Updated the S&P Case Shiller Home Price Index graphs with the November release data. These graphs show all indicies for the NY Metro Commutable Area. As the name implies, this price index covers regions that are within commutable distance to New York City and does include other states. New to the series is the condo index, which has been added to the graphs.
The aggregate index shows home prices in this region peaking in June of 2006. The total price decline to date in the aggregate index is 13.45%. The tiered price index gives us a bit more visibility into the price movement of different categories of homes.
Low Tier (Under $320407) – Peaked in October 2006 and is down 15.52% from peak
Mid Tier ($320407 – $476338) – Peaked in September 2006 and is down 14.76% from peak
High Tier (Over $476338) – Peaked in June 2006 and is down 9.72% from peak
Aggregate (Overall Market) – Peaked in June 2006 and is down 13.45% from peak
The first graph is the year over year change in the index.
(click to enlarge)
The second graph is straight index value.
(click to enlarge)
It is still too early to be calling for any kind of bottom in the region. Unlike other regions that show home price declines beginning to slow, the declines appear to be accelerating in our region. In fact, the most recent data point is the steepest decline since the last cycle. The rate of decline peaked at 8.9% in March of 1991. See below:
S&P CS NY Commutable Year over Year Price Change
Jan 07 -0.34%
Feb 07 -0.91%
Mar 07 -0.91%
Apr 07 -1.56%
May 07 -2.35%
Jun 07 -2.94%
Jul 07 -3.20%
Aug 07 -3.35%
Sep 07 -3.60%
Oct 07 -4.09%
Nov 07 -4.61%
Dec 07 -5.48%
Jan 08 -5.80%
Feb 08 -6.70%
Mar 08 -7.48%
Apr 08 -7.98%
May 08 -7.74%
Jun 08 -7.04%
Jul 08 -7.03%
Aug 08 -6.60%
Sep 08 -7.13%
Oct 08 -7.65%
Nov 08 -8.59%
WOOHOO first!
Will there be jobs in the city to commute to?
From the Record:
Home prices decline in area, but not as bad as elsewhere
Home prices in the New York metropolitan area, which includes North Jersey, declined 8.6 percent in November 2008 from November 2007, the Standard and Poor’s Case-Shiller index reported today.
The regional market is in considerably less distress than the national real estate market, which posted a record decline of 18.2 percent. Values plummeted more than 30 percent in several of the nation’s most troubled markets, including Las Vegas, San Francisco and Phoenix.
…
In Bergen County, single-family prices declined 7.8 percent from November 2007 to November 2008, to a median of $470,000, according to the New Jersey Multiple Listing Service. Sales activity was down by about 16 percent. Similar figures were not available for Passaic County, which largely uses a different multiple listing service.
Cathy Denis of Century 21 Mainstream in New Milford said many buyers have backed out of transactions because they are nervous about the market and the economy.
“In their heads they know it’s probably a good time to buy, but they still question whether prices will drop even more,” she said. “I think the fear factor is definitely there — ‘Will I have a job?’”
Nelson Chen of the Chen Agency in Fort Lee said prices in the area have dropped around 20 percent from the market’s peak a few years ago. And he said average prices may have further to fall, because some sellers still insist on high asking prices.
“It will take the whole year for many of those people to get with the program,” Chen said. “But sellers who have gotten the memo [on pricing] — there are multiple buyers for them. We’re making deals for them.”
Average sale price in Passaic County (since the piece above doesn’t list, from GSMLS):
November 2007 – $391,285
November 2008 – $353,474
Down 9.7% year over year.
Passaic County Total Sales
November 2007 – 186
November 2008 – 120
Down 35.5% year over year.
Shore – re VT previous thread.
Essex Junction has a population of about 8600. The greater Burlington, VT metro area has a population of just under 200k. 500 jobs here seems like a pretty big hit, relatively speaking. And they are probably good paying, professional jobs and not low wage service jobs.
Grim –
In the previous thread you had mentioned that condos take the biggest haircut in any downturn. However, from the graphs it seems that NY metro condo prices are holding their own. Any ideas as to why is this the case?
#3 grim
Bad economy – check
Falling prices – check
Justifiable fear of losing job – check
How does that make this a good time to buy…???
