Tuesday, January 11, 2011

US housing market - still weak

Core logic came out with their house price index with data up to November. The data is repeat sale like the Case-Shiller index so should be reasonably reliable and covers all states so is broader than the Case-Shiller index which I commented on in my previous post.

Aggregated to a national level the data says moderate (4.7%) but broad based house price falls in the last six months that are accelerating in the October/November period. Looking at the state based data I wanted to check if my two ideas from my previous post matched this set of data. These ideas were:
1. Prices holding up in Washington DC and New York, where the centres of power are, and weak elsewhere.
2. Prices not following the previous boom/bust cycle but basically also weak in areas that did not have real estate booms in the early/mid 2000's.

OK so point 1 the answer is yes. House prices basically flat last 6 months in District of Columbia (i.e Washington DC) and Rhode Island (New York) and down in practically every other state.

On point 2 the data is not so clear. I looked at the states that had price decreases greater than 6% over the last 6 months and checked whether they had previous price booms. 9 States had falls greater than 6% and only 3 of these did not have previous big booms (Alabama, Delaware, Missouri). In contrast 6 states where prices are dropping fairly rapidly had previously experienced the big booms (Arizona, Idaho, Florida, Montana, Oregon, Utah). Given that only about 35-40% of states previously had the big booms and that 66% (6 out of 9) of these were states where prices are now dropping the most rapidly it looks like some of the boom/bust cycle is still playing out in housing. So some states that did not have booms are now having the bust but other states that had the booms (particularly those adjacent to California) are having a second dip in prices.

My guess is there are more price falls to come at a national level over the next year (say 10%) but clearly there will be a fair bit of variation across states, cities, housing types etc. Apart from Washington DC and New York it still looks like the previous boom states are likely to fall the most.