Case-Shiller lags anywhere from 3-5 months at the field level., but...
Companies (particurarly banks) pay a lot of money to access subscription services generated by Fiserv and Moody's. Their good reputation is on the line
Fiserv - Moody's Case-Shiller Forecast - SFBA
By SFace Follow Fri, 24 Feb 2012, 11:34am 10,621 views 99 comments
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I think it's amusing that anyone who has a different opinion than the bears must either be a real estate agent or a homeowner desperate to prop up prices. Nevermind that it is totaly ridiculous to think that posting on pat.net will affect home prices...
I think you guys might want to bone up on "groupthink". Start with the Bay of Pigs.
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That graph is ludicrous. The whole point of the Case-Shiller index is to point out that home prices always go back to 100. Overvalued is over 100, undervalued is under 100, but prices will always go back to 100.
Now, if you say it'll go up in nominal terms, that's another matter. Inflation can drive home prices up, but the value must come back down in real terms.
It would be better if these guys claimed that the "new norm" is at the 125 or the 150 mark, and therefore the 100 mark should be moved up accordingly. That would imply that homes are currently undervalued and must go back to "the norm".
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tatupu70 says
1 out of 50 in Calfornia is a real estate agent or directly related to RE business. God knows how many others out of state REA we imported... Vested interest .. there is plenty...
http://www.bizjournals.com/sacramento/stories/2006/05/22/daily20.html?from_rss=1
New record: Nearly a half-million real estate licenses
Nearly 500,000 people hold real estate licenses in California -- the most ever -- the California Department of Real Estate reported Tuesday. That equates to one real estate licensee for every 52 adults.
In 2005, the number of real estate licensees soared to a record of more than 476,000, up 14 percent from the previous year and a 57 percent increase over five years ago.
As of April, the trend continued with the number of licensees climbing to 495,000.
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SFace says
To study and render an objective opinion on hehavior you pretty managed to compromise your independence when you said..
"Ultimately, I also believe house price have bottomed based on the facts as I understand them."
But "studying behaviors" is not your real objective.
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Jeez there you go again, dignifying with argument someone who branded their handle with American Express Black.
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B.A.C.A.H. says
His handle is just and illustration of greed and self interest in a hope of a W-shaped recovery, after the V shaped didnt workout, and we are all back to the good ole days during the boom. .
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thomas.wong1986 says
It seems like BA prices and the forecast of BA are the only beacon of hope for the bulls. LOL.
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Yahoo! Jobs must be back full force. Wow, just a couple of weeks ago I thought I saw an article saying our unemployment rate was over 11% (the real number, not any voodoo or adjusted). Amazing how time flies and the world gets better in a few weeks.
http://www.forbes.com/sites/peterferrara/2012/02/09/dont-be-fooled-the-obama-unemployment-rate-is-11/
No job improvement, then you can bet your grandmother's china that we will not see any housing improvement. The government is out of bullets to shoot. Time will be our witness here. Don't say I didn't warn you.
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SFace says
Their prediction contradicts 400 years of recorded data. There has never been a V-shaped recovery after a bubble collapse. There has never been a housing bubble even close to the proportion of this one we just had. A bubble of this magnitude justifies a crash of an equal magnitude followed by at least 2 decades of flat prices. Forget house buying until 2030 and look for 1975 prices coming back.
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RentingForHalfTheCost says
So Morningstar is biased, but Forbes is OK?
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tatupu70 says
I've been following Peter for years. There are honest individual contributors that don't have to sell their soul to survive. Just good reportable facts do them justice.
http://blogs.forbes.com/peterferrara/
Also, it is about the money trail. Forbes are not paid by anyone to report a particular way about jobs. Most main stream media outlets get a good source of money from the real estate industry. In return they keep quiet on anything negative about the housing market. Just the nature of the beast. If you dumped 10's of thousands to a paper each month running listing and kept seeing that same paper talk badly about the prospects of the housing market, you would most likely complain or move your listings somewhere else. I didn't invent this stuff, it is basic survival 101.
