Monday, March 12, 2012

Has the Real Estate Market Finally Bottomed Out?

Following this CD post from last Saturday "Has the Real Estate Market Finally Bottomed Out?" comes this WSJ article "Rise in Phoenix Housing Shows Path for Other Cities":

"As home prices continue to drop in most cities, a nascent real-estate rebound here holds lessons for the rest of the country. This sprawling desert metropolis was one of the hardest hit housing markets during the bust. Phoenix home prices declined 55% from 2006 through the end of 2011, and Arizona's foreclosure rate jumped to No. 3 in the nation in 2009. Hundreds of thousands of homeowners are underwater, meaning they owe more than their homes are worth.

"Now real-estate economists across the country are studying an early but surprisingly broad Phoenix turnaround. The sharp drop in home prices has brought new buyers into the market. Unlike other markets where housing recoveries have been snuffed out by big overhangs of homes for sale and foreclosed properties, inventories are lean here.

"Phoenix has hit a bottom," says Thomas Lawler, an independent housing economist who was one of the first to warn six years ago that prices in overbuilt metros were poised to fall.

The nation's hard-hit housing markets face a tough act: engineering a housing recovery without traditional trade-up buyers, many of whom are either unwilling or unable to sell because of huge price declines.

Phoenix has found a viable formula. Low prices are igniting demand from first-time buyers and investors who are converting the homes to rentals. The local economy is on the upswing with several big employers like Amazon.com Inc. and Intel Corp. hiring again, which is further increasing demand for housing. And the region is benefiting from a surge of buyers from Canada who are using their favorable exchange rate to scoop up bargains in the desert."

7 Comments:

At 3/13/2012 2:18 AM, Blogger mieledi said...

Good post, I like read, Christian Louboutin will continue to pay attention to it.

 
At 3/13/2012 3:46 AM, Blogger rjs said...

seasonality...northern cities will edge up in price in the summer...when its 110F in the shade in phoenix, their market will slow down..

 
At 3/13/2012 8:56 AM, Blogger Seth said...

What formula has Phoenix found?

 
At 3/13/2012 10:13 AM, Blogger morganovich said...

"What formula has Phoenix found?"

the formula is "don't interfere".

make foreclosure fast and easy. all the aid and restructuring does not fix the problem, it just drags it out.

rip the band aid off, and get on with things.

i'm reminded of an old eddie muprhy routine about aunt bunny falling down the steps.

she doesn't want to fall, so unlike a kid (phoenix) who just falls and gets back up, she keeps trying to catch herself and spends a half hour falling down the stairs. (but falls nonetheless)

that's how markets work too.

you need to let them fall. you need to let malinvestment be punished and investments find a clearing price and move into stronger hands. that's how you get back to grwoth.

trying to prop them up just feeds more speculation and keeps capital in the wrong hands while upping moral hazard and rewarding reckless speculation and leverage.

since the mid 90's and the "greenspan put" we have seen this over and over in an increasing number of markets.

it's precisely why the equity and housing markets have gone nowhere for 13 years and are WAY down in inflation adjusted terms.

eg the S+P ended 1999 at 1473.

it's 1380 today, 6.3% lower.

if we assume 3% annual inflation fro then to now, the real figure becomes 967 today (in 1999 dollars) a drop of 34%.

in terms of inflation adjusted value, the S+P is at about the level of 1996-7.

that's what happens when you prop up a market, and equities turn over much more quickly than homes, so we can expect the housing market to feel such interference in a much more pernicious and durable fashion.

 
At 3/13/2012 12:05 PM, Blogger bart said...

The Dataquick national weekly series shows no bottom has arrived, same as all the other major indexes like Case Shiller.

http://www.nowandfutures.com/images/dataquick_real_estate_weekly.png

 
At 3/13/2012 12:15 PM, Blogger morganovich said...

bart-

agreed.

i think the point was that it could have.

we're going to reach the same ultimate bottom, we're just making it take longer.

better to take the one sharp shock, rip the bandaid off, and get on with recovery than this slow water torture brought on by trying to stave it off.

 
At 3/19/2012 5:24 AM, Blogger Nyssa Berryman said...

Interesting and important information. It is really beneficial for us. Thanks
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