By Christopher Briem, on July 29th, 2011
Oh man, this is bad. I mean, really bad. Like one of the worst ideas to flow out of Harrisburg in a long long time. For those who follow these things, it remains true that Pennsylvania has fared at least relatively well (or how about ‘less bad’) in the vast foreclosure crisis that hit most everywhere in the nation. There is not any one explanation for why that is, but one big factor has been that Pennsylvania was remarkably ahead of the curve (how often does that happen?) in policies aimed at foreclosure prevention. Why that is may all relate to our past economic calamities that forced us to deal with these types of things long before others.
So one of the key programs that kept Pennsylvania stable was the state’s longstanding HEMAP program, which I m just now seeing is being defunded and thus shutting down for the most part. I am not sure anyone has ever done a cost benefit analysis of any kind on the program, but this just has to be one of those programs that has a benefit far outweighing the costs. No matter what your political or philosophical bent it’s hard to see how this makes sense. In fact I think it had a sort of omni-political level of support.
It just … like…. I’m speechless. Bad. Bad. Bad.
h/t @capitol_ideas for pointing it out. I have just been distracted or I should have caught this earlier. I see the Inky had some longer coverage earlier in the month.
Ugh.
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By Bron Suchecki, on July 1st, 2011
The two charts below from Andy Smith’s (Bache Commodities) latest piece are a humorous use of US house prices to illustrate the problem of Big Government. The first shows the real boom is in Government jobs and lobbying. The second how gold buyers aren’t fooled by America’s shift from productive to unproductive jobs.
By Christopher Briem, on June 21st, 2011
When I say writing matters, it’s no joke. I still am trying to figure how these two headlines represent reporting on the same exact new data:
Trib: Western Pennsylvania home sales plummet during May
PG: House Sales in Region Rise in May
Good thing everyone reads more than the headlines.
Ignore the meta for the moment. The data out there on the local real estate market is getting interesting beyond the generally positive trends that is getting more and more notice nationally. The fact that average prices are accelerating so much more than median prices here for residential real estate could be quite significant. It probably correlates with the faster appreciation for new homes compared to existing homes that is being reported as well.
If we are seeing some marginal improvement in population migration into the region, then it follows those folks might be in the market for homes. Do the numbers suggest that the existing housing supply in the region is not what these new residents are looking for. That is my best hypothesis how we have a bifurcated market to the degree we do with ample supply of for lack of a euphemism we will call low-end housing… but at the same time a lack of supply in what the average US home buyer wants.
Just a hypothesis, but whatever the answer is, it is awfully important and would have lots of implications for growth patterns within the region and possibly overall regional growth. It all would fit with what is another known known that residential real estate construction has been on life support here for decades. Lack of new supply has resulted in one of the oldest housing stocks in the nation. In that sense we have decades of catching up to do before the local real estate market can supply what is common elsewhere.
Speaking of writing… another headline today: “Pittsburgh, Worldwide economic powerhouse“. Not over the top is it? Maybe it is time for Westsylvania to actually secede?
By Christopher Briem, on May 20th, 2011
I regret to report what is awful news for the Pittsburgh region. By yet another metric out there, local real estate prices are growing faster than most anywhere else in the nation. If the folks who look at real estate data do not stop spreading such misinformation about the region than who knows what bad things may result. Once Pittsburgh housing markets gain much more against some of our regional competitors we will not be able to tout the low cost housing here in the region. Most rankings of regional quality of life or similar things place a disproportionate rank on housing affordability which certainly is going to suffer as a result. We will have to drop on all those rankings. It could be really bad. What can be do to stop this? Where is Richard Nixon when you need him? I am sure there is some form of price control that might be helpful.
Even if you discount the fact that most real estate markets nationally are continuing to decline, it is remarkable news for Pittsburgh. Most other markets are not expected to see rebounds until 2014!? Yet Pittsburgh is on the opposite tract altogether. At +3.9% over just the first part of the year, you are really talking a really rapid rise in prices at an annual clip. Not sure Pittsburgh has seen that in some time. If you then account for the low inflation of late compared to past decades, you have to ask yourself if real estate is the fastest period of real housing value for the region since ???
