburban fringe.
I still think the national housing prices will slide further, maybe back to 1998 or even earlier prices. And forget calling it an over correction in response to the credit bubble. It isn’t through yet. The credit bubble was a cover for what was going on in the “real” economy. We are witnessing correction after job loss and a free economy that ushered in globalization. Which, if you believe free economy theory explains anything, would indicate somebody messed with the economy before 2001.
People need money in order to spend it and most of them I know get their money from their jobs. Just watched a piece on PBS that wages are not flat, they are falling and at the same time job security is a thing of the past.
Ergo, we who consume can’t spend as much as we did and that includes spending on houses. This is a fundamental fact that was obscured by the credit crises fluff and flap. Now we are going to face it.
We’ll no doubt fire politicians over this, but what has been called a free fall is a return to sound footing and we got a way to go yet.
The free economy permits us to compete with offshore and green card workers at the wages they accept for doing the jobs we are qualified for. ‘course something has to give and I predict it is going to be prices for the stuff we have to have. Among that stuff is houses. Seems transportation is about to realize it has to be affordable and we know energy doesn’t have to be and it can’t be food. We’re working on health care where the pain involved in shrinking is evident.
There is no indication the old jobs are coming back.
Big change. Health care and housing is going to be cheaper and will of necessity stay that way. Maybe that will be enough.
Just another post of Case-Shiller which was reported on by several prominent news publications earlier this week. And mind I say, all with a different take on the reported results. Furthermore, the Case-Shiller Index is considered by several economists to be biased towards regions with heavy foreclosure activity, so what relevance does it have to New York City where there really is no issue with abnormal foreclosure activity?
There are other reports published which indicate New York City values are holding steady if one removes the influence of few areas with heavy foreclosure activity.
Why is it, that when we have property data that is collected from public records covering a seven year sales cycle in New York City everyone dismisses the analysis produced and refers to Case-Shiller.
There are organizations, including yourself, that report specifically on New York City. These organizations are reporting that the Manhattan condo market is stable, and residential housing is stable in regions where foreclosure activity is minimal. So why do you publish an index that contradicts the more detailed information available from the New York City Department of Finance. By publishing the Case-Shiller index you are contradicting your own analysis and publications.
More importantly, the property data being analyzed is the critical piece and yet you never discuss this in any of your posts. It is amazing that with the new technology and expanded analytical capabilities we are referring to an index that was developed over twenty years ago. An index, that when we add more data elements for analysis, shows a weakness and bias tendency that is not adjusted for.
In closing, until the Case-Shiller index accounts for locational factors and removes the underlying bias of not adjusting for sales activity and distressed sales, it will remain a benchmark that will prove to be less and less reliable as time progresses.
I’ll try to answer as best as I can – a lot of stuff here. CSI generally omits foreclosure sales or look at them case-by-case, so I don’t understand your premise. Brooklyn and Queens have relatively high foreclosure activity in specific neighborhoods. CSI also excludes co-ops and condos. However, this post wasn’t referencing NYC at all – national, following a widely followed index. It’s in the public domain and worth commenting about. You are a bit misleading in your characterization of what I say in my reports – we aren’t reporting condo prices are stable – look at the YOY.
Thanks for reading Matrix and I appreciated your input.
What is there to interrupt further decreases? Why should it stop now? GDP? CPI? Wages? What?