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SFace says
sometimes these forecasts are a self fulfilling prophesy. If the forecast is up banks and businesses position themselves accordingly in terms of lending and business deals and ends up going up. same thing happens on the way down.
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tdeloco says
I don't agree with this.
Wikipedia (I know) says: "The national index is normalized to have a value of 100 in the first quarter of 2000."
But nothing about this representing some "right" value, above which houses are overpriced, and below which houses are underpriced. I don't see why values would have to revert to some norm, especially as population grows (and land doesn't), or some event or transformation happens to make a location more valuable.
I bet Houston prices are higher than they would otherwise be if it weren't for the importance of oil...I bet the completion of the Erie canal was followed by a rise in values in newly connected cities. Statehood for Hawaii probably started a trend of increasing house (land) values.
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tdeloco says
(include Thomas' stupid graph he posted about 100 times about reverting back to the mean)
That may be true if there are no transformative changes (that impact real estate prices) over the past decade. Transformative changes may include:
1) Interest Rates.
2) Supplies and household growth.
3) Income and net wealth
4) Taxes
5) Others such as lending environonment
So with regards to SF over the last decade:
1) Interest rate went from 6-7% - 4%
2) No new SFH homes were added while new households were added. (Of course Condo's balanced that out as a competitive choice somewhat..
3) Income grew but millionaires and wealth grew even faster.
4) MID is more lucrative and property tax rate is the same. Add-on's property tax in SF are non-existent. Combined, taxes have been landlord friendly.
So no, it cannot revert to 100 given the above. Where it should be is of course where everyone likes to know.
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robertoaribas's website
Even Dr. Robert Shiller said that rates can effect the long term trend of his index... interest rates are roughly 2/3 of what they were when the 100 level was set, that certainly figures into affordability.
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swebb says
The original Case-Shiller spans 120 years and is normalized at 1890 values. That puts the version you mentioned normalized at approx 125 (eyeballed). What's fascinating is that we've had exponential population growth during the past century, yet the chart remains stable hovering near the 100 index.
Population Growth:
Full Case-Shiller graph:
swebb says
Your argument should've shown changes in the 120-year chart. I only see a 10-point shift for the years 1945-1997, a new norm for the 52-year span. Lots of things happened within this time frame, including steady decline in income taxes. Then, everything seemed out-of-whack after the year 2000. As I've argued, it is better to re-normalize the graph and move the 100-point mark.
SFace says
Income Taxes rates are at their lowest in decades. Interest rates have also been at their lowest. I don't think either rate can move further down, so home prices should stabilize rather than grow exponentially.
That constrains home prices to be a function of income. Just for the sake of example, if home prices stabilize at 5x a person's salary, when the average Joe earns $10k, home prices stabilize at $50k, and when average Joe earns $100k, home prices stabilize at $500k, assuming all other things remain constant.
swebb says
If you look at the people actually living in them, the average should still be some number (say 5x) compared to the person's salary. Do realize that people who buy property in downtown areas tend to be highly paid. Prices are a function of their affordability (assuming all other things remain constant).
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And income is whatever you say it is - or whatever the broker tells you to claim on the application he's helping you fill out with fictions.
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SFace says
I agree. Furthermore, the 100-point mark chosen by Moody's or Wikipedia seems completely arbitrary to me. Why is it 25 points higher with respect to the full graph?
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tatupu70 says
Only because about 99% of the time it turns out to be true.
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thomas.wong1986 says
Holy crap. Make no wonder we are screwed so bad. These clowns are now littering the unemployment lines. We just can't stop them from reaching in our pockets. Dammit.
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dunnross says
+1
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tdeloco says
Not really. It is closer to linear since 1960 and now is actually slowing. Many predict that we will be actually stagnant past 2030.
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RentingForHalfTheCost says
lol--I rest my case.
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tatupu70 says
Glad you feel good. It'll offset the 20% drop that is coming your way soon.
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RentingForHalfTheCost says
You could be right. You could be wrong. I'm pretty comfortable with the direction of my local market, but it's certainly possible that there are more losses to come.
