Home price futures show NY MSA down -25.8% in 2009
Started by jake
over 17 years ago
Posts: 277
Member since: Jan 2007
Discussion about
From ML this morning. I cannot copy the charts but here is the quote: "One striking feature of Chart 8 is the degree to which 2008 and 2009 implied HPA for New York stands out among the other MSAs. This is due to the fact that the implied HPA is for the full-year 2008, and New York home prices have held up well in comparison to the rest. The market is expecting that relative out-performance to... [more]
From ML this morning. I cannot copy the charts but here is the quote:
"One striking feature of Chart 8 is the degree to which 2008 and 2009 implied HPA for New York stands out among the other MSAs. This is due to the fact that the implied HPA is for the full-year 2008, and New York home prices have held up well in comparison to the rest. The market is expecting that relative out-performance to change, however, in 2009. The market expects New York home prices to fall by -25.8% in 2009, with LA, Miami, and Phoenix prices down -13.8%, -21.8%, and -13.9%, respectively."
The near term outlook for NY is getting worse:
"From these charts, the recent drop in 2009 home price expectations for the Composite and for New York are readily apparent. From mid-November to today, market expectations changed from -14% to -20% and from -13% to -25% for each of these markets, respectively."
The good news is that forwards have 2010 flat.
If the forwards are realized then the annualized HPA for the NY MSA from end 2000 to end 2010 would be 3.18%. End 2010 prices would correspond to prices from April 2003.
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Response by AdamM
over 17 years ago
Posts: 42
Member since: Nov 2008
Where is deep pockets Alpine to take advantage of this arb? Matter of fact, how could it exist given his deep pockets?
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Response by stevejhx
over 17 years ago
Posts: 12656
Member since: Feb 2008
"deep pockets Alpine"
Didn't WaMu deny him a mortgage? For $300,000?
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Response by Topper
over 17 years ago
Posts: 1335
Member since: May 2008
Thanks for the posting, jake.
I'm inclined to think, though, that you have to take these figures with a big grain of salt. Housing futures are notoriously thin - and this time of year in particular. Very little volume - particularly for individual MSA markets.
Let's see how things shape up in January. (As a Manhattan wannabe buyer your posting was good news - but I'm pretty skeptical the number will hold. FYI: Case-Shiller October numbers are released tomorrow.)
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Response by jake
over 17 years ago
Posts: 277
Member since: Jan 2007
Agree Topper. It does reflect a forecast though where players can put their money down. There is no debate about the direction of prices in 2009. The debate is about the magnitude.
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Response by Topper
over 17 years ago
Posts: 1335
Member since: May 2008
If you have access, jake, it would be interesting to see a current quote and size on the this contract.
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Response by nyc10022
over 17 years ago
Posts: 9868
Member since: Aug 2008
We started later and are now falling faster, so I can't say this is a particular surprise.
But I am interested to see how the 25% implied drop (over what I believe was a 10-12% decline for the MSA) in the overall region will apply back over to Manhattan specifically.
The 20% decline I assume priced into that, but remember these implied declines are off numbers pre that decline.
So, even if you made the decline a 30% from here out, i theory we've already seen 20% of it...
NY MSA was down -7.8% in 2008 and is off -13.5% from the peak. Contract implied peak to trough is -36.8% so NY MSA has another -23% to go. If you poke around the site there are more granular breakdowns for historical condo prices in Manhattan. 2003 is back to around $700 s.f. for condos.
I can think of a number of resaons why prices will over shoot the equiibrium on the downside not the least of which is how much we over shot the equiibrium on the upside. But lower incomes, higher unemployment and higher property taxes also suggest we over shoot on the downside.
As as aside, some of the higher maintinence units seem like whie elephants to me. Unsalable except at a very steep discount. Going forwad buyers will focus more and more on the costs of ownership not just the purchase price as was the case during the bubble.
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Response by nyc10022
over 17 years ago
Posts: 9868
Member since: Aug 2008
> I can think of a number of resaons why prices will over shoot the equiibrium on the downside
Absolutely agree... but wouldn't that be factored into the futures as well...?
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Response by jake
over 17 years ago
Posts: 277
Member since: Jan 2007
As I look at it, futures are forecasting 2003 prices. I mentioned a number of factors which could take prices below 2003 levels. The greed and animal spirits of "buy now or be priced out forever" have been replaced with fear and "why buy now when things will be 20% cheaper in 6 months". There is a self ful-filling nature to this momentum. Not to mention the difficulty of buying a new place or trading up to a larger place when you do not have a job.