“Cathy Denis of Century 21 Mainstream in New Milford said many buyers have backed out of transactions because they are nervous about the market and the economy. “In their heads they know it’s probably a good time to buy, but they still question whether prices will drop even more,” she said. “I think the fear factor is definitely there — ‘Will I have a job?’””
BTW, financial exploding AH on the “bad bank” news.
Any ideas as to why is this the case?
New York City
The S&P CS price index includes single family homes only. It does not include condos, coops, apartments, multifamily, etc.
Given the exclusions, the shape of the NY Commutable area is actually more like a donut, excluding Manhattan and other parts of NYC, which are basically made up of all the excluded categories.
The condo index, however, does include the NYC market, which has been stronger than even the local commutable areas.
Given the quality of assets, may I propose a name?
First National Bank of Yucca Mountain
BTW, financial exploding AH on the “bad bank” news
This won’t prevent layoffs, make up for lost/non-existent revenue, get consumers and businesses to start borrowing again, stop the fall in commercial and residential RE values or halt deflation now that it’s started.
Other than it should work.
“Other than it should work.”
Yes, it should work at destroying the long bond. I mean how long can the foreigners continue to subsidize our kleptocracy. If this goes through, I am joining Clot’s camp of firmly believing that all politicians are crooks, and putting in 1 order for a grenade launcher.
Grim – thanks for the great charts! A great addition would be to show the inflation adjusted value of the starting point, so that one could easily see what price increases were justified by inflation. Just a thought.
I have a question about the MLS system. I know that the department of justices sued the NAR and reached a settlement for opening up MLS access and allowing realtors or brokerage houses to post MLS data on their websites. Since the settlement I have heard very little about how this will actually change online home searches.
Now that the deadline for compliance by all MLS systems is under 3 weeks away (FEB 15) what, if anything, will actually change for those of us searching for a home.
GE, GE Capital Aaa Ratings May Be Cut by Moody’s
http://www.bloomberg.com/apps/news?pid=20601087&sid=aH80ft4BqUFw&refer=home
so i asked that friend from wachovia who ‘only’ got 15% of his bonus whether or not he thought he got taxpayer money.
I’m under the impression that Wachovia didn’t take bail out money; but even if they did, as I understand it, that wasn’t free money anyway, but was exchanged for preferred stock and similar. So it was really an investment in the banks as opposed to a handout. Banks got money from the government because the lack of confidence in the markets prevents lending by other typical sources.
Plus what we call “bonuses” aren’t really for exemplary performance, they’re just a way to have variable compensation…there is no way in hell anyone would work in investment banking for the base salary we get, and if you don’t pay people a decent amount they would all leave and there would be no such thing as investment banking. People work between 55 hours and 100 hours a week (not even close to an exaggeration) and are usually ridiculously smart and hard working. Furthermore, the problems with the banks lie in probably 10% of the former employees, so the other 90% of us don’t deserve to get fucked. The money that Wachovia had but didn’t use to pay us bonuses went to Wells Fargo. Most banks paid around 50% of typical bonuses. So overall, we at wachovia got screwed.
“Target to Cut 9% of Headquarters Jobs, Shut Distribution Center”
http://tinyurl.com/c5f8hb
-The company will slash 600 existing jobs and 400 open positions, mainly in its hometown of Minneapolis. It will also close its Little Rock, Arkansas, distribution center, which employs 500, later this year, Target said today.
“Will there be jobs in the city to commute to?”
HELP IS ON THE WAY!!!!:)
Help may come in the form of National Security forces, brandishing truncheons.
Help? You mean an 825bn money bomb?
asked my buddy at wachovia if he thought his bonus (‘only’ 15 percent) was thanks to us taxpayers. his response …
I’m under the impression that Wachovia didn’t take bail out money; but even if they did, as I understand it, that wasn’t free money anyway, but was exchanged for preferred stock and similar. So it was really an investment in the banks as opposed to a handout. Banks got money from the government because the lack of confidence in the markets prevents lending by other typical sources.
Plus what we call “bonuses” aren’t really for exemplary performance, they’re just a way to have variable compensation…there is no way in hell anyone would work in investment banking for the base salary we get, and if you don’t pay people a decent amount they would all leave and there would be no such thing as investment banking. People work between 55 hours and 100 hours a week (not even close to an exaggeration) and are usually ridiculously smart and hard working… Furthermore, the problems with the banks lie in probably 10% of the former employees, so the other 90% of us don’t deserve to get fucked. The money that Wachovia had but didn’t use to pay us bonuses went to Wells Fargo. Most banks paid around 50% of typical bonuses. So overall, we at wachovia got screwed.