And then there is the impact on property assessments in Allegheny County which generally have been showing some of the stronger gains within the region. It means, among other things, that any delay in property assessments will only result in ever larger jumps in assessed values. Right now the county must be using recent sales price transaction data through the end of 2010 and going back a couple years I bet. If that window of data gets pushed to the right it could mean significantly higher assessed values.. especially for some homeowners since I am sure the appreciation is not uniform across the region.
By Bron Suchecki, on May 16th, 2011
This post by Terry McFadgen on Australian housing prices is a good summary of the question of if/when prices will tank. One thing overseas readers should keep in mind is that Australian borrowers can’t walk away from their debt – the bank can foreclose on you and then go after you or bankrupt you for any remaining debt not paid by the sale of the house.
As you would expect this dampens the negative price spiral that can occur in countries where walk away is an option. However, consequence of this is that in the face of financial difficulties people will tend to restrict other spending and divert money to paying off the mortgage to avoid the stigma of bankruptcy (although this doesn’t seem to have bothered “former tennis ace” Mark Philippoussi) This contraction in discretionary spending acts like the “Paradox of Thrift” Terry mentions in his article.
I think Terry makes a good case that “house prices could simply slide down gently over a long period, with inflation doing most of the work of price adjustment” but he does identify four risks/shocks which could bust prices.
He notes that the RBA is between a rock and a very hard place in trying to de-bubble housing but having to increase interest rates too much to control inflation, or having to cut interests rates too much if housing tanks which will weaken the Aussie dollar and stocks as foreign investors pull out.
My view is that push come to shove RBA will cut rates and damn the exchange rate as an imploding housing market is not good for banks and the political pressure will be too intense. This will be an extend and pretend that will work for a few years as there is plenty of room to move with interest rates at the 6% level. A weak exchange rate is good for AUD precious metals prices, by the way, a sort of hedge against house price drop in a way.
I would also not discount politicians doing something stupid to “help” housing. With debt to GDP of 20% a populist call to “do something” could be made when other countries are at 100% ratios (”we have the capacity”). It will all be wasted of course but could drag the game on a bit longer.
However, as the US shows us, once you get to zero interest rates you’ve got nowhere to go and QE doesn’t help housing. Once we reach that point then we will really see a housing price crash as the boomer demographics, China slowdown and “income levels [don't] hold up relative to interest rates” factors all kick in together.
To sum up my view on house prices, “It Won’t Happen Overnight … But It Will Happen” (explanatory link for non-Aussies)
By B.P.T., on February 11th, 2011
The federal government released its long awaited plan for Freddie Mac and Fannie Mae today, where it announced that it plans to wind down the two companies by slowly increasing their guarantee fees, reducing the maximum amount of money that they can lend on a home, and selling off their existing loans at a rate of about 10% per year. These changes, combined with increasing interest rates, are expected to have a negative impact on housing prices, so here is a look at a few high end markets that could see the greatest impact from the end of Fannie and Freddie:
Maui: Maui’s real estate market is still recovering from a decade long bubble as housing prices continue to decline, and are expected to show further weakness throughout 2011. There is hope for an improvement in the Maui real estate market in 2012, but average home prices that are significantly above the national average, continued weakness in the tourism sector, and the large number of vacation homes in the market could continue to hold prices down.
Manhattan: Home prices in Manhattan appear to be stabilizing and even improving as condo prices increased between 7.5% and 14% in the third quarter of 2010 compared to the previous year. This gain was attributed to the rebound in the financial services market, which added jobs over the last year and saw the stock market continue to post gains, but high prices and tighter lending standards are expected to keep prices from rising too quickly.
Washington DC: Home sales in the nation’s capital showed a strong gain in January, with sales volume up 31% over a year ago, and home prices up 7.5% compared to January 2010. Despite having some of the most expensive housing in the country, Washington area home sales have continued to show strength as the area’s economy remains strong.
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By Eldon Mast, on February 24th, 2010
Seasonal factors play an important part in the monitoring housing prices, pushing up prices during the high traffic months of the spring and summer and pulling them down in the cold of the fall and winter.
The Case-Shiller data on home prices was released on Tuesday. When seasonally adjusted, the data points to an extended price recovery, at plus 0.3 percent in December vs. 0.2 percent gains in the prior three months going back to September. These results point to a building on top of last years mid-year gains.
City-by-city, the data shows consistent improvement continuing to build in the West and the Midwest. The narrower 10 City Composite Index also accelerated to a gained 0.3% following three months of only a 0.2% increase.
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