Bad news from Case-Shiller, Y'all come back now

Okay, so first the NON-seasonally adjusted NY metro data:

January 2004 163.63
February 2004 164.92
March 2004 166.61
April 2004 168.30
May 2004 170.52
June 2004 172.90
July 2004 175.74
August 2004 177.93
September 2004 179.79
October 2004 181.90
November 2004 183.69
December 2004 185.16
January 2005 187.19
February 2005 189.29
March 2005 192.17
April 2005 194.10
May 2005 195.96
June 2005 197.77
July 2005 199.86
August 2005 202.33
September 2005 204.83
October 2005 207.64
November 2005 210.30
December 2005 212.68
January 2006 213.50
February 2006 214.47
March 2006 214.33
April 2006 214.97
May 2006 215.57
June 2006 215.83
July 2006 215.25
August 2006 214.34
September 2006 214.09
October 2006 214.29
November 2006 214.24
December 2006 213.79
January 2007 212.78
February 2007 212.52
March 2007 212.40
April 2007 211.62
May 2007 210.51
June 2007 209.49
July 2007 208.37
August 2007 207.18
September 2007 206.39
October 2007 205.54
November 2007 204.38
December 2007 202.09
January 2008 200.44
February 2008 198.31
March 2008 196.52
April 2008 194.72
May 2008 194.23
June 2008 194.74
July 2008 193.70
August 2008 193.48
September 2008 191.66
October 2008 189.66
November 2008 186.52
December 2008 183.45
January 2009 180.93
February 2009 177.84
March 2009 173.60
April 2009 170.69
May 2009 171.17
June 2009 172.37
July 2009 174.16
August 2009 175.47
September 2009 175.33
October 2009 174.89
November 2009 172.98
December 2009 171.78
January 2010 171.22
February 2010 170.46

Yikes -- the MoM of pretty much every single metro dropped nationwide. Perhaps the beginning of the double-dip many are predicting once stimulus wears off, perhaps just seasonal...

Here's the NY Metro SEASONALLY adjusted Case-Shiller Index data. (For the record, given anomalies in the market, most of the experts are saying to pay more attention to the NON-Seasonally adjusted C-S Index data.)

January 2004 163.6
February 2004 165.4
March 2004 167.4
April 2004 169.1
May 2004 171.1
June 2004 173.3
July 2004 175.7
August 2004 177.5
September 2004 179.2
October 2004 181.2
November 2004 182.9
December 2004 184.6
January 2005 187.1
February 2005 189.7
March 2005 193.0
April 2005 195.1
May 2005 196.7
June 2005 198.2
July 2005 199.9
August 2005 201.9
September 2005 204.3
October 2005 206.8
November 2005 209.4
December 2005 212.0
January 2006 213.4
February 2006 214.9
March 2006 215.3
April 2006 216.1
May 2006 216.5
June 2006 216.2
July 2006 215.3
August 2006 213.9
September 2006 213.4
October 2006 213.3
November 2006 213.2
December 2006 213.2
January 2007 212.6
February 2007 212.9
March 2007 213.4
April 2007 213.0
May 2007 211.6
June 2007 209.8
July 2007 208.3
August 2007 206.6
September 2007 205.6
October 2007 204.4
November 2007 203.4
December 2007 201.6
January 2008 200.3
February 2008 198.7
March 2008 197.6
April 2008 196.1
May 2008 195.5
June 2008 195.0
July 2008 193.6
August 2008 192.8
September 2008 190.8
October 2008 188.5
November 2008 185.7
December 2008 183.1
January 2009 180.8
February 2009 178.2
March 2009 174.6
April 2009 172.0
May 2009 172.4
June 2009 172.6
July 2009 174.0
August 2009 174.8
September 2009 174.4
October 2009 173.7
November 2009 172.2
December 2009 171.5
January 2010 171.1
February 2010 170.8

For the record, I will post the usual disclaimers. The Case-Shiller is an awkward measure of Manhattan RE (and to a lesser extent other boroughs) since it does not include Co-ops and Condos. There is a Case-Shiller Condo Index but even that is probably a poor measure of what's going on since it only covers resales - hence omitting all the new inventory on the market.

