Skip to comments.Some Real Estate Won't Recover in our Lifetime
Posted on 12/22/2011 7:20:17 AM PST by Kaslin
A statement by Lawrence Yun, chief economist for the National Association of Realtors as listed in a report on existing home sales caught my eye today.
"From a consumer's perspective, only the local market information matters and there are no changes to local multiple listing service data or local supply-and-demand balance, or to local home prices" said Yun.
On the surface, the statement seems incredulous. How can the national data be completely screwed up, in need of major revisions, if the local data is accurate?
I had a chat with Calculated Risk today regarding that statement by the NAR. Calculated Risk explains various ways the national data can be messed up even if the local data is accurate. It has to do with procedural errors in NAR methodology, extrapolating local data to national trends.
Major Procedural Errors
Not all markets fluctuated equally. California's bubble was not indicative of the conditions here in Tulsa. That's a big reason national statistics don't represent (all) local markets.
zillow.com is showing my house in Phoenix being worth less now than what I paid for it in 1984.
” That’s a big reason national statistics don’t represent (all) local markets “
Conversely, just because houses in your neighborhood are selling like hotcakes, it’s not indicative of national recovery....
Zillow can be all over the place; on my home they short me one full bath and one bedroom, attempted corrections on my part having no change affected.
Nor here. Prices in my neighbor hood barely fell and have actually continued to rise after the initial debacle.
The time on market rose somewhat but prices did not fall.
They have just started the recovery process of coming back from government manipulation of the housing market by PRICES DROPPING BACK TO A REASONABLE LEVEL!
The stagnant economy is weeding out the home buyers who were in over their heads. Foreclosures are resulting in rental demand for those who forfeited ownership. Conversely, long-term renters with good credit and savings are now able to purchase homes for less than rent.
People whose equity is higher than current value will stay put.
Real Estate speculators will buy up cheap houses as income property or HUD will step in.
Losers and winners, winners and losers.
If by never recover, the author is referring to markets located in the slums, he may be right. Otherwise....in our lifetime? Uh...that’s just wrong.
Real Estate is local; the “sand” states are far worse than the national averages. Some of the better R/E areas around the nation are getting by ok in terms of being able to sell property.
Also, the R/E problem is exacerbated in states where the politics is liberal. Many people know the local economy will be better in conservative states, so the migration will continue until local liberalism is abandoned and then some.
Also, big corporate builders are not the way to go in terms of having a healthy economy and R/E market, but that’s what we have doing much of the building out there.
Once again, small business on the short end and the national economy follows suit.
It’s not the answer many people want, but nonetheless, it’s simple arithmetic.
Zillow appraised valuation is just like anything else that costs you zero, you get what you pay for.
You seriously want to know current market value, hire a licensed appraiser.
Shedlock’s analysis is based on the assumption that we do not get runaway inflation of 10% or more. Long term, housing always goes up with the rate of inflation, assuming income inflation roughly keeps up at the same rate more or less. So if we get to a 10% annual inflation, which is less than the late 70s/early 80s, then we could easily see nominal house values quickly rise back to peak values.
Shedlock’s assumption is, absent stout inflation, assuming we remain in this deflationary climate for the rest of our lifetimes, then yes the peak nominal house values in bubble ares may not be seen again for the rest of many of our remaining lifetimes. I’m 53 so that is only 25 years for me. Fortunately, I bought in California long after the peak decline in values, so while I took a haircut, my value didn’t suffer much and I still am locked into 5% in the event we get that horrific inflation at some point.
Houses in my neighborhood are not selling like hotcakes. That wasn't my point. In my neighborhood, housing did not experience anything like California's "bubble." Our housing prices didn't go into orbit. Therefore, when the adjustment came, housing prices didn't drop all that much in Oklahoma. But the market is still slow, just like everywhere else.
It's slow because lending regulations have tightened across the board. The market was on fire thanks to that fat pig clinton insisting bad credit people get loans. The lending market crashed and now lenders don't lend to bad credit risks. They discovered why those people have bad credit in the first place.
My point was that it's impossible to declare a national "condition" of the housing market because different areas of the country vary widely. That's what the article is suggesting.
But yes, you're correct, it appears that the market has slowed considerably.
ZIllow is getting better in some of those areas their models have traditionally been problematic. Here in the pacific northwest, it’s dead on.
I was in Phoenix a few months back, the west side, and it has really turned around there. Still a ways to go, but it doesn’t look like Beirut anymore.
Well, not that I don’t Arizona, I do.
But I’ve always noticed real estate *stability* at a price (not necessarily the high amount) is determined by its human habitable status without modern technology or infrastructure.
For instance, the NE is so highly valued no matter what, even in the worst of times, because if everything were to break and stop working (EMP, Aliens, natural disasters) there is plenty of farmland, food and water to naturally live off without much effort right there by your community.
In Arizona, you die... and fast.
Low water, no farmland, no nuclear power (I think?), no life.
I don’t think this will ever change about real estate.
Bubble = gov’t intervention.