Found this article (and comments) interesting: blogger breaks down economists’ predictions based on what sector they represent (as reported in the WSJ)
http://www.fivethirtyeight.com/2009/01/smarter-than-average-bears.html
quick take away: academic economists are most pessimistic, investment firm economists are least pessimistic. (and banks, interestingly, are the second most pessimistic group)
Nations turn to barter deals to secure food
Countries struggling to secure credit have resorted to barter and secretive government-to-government deals to buy food, with some contracts worth hundreds of millions of dollars. In a striking example of how the global financial crisis and high food prices have strained the finances of poor and middle-income nations, countries including Russia, Malaysia, Vietnam and Morocco say they have signed or are discussing inter-government and barter deals to import commodities from rice to vegetable oil. The revival of these trade practices, used rarely in the last 20 years and usually by nations subject to international embargoes and the old communist bloc, is a result of the countries’ failure to secure trade financing as bank lending has dried up.
Nations turn to barter deals to secure food
Countries struggling to secure credit have resorted to barter and secretive government-to-government deals to buy food, with some contracts worth hundreds of millions of dollars. In a striking example of how the global financial crisis and high food prices have strained the finances of poor and middle-income nations, countries including Russia, Malaysia, Vietnam and Morocco say they have signed or are discussing inter-government and barter deals to import commodities from rice to vegetable oil. The revival of these trade practices, used rarely in the last 20 years and usually by nations subject to international embargoes and the old communist bloc, is a result of the countries’ failure to secure trade financing as bank lending has dried up.
http://www.ft.com/cms/s/0/3e5c633c-ebdc-11dd-8838-0000779fd2ac.html
fun charts on housing
http://www.oftwominds.com/blogjan09/endgame-RE01-09.html
Fed buys $1.7 billion in agencies, program 25% done
The Federal Reserve bought $1.7 billion of Fannie Mae, Freddie Mac and Federal Home Loan Bank notes on Tuesday, for a total of nearly $25 billion since the purchase program began in December.
http://www.reuters.com/article/bondsNews/idUSN2744985320090127
“Help? You mean an 825bn money bomb?”
Clot, you sound like you don’t think it’s going to work?:)
That $ is going down more ratholes than that Homeland Security money found.
20. Kettle
Interesting. Is small local farming the new cottage industry? Lots of cheap land in PA
barbara
it will be in time. soil remediation may also be a big business…..
along the lines of SAS’s alternate economy
Barb:
How much is considered “lots”?
yikes (21)-
That was a great argument for the seizure and dissolution of assets of every large bank in the US.
From MarketWatch:
Bill to allow judges to modify loans passes hurdle
A key House of Representatives committee approved legislation Tuesday that would give bankruptcy judges the authority to eliminate some mortgage debt in order to help reduce foreclosures.
The bill, which was passed 21 to 15, was introduced by House Judiciary Committee chairman John Conyers, D-Mich., and was modeled after an agreement with Citigroup Inc. that would give bankruptcy judges the authority to modify mortgages that were set up prior to the enactment of the bill.
…
Lawmakers included a provision that would require a borrower that sells his or her home within one year of having a mortgage modified to provide 80% of the appreciation to the lender.
The bill has a similar provision that would give lenders 60% of any appreciation of a home sold in the second year after the mortgage is modified by bankruptcy judges.
HE (27)-
I guess after the 825bn disappears, we can get on to the riots.
Progress, of a sort.
From the WSJ:
U.S. House Panel Approves Mortgage Measure
A measure to allow judges to reduce the principal amounts of mortgages for troubled borrowers in bankruptcy cleared a key hurdle Tuesday when it was approved by a U.S. House panel.
The legislation, which is progressing quickly in Congress, would amount to the most aggressive step yet by the federal government to help strapped borrowers avoid foreclosure.
Proponents contend it will act like a stick, spurring mortgage servicers to complete more loan modifications. Meanwhile, the banking industry warns that it will raise mortgage costs for all borrowers.