Still, it's the best measure I know of for judging the change in prices in similar units. Changes in "average sale" tell you very little since the composition of the sales change from month to month and quarter to quarter.

Sure, its not an accurate assessment of the Manhattan market.

But it sure is a sign that something is going on around here....

Not that the 170.8 is the lower number since 2004.

While the NY metro is not among the "sand states," the number of foreclosure properties on the market, especially in the outer boros and outlying counties, seems to be steadily increasing. As a general rule of thumb, the existence of distressed properties in the market tends to drag prices down.

The C-S data reported today is for February. It wouldn't surprise me if the end of the $8K tax credit on April 30th (in contract by April 30th, closed by June 30th) gives a slight bump up to the C-S data for the next few months (March through June), but unless all of the distressed properties magically disappear, or vast numbers of new jobs arise from the aether, the end of the tax credit, the bump up in mortgage rates, and the continuing increase in distressed (especially "short sales") properties, is likely to bring another step down.

In 2009, there was a significant bump in both prices and activity starting in the Summer and running through early Fall (later than the usual late Spring bounce,) I'm skeptical that lightning will strike twice. People can continue to believe in the Real Estate Fairy and hope they'll find a big chunk of cash under their pillow in the morning, but if they're not in contract by April 30th, I suspect they'll be in for a rude awakening later this year.

> While the NY metro is not among the "sand states,"

what is that?

About jobs: how much impact does some job creation have on home buying? which is the lag? nobody buys a home the month they got a job. maybe the relevant number is the decrease in job destruction, so that people are less afraid of losing their current job. i've seen no good research regarding this though.

Tax Credit: are you 100% sure it will not be renewed?

From the report:

* prices reached recent new lows for six cities in February – Charlotte, Las Vegas, New York, Portland, Seattle and Tampa – sending a more cautionary message compared to the annual figures

* foreclosure activity, which have reached their highest level in at least the last five years. As these homes are put up for sales, we may see some further dampening in home prices.

I'd add that better quality of housing is entering the REO pipeline, so prices will be affected much more at the mid-range than what they were with subprime REOs, bought mostly by investors to rent and then flip. Those new prime REOs are going to provide a better substitute for buying a used or new home the regular way as a 1st residency.

"* prices reached recent new lows for six cities in February – Charlotte, Las Vegas, New York, Portland, Seattle and Tampa – sending a more cautionary message compared to the annual figures"

I have to say that given all the recent press, I'm surprised. Not surprised that it happened, just surprised at how much the coverage is pointing the other way.

notadmin - as for your question about the "sand states":

> While the NY metro is not among the "sand states,"

what is that?

The term "sand states" is the term used to describe the group of states hit earliest and hardest by the bursting of the housing bubble. These include California, Nevada, Arizona and Florida. (Texas also has a lot of sand but it is a noticeable exception to the downturn.) I mentioned the sand states because NY's RE problems are nowhere near as bad as the "sand states." Comparatively speaking the percent of NY homes in foreclosure is very low relative to the sand states, but by historical standards relative to NY itself, the amount of distressed property on the market is very high.

As for jobs and housing prices, you are correct in assuming that the relationship is not direct, but there is a relationship. What people more knowledgeable than myself usually stress when talking about housing is "household formation." To use a very elementary example, Jane and Johnny Collegegraduate get their BA. Jane and Johnny can't get a job in NYC so they move back in with their folks in the burbs. (That is to say, they maintain the existing household.) If and when Jane and Johnny find a job in the city, they might rent or they might have the folks help them buy a place in the city. (That is, Jane and Johnny have formed a new household, and regardless of whether they rent or buy, the new household creates demand for housing stock.)

As for the renewal of the Tax Credit - I'd be willing to make a bet that it won't be renewed before it expires. If housing starts to slump really badly again, it wouldn't surprise me if the gvt started buying MBS again. If it gets really bad, Congress might even entertain the idea of bringing back the tax credit - but I know of no serious effort in Congress to revive the tax credit as we speak - so I'm willing to bet money it won't be renewed by June 30th.

"Comparatively speaking the percent of NY homes in foreclosure is very low relative to the sand states, but by historical standards relative to NY itself, the amount of distressed property on the market is very high."

Of course, most of that is factored into the fact that Manhattan property is several times more expensive. If all factors evened out, that would be a catastrophic drop for NYC.

