1 / 20

Why the Housing Market “Crisis” Isn’t

Why the Housing Market “Crisis” Isn’t. Dr. Stanley D. Longhofer October 2, 2007. Some Scary Housing “Facts”. New and existing home sales are “plummeting” while inventories are “through the roof” New home construction has “come to a standstill” Foreclosures are “skyrocketing”

jacob
Download Presentation

Why the Housing Market “Crisis” Isn’t

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Why the Housing Market “Crisis” Isn’t Dr. Stanley D. Longhofer October 2, 2007

  2. Some Scary Housing “Facts” • New and existing home sales are “plummeting” while inventories are “through the roof” • New home construction has “come to a standstill” • Foreclosures are “skyrocketing” • Home prices are “in a freefall”

  3. Why Do We Care? • Macroeconomic impact of housing • Determine what is happening to my personal housing investment • Should I buy or sell? • What is happening to the value of my house? Remember: No one owns the average U.S. home

  4. Home Sales are Down Year-over-year Percentage Change Existing Home Sales NewHome Sales Sources: NAR; U.S. Census Bureau

  5. Inventories Are Up As Well Months Supply (SA) Existing Homes NewHomes Sources: NAR; U.S. Census Bureau

  6. Home Sales: The Real Story • New and existing home sales have fallen and this is a nationwide phenomenon • The rise in inventories is largely due to the decline in sales, not an up-tick in new listings • Question: Why are sales falling while the overall economy is still fairly strong? • Real GDP growth was up 3.4% in 2007Q2 • Unemployment was 4.6% in August

  7. What about Construction? • New home construction has fallen sharply as well, no matter how you measure it • Building permits • Housing starts • Completions • This is of more concern, because it represents real economic activity, not simply the transfer of existing assets

  8. Are Foreclosures Skyrocketing? • Ignore foreclosure reports that use data from RealtyTrac • The areas covered by these reports change from month to month, making comparisons over time meaningless • The “good” foreclosure and delinquency data are compiled by the Mortgage Bankers Association of America

  9. Severely Delinquent Loans Percent of Loans Serviced 14% of all loans Subprime Loans 2% of all loans 3% of all loans All Loans Prime Loans Source: MBAA

  10. The Foreclosure Debacle? • If it were not for two problem areas, foreclosures nationwide would have fallen in the 2nd quarter • A regional recession in the rust belt • Four states with a high percentage of investor loans: Arizona, California, Florida, and Nevada

  11. Are Home Prices Falling? • It depends on whom you ask? • NAR median sale price • OFHEO house price index • S&P / Case-Shiller house price index

  12. U.S. House Price Appreciation Year-over-year Percentage Change NAR Median Price S&P / Case-Shiller HPI OFHEO HPI Sources: NAR; S&P; OFHEO

  13. Comparing House Price Indices • The drop in the NAR median sale price reflects fewer sales in high-priced coastal markets, not a decline in the value of any given house • The S&P index is constructed so that it emphasizes changes in high-end houses • Centered on large, high-priced markets • Includes very-high priced houses • Value-weighted

  14. OFHEO HPI by S&P Coverage Quarter-over-Quarter Percentage Change States with Full Coverage States with Partial Coverage States with No Coverage Source: WSU Center for Real Estate, using data fromOFHEO and U.S. Census Bureau

  15. Comparing House Price Indices • Differences between the OFHEO and S&P indices gives us insight into what is really happening to house prices • Appreciation in most markets nationwide has slowed, but is still positive • High-end homes in high-priced markets are bearing the brunt of the downturn • Even in these markets, prices are well above where they were just three years ago

  16. Comparing House Price Indices Index: 2000Q1 = 100 S&P U.S. HPI OFHEO HPI Sources: S&P; OFHEO

  17. A Housing Market Crisis? • New and existing home sales have fallen, but it is hardly the crash being portrayed in the media • A self-fulfilling prophecy? • Foreclosure problems are fairly isolated • House price appreciation has slowed, but prices continue to rise most markets across the U.S.

  18. A Housing Market Crisis? • From a macroeconomic perspective, there could hardly be a better time for a housing slowdown • Interest rates are low • Employment is growing, albeit slowly • GDP growth is solid • Housing market statistics typically reflect what is going on in the overall economy, not the other way around

  19. A Housing Market Crisis? • From a personal perspective, you should simply ignore what you hear about the housing market in the national media • Focus on what is happening in your city or, even better, your neighborhood

  20. Wichita State University Center for Real Estate Building a Vision for Real Estate in Kansas

More Related