Matrix Blog


[1987-09] Median Household Income v. Housing Values

July 27, 2009 | 11:31 pm |

I was searching for income trends as they relate to housing and stumbled on this clip at designing better futures. A very clever time lapse presentation of household income versus Case Shiller median housing prices. Love it.

If you like this, he’s got another one that tracks S&P 500 rolling returns movie 1881- 2009 .


[Confluence and Communion] From The Pope To Prudential, From Bill Gross To Bob Shiller

July 7, 2009 | 11:37 pm | |

Everyone is out there talking about where we are and where we seem to be going. One thing that is rather striking is the lack of spin relative to a few years ago – surprisingly refreshing.

Here’s a few notable individuals’ takes on the-state-of-where-the housingmarket-economy-is-at-right-now.

Pope Benedict XVI (Yes, the Pope): The “economy of communion.” ahem…amen.

The economy needs ethics in order to function correctly — not any ethics whatsoever, but an ethics which is people-centered. Today we hear much talk of ethics in the world of economy, finance and business.

Allen Smith, CEO Prudential Real Estate Investors: Confluence Of Indicators. Here’s the podcast.

Some have spoken about deleveraging. Some have told us about the shrinking of values. Others have said it’s a confidence game — as in, there isn’t any.

William H. Gross, Managing Director, PIMCO: “”Bon” or “Non” Appétit?” I always have to re-read his columns a few times to follow, because the nuances in his delivery are staggering.

Investors who stuffed themselves on a constant diet of asset appreciation for the past quarter-century will now be enclosed in a cage featuring government-mandated, consumer-oriented fasting. “Non Appétit,” not Bon Appétit, will become the apt description for the American consumer, and significant parts of the global economy, including the U.S.

Robert Shiller, Professor of Economics, Yale University:“Bob Shiller didn’t kill the housing market”

When the June Case-Shiller figures were released, he said they showed “striking improvement in the rate of decline.” Asked to look ahead, he says, “My guess is that prices will continue to fall for a while, but at a slower pace, and then stabilize. We’ve become very speculative in our attitude toward real estate, so there could be another boom. But if so, it likely won’t happen for another five to 10 years.”

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The Housing “Turning a Corner” Concept: On A Matrix

July 6, 2009 | 5:35 pm | |

There is a lot of discussion about when housing is going to turn around yet it looks like housing in this cycle is going to trail the economy rather than lead it because credit is not placing housing in the hands of the consumer.

Here is a terrifically interactive graphic a la with a 4-quadrant matrix based on data compiled by NYT from Organization for Economic Cooperation and Development (O.E.C.D.); Federal Reserve; National Bureau of Economic Research; Conference Board.

As you watch the time series, the current year shows the sharpest downturn since the mid 1970s when the data series begins. In other words it is hard to imagine we are nearly out of the downturn quadrant.

Here’s the OECD Business Cycle Clock.

New Home Sales As Recession Measurement

June 27, 2009 | 11:50 am | |

In Floyd Norris’ “Off the charts” column A Recession Measured by New-Home Sales

The pattern difference between new and existing home sales are very different in this recession than those in prior years. The difference can be observed in price trends versus sales trends.

In the US as well as the New York City regional market, existing home sale prices have fallen harder than new home sale prices. At the same time, the number of sales have fallen farther for new home sales than existing home sales.

“Foreclosed homes are the supply that has to be worked off,” said Robert Barbera, the chief economist of ITG, an investment advisory firm. He said the problem had worsened in recent months after the end of the foreclosure moratorium adopted by many lenders while they waited to see what the Obama administration would propose.

Of the 135,000 completed but unsold new homes at the end of May, nearly half had been sitting for a year or more. The median age of such homes was 11.5 months, an unprecedented figure.

It may be that builders will have to cut prices even more to sell some houses — houses that, in retrospect, probably should never have been built at all.

This time its different
Existing home sales have been quicker to adapt to changing market conditons, while new home sales have not. In the current market, developers are hampered by the very lenders than enabled them to build in the first place because of the drastic change in the credit environment. Balance sheet issues with lenders are making them less nimble.

It would seem that developers do not have indefinite staying power for stalled projects.

It is going to get interesting.

[Interview] Matt Woolsey, Senior Reporter, Forbes Magazine,

June 26, 2009 | 5:57 pm | Podcasts |

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[Forbes Interview] FDIC Sheila Bair on Systemic Risk

June 22, 2009 | 9:59 am |

Steve Forbes interviews FDIC Chair Sheila Bair on the credit crunch, systemic risk, “too big to fail”, toxic assets, shadow banking and others. The questions have the former presidential candidate’s less-government orientation and it’s a good interview.