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Response by jgr
over 17 years ago
Posts: 345
Member since: Dec 2008
"but wouldn't that be factored into the futures as well...?"
It would be.
"will apply back over to Manhattan specifically."
Before the credit crisis there was the belief that Manhattan would fall less than the region which includes some pretty far out places that would have never been built up without shady loans and being priced out of the inner suburbs. This has been the case in several other metropolitan areas (DC comes to mind) where the city and inner suburbs have held up better than the outlying suburbs. I'd be curious if that same sentiment is being held now that Manhattan prices has swung very violently to the negative in only 4 months. A lot of fundamentals have changed besides the primary one - homes prices have outpaced salary gains.
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Response by nyc10022
over 17 years ago
Posts: 9868
Member since: Aug 2008
"There is a self ful-filling nature to this momentum."
Of course...
Jgr, you raise an interesting point. Clearly there has been rise of "the city" in the last few years, and that did lead to some misguided notions.
But I do wonder where we net out after the pop is complete. I figure cities will remain a premium over where they were (relative to suburbds) 10-20 years ago. But how much so is the question. Certainly, not as much as had been at peak...
Where is deep pockets Alpine to take advantage of this arb? Matter of fact, how could it exist given his deep pockets?
"deep pockets Alpine"
Didn't WaMu deny him a mortgage? For $300,000?
Thanks for the posting, jake.
I'm inclined to think, though, that you have to take these figures with a big grain of salt. Housing futures are notoriously thin - and this time of year in particular. Very little volume - particularly for individual MSA markets.
Let's see how things shape up in January. (As a Manhattan wannabe buyer your posting was good news - but I'm pretty skeptical the number will hold. FYI: Case-Shiller October numbers are released tomorrow.)
Agree Topper. It does reflect a forecast though where players can put their money down. There is no debate about the direction of prices in 2009. The debate is about the magnitude.
If you have access, jake, it would be interesting to see a current quote and size on the this contract.
We started later and are now falling faster, so I can't say this is a particular surprise.
But I am interested to see how the 25% implied drop (over what I believe was a 10-12% decline for the MSA) in the overall region will apply back over to Manhattan specifically.
The 20% decline I assume priced into that, but remember these implied declines are off numbers pre that decline.
So, even if you made the decline a 30% from here out, i theory we've already seen 20% of it...
more info here:
http://www.radarlogic.com/index.html
http://www.rpxdealers.com/rpx/report.html
NY MSA was down -7.8% in 2008 and is off -13.5% from the peak. Contract implied peak to trough is -36.8% so NY MSA has another -23% to go. If you poke around the site there are more granular breakdowns for historical condo prices in Manhattan. 2003 is back to around $700 s.f. for condos.
I can think of a number of resaons why prices will over shoot the equiibrium on the downside not the least of which is how much we over shot the equiibrium on the upside. But lower incomes, higher unemployment and higher property taxes also suggest we over shoot on the downside.
As as aside, some of the higher maintinence units seem like whie elephants to me. Unsalable except at a very steep discount. Going forwad buyers will focus more and more on the costs of ownership not just the purchase price as was the case during the bubble.
> I can think of a number of resaons why prices will over shoot the equiibrium on the downside
Absolutely agree... but wouldn't that be factored into the futures as well...?
As I look at it, futures are forecasting 2003 prices. I mentioned a number of factors which could take prices below 2003 levels. The greed and animal spirits of "buy now or be priced out forever" have been replaced with fear and "why buy now when things will be 20% cheaper in 6 months". There is a self ful-filling nature to this momentum. Not to mention the difficulty of buying a new place or trading up to a larger place when you do not have a job.
"but wouldn't that be factored into the futures as well...?"
It would be.
"will apply back over to Manhattan specifically."
Before the credit crisis there was the belief that Manhattan would fall less than the region which includes some pretty far out places that would have never been built up without shady loans and being priced out of the inner suburbs. This has been the case in several other metropolitan areas (DC comes to mind) where the city and inner suburbs have held up better than the outlying suburbs. I'd be curious if that same sentiment is being held now that Manhattan prices has swung very violently to the negative in only 4 months. A lot of fundamentals have changed besides the primary one - homes prices have outpaced salary gains.
"There is a self ful-filling nature to this momentum."
Of course...
Jgr, you raise an interesting point. Clearly there has been rise of "the city" in the last few years, and that did lead to some misguided notions.
But I do wonder where we net out after the pop is complete. I figure cities will remain a premium over where they were (relative to suburbds) 10-20 years ago. But how much so is the question. Certainly, not as much as had been at peak...