Real Estate Is Not All Local

Posted by: Maya Roney on August 28, 2007

Yes, home prices can fall, and they do. U.S. home prices fell 3.2% in the second quarter of 2007 from the year-ago period, according to Standard & Poor’s Case-Shiller home price index. To put it in perspective, that’s the biggest decrease in the index’s 20-year history.

And it’s not just happening in Florida and Michigan. Prices fell in 3.5% in 20 metropolitan areas and 4.1% in 10 metro areas. In Detroit, they plummeted 11%.

Many real estate trends—speculation, job market growth— are indeed local, but it’s hard to deny that current problems in the mortgage market are national. Turmoil in the credit markets is putting lenders out of business and leading others to tighten their standards for loans.

It’s no surprise that houses are still selling slowly and demanding price cuts. Yesterday, the National Association of Realtors said total existing-home sales were down 0.2% in July. “Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months,” said NAR senior economist Lawrence Yun.

Fans of the “David Lereah Watch” blog will be delighted to know that there is now a “Lawrence Yun Watch” blog out there.

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Reader Comments

p

August 28, 2007 10:55 AM

I confess to not having seen any solid data on this topic, but my perception is that it's not only the financing that's national. Many speculators are buying to hold outside of their own 'local' markets, and even beyond their state markets to buy regionally or nationally.

Personally, the last house I rented was sold by a local couple to a woman who lives 500 miles away. She immediately signed over management to a local property management company.

While I could speculate on what sort of impact this behavior has on a macro level, I really only mention it to reinforce that the housing market as a whole is 'national' in a broader sense than just the issuance of mortgages.

Go Long Go Guam

August 28, 2007 03:47 PM

Yes - Overall, national markets are trending down. How far is yet to be seen.

However, one tiny spot in the U.S. is doing quite well. The tiny U.S. island of Guam is doing very well with YOY sales and prices up substantially.

Why? A massive U.S. military move is slated from Okinawa to Guam from 2008-2014. It will bring an additional 40K people to an island with a current population of only 170K.

Home are still cheap but not pretty to look at as they are buildt with concrete for tyhphoon protection.

I just bought a brand new 3/2 1200 sq ft and rent it to a navy member for $1,900 a month. My PITI is only $964.

It's the only place I can get great returns in the U.S. Low inventory and cheap prices combined with high housing allownances for U.S. military personnel make Guam a great oppourtunity.

I'll go back into the mainland around 2009 when there's blood in the streets.

Go Long Go Guam

August 28, 2007 04:52 PM

Sorry for my spelling on the first post. I got carried away a bit.

Anyways, check out gobalpropertyguide.com on more information about Guam. Also, military housing allowances for Guam are public information.

Go Long Go Guam

Nemoudeis

August 29, 2007 02:33 AM

The decline is in real dollars, right? And not inflation-adjusted ones? None of the articles say; but I assume that's the case.

Because I think if you adjust for inflation, the actual decline in 2Q nationwide housing values is more like something in the area of 5%. Not that anyone's paying attention to that factor at the moment; but it may have long-term consequences in regards to regaining some semblance of affordability.

glenn

August 29, 2007 01:20 PM

Real estate is local! Yes, there are reasons from a national perspective that an affect an area's values, however, there are communities that are better insulated due to its demographic make up.

Yet, even within a real estate market there can neighborhoods still in demand and those that are less in demand resulting in median prices increasing or falling like a rock.

Developersagent.com

September 1, 2007 10:21 PM

Real Estate IS local. I'm a realtor in the DC metro area and despite the downturn for the rest of the country, DC alone is up 4% from July '06-July '07, job growth for the year is up 6.4% and an estimated 18,200 jobs are being created this year in the District alone. Thats nothing compared to the fact that our neighboring state to the North, Maryland, came in at the #1 spot for highest average median income for any state in the country and Virginia is #9. In addition Fairfax, VA is the #1 county in the country for highest average median income, at $100k+ and the first to break the 6 figure mark.
Fortunately its my job to keep my developers and investors as informed as possible so this data has already been researched and written about on my daiy blog but with this market, I couldn't disagree with the NATIONWIDE housing bubble more.

Panama Real Estate

September 2, 2007 10:38 PM

Real Estate Market is going overseas!!

Seattle-Bellevue

September 4, 2007 12:10 PM

Come to the beautiful Northwest! 3.6% unemployment stable and growing housing and a diverse job base. Who cares about rain when you home goes up a STEADY 10% a year and you can breathe. Everyone is coming up here for the education (3 of the top 50 Public High Schools in Bellevue alone). A ton of new condos however those are being absorbed by the elder locals downsizing and first time home buyers. The office space is in high demand and supplies are dwindling as time goes on with prospects coming online. Boeing, Microsoft, Expedia, (headquartered) Google and Yahoo and Research in Motion (Blackberry) looking to locate here off of I-90. This is what a stable Real Estate market is to look like. Check out the historical charts! I agree with Developers Agent as well! I too work along side a developer and this is an opportunity for us to continue buying existing sites and doing it right. No flipping here. Stick built from the ground up.

What the??

January 6, 2008 07:13 PM

Real Estate local? Yes maybe in some areas FOR NOW! The lax and speculative lending standards and greed of both the home buyers and lenders are a NATIONAL problem. WE HAVE NOT EVEN SCRAPED THE SURFACE OF THIS HOUSING MARKET CRASH! Prices and unemployment in the Northwest will be affected in due time. It about time American's smarten up and ignore the cheerleading of realtors and the propaganda on TV. Go to EUROPAC.NET and check out someone who really knows what he is talking about.
PETER SCHIFF....

Thank you for your interest. This blog is no longer active.

 

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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