So, instead of hoping that these risks will be competently managed … we also need a “fail-safe” system where if any one large institution fails, the system carries on without breaking down. We need to reduce systemic risk by limiting the size, complexity, and concentration of our financial institutions. We need to create regulatory and economic disincentives aimed at limiting the size and number of systemically important financial firms. For example, we need to impose higher capital requirements on them in recognition of their systemic importance, to make sure they have adequate capital buffers in times of stress.

If you don’t want to watch the video, here’s the transcript.

I am doubtful any regulatory agency can prevent a catastrophe because they are human and are subject to mob mentality just like investors are. I see any such effort as simply reducing the odds of such an event. In this recent disaster, there were no tangible safeguards in place.

I think she is one of the brightest leaders of all the regulators out there, but she was at the helm during this crisis and we saw little of her until things went wrong.

Was she held back by the prior administration or simply now sees the light?

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[Brookings’ MetroMonitor] 1Q 09 Tracking the Recession and Recovery

June 22, 2009 | 9:38 am |

To figure out how to fix it, you’ve got to understand what’s going on.

Brooking’s has a created a quarterly series of interactive reports on the 100 largest metro areas called the MetroMonitor:

The Metropolitian Policy Program has launched a series of interactive quarterly reports, the MetroMonitor, a barometer of the health of America’s metropolitan economies, ranking the nation’s 100 largest metro areas—which generate three quarters of U.S. output—on key economic indicators.

They look at a number of metrics in the largest 100 US metro areas.

My only criticism is their use of FHFA data which will overstate the recovery of housing since it only covers Fannie and Freddie data, while comprising 80% of current mortgages being issued, is outperforming the remainder. FHFA doesn’t address higher priced housing, often found in metro markets and are usually financed with jumbo mortgages. Only conforming mortgages have been addressed in the stimulus and federal bailouts. The secondary mortgage market for jumbo financing is essentially gone.

Still, its interesting to see how various metro areas stack up. For example, New York:

Regional employment has fallen 2.1%, compared to 2.9% in the US and ranked 34th out of 100 (1 being the strongest). However, wages have fallen 1.5% compared to +1% in US and ranked near the bottom at 97.

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[Interview] Robert Shiller PHD, Yale Professor of Economics, Case Shiller Index, Irrational Exuberance

June 15, 2009 | 12:01 am | | Podcasts |

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[The Housing Helix Podcast] Robert Shiller PHD, Yale Professor of Economics, Case Shiller Index, Irrational Exuberance

June 14, 2009 | 10:46 pm | | Podcasts |

Professor Robert Shiller took time out from his busy schedule when he was in New York to pay me a visit and let me interview him for The Housing Helix Podcast.

I invited him after I read his recent Op-ed piece in the New York Times, Why Home Prices May Keep Falling.

Dr. Shiller is well known for many things, including his New York Time’s bestselling book: Irrational Exuberance and his widely referenced monthly state of the housing market tool, The Case-Shiller Index. But he also continues to write about the housing market, having released two books over the past two years:

Last year’s The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It

and this year’s

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism

I hope you enjoy his insights.

Check out this week’s podcast.

You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.

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[The Housing Helix Podcast] Barry Ritholtz, Bailout Nation, Fusion IQ & The Big Picture Blog

June 12, 2009 | 10:34 am | Podcasts |

I had the pleasure of speaking with Barry Ritholtz of Fusion IQ and The Big Picture weblog. He’s a wealth of information and never pulls any punches in his characterizations of the current economic mess we find ourselves in. Listening to Barry speak about this whole situation and reading his book is much pretty much required.

The Big Picture is the leading financial weblog with must-read content and it boasts a huge following (self-included).

Barry recently released a terrific book: Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy. I highly recommend it.

Check out this week’s podcast.

You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.

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[Interview] Barry Ritholtz, Bailout Nation, Fusion IQ & The Big Picture Blog

June 11, 2009 | 10:17 am | Podcasts |

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Ritholtz’ Anatomy (of a Crash)

June 9, 2009 | 12:01 am |

Next week, my guest on The Housing Helix will be Barry Ritholtz of Big Picture (check out this week’s podcast with Dan Gross of Newsweek). He’ll be discussing his book, Bailout Nation.

Source: Big Picture

Click here for full sized graphic.

Barry does a great job at laying out how this crisis evolved.


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