Portland Home Values: Case-Shiller August Numbers

Portland home values were flat in August (up 0.1%) and down 7.6% since August of last year.  Except for a couple of outliers, most of the 20 metro areas Case-Shiller tracks did not budge much.  

One interesting tidbit, home values are so low in Detroit that it actually had the biggest annual gain, increasing 2.7%.  In fact, only Detroit and Washington, DC (0.3%) were in positive territory.

The Wall Street Journal has their sortable table ready for your manipulation.

Portland Home Values: Case-Shiller December Numbers

And now for your monthly Case-Shiller update.  The December numbers are out and things continue to look grim for Portland (and the US in general).  With the federal new home buyer credit ending, the backlog of defaults and the continuing unemployment situation, the downward pressure on prices is still strong.

But, in some better news, consumer confidence is up sharply.

Portland Home Values: The March Case-Shiller Update

From the Case-Shiller Home Price Index for March 2009, some lovely pictures.  First the raw data:

Still shows a serious erosion of home values in the winter of 2009.  Here is the year over year percentage change in home prices:

These are still declining for Portland and Seattle but the 20 city composite may be leveling off and even turing upwards.  These data are too old to assess the current situation with summer approaching and mortgage rates incredibly low.  But again, unemployment is very high, so where is the demand going to come from?

The Wall Street Journal article has a nice interactive graphic and also reports on the jump in consumer confidence - which with the increase in the leading indicator improvement give optimists like me some small hope that the end of the decline may be here by the end of the year.  Then it'll just be the digging out that we'll have to worry about (and probably for years).

Portland Housing Market: Case-Shiller January

Last week I posted on some interesting data from the OFHEO. That data showed a modest gain in January home values. Today the Case-Shiller numbers came out for January and they show a steep decline. Here is the graph for Portland, Seattle and the 20 city composite:

What explains the discrepancy? Well, the OFHEO numbers could just be an error (they are preliminary and are subject to revision), or a statistical anomaly from the fairly low home sales in January, but it could also reflect the key differences in the two indices. The CS data are for 20 major metropolitan areas and include all houses of any price. The OFHEO is for both urban and rural areas and include only houses with conforming loans. So if it is expensive houses and urban areas that are driving the downturn in average home values in the US, this could different numbers in the two indices. But these are so different, I suspect the OFHEO data is an aberration.

These are for January and what will be key is to see how home values are responding to the current fed programs and low mortgage rates. What will the March through June numbers look like in other words? Given the dismal employment picture I am not too optimistic

How Does Portland's Housing Market Compare?

A quick re-arranging of a chart produced by the Wall Street Journal shows how the Portland metro area compares to others in the Case-Shiller numbers. I sorted by the year-to-year change in home values. I think that overall we can still say it is moderate.

In the comments to yesterdays post on the Case-Shiller numbers, Gregory takes issue with something I said:

"I would like to see the movement in home values going positive by June, but this is optimistic."

How do you account for home pricing in PDX remaining overpriced? This is true based on affordability or the secular trend in Case-Shiller, before the pricing bubble began in 2004. I think we won't see prices achieve the secular trend until end of 2009 after further declines of 10-12%.

I understand why you want prices to stabilize, in order to end the bleeding of the banks balance sheets. However, restoring conditions for the next housing bubble is not a good idea. I would really like prices flatten, and stay flat for the next 10-15 years. Real estate is not an investment.

This is an interesting comment and I agree that there is good reason to expect home prices to fall another 10%, but I believe that will happen pretty quickly - perhaps not by June, but the acceleration of home value erosion is marked. I also agree that we should not spark another housing bubble, but I am not worried about that at all at this time. I think banks are, if anything, over cautious in the residential housing market and I can't see them returning to the kind of massive sub-prime lending as the market for securities derived from residential mortgages has simply disappeared. In the future, new regulations and more caution on the part of banks and the Fed should forestall any hosing bubble.

But real estate IS an investment. I take Gregory's comment to mean the speculators that were in real estate for a quick buck and in that I agree, they were a main driver of the bubble one the house price inflation heated up. But real estate is an important store of wealth for most homeowners and one that is essential for healthy families, healthy communities and a healthy economy. So a return to the steady, but modest, appreciation of home values is important and desirable. Ten to fifteen years of no appreciation would be very damaging to local economies.

Portland's Housing Market: The December CS Numbers

The December Case-Shiller numbers are in and the news is more of the same for Portland. Here is the raw data in graph form for Portland and the 20 city composite:




And here is a sobering picture, it is the average annual appreciation of a Portland home over the last seven or so years. As many near-in neighborhoods are holding on pretty well, it means there is some pretty severe bloodletting elsewhere.



I always wonder, however, what to think of the bloodletting in the new developments. Sure there are people who invested in their own home who see the value go down, but if they are there for the long-haul, this is not necessarily a problem as long as they could afford the original mortgage. Then there are the speculators who bought for investment purposes and it went south, but with limited liability they are not too badly off (one of the reasons for the real tanking of the housing market is the ease at which such investors can walk away).  There were also the liars who used the no doc loan opportunity as a chance to fraudulently obtain a home.  Finally, there are the people who couldn't really afford what they bought but were counting on quick appreciation to allow them to extract equity from the home. These are the folks who are really adversely affected by the downturn and represent people who made a reasonable calculation but extraordinary times dealt them a bad hand. These are the folks I feel for.

There is a bright spot: the Fed is actively working to push long-term rates down and it is working - mortgage rates are insanely low. I think the worm is about to turn. It is crazy to sit on the sidelines too much longer and good deals are plentiful. So, though I have been wrong before, I think we may see some leveling off this spring (remember, these data stop in October).



By the way, as a side note, one of the reasons the Fed is doing this is because banks are still not loaning money like they should be because they can borrow from the Fed at these incredibly low rates (.25%) and buy treasuries that pay about 2%. Not a great return, but incredibly safe and since all other lending seems too risky, that's what they are deciding to do. So the Fed reckons they can buy treasuries and drive the rates down so much that banks will start to switch to the riskier loans. This is quantitative easing.  See a great Marketplace whiteboard video for a nice explanation of this.