Correction: Harvard Housing Report Says Low Price Homes Declined More than High Price Homes, But Portland Best of Metro Areas Listed.

Correction: Cleaned up % decline shown in text bullets to match data in table
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WSJ has picked up HERE on one of the tables in the Harvard Joint Center State of the Nation's Housing Report for 2011. 

Table shows that from their peaks since 2000, low price homes have declined MORE in price than high price homes in 16 metro areas. (High price homes are those in top third of prices, low price homes are those in lowest third of prices).

I went back and calculated the ratio of low price vs high price decline and as table pasted below shows the ratio of low price home price decline vs high price home price decline was LOWEST in the Portland metro area amongst the 16 metro areas listed.  

1. Portland's low price home decline from the peak was 27.9% vs a decline of 25% for high priced homes; this means that low price homes declined only 12% more than high price homes.
2. I calculate the non weighted average ratio for these 16 metro areas at 72%; ratios for select metro areas: 

• In Seattle low price home sales prices declined 31% more than high price home sales prices.
• In Phoenix low price home sales prices declined 41% more than high price home sales prices.
• In Minneapolis low price home sales prices declined 67% more than high price home sales prices.
• In Denver low price home sales prices declined 91% more than high price home sales prices.

 Originally created and posted on the Oregon Housing Blog.

Corrected: Latest Oregon Economic Forecast Lowers Expectations for Oregon Home Prices, Oregon and US Housing Starts.

Corrected link to table I created
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When Oregon releases Economic Forecasts it also releases other data forecasting future economic changes that directly relate to housing. (Housing data includes home prices and construction starts).

The latest set of quarterly Excel "Other" data is HERE. I kept the "other" data from the February Economic Forecast (Prior post HERE) and did some comparisons of 4th quarter projections for 2011-2017.
 

The comparisons and a graph can be found in the PDF file I created HERE.

Some observations:

1. Compared to the February 2011 Forecast the May 2011 Forecast has reduced the expectation for the Oregon Home Price index by more than 4% for the 4th quarters in every year through 2015.
2. The Forecast 4th Quarter 2015 Oregon home price index value in the May Forecast (413.33) is about the level of the price index (412.6) in the 1st quarter of 2006.  
3. So, at the start and end of nearly a 10 year time period, the home price index for Oregon will be virtually the same. That's a Wow, and not in a good way.
4. Oregon housing starts for the 4th quarters in 2011 (-4.2%) and 2012 (-8.3%) in the May Forecast are also down significantly from the February Forecast. US Housing starts for same periods are also down, by 8.7% and 3.2%).
   

Originally created and posted on the Oregon Housing Blog.

Real Long Term Return on Home Ownership, Less than 0%?

Post HERE from Business Insider will likely make some people mad.  

Based on article HERE from Philadelphia Federal Reserve Bulletin, originally published in Harvard Business Journal. Article says:

Assuming an annual depreciation rate of 2.5 percent, a property tax rate of 1.5 percent, a mortgage interest rate of 7 percent, and a marginal income tax rate of 25 percent for a typical taxpayer, the adjusted real rate of return on housing actually falls below zero (1.3-2.5-1.5+0.25(7+1.5))=-0.575 percent! Remember that 1.3 percent is the real rate of return of the national house-price index between 1975 and 2009.13 Meantime, under the 25 percent marginal income tax rate for a typical taxpayer, the rate of return on stocks during the same period falls only to 4.5*(1-0.25)=3.375 percent.

Originally created and posted on the Oregon Housing Blog.

New Market Specific WSJ Real Estate Charts, Table: Portland Metro a Mixed Bag.

Link that includes graph for Portland metro is HERE; using WSJ data I created a ranked Metro table HERE.

Table shows out of 30 metro areas that Portland Metro ranks better than most in inventory reduction and past due loans; slightly below the middle of the pack for months of supply and unemployment rate, and close to bottom in price change. (Seattle outperforms Portland in all but the past due loans category).

Originally created and posted on the Oregon Housing Blog.

Portland Case Shiller December 2010: Down 7.82% from Year Ago, 25.6% from July 2007 Peak; But CS Increase Still Handily BEATS the DJIA Since Dec. 2000.

National PR is HERE:

National Home Price Index declined by 3.9% during the fourth quarter of 2010. The National Index is down 4.1% versus the fourth quarter of 2009, which is the lowest annual growth rate since the third quarter of 2009, when prices were falling at an 8.6% annual rate. As of December 2010, 18 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were down compared to December 2009. Both Los Angeles and San Francisco reported negative annual rates of return in December, leaving San Diego and Washington DC as the only two cities where home prices are increasing on a year-over-year basis, +1.7% and +4.1%, respectively.

Portland: Annual and Monthly Changes Continue Negative; Index Continues to Plummet to a New 2010 Low; But, Over 10 Years, CS Increase Remains Far Above DJIA Increase.

Annual: The Portland index value of 138.23 for December is a 7.82% decrease from December 2009. This follows a 6.96%  annual decrease from November 2009, a 5.15% annual decrease in October, and a 3.62% annual decrease from the September.