The measure was approved on a 21-15 vote after its House sponsor, Judiciary Chairman John Conyers (D, Mich.) agreed to changes that would narrow its scope.
“While bankruptcy reform may not provide all of the answers to this crisis, surely it provides a common sense and practical approach to helping stop the spiral of home foreclosures,” Mr. Conyers said in remarks before his panel.
Under the legislation, borrowers would be eligible to have a bankruptcy judge reduce the principal balance on their home loan — a move known as a “cram down.” Current law allows cram downs for mortgages on vacation properties, but not for those on primary residences.
…
Though banking lobbyists favor the changes, they remain staunchly opposed to the legislation. Even though it applies only to existing mortgages, they contend it will raise costs on new mortgage loans because lenders will assume Congress will extend the legislation.
“The housing market is already contracting and enactment of cram down legislation would make things even worse by injecting more risk into the mortgage market, making it harder and more costly for people to buy and sell homes,” a coalition of industry groups wrote in a letter to Mr. Conyers and Rep. Lamar Smith of Texas, the panel’s top Republican.
In the letter, they warned that court-ordered modifications would trigger more losses at Fannie Mae and Freddie Mac, which own or guarantee more than $5 trillion of U.S. mortgages. Those losses would flow through to the U.S. government because it has agreed to pump money into the firms to keep them solvent.
Industry lobbyists also argued that mortgage servicers would shun federally insured loans because, despite Mr. Conyers’ changes, the legislation doesn’t protect such loans from being crammed down by the courts.
30 spam,
I’m no expert but I have friends that are looking at 5-7 acre lots. I suppose there are opportunities to buy adjacent land if more were needed. It was so cheap they could put it on a credit card (I don’t recommend).
grim (32)-
Appreciation? One year out? Two years out? 80%? 60%?
These people are both stupid and insane. We really have entered the end of days.
Starting tomorrow, I really am getting the tent, camping equipment, guns and ammo situation squared away. This thing is going to go full tilt bozo…and soon.
I guess after the 825bn disappears, we can get on to the riots.
Doesn’t the AMT proposal push that to $900 billion?
The fact that the current legislation only applies to loans existing at the time the law is passed is irrelevant.
This law injects a new political risk into all mortgages being written.
Why?
If this law can be passed now, what is stopping it from the same law being passed a year from now? Or worse, the same law without a restriction. The problem is that it’ll work, and it’ll have a successful track record. No stopping a train like that.
grim (37)-
Hey, who’s counting?
Going to need lots of hope to go with change…
http://news.yahoo.com/s/ap/20090127/ap_on_re_us/bodies_found
anyone have the latest bailout count? we were at 8.8 trillion in december…..
grim (38)-
What comes after this law won’t matter. The mortgage market will be dead. No investor in his right mind would touch paper that could have its principal balance slashed by a judge.
From the minute this law is enacted, the only viable underwriter of mortgages will be the gubmint.
Pandit: Banks Are Capitalized Just Fine
Pandit dismissed TCE, or tangible common equity, as a way to measure the health of banks. The more accurate number, he argues, is Tier 1 capital, which is the regulatory capital and is not as dependent on stock prices. He says the entire banking sector is essentially well-capitalized for business if you look at Tier 1.
http://clusterstock.alleyinsider.com/2009/1/pandit-the-whole-banking-sector-is-well-capitalized
From Diana Olick at CNBC:
http://www.cnbc.com/id/28878653
I also got some new information today from Zelman & Associates, the shop of wunder-analyst Ivy Zelman, predicting a far worse 2009 in housing than previously, and not predicting recovery of any sort until well into 2010.
Why? Foreclosures. They expect the flood of foreclosures to increase, thanks to job losses and falling family incomes. With foreclosed properties adding to already surging inventories, prices could fall another 20 percent, they say.
It seems to be a crisis feeding on itself.
The more foreclosures, the more values fall, the more people are unable to refinance because they have no equity, the more people fall into foreclosures.
And what about the hope of a government bailout? If the action in Congress so far is any indication, things are moving far too slowly to help. Moody’s predicts 5 million borrowers will default in the next two years with foreclosures peaking in the first quarter of next year. Even if the government does finally choose a bailout plan and even if it saves half those borrowers, that’s still 2.5 million foreclosed properties hitting the market.
