Tuesday, June 24, 2008

Slide or Cliffdiving?

It's all in the spin. This is far worse than the words belie.
Reuters
Home prices extend record slide in April: S&P
Tuesday June 24, 9:04 am ET

NEW YORK (Reuters) - U.S. home prices extended their record slide in April, with every top metropolitan area now posting annual losses and many showing double-digit declines, according to the Standard & Poor's/Case Shiller home price index report on Tuesday.
The S&P/Case Shiller composite index of 20 metro areas fell 1.4 percent in April from March and slumped by a record 15.3 percent over the year.
1.4% per month compounded is nearer 19% per year. The toboggan is speeding up. Put another way near everyone who bought since 2002 has lost money on their housing investment after expenses.

30 comments:

Agent #777 said...

I know this is a weekly newspaper AND many people likely couldn't care less about Tennessee (where we have moved), but you have to see at least the last 2 paragraphs of this article:
http://www.metropulse.com/news/2008/jun/18/realty-bites/

“How many times in your life are you going to be able to buy a house that didn’t lose its value at a discount?"

CLASSIC!

At current sales rates, about a 4 year supply of 500k+ houses is a great market? I am just mad that it does not have table 3 which is in the hard copy version, which states losses for different cities "bearing in mind these are sales prices, not values..."

Pass the kool-aid please!

Agent #777 said...

Rob, I have to know...

How do you figure people who have bought since 2002 have lost money? I would say 05 and maybe 04, but to make a blanket statement of back to 02 seems out of line. I bought in 02 and sold in 06, and while the sales have stagnated in my old hood, I would be way ahead even now, even with selling costs.

Rob Dawg said...

Median prices don't tell the whole decline story. Case-Shiller tries to adjust for quality by tracking same house but even they miss all the quality improvements necessary to see a price increase. Buy a house 2002 pay transaction costs. Hold/live 6 years till 2008 and sell at market. Total up all the intervening costs and subtract out OER. Charlotte, Dallas, other places may see inflation beating increases but even there most likely those are exceptions once you include carrying costs of HELOCs or lost opportunity costs or ROI of improvements. '06-'08 has wiped out the gains of '02-'05 and the next 18 months will wipe out what's left of '00-'02.

w said...

I am seeing more and more REO in the million plus range in Ventura County. I cannot wait to see what happens next year.

Rob Dawg said...

VenCo has termites. Looks okay but don't look underneath. Next week 4% of the workforce gets a pink slip. T.O. and Simi are about to get bitch slapped.

Agent #777 said...

I did not know you were adjusting for inflation - I thought we were talking a pure gain or loss.

I understand the other items you are including, but then you are leaving out the equivalent rent. The Orlando area is definitely weakening, but I bought in the low 120's, and I am pretty sure my old house would bring 180k even on an emergency basis. A few non-distress sales still show the house being salable at 235-250k. I would say this is still in the profit range for 02.

w said...

4%? Countrywide?

I see that the Realtor down the street is throwing their house of 4 years onto the market while it is hot
! Selling cars too. Kinda sad. Hearing more and more stories of underemployment and unemployment from friends. Some others getting worried as they think of themselves as being on the bubble at work. The mood has definitely changed. Most people living off of two salaries and thinking "gosh, what happens if one of us loses our job?"

w said...

By the way these dual incomes were required to earn the six figure family incomes to live modestly in VenCo. Psychologically it was worth the struggle and sacrifice during the boom as everyone was getting rich. I wonder how much fun it is to sacrifice while you get poorer?

Peripheral Visionary said...

I realize the Case-Shiller index looks bad, but none of us have checked the Shill-Casey™ index since last January. Last I heard, it's on track to hit a million by Christmas. Sweet™.

Casey Serin said...

That's right P.V., I intend to be a millionaire [in Zimbabwean Dollars] by Christmas [of 2050]. Sweet!! ;-)

Akubi said...

If condos were included in the index I think the decline would be even worse.

w said...

Casey, you crack me up. You were already a Zimbabwean millionaire several times over when you got your rebate check from George. Set your sights higher, like billionaire.

Tav said...

Crazy cats, this is WOLFMAN TAV here.

I have some news that will BLOW YOUR MINDS. I have here another single from the upcoming CASEY SERIN GREATEST HITS (due to appear in your favorite record store on July 4!) which has just been released!

