US Prices

A lot of you probably saw this on the MSN homepage, but for those who didn’t there is an interesting chart included with the article showing price increases/decreases for a wide range of US cities. I’d be interested to see what impression the numbers give the readership.

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21 Comments

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21 responses to “US Prices

  1. I often find your posts possibly veiled or your intentions ambiguous .. is this data even important considering this:

    “The OFHEO data is gathered from a wider sampling than most other gauges of housing activity and focuses primarily on properties financed with conventional 30-year home loans.”

  2. canyongal

    Anecdotally, my YVR friends and acquaintances are saying “not another penny in YVR–prices too high, not good value.” They are shopping the U.S. to buy while prices are down and the loonie is high…vacation homes in warmer locations (e.g. Palm Springs), and investment properties in premium locations. Everyone seems to want a piece of the U.S. If this is happening in my little circle, I wonder if it’s a wider phenomenon among other RE investors that might otherwise buy in theLower Mainland?

  3. Johnnyrent

    What the chart shows is that “frothy” markets, ergo, those that spiraled up significantly beyond what economic fundamentals could ever support, are correcting.

    Two years ago during a Globe and Mail interview Robert Shiller singled out Vancouver as the most “bubbly” market in the continent. For that and many other reasons, not the least of which is our history, there can be little debate about the froth that exists here.

    When a market disconnects as far as we have from fundamentals and is driven to such a large extent from speculation as we are, it is bound to correct. That said, nothing is certain in this world but death and taxes. If we’re speaking about probabilities however, look out below.

  4. robchipman

    macchiato:

    Don’t look too hard for the conspiracy. The homepage on my home computer is MSN’s home page and it had a big picture witht he headline “More Woes For Home Prices” I took a quick look and couldn’t resist posting the link, since many people seem interested. I’m interested in what other readers conclude, because sometimes the readership comes up with some pretty insightful comments. There’s really no other agenda.

    My question becomes: why do you wonder if the data even important considering that it focuses primarily on properties financed with 30 year conventional mortgages? (Honest question – no hidden agenda).

  5. paulb

    It must be annoying as hell to provide daily…or multi -weekly stats ๐Ÿ˜‰ only to be accused of hidden agendas etc. on a daily basis. I am surprised you keep at it.

  6. Anonymous

    Rob “My question becomes: why do you wonder if the data even important considering that it focuses primarily on properties financed with 30 year conventional mortgages? (Honest question – no hidden agenda).”

    because it doesn’t include subprime, Alt-A, or jumbo which are a large proportion of the US market.

    oh, but then this should be a good proxy for what Canada might experience.

    oh, but only one city in 300 has declined over the past 5 years.

    so, the probability of this happening in Vancouver is less than 1/300 (since Vancouver is not a rush belt city like Detroit… well, maybe… if you consider the situation with lumber)

    anyway, the bulls can probably see positive stuff in this.

    Rob: you’re a “closet bull” ๐Ÿ™‚

  7. robchipman

    Anonymous:

    Glad you can read between the lines when I say “The metrics aren’t good for investment right now”, “a correction has to come because we can’t continue to have double digit increases year after year”, “only buy what you can hold when times get difficult”, “take care of the downsides (they exist)” and “the market will change because it always does” to decipher my real message: real estate only goes up, it can never go down – buy it now before you’re priced out forever! ๐Ÿ™‚

    In other news, TD Bank reported increased profits. Does that mean I think the ABCP challenge is a positive? ๐Ÿ™‚

  8. Anonymous

    i must have missed it. when did you say those things?

  9. Anonymous

    particularly โ€œa correction has to come because we canโ€™t continue to have double digit increases year after yearโ€

  10. vanreal

    are small single digit price increases considered a correction? just wondering?

  11. robchipman

    Indeed, you must have missed it. Luckily, all the posts are still up and you can go look at them.

    Have you ever actually seen me write anything different?

  12. BBY

    Thanks for the numbers Rob. I’m quite bearish and currently priced out. But after all the RE blogs I’ve been reading for the past months, I think you present a fairly decent forum. Especially for a RE agent. I actually relish the bullish(*t) posts that challenge (unsuccessfully) my bearish and cynical stance. ๐Ÿ˜‰

  13. Well, could be veiled for the reasons
    Anonymous( 10:12 pm) mentions .. or ambiguous cause it’s rare you mention (link to) such things as US prices tanking and in the case you do, it excludes subprime and the like, opening the door to possible post degradations of bears and bulls spinning their cases on something that doesn’t clearly paint the true picture. So, I wasn’t sure what you’re after, I guess I read too much into it.

    Hidden agenda is a bit strong, since I am not sure what a hidden agenda would accomplish for you, you are probably thinking the same thing. You do a good blog though.

