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Posts Tagged ‘Harvard JCHS’

[Getting Graphic] Its More Than The Kitchen That Needs Fixin’

October 23, 2007 | 11:46 pm |

Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related chart(s).

Source: Joint Center for Housing Studies.

Click here for full sized graphic [pdf].

The Joint Center for Housing at Harvard University released its quarterly The Leading Indicator for Remodeling Activity (LIRA):

“As homeowners become increasingly concerned about falling house prices and a slowing economy, home improvement spending is dragging” explains Nicolas P. Retsinas, director of the Joint Center for Housing Studies. “Coupled with very modest home sales, spending levels are likely to fall.”

Economic conditions are currently mixed and the futures markets are projecting the 65% likelihood of the Fed reducing rates by another 1/4 point, with more decreases in the future. The impact of the housing market has not had a chance to completely impact the economy. During the recent housing boom, rising labor and material costs were kept in check by low mortgage rates.

Remodeling expenditures are projected to decline through mid-2008 although I must admit that seems conservative. The LIRA indicator is a moving average and the impact of tightening credit during the quarter is likely not included in the report results.


[Getting Graphic] Remake, Remodel: Slow but Steady

July 23, 2007 | 12:01 am |

Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related chart(s).

Harvard’s Joint Center for Housing Studies just released their quarterly Homeowner Remodeling Activity Report which forecasts low but steady growth over the coming year.

Source: JCHS

Click here for full sized graphic [pdf].

I expanded their chart back to 1995 using their historical data [XL]. It shows 2-3 year cycles of robust activity followed by a sharp drop in activity.

Source: JCHS, Presented by: Miller Samuel

Click here for full sized graphic.

I always assumed their was a fairly close correlation between housing activity and remodeling activity over the past decade. As prices rise, activity increases due to either upgrading the home after purchase, or expanding and re-configuring homes as an alternative to buying a new one. I know in my home town, it seemed as though there were more homes being extensively renovated and expanded, than there were sales of new homes. However, my expanded chart shows a different pattern as far as I can tell.

The whole topic of remodeling brings to mind one of my pet peeve with repeat sales indexes. Advocates of this methodology say it is clearly better than looking at aggregate differences in prices since the index plots patterns of the same asset over time. However, in reality, repeat sales indexes rely on a false sense of continuity because tend to miss a significant characteristic of a changing housing market: Houses change a great deal. Houses get larger or their interiors are significantly improved upon in a large number of the transactions. The subsequent sale gets distorted because it may essentially be a different house.

but I need to digress…

While writing this post, I thought of Remake/Remodel. Did I dress like that in the early 70’s? (age check: I was 13) I must have remodeled since then.

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[List-o-links] 7-9-07 From The Tank: Trying To Make It To 2012

July 9, 2007 | 12:00 am | |

Its been a while since we fired up the Tank, with stories or ideas that didn’t quite make it into Matrix for one reason or another over the past month (ok, mainly because I was frozen with anticipation over the impending iPhone release).

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[List-o-links] 3-8-07 From The Tank: SUCK As A Real Estate Market Description

March 8, 2007 | 7:34 am | |

Here’s a collection of studies gathered from the Tank, with the exception of the first two. I was intrigued by the use of the word suck in public commentary. Uncommonly refreshing. This is the same person who characterized homebuilders as being in a death spiral last fall.


Looking At The Wealth Effect From An Older and Foreign Perspective

January 22, 2007 | 12:01 am | |

About a year and a half ago, I presented a post called [The Wealth Effect: Stocks vs. Housing [Matrix]]( which was simply a definition of the term and linked to the quintessential 2001 paper [Comparing Wealth Effects: The stock market versus the housing market [pdf]]( Here’s a [2004 Housing Wealth Effect study by Harvard’s JCHS [pdf]](

[Wealth Effect Defined [Wikipedia]]( In economics, the wealth effect is an increase in spending that accompanies an increase in wealth (in absolute terms), or merely a perceived increase in wealth (in relative terms).

The validity of the wealth effect, was further validated in a recent paper presented at the Federal Reserve Bank of San Francisco called: [Disentangling the Wealth Effect: Some International Evidence [FRBSF]]( or download the [pdf version]( ).

The lessons learned from this study of the wealth effect in foreign markets suggest that the wealth effect doesn’t appear to be some sort of United States fluke, and that an aging population is more influenced by the wealth effect [translation: we have a bubble of aging baby boomers].