Click here to listen to some more sexy swingin' sounds of Casey "DOWN UNDER"

Northern Renter said...

The most interesting thing I've read recently (and I think it was in HBB over the past few days, maybe Calc Risk) was a discussion about banks that hesitate to foreclose. A lot of people stop paying their mortgage and the banks let them live quite a while at their home before foreclosing. Naturally, they send the bills and angry letters and naturally the "homeowner" tears up the letters. This works for the banks in a sense because they don't want a sudden deluge of foreclosures and would rather have a slow, orderly disposal. More importantly, the house is lived in and maintained by the "homeowner", so that its worth doesn't drop to zero.

Yes, I know that this doesn't always happen, but this phenomenon will blunt the immediate effects of the housing bubble but also prolong it.

NR

Property Flopper said...

W - Casey did not get a "stimulus" check, they only went out to people who filed a tax return.

w said...

From IRS website:

Basic Eligibility
Q. What do I need to do to get an economic stimulus payment?

A. All you need to do is file a federal income tax return for 2007. Even if you are not otherwise required to file a tax return, you must file a 2007 return in order to receive a payment this year. Although some filers, such as high-income filers, will not qualify for a stimulus payment, most will.

Casey is an expert at filling out paperwork for free monies!

H Simpson said...

local talk radio station followed this news story with NAR side. Kisses and umbrella drinks for everyone. No problems, C-S is wrong etc..

FBI ought to raid their Hq looking for their meth lab...

Property Flopper said...

W - But it's been pointed out to Casey that the moment he files, he needs to claim the income from the "Sweet Cash Back".

The IRS has a file on him and CS had avoided filing 06 and 07 taxes for fear of this.

w said...

I really should dedicate part of my life to Caseyology so that my attempts at humor will not be tripped up by my lack of understanding his minutiae.

soem dood said...

w - Caseypedia is your friend.

w said...

You're kidding right? Caseypedia! I have always wondered how you guys know so much to keep this running joke going. Can you tell me the background about how you all got to be so steeped in Casey's tea?

Sweet Cashback said...

It's the CASHBACK stupid.

I hope you all watch the pathetic display on Larry King tonight (1,000,000 Foreclosures!).

Kiyosaki, Trump and various other morons. They should have invited Snowflake as a foreclosure expert.

Akubi said...

Caseypedians are aware of all internet traditions™!

Casey Serin said...

Damnit, soem dood -- we miss you over at CH.C ... big news might be brewing:

It appears that "I" have added two words to the old Escape My House site. WHAT WILL HAPPEN NEXT?!?! ;-)

Akubi said...

Fully Zillowed Luba is aware of all internet traditions.

soem dood said...

Casey:

You trying to troll me back into your world with just a word or two on one of your otherwise dead sites is an old internet tradishun! I shant fall for it again!

(must....avoid...impulse...to.look...)

Peripheral Visionary said...

"A lot of people stop paying their mortgage and the banks let them live quite a while at their home before foreclosing."

There has been some discussion of it (most recently on Mish's site), and quite a bit of anecdotal evidence to support it. I suspect that the "new squatters" trend will be more significant than the "walk aways"; it never made sense to me why someone would voluntary leave their domicile when they could stay for a very long time rent-free, even under the perpetual threat of eviction.

The real risk comes when people start finding out about how much this is going on. Imagine a family with serious financial problems finding out that their neighbors have been staying rent-free after defaulting on a loan, and that the bank hasn't gotten around to foreclosing for nearly a year; there will be a serious temptation to stop sending in the mortgage check and see how long they can skate by.

As you indicated, the net effect will be to soften the impact of the housing crash in the near term, but it will seriously prolong it in the long term

Rob Dawg said...

PV,
You managed to say almost exactly the same thing I said at Calculated Risk when this came up.

Over there I've been taking a major ration of crap for shouting how critical it is that lender and government response not create more moral hazard. Tanta and others wave it away. First, it was banks acting in best interests, then it was dismissed as no evidence, then anecdotal evidence and then it was impossible to separate out from other factors. All they have left is "it never happened before." We will prevail.

Property Flopper said...

CA AG suing CountryWide...

Casey Serin said...

Countrywide's orange-colored CEO Angelo Mozilo thought that his company could rip off the general public, but let's not forget that I took them for slightly over a half million dollars.

Win-win for me, once again! If there's anyone the Attorney General should be suing, you're looking at him. ;-p