Monthly: The Portland December index is a 1.2% decrease from November.

Historical: As of December 2010 the Portland home price index had declined 25.6 % from the July 2007 peak, and by 6.2% since January, 2010. The most recent time the Portland CS index was below the current 138.23 was in February of 2005 when the index value was 136.35.
NEW TABLE: A new table I have constructed and pasted below shows the ANNUAL change (December to December) in the CS index for the Portland Metro area in the last 10 years.  It shows that the 

1. While the Portland Metro index remains 33.1 % HIGHER than in December 2000; but just three years ago, in December 2007, the index was 75.7% higher than in December 2000. 
2. HOWEVER, the DJ Industrial Average increased by only 7.3% from December 29, 2000 to December 31, 2010 [(11,577.51/10787.99)-1]. This means that the 33.1% Portland Metro CS index increase for a similar 10  year period was 353.3% HIGHER than the 7.3% DJIA increase [(33.1% /7.3%)-1]

Click to Enlarge

 Originally created and posted on the Oregon Housing Blog. 
 

Freddie Mac Analysis Shows Big Foreign House Price Run Up and Fall Too, but Not In Germany.

Freddie Mac Chief Economist blog post is HERE.  His explanation of lack of run up in Germany also points out that Germany was not totally immune to financial strain in other countries.

First, the hurdles to homeownership are higher in Germany. While long-term prepayable mortgages with down payments of 20 percent or less are standard in the U.S., they are virtually unknown in Germany. Borrowers there can expect to make 30 to 35 percent down payments on mortgages with terms of 10 years or less, and also agree to stiff pre-payment penalties equal to the interest they would have paid had the loan amortized to full maturity. Second, Germany's mortgage terms also reflect a housing policy that has primarily targeted public support towards middle-class rental housing as opposed to owner-occupied homes. The homeownership rate in Germany is 42 percent versus 67 percent in the U.S. and more than 80 percent in Spain.Third, Germany did have a housing price bubble. But it took place a decade earlier, following re-unification. German home prices rose much faster than incomes as the country merged, and were coming off their peak at the start of the 21st Century. As a result, they are now back in line with neighboring countries.

Even so, Germany wasn't immune from the financial aftershocks that followed when the housing bubble popped in 2007, according to a recent report from the Congressional Budget Office."In some (European) countries, the government bailed out issuers of covered bonds, and in early 2009, the European Central Bank launched a €65 billion ($84.5 billion) program to purchase covered bonds in an effort to restore liquidity to that market," the CBO writes, and "Spain and Germany guaranteed another €300 billion ($390 billion) worth of covered bonds issued by mortgage lenders" to shore up their housing finance systems.

Originally created and posted on the Oregon Housing Blog.

Oregon Economic Forecast: Housing Price Indices for US and Oregon Have Different Short Term and Longer Term Results.

Yesterday, Oregon released it's latest economic forecast; related materials can be found HERE.  From the quarterly other indicators Excel workbook, I extracted values for 4th quarter home price indices for Oregon and the US.

Trajectory of Projected Home Price Indices are DIFFERENT for Oregon than for US. 

The graph below shows DIFFERENT results for Oregon vs the US: 

• For Oregon the index price from 4th quarter CY 2010 to 2011 is expected to increase, but the US price index is expected to decrease. 
• Longer term, for Oregon the 4th quarter 2015 price index is projected to be still 6.4% BELOW the 4th quarter CY 2007 level, but for US the price index is expected to rebound to .5% HIGHER than the CY 2007 4th quarter level.

Click to Enlarge

Originally created and posted on the Oregon Housing Blog.

Clear Capital Projects Continuing Price Declines for Portland Metro in 2011.

Their monthly price index HERE projects Portland metro decline of 4.6% this year, following a 9.5% decline in 2010.  They project even worse for Seattle, a 6.3% decline in 2011, following a 9.4% decline in 2010.

Originally created and posted on the Oregon Housing Blog.

Pic Worth 1,000 Words: Graph Shows 5 Year Case Shiller Peak Price Declines for All Areas.

In thinking about the just released Case Shiller October 2010 data it occurred to me that a graph showing the change in the index for all areas from the peak index value for each area might provide a good snapshot of the relative change in prices. 

So HERE is that one page graph. It shows :

• Portland's decline from it's peak in the last 5 years is 23.8%;
• Portland's decline is slightly more moderate than the 25.6% decline from Seattle's 5 year peak;
• Portland's decline is MUCH more moderate than the 57% decline in the 5 year peak for Las Vegas and the 53.4% decline from the 5 year peak in Phoenix. 

Whether this means that Portland is likely to see higher future declines to catch up with other areas is unknown.

Originally created and posted on the Oregon Housing Blog.

CoreLogic Price Index Shows October 12 Month Oregon Price Decline Is Near Top of All States and is Accelerating.

The Portland Housing Blog has interesting report HERE that says that CoreLogic data show that, as of October, home price declines in Oregon are accelerating. 

And a graphic from their post shows Oregon is near the top in 12 month price decline (note that 3 of the top 12 month declines are in NW states) :

Originally created and posted on the Oregon Housing Blog.