I know many of you think I’m the angel of housing doom, but we need to face some cold hard facts.
One month-to-month increase in sales, percentage-wise, from a huge drop the previous month, means absolutely nothing. I have been to the neighborhoods, I have spoken to more experts than you can imagine, and I am looking for the good news here, but I’m not finding it.
Housing is going to get worse before it gets better, and until someone in the Obama administration really and truly gets that fact, I don’t care what city or town you live in or how far you are from the wreckage of California, Florida, Nevada and Arizona, you will feel it.
Mike Morgan surfaces:
“On the O front. He got his honeymoon rally prior to coming to office, and it turned out to be a dud. He’s getting his stim-useless rally this week with an up day yesterday and an up day today that could fall either way. He has his cabinet, and as I have said before:
1 – It is full of HUGE egos.
2 – None of these kiddies play well together.
3 – Several of these would be in jail if they did not have the right connections.
4 – They all have their own agenda for personal aggrandizement.
5 – They are all running with scissors, or as one of my Wall Street friends noted . . . running with chain saws.
6 – Nancy Pelosi has truly outdone herself in demonstrating just how ignorant and obnoxious she is. Let’s forget about her access to air force planes for her, her friends, her family and her entourage. Have you heard her try to explain what is going on? This lady is either on some kind of drugs or she is simply and truly that stupid.
7 – O’s backers are obviously calling in their markers.
8 – One example is the new head of the NY Fed . . . another Goldman Sachs boy and another one of the boys that has been involved in creating the mess we are in. Now we have one at the NY Fed and one heading up the Treasury. It’s almost as if King Henry set this all up to further implement his plans. I’ll have more later.
I am seeing a lot of what I wanted to see to convince me that we can feel comfortable holding on to our positions. On Sunday I thought we were 75% certain to see a big rally. This morning I cut that down to 60%, and now I will cut that number further to a 33% chance. If a few more things fall into place today and tonight, the number will drop.
[snip]
One final thought. Even if we rally on the close today, it will not change my outlook. In fact, if we rally this afternoon, it will push my rally fears down and I will add further to our short positions.”
sean (40)-
If you told me somebody would sneak up on me from behind and cap me nice and quick, I’d think about it for a while.
Barb:
I would not buy 5-7 acres if I wanted self-sustainability.
Also, a wise person once told me…
“If you want to keep the view, you’d better OWN the view…”
Other people never act according to YOUR plan…
IOW, never count on being able to buy contiguous properties.
47 spam,
what I meant was, sometimes the lots are up for sale at the same time. Of course i wouldn’t recommend buying one in the hopes that the other will go up for sale eventually.
vic (43)-
“Pandit: Banks Are Capitalized Just Fine”
There’s your tell that the shitstorm is about to begin.
I truly appreciate all of the shared wisdom on this board. Thanks everyone.
That said, re. the housing market, I wouldn’t know a good deal if it fell out of the sky and landed on me like I was the Wicked Witch of the East in the Wizard of Oz.
“Pandit: Banks Are Capitalized Just Fine”
That will be the statement that hangs Pandit out to dry.
Priced Out:
Immerse yourself in what you’d like to buy. Look everyday.
Look again.
And then, when the good deal pops up, you’ll recognize it. It’ll be as visible as a blinking neon sign.
I would have thought that they might have seen the interviews of Fuld et al and made modifications to the “well capitalized” spiel.
Well, at least they have not started blaming the short sellers.
BTW, Looks like we are going to complete a Jamil-free day. Thank God for small mercies.
spam spam bacon spam says:
January 27, 2009 at 10:20 pm
Priced Out:
Immerse yourself….
Thanks spam – seems like looking for a diamond in the rough, or a needle in a haystack.
Grim,
Thank you for the charts, and thank you for including the condos this time.
Victorian poses an interesting question: “NY metro condo prices are holding their own. Any ideas as to why is this the case?”
Njrereport readers will be pleased to know that I have created a chart that displays the performance of the 5 condo markets measured by S&P/Case-Shiller indices.
Grim, I just sent you this chart, along with supporting data. I suggest that this chart headline tomorrow’s edition of your blog. The reason is New York metro condo prices have outperformed every US housing market over every time period – including the current financial crisis.