I am curious to know if Urbandigs still believes his predictions that Manhattan will look good in the "next few quarters" because the year over year price improvements will, he claims, be positive.

To quote from his web site:

By sifting through all the Big Brokerages' quarterly reports, I am seeing a clear trend that:
# Q1 2009 reflected the extreme low for sales volume/pace
# Q2 2009 / Q3 2009 reflected the extreme low for price action
Therefore, as I said in previous discussions, "What I am unsure of is which quarterly report will ultimately show the improvement in price action from the extreme trades at the height of fear in early 2009". I think I am now getting more confident that the extremes of price action this market saw were spread out due to the natural lag and ultimately reflected across Q2 & Q3 reports of 2009.
[Urbandigs uses Quarterly aggregate numbers for sales which, because of the changing composition in sales, tells us very little about changes in pricing (aka "price action"), you need an index like Case-Shiller to do that.]

January 2009 180.93
February 2009 177.84
March 2009 173.60
April 2009 170.69
May 2009 171.17
June 2009 172.37
July 2009 174.16
August 2009 175.47
September 2009 175.33
October 2009 174.89
November 2009 172.98
December 2009 171.78
January 2010 171.22
February 2010 170.46

To be fair, as stated earlier, the C-S index is an awkward proxy for Manhattan RE prices, but it is still the best measure of comparable properties in the area. That said, given that the numbers for the February 2010 C-S Index for NY metro are lower than February 2009, Urbandigs is essentially claiming that we will get a bigger bounce in pricing this Spring and Summer than we did last year. (Do the math, for Y-o-Y to be positive for 2nd or 3rd Quarter 2010, the numbers this year have to be higher than last year. As of the February 2010 data we are lower, so the only way to be positive Y-o-Y is for the next four months to go higher than last year.)

I would rate the possibility of positive Y-o-Y Quarterly change in pricing (including Manhattan) impossible in the First Quarter 2010*, slim in Second Quarter 2010 (the expiration of the tax credit during 2nd Quarter at least gives it a chance) and the probability of an increase in Third Quarter 2010 (after the expiration of both the gvt MBS purchases and the tax credit) highly unlikely.

*At one point, UD claimed that he thought Y-o-Y price increases in Manhattan would show up in First Quarter 2010 but he has been backing off that claim of late.

well, the GS fraud case and financial regulation getting started with a witch hunt mood is not bullish imho. but maybe nothing will come from it and it's only window dressing? no idea.

I don't think anything meaningful comes directly from the fraud case...
but it doesn't need to.

Its the worst timing possible for banks, the folks pushing for regulatory overhaul will keep pointing at it and scoring points. This will give them cover to do some damage.

Update:

One of the topics in this thread (and others) is the market for housing in NYC, and the importance of "new blood" - that is, the "traditional" influx of fresh college graduates into the NYC job market and consequently the NYC housing market. I saw an interesting article today on this topic. As is often the case, the headline doesn't necessarily match the content.

More college graduates have jobs waiting
By Blake Ellis, staff reporterMay 6, 2010: 2:32 PM ET

NEW YORK (CNNMoney.com) -- More college graduates are heading straight into new jobs this year, a study from a college employment group showed Thursday.

The number of college seniors who already have post-graduation jobs lined up jumped to 24.4% this year, up from 19.7% of the graduating class of 2009, according to a study from the National Association of Colleges and Employers.

While the increase in graduate employment is a positive trend, the uptick may be a result of more students accepting the jobs they are offered as they realize how tough it is to find a job in this economy, Marilyn Mackes, NACE executive director, said in a prepared statement.

It turns out that while more graduates have jobs waiting for them, employers actually extended slightly fewer job offers to this year's graduating class.

NACE said that 39% of students in the graduating class of 2010 said they had received job offers, and 59% of those students took the jobs.

Last year, 40% of graduates were offered jobs, but only 45% accepted the offers.

"There appears to be a greater awareness of the economic realities among this year's graduates, and greater flexibility in the types of jobs they will consider," said Mackes.

http://money.cnn.com/2010/05/06/news/economy/college_graduate_jobs/index.htm

So fewer jobs were actually offered than last year, but more grads accepted them. This doesn't sound like it bodes very well for NYC housing...