  14. robchipman

    M:

    I really don’t know how much of the US market is represented by ” …subprime, Alt-A, or jumbo [mortgages] which are a large proportion of the US market” but would point out the obvious (which you also quote): “The OFHEO data is gathered from a wider sampling than most other gauges of housing activity…” So, is the data gathered from wider sampling, or is the data that is apparently excluded the wider sample? I’m not sure.

    Anonymous 10:12’s other reasons are pretty weak too (or at least they seem so to me). After all, the disease isn’t caused by the symptoms, right? And despite the way it may look, its not contagious. If we have a melt down/correction/whatever here, it won’t be because it happened somewhere else too. It may happen for the same reasons (affordability, mortgage gap, over-supply), but it won’t happen just because other places suffered real estate declines.

    I’m the last guy to argue that what happens in any particular US site, or the US nationwide, is a proxy for Vancouver or Canada. I’ve actually pointed out a BoC study that indicate that we don’t mirror many places in the US or Canada. Arguing otherwise has always seemed weak to me.

  15. jesse

    “Iโ€™ve actually pointed out a BoC study that indicate that we donโ€™t mirror many places in the US or Canada. Arguing otherwise has always seemed weak to me.”

    Just because Vancouver doesn’t mirror other markets doesn’t mean we are immune to a crash. Las Vegas doesn’t “mirror” Cleveland either but both markets are in trouble. The Federal Reserve claims a significant and ongoing housing slump in the US right now. My guess is they aren’t using the seemingly benign OFHEO data presented in the MSN article. But by all means use what ever data you want to come to your own conclusions.

  16. capcialist

    Alt-A, Option ARMs, and Jumbo being in trouble is a symptom of a heavily correcting real estate market, not a cause. If valuations were justified, the type of financing would not be an issue. That voodoo financing contributed to inflated valuations over the last 5-6 years is likely correct, however only a portion of the US market has actually moved in that time. The bulk of homes in the US are financed on 25-30 year fixed. Those that bought 10 years ago are just seeing their equity retreat, which is fine if its your principal residence or you are a buy and hold investor.

    Yes, this blogs author is long term very confident in his market. If he wasn’t, I don’t think he could reasonably be a RE agent. I wouldn’t want to buy from a RE agent who didn’t have confidence in what he was doing. That doesn’t mean I have to drink the Kool-Aid. My local RE agent knows and respects my position, will call me when the local prices hit my target price, and will make a commision at that time.

  17. robchipman

    Jesse:

    I’ve never said we’re immune from a crash (we experienced a bubble/crash in ’81/’82, as we all know). My argument is pretty simple: the fact that market B goes through the same stages as market A doesn’t mean that market A caused the experience in market B. I’m not precluding the possibility (a crash in the Vancouver market could cause a crash in the Interior of BC market, for example), but I am pointing out that the reasoning that “it happened in Las Vegas so it has to happen here” is simply foolish if we ignore the underlying causes.

    capcialist:

    “My local RE agent knows and respects my position, will call me when the local prices hit my target price…”

    Is that similar to saying that current metrics aren’t suitable for an investor?

  18. Crabman

    That OFHEO data looks a little out-of-date, or distorted. I know for a fact that Phoenix is down a lot more than 0.74% in the last year! The best, most up-to-date info I’ve found for US cities is:

    http://www.housingtracker.net

    It’s not perfect, because it looks at asking prices on MLS, not sales prices. But the advantages are that nothing is filtered out, and it is updated weekly.

  19. bulear

    I found this interesting post re: Subprime

    Quote:

    The entire market in subprime debt is just 1.4% of the size of global equity markets. Or, to put it another way, a 1.4% downward fluctuation in stocks erases the same amount of value as if all subprime-backed bonds were collectively marked to $0.

  20. Ulsterman

    I have been so wrong on calling the top of this market that it makes me want to cry. I’m priced out. I’ve missed so many real estate opportunities that i can barely log onto these sites. I can barely look my dad in the eye because he told me years ago to buy and i waffled about corrections etc. HOWEVER! This i’m certain about. Anyone who thinks that “it’s different this time” and prices will keep rising indefinately is crazy. Then again, i’m probably totally wrong ๐Ÿ˜‰

  21. robchipman

    Ulsterman:

    I sympathize/empathize with your position. FWIW, I’m sure you’ll get an opportunity to buy at some time in the future if you really want to.

    Prices will keep rising indefinitely, which is why this market confounds so many. Indefintely may be until February, or next October, or 2009 or later.

    But, in the grand scheme of things nothing major has changed. Intergenerational wealth transfers, longer amortizations periods, more widely available insurance and increased liquidity have all been priced into the market and their contributive power will, at some point in time, run out of steam.

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