This performance deserves discussion in your blog.
Clotpoll says:
January 27, 2009 at 7:55 pm
I think Knob Creek is starting to eat a hole in by brain.
clot: for you….
http://www.youtube.com/watch?v=2cScpYvzlv8&feature=PlayList&p=4C77EA373B23EB5F&index=71&playnext=3&playnext_from=PL
Footage of Branchburg NJ in April 2009:
http://www.youtube.com/watch?v=miIPEOExM8U&feature=PlayList&p=4C77EA373B23EB5F&index=76
chicagofinance says:
January 27, 2009 at 7:41 pm
CF Sorry for encroaching on your world. May I add some context to my statements.
In the case of an Independent Financial Planner, you rightly point out that fiduciary responsibility is automatic unless they provide you with specific language that states they do not uphold the requirement. That language will most likely be buried in the back of the paperwork, than emblazoned on the front. Unless you know what you are looking for, most people may miss the fact that the Independent FP may be getting an extra commission for putting you in those nice Merrill funds. With fee only, you don’t get into this situation, they are always working for you.
“A fee only FP is a good idea if you have the assets to justify it.”
This statement is so qualified that it is a joke. It is the equivalent of saying, you should play pro football if you have the talent to justify a career.
Maybe I should have phrased it as you may need to have more talent than you currently have before you even consider trying to go pro?
Most Fee only will have a band charge with a minimum fee. If their fee structure starts at 1% of assets for 0-$1 Million with a $5K minimum, then if you are showing up with $100K-$200K, you may be better off with the Independent guy trying selling you into commissioned funds. If you have 2Mil, then paying 1/2% to a fee only, may make more sense.
As always everyones situation is different. I merely put out an option that may not have been considered.
I would be interested in your thoughts on Fee Only?
“Pandit: Banks Are Capitalized Just Fine”
As seen painted on the side of the new $50mil Falcon…
Fee Only is pitched as some kind of philosophy, when in reality it is just another form of marketing.
Some of the most expensive financial planners around are fee-only. They have nice little tricks such as including the value of your house as assets under management and only taking clients that have $2M or more….you know…”the middle market”….. :-P
The critical featues of financial planning are competence, integrity, and fiduciary responsibility. Anything else in any shape or form is marketing.
I would throw Life Planning in the same boat. Actually life planning is worse. It is meddling financial planners with big egos that want to play doctor on people’s lives when they no credentials or expertise.
No matter what is the case, watch your wallet.
PGC says:
January 27, 2009 at 11:00 pm
With fee only, you don’t get into this situation, they are always working for you.
PGC: I apologize for the snide sounding response. Please let me comment here. With fee-only, you need to be very careful with external expenses. The fee-only planner charges you, but then everything else comes out of your pocket.
As you stated, the best approach varies and we use fee-offset, flat fee, hourly rate, or for small clients commission.
sorry about that double post.
#61 CF
I think fiduciary responsibility is the most important. If you don’t have the other two I can use it to put you into the big house. It will be interesting to see if the Madoff lawsuits will have any cases of clients suing their financial planners for putting them in those funds and the FP pointing out the fine print where they stated they were not a fiduciary and declaced the third party commission.
As for the house as an asset under management, it would depend on the circumstances, if you are using it as collateral or as part of a trust, or if the FP has to make cash available to pay a ballon or note, it should be considered.
#62 CF
As you say it all comes down to watch your wallet and making sure you know what you are paying for, or who’s getting paid.
As my boss always says, “There’s no such thing a free lunch, you will pay for it some how”.
It’s just like those free phones you get with that nice 2 year cell phone contract.
Yeah, these investment bankers are “super smart”. They just learned that you can’t loan money to people with no money and bad credit. Even Tony Soprano knows this.
RE: grim says:
January 27, 2009 at 9:11 pm
From the WSJ:
U.S. House Panel Approves Mortgage Measure
I told you guys the other day to go with UYG which I got @2.90. Bi was right on one thing – you cannot go long with these ETFs. I had SKF\SRS and sold a week ago (I know – too early) I think we’ll have a sucker’s run again for the next month or two, then I’ll reverse
And :) Nobody awake :) kidding
Hope! Change!
———–
Clotpoll says:
January 27, 2009 at 9:28 pm
Mike Morgan surfaces…