A synopsis of the repor

These results suggest that it is important for policymakers to keep an eye on housing market developments separately from financial markets. If it is true that the housing wealth effect dominates the financial wealth effect, at least in some countries, then the effects of a softening in the housing market in a number of industrialized countries could have a more dramatic impact than the historically large stock market declines that began in 2000. Additionally, if the wealth effect is stronger for older households, the demographic changes around the world could make housing wealth effects even more important in the future.


[In The Media] America This Morning – ABC News Clip for 1-18-07

January 18, 2007 | 11:00 am | | Public |

Here is [the clip of my appearance]( live on this morning’s edition of America This Morning on ABC News.

The spot covered the growing role of women in the real estate market. I relied on information from a study by the [National Association of Realtors [NAR]](, [Harvard’s Joint Center for Housing Studies [pdf]]( and a recent and very cool page one [New York Times study on census data]( and the phenomenon of women choosing to live alone.

Caveat: Of course, live television doesn’t provide time for much detail and it was 4:45 am so I was a bit groggy after getting up at 2 am for the spot. But it was fun and I am very appreciative of the opportunity afforded me by ABC News. Amazingly, they have a full crew at that time of day.

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[Getting Graphic] Home Improvement Market Takes A Bath

October 20, 2006 | 7:06 am |

Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related chart(s).

Harvard’s Joint Center for Housing Studies [released its third quarter remodeling index]( and not surprisingly, the index showed a slowing rate of increase of spending by homeowners on remodeling.

“The softening housing market, including a reduced volume of home sales, has contributed to slowing expenditures on home improvements by homeowners. As sales continue to fall, remodeling expenditures will continue to slump,” states Nicolas P. Retsinas, director of the Joint Center for Housing Studies.

This is logical given generally higher interest rates from a year ago, slowing sales volume and a cooling economy.

Some of the past rising trends in remodeling expenditure seems to be correlated with installing more of the same things as houses got bigger, such as the [number of bathrooms [KBD]](

Source: Kitchen & Bath Design News


300 Million Of Us, 12000 DJIA, Yet Why Are We So Darn Unhappy?

October 18, 2006 | 4:39 pm |

Records are abound lately:

Yesterday at 7:46am EST, the [U.S. POPClock Projection]( reached 300,000,000 as the estimated US population.

  • One birth every…………………………………. 7 seconds
  • One death every……………………………….. 13 seconds
  • One international migrant (net) every………. 31 seconds
  • Net gain of one person every………………… 11 seconds

(in fact 12 new borns just now started screaming)

200,000,000 was passed in 1967 – population doubled in 39 years. I find it amazing that the population was 76,000,000 in 1900 – seems huge to me for that period of time.

[Hospitals were having fun with the 300M stat [Chicago Trib]](,1,4018342.story?coll=chi-newsnationworld-hed) as well.

The idea of a growing population seems to be favorable, especially with growing immigration and their influence on the demand for housing. Harvard’s Joint Center for Housing Studies released their seminal [The State of the Nation’s Housing 2006 [JCHS]]( early this year which projected favorable demand for housing over the next 10 years.

Over the longer term, household growth is expected to accelerate from about 12.6 million over the past ten years to 14.6 million over the next ten. When combined with projected income gains and a rising tide of wealth, strengthening demand should lift housing production and investment to new highs.

In combination with the 300,00,000 number, Forbes did a study on [The Average American: 1967 And Today [Forbes]]( referring to Mr. & Mrs. Median. The Median’s can’t be seen as average can they?

Mr. and Mrs. Median’s $46,326 in annual income is 32% more than their mid-’60s counterparts, even when adjusted for inflation, and 13% more than those at the median in the economic boom year of 1985. And thanks to ballooning real estate values, average household net worth has increased even faster. The typical American household has a net worth of $465,970, up 83% from 1965, 60% from 1985 and 35% from 1995.

Here’s a great [summary of the Forbes article stats in Big Picture]( by Barry Ritholtz who also comments below.

Although we have more, apparently we are not very happy about it. We suffer from Permanent Income Theory.

Milton Friedman dubbed “Permanent Income Theory,” which assumes that people measure where they are relative to where they expected to be a few years ago. They don’t care a bit what the average income was four decades ago.

“If you expect a 3% rise in income and you get 2.5%, you’re disappointed,” says Ken Goldstein, an economist at the Conference Board, a private research group in New York.

And today, the [Dow Jones Industrial Average exceeded 12,000 for the first time]( breaking the October Jinx of 1929, 1987, 1978, 1979, 1989 and 1997.

