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November 29, 2007

Richard Florida

Housing Market Mayhem

« Human Development | Main | Real Estate and the Creativity Index »

Case_shiller_indices
This chart reflects the new S&P/Case-Shiller Home Price Index data (chart via Tom Iacono of Seeking Alpha). A table by region is after the jump.  Tampa, Miami, Detroit, Las Vegas, Phoenix, and San Diego have seen the biggest annualized declines. My sense is that we are a long way from the bottom in all of these markets with the partial exception of San Diego.  Seattle, Portland and Charlotte remain up for the year.  Dallas and Atlanta are treading water. Boston, New York and Denver are down, but not by a whole lot. 

I still believe we are looking at two or three separate housing markets. The crash will be worst in areas where housing investment was highly speculative and where the underlying economy is shallow, and in older regions like Detroit where the economy has turned quite negative.  Regions where economic fundamentals remain more stable, where there is a sizable creative economy, and which have been long-run super-star real estate markets may decline but the decline will be much less severe than in other markets and they will be much more likely to rebound in time.

If you live in a cold climate like me and are looking for the vacation home in warm weather, my advice is to hold on for a season or two (or make very aggressive offers). These markets still have a long way to fall and asking prices have not yet adjusted to the new market reality. 

                         2007 Q3/     2007 Q2/
                               2007 Q3    2007 Q2      2007 Q1     1-Year
                                Level     Change(%)    Change(%)   Change(%)
    U.S. National Index        180.45       -1.7%       -1.0%        -4.5%

                                          September/   August/
                          September 2007    August      July       1-Year
    Metropolitan Area          Level       Change(%)   Change(%)   Change(%)

    Atlanta                    135.59       -0.6%        0.0%         0.4%
    Boston                     170.73       -0.1%       -0.5%        -3.2%
    Charlotte                  135.13       -0.6%        0.2%         4.7%
    Chicago                    164.42       -0.8%       -0.2%        -2.5%
    Cleveland                  117.35       -0.9%       -0.3%        -4.0%
    Dallas                     125.44       -0.7%        0.0%         0.2%
    Denver                     138.43       -0.9%        0.3%        -0.9%
    Detroit                    110.83       -0.7%       -0.2%        -9.6%
    Las Vegas                  213.47       -1.5%       -1.4%        -9.0%
    Los Angeles                254.79       -1.3%       -1.1%        -7.0%
    Miami                      249.61       -2.2%       -2.0%       -10.0%
    Minneapolis                163.45       -0.4%       -0.4%        -4.5%
    New York                   206.28       -0.3%       -0.7%        -3.6%
    Phoenix                    205.28       -1.7%       -0.9%        -8.8%
    Portland                   185.67       -0.2%       -0.3%         2.2%
    San Diego                  222.82       -1.7%       -1.3%        -9.6%
    San Francisco              206.46       -0.8%       -0.2%        -4.6%
    Seattle                    191.66       -0.2%       -0.1%         4.7%
    Tampa                      210.14       -1.3%       -1.9%       -11.1%
    Washington                 228.67       -0.7%       -0.8%        -6.6%
    Composite-10               212.65       -0.9%       -0.8%        -5.5%
    Composite-20               195.62       -0.9%       -0.7%        -4.9%

    Source: Standard & Poor's
    Data through September 2007

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Comments

Michael Wells

If you sort the table by 1-year change, the pattern is even clearer. Richard's Creative Class cities do pretty well, beating or matching the national average of -4.5, in some cases (SF, Boston) after spectacular and unsustainable runups. Three Southern cities had gains after decent runups -- Atlanta is a CC city, Charlotte and Dallas are midway down the list.

The sunbelt sprawl cities like Phoenix, Las Vegas, Miami that had lots of speculation are hit bad. The tragedies are Detroit and Cleveland which are falling after virtually no runup. I would have thought Detroit couldn't go lower, but its plummeting.

Charlotte 4.7
Seattle 4.7
Portland 2.2
Atlanta 0.4
Dallas 0.2
Denver -0.9
Chicago -2.5
Boston -3.2
New York -3.6
Cleveland -4
Minneapolis -4.5
San Francisco -4.6
Washington -6.6
Los Angeles -7
Phoenix -8.8
Las Vegas -9.0
Detroit -9.6
San Diego -9.6
Miami -10
Tampa -11.1

Matt

The Canadian and American housing markets are diverging (much less subprime lending here, less of a tax incentive for ownership, and no signs of a foreclosure crisis), so it's probably pointless to compare numbers across the border. But I was curious, so I tried anyway.

The Toronto Real Estate Board archives all their market updates on their web site, so while the statistical methods aren't nearly as fancy as S&P's, it was easy to find numbers for single family detached homes in Toronto:

September/August change: 3.1%
August/July change: 0%
One-year change: 7.3%

September 2007 level: 159.47 (where January 2000=100)

Richard Florida

Matt - Nice. Thanks. BTW, I found with current exchange rate, Toronto to be 20-30 percent more expensive than Washington DC. R

Matt

Ah, yes... in US dollar terms Toronto house prices are up 16.9% over one year. Since most of buyers are locals whose savings are in CAD, it's an interesting question whether a stronger currency will have any impact on housing prices.

The Canadian dollar was very low back in January of 2000 (69 cents US) so it makes the seven year comparison even more dramatic. In USD terms, where January 2000 = 100, Toronto's September 2007 level is 225.42.

A year ago I'd have said 80-85 cents US was a "fair" (long-term) value for the Canadian dollar, but hard to say if that still holds true.

RF

Toronto is a bargain globally. It will continue to attract Canadians and increasingly foreign residents and investors. Depending on how the US election goes and the American economy performs, it may even begin to see more of a reverse brain drain. One thing is for sure: A strong Canadian dollar makes it way more easier to attract foreign professionals, especially professors. What were once seen as below par salaries are now among the highest in the world!

Michael R. Bernstein

Disclaimer: I am trying to sell my Las Vegas home to be able to move to Albuquerque.

Part of the reason asking prices have not dropped to more 'realistic' levels here in Las Vegas is ironically because of the huge inventory of properties available at auction, as well as new home builders dumping much of their unsellable inventory (mostly built in distant and otherwise undesirable new suburban tracts).

Under these conditions, there is no way to really compete on price, unless I'm willing to give the house away, because other sellers are doing just that.

As a result, over the past five months (during which I lowered my asking price by quite a bit) I have received no offers at all, aggressive or otherwise, and now no one has even come to look at the house (a 2001 model-perfect home in a reasonably central and walkable neighborhood) in over a month.

So what else can I do except wait until all the overleveraged sellers have gone bankrupt or otherwise exited the market, the excess inventory eventually clears out, and prices stabilize at some new level? Until then, we have no yardstick for setting a realistic price that isn't based on someone else's desperation.

If no-one is buying at all (except at auction or new houses at deep discounts), there is no incentive to further lower the asking price unless you *must* move.

Gary Dee

It seems that the US-Canada migration flow (based on award of permanent residence) has narrowed to about 2 to 1 southward, as a record number of Americans moved north last year. (By the way, the article in the link under my byline is from the more conservative of Canada's two national Toronto newspapers.) My own take is that with half the Americans being family class, the cross-border movement may actually be closer since a Canadian spouse is repatriated and maybe dual citizen children, who aren't counted because they already have Canadian nationality. Meanwhile, the Canadians electing to stay in the US may sometimes involve couples or even families, with each member receiving a green card in that count.

More info here

Great info, keep up the good posts!

tampafreerealestateinfo.com

Keep up the informative posts!

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