I'm open to either possibility--I am not a bear, but I come here to see what others think. Bulls, bears, neither...
I just get the impression that your mind is made up and you only want to read things that agree with your viewpoint.
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tatupu70 says
Data changes my mind. The real kind, not that fake stuff. Show me the data! No one has yet. Momentum is a bitch. I only see a wind pushing things down and lots of people crying that it cannot continue with absolutely no data to back up their claims. What kind of data?
- Improving Jobs
- Improving Salaries
- Growth in GDP
- Lowering of the Debt (not adding another trillion or more each year!)
- A reduction in distressed properties (nothing but an increase happening)
- No real inflation (did you see the price at the pump lately)
- etc. etc.
Everything is pointed in the absolute wrong direction for home prices. Not a few things, not a mix of things. Everything. The only thing the bull pundents got to grab onto is that we have low interest rates. What they are not realizing is that we have them because we just fell off a cliff. Imagine for one second the price of a BA home now, if interest rates stayed at the 6% range. That would show you how much has changed since 2007. Rates have had to drop over 100% relative just to stop the country from going bankrupt. Then we had to start buying up our own paper? Simply ludicrous.
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RentingForHalfTheCost says
There's the rub. Any data I show will be the "fake" kind. Any data you show will be the "real" kind.
Or stated another way--any data that agrees with your viewpoint is real, any that opposes your viewpoint is fake.
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tatupu70 says
Your point is "confirmation bias"; I get it. Sadly, I agree with RentingForHalfTheCost. There is a mountain of data pointing towards the other direction compared to a few positive data points, and everyone is already claiming "bottom" and that it's all recovery from here.
Also, the way they measure unemployment had always been rigged. I understood this over a decade ago (well before the bubble). My understanding hasn't changed. It was true then; it is still true now. When people no longer qualify for unemployment benefits, they drop out of this count (even if they didn't get a job).
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More bearish data: http://advisorperspectives.com/dshort/updates/ECRI-Weekly-Leading-Index.php
If you watch the video, it seems like we are headed for a recession. ECRI measures the economic cycle. I regularly look at the WLI (weekly leading index), as one of my lead economic indicators.
From what I understand, the definition of a recession is when the annual GDP expansion is lower than the population growth (be it 1% or 2%). Fact of the matter is, it has been negative for the past few months. We're not growing, we're contracting.
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tdeloco says
There are probably several definitions that people like to use, but that is not the generally accepted definition. Most define it as negative GDP
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SFace says
That's pretty funny. Ever since you've been on here you've been proffering some rinky dink prediction of imminent appreciation in housing based upon this that or the other chart. Objective analysis of consumer beahavior is not evident in anything you've conveyed. It's just up up up with you.
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SFace says
There isnt anything new form the above points. They been around for decades.. still prices do correct to the long run. Where you born yesterday ? sure sounds like it. From the local economic boom of the 80s to the eventual corrections, it has happened all before.
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tatupu70 says
Now you are showing that you are suffering from the exact things you are claiming I am suffering from. Instead of making up situations and assuming behavior, show some data! I got more than the 20% in waiting, and if you can show me data that it makes sense to buy in the BA, shit I'll use you for the realtard. ;)
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tatupu70 says
Ok, so I was wrong.
What I'm trying to say is that there is a need to increase the GDP relative to the growth of the workforce. This shouldn't be the population growth per se, but the difference between the people entering the workforce minus leaving the workforce. If the GDP remains constant despite the increase in workforce, then either real unemployment is growing or everyone's salary is decreasing.
Workforce - 2. (Economics) The total number of people who could be employed
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RentingForHalfTheCost says
No--I certainly wouldn't make a recommendation to buy in the BA. When I lived in northern, CA, I rented too.
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RentingForHalfTheCost says
The Morningstar article I posted has lots of data.
http://finance.yahoo.com/news/housing-bottom-120000751.html
If you read the article instead of disregarding it, you would have seen the data. Ignore the conclusions if you like, but the numbers don't lie.
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tatupu70 says
I just read and and got a little sick to my stomach in the process.