However, the new high-water mark also was achieved at a time when many economic reports have pointed to slower growth, and suggested to some analysts that a market correction might be more appropriate. For Barry Ritholtz, president of Ritholtz Capital Partners, the market has been on “a mission to get to 12,000 no matter what the data has been saying.” “But I think there is a disconnect between the market and economic reality,” when you bear in mind that earnings are at their cyclical peak and the economy is slowing.

A recap: There are a lot of us, we are making more money, the stock market is active yet we are unhappy. I must need to buy a new house.

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[In The Media] CNBC Morning Call Clip for 9-25-06

September 25, 2006 | 3:09 pm | Public |

Here is [a clip of my appearance]( on today’s Morning Call show on CNBC.

I was guest along with [Nicolas Retsinas, the Director of Harvard’s Joint Center for Housing Studies]( We were interviewed by [Mark Haines]( who was great.

As it always is the way on television, there was not enough time for the topic but it was fun to do.

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[Getting Graphic] Remodeling Eases As Home Sales Slow

July 26, 2006 | 5:45 am |

Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related images(s).

The slowing of existing home sales is having a dampening effecting on remodeling since the large portion of this occurs at the time of purchase. This is an example of one of the significant ancillary economic effects of a cooling housing market.

Through the second quarter of 2006, homeowner remodeling spending has seen slow growth. According to the Remodeling Activity Indicator (RAI) devised by Harvard’s Joint Center for Housing Studies, homeowners spent an estimated 155 billion dollars on home improvements and repairs over the past four quarters, representing a 2.8% increase compared to the previous four quarters.

[Click here for full graphic [Harvard]](

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Harvard: The State of the Nation’s Housing 2006

June 7, 2006 | 11:04 pm |

Every year I look forward to the release of the The State of the Nation’s Housing study by the [Joint Center for Housing Studies at Harvard]( Its a comprehensive macro look at our nation’s housing that is insightful and easy to read.

[Download the report [pdf]](

The report suggests that the current housing slowdown will be moderate but affordability problems over the next decade will continue to deteriorate.

Nevertheless, the housing sector continues to benefit from solid job and household growth, recovering rental markets, and strong home price appreciation. As long as these positive forces remain in place, the current slowdown should be moderate.

Over the longer term, household growth is expected to accelerate from about 12.6 million over the past ten years to 14.6 million over the next ten. When combined with projected income gains and a rising tide of wealth, strengthening demand should lift housing production and investment to new highs. But with the economy generating so many low-wage jobs and land use restrictions driving up housing costs, today’s widespread affordability problems will also intensify.

Here’s a sample of some of the wide variety of charts from the study:

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No Natural Rule Of Housing Market Order: Manmade Scarcity Drives Up Prices

March 10, 2006 | 12:10 am |

A paper by economists Edward L. Glaeser, Joseph Gyourko, Raven Saks called, simply enough, [Why Have Housing Prices Gone Up? [NBER]](

If you believe in the power of the supply side of the equation, then Glaeser & Co. are for you. Here’s an abstract:

Abstract: Since 1950, housing prices have risen regularly by almost two percent per year. Between 1950 and 1970, this increase reflects rising housing quality and construction costs. Since 1970, this increase reflects the increasing difficulty of obtaining regulatory approval for building new homes. In this paper, we present a simple model of regulatory approval that suggests a number of explanations for this change including changing judicial tastes, decreasing ability to bribe regulators, rising incomes and greater tastes for amenities, and improvements in the ability of homeowners to organize and influence local decisions. Our preliminary evidence suggests that there was a significant increase in the ability of local residents to block new projects and a change of cities from urban growth machines to homeowners’ cooperatives.

[Joint Center for Housing Studies of Harvard University released their rental market report [BW]]( which found that the nation is losing approximately 200,000 rental housing units each year due to demolition.

“We are taking one step forward and two steps back as gentrification in some neighborhoods and continued deterioration in others leads to the removal of vitally needed lower-cost rental housing,” notes Nicolas P. Retsinas, director of the Joint Center.

This is an interesting dilemma as cities are faced with lower tax revenues as the condo market cools yet cities wish to incentivise developments to keep the treasury full. The loss of much of this housing may affect the market in the long run as buyers realize the texture of the city has changed rapidly. I recently wrote a research paper called [The Gentrification of Manhattan [Miller Samuel]]( available in the [Stamford Review]( that discusses this very dilemma.

[Here’s a non-technical summary of the Harvard paper [pdf]](
[Edward L. Glaeser: An Economist Who Looks At Supply Side Of The Housing Equation [Matrix]](
[America’s Rental Housing [JCHS]](
[Gentrification: Too Much Of A Good Thing? [Matrix]](


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