It is amazing how so much can be said without any reference to data. I kept looking but all I got was fluff. When data did reveal itself it didn't justify the wording. This is a common gimmic by writers because they know people really don't understand the data. They just want someone to say "we are going up", or "we are going down" and not have to think math.
Here are some examples directly from the article. Check out this "no data" writing.
-----
Housing Numbers Continue Climb This Week
This week, there was a lot of housing data, all of it good. Both new- and existing-home sales looked in better shape, as did pricing data from the Federal Housing Finance Administration (lagged and averaged Case Shiller data is due next week). Not only did the January data look great, but also there were massive upward revisions to December's statistics. Last month I was puzzled when some of the originally reported housing data looked incredibly weak, especially given the positive buzz that our homebuilding analysts were hearing from the field.
------
Thinks like "look great", "all of it good", "positive buzz", are all subjective terms and should not be used in reporting on housing.
Here is the teller. After all the hype about the positive conditions and how great the data looks, the writer then shows his true assumption.
"Low Inventories Could Mean Higher Prices". Read it. He is saying "Could" for crying out loud. He can not even say they are, they have, they will. He really isn't saying anything at all, just straight up BS. Here is more from that same BS line. "Low inventories should put a damper on future price declines. Low inventories will also encourage buyers to act more quickly when a desirable house does become available." Lots of cool non-factual assumptions about price direction. This is just bad reporting in my book. To say inventories are short for 2012 when we know the shadow inventory gorilla is walking into the room is crazy. The inventories are going to explode incredibly in 2012, just wait.
Then I did a second read and finally found the data the writer doesn't want the article to focus on. Ready for this? Here it comes and it is buried in the fluff of the article deep in the dungeon.
"Looking at year-over-year, quarterly data, prices declined 2%"
Booyah! Down! This article is so biased I now have to go get a shower to feel clean again. Just sick stuff. Thanks for pulling me in there and justifying my claims. Ugh
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RentingForHalfTheCost says
Wow. So, I take it you didn't listen to my advice then:
tatupu70 says
The article actually contained a great deal of data. It didn't agree with your thinking, however, so it appears you ignored it. Which is your right.
One other thing that I did a doubletake on--it's bad reporting to conclude that lower inventories might lead to higher prices? But it's good reporting to claim that the shadow inventory gorilla is about to explode?? Really?
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tatupu70 says
I didn't conclude that lower inventory leads to lower prices. They were the ones making the conclusions. I posted the actual factual results that prices are still dropping yr-to-yr. If you disagree with that fact, that that is your choice.
About inventory. We are not dropping in inventory Sherlock like the article is trying to say and the basis for all the positive comments. The inventory in California alone is at a 9yr supply. 9 yrs! We are all screwed in my opinion.
http://www.doctorhousingbubble.com/california-has-nearly-9-years-of-housing-supply-58-county-mls-supply-and-foreclosures/
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tatupu70 says
I wish I had ignored it. It proves to me that people are dishonest. Maybe not solely intentionally, but it still makes it dishonest in my opinion. I have a EE degree, a degree in mathematics with a specialization on statistics. How the general public throws around numbers to make hair brain conclusions is amazing to me. What really pisses me off is that this main stream reporting is what all my friends and relatives use to make their purchase decisions in life. There are a small percentage of people that have enough critical thinking training to see through this stuff easily. However, the vast majority, most of my relatives and friends, don't have that training.
To me it is just like the denial of smokers in the 80's and early 90's. The real hurdle to get over was to actual convince people that smoking was bad for their health. Even after so much evidence that proved without any doubt, they still were bombarded by a few reports from people with a vested interest saying things were not conclusive. They hung onto them reports like it squashed all the good science that was already done. You know what it finally took? For people to have friends and family around them get seriously sick and die, unfortunately. Now, you ask anyone if smoking is good for you and everyone knows. Back then, it was 50/50. I wish everyone knew how to filter the data. It would make us all a little sharper and maybe stop or slow down these boom/bust cycles that almost kill us all.