Matrix Blog

It is affecting population shifts, congressional representation and housing demand.

_Population Shifts_
In the article [People Fleeing Pricey Coastal States for South, West [USAToday]](http://articles.news.aol.com/business/article.adp?id=20051222070509990001&%20id=505) an analysis of the census data halfway through the decade, Americans are shifting away from the coasts toward more affordable locations such as the Southwest, Southeast and the Rocky Mountains.

The quest for affordable housing and jobs is driving Americans from expensive coastal states to more moderately priced parts of the country.

• At its current rate of growth, Florida will exceed the population of New York in 5 years.

• Upstate New York population losses more than offset the boom in New York City.

• California’s gains were more attributable to births than to new residents.

• Virginia gained more population than 9 northeastern states combined due to employment growth.

_Affordability_
A growing number of people are simply [Too Poor for Hot Housing Market, Too Affluent for Buyer Assistance [Washington Post]](http://www.washingtonpost.com/wp-dyn/content/article/2005/11/30/AR2005113002248.html)

Government officials “are scrambling to provide “workforce housing” — price-controlled homes for families with high five- and even six-figure incomes.”

While urban areas like New York have long provided housing assistance for low and middle income residents, areas like Washington, D.C. have focused on low income. As a result, there are a lot of residents simply priced out of the current boom.

The National Association of Realtors released its affordability index [Housing Affordability Hits 14-Year Low Higher Prices, Rising Rates Hurt Buyers as Creative Loans Lose Some of Their Punch [WSJ]](http://online.wsj.com/article_print/SB113522076238329211.html)

“There are signs that the growing costs of homeownership are also beginning to take a toll on the housing market. “There’s a systematic erosion of affordability,” says David Seiders, chief economist of the National Association of Home Builders. That decline is “the main reason … the market is starting to cool.””

Tags: Commerce Dept, Census, NAR, National Association of Realtors

Comments Off on In Search Of Affordable Housing, Many Are Moving Away From The Coasts

Source: Times-Picayenne

Despite the impression of most of the nation, parts of New Orleans that were high enough to escape flooding, the real estate market is booming in certain locations. [The New Orleans real estate market velocity in November was up 50% over the same month a year ago [The Times-Picayenne].](http://www.nola.com/news/t-p/frontpage/index.ssf?/base/news-4/113480301211600.xml)

Warning: The figures are based on signed contracts by a real estate brokerage Latter & Blum that claim a 20% market share.

This is not very scientific but it is consistent with the pattern seen in the second largest city in Louisiana, [Baton Rouge which saw a 22% increase in the number of sales over the same period [Ch2/BR Advocate].](http://www.2theadvocate.com/stories/121605/bus_biz001.shtml) This was based on information provided by the Greater Baton Rouge Association of Realtors’ Multiple Listing Service. However, brokers say this market seemed to be cooling off as list prices were outpacing property values, partially due to investors trying to cash in on the surge in demand for housing.

The sweet spot in both New Orleans and Baton Rouge seems to be in the $100,000 to $200,000 range.

Brokers commented that New Orleans will be smaller and more gentrified when repairs are completed but will still be a “destination” place.

Tags: NAR, National Association of Realtors

1 Comment

In [Professor Robert Shiller’s](http://www.econ.yale.edu/~shiller/) article for Project Syndicate called [Home Sweet Home](http://www.project-syndicate.org/commentary/shiller31″) he discusses the changing attitudes for vacation properties. The surging demand has made their cost rival primary homes and gain market share. Their cost may outpace GDP in many countries. This is a global phenomenon.

A study by the National Association of Realtors (NAR) indicates that 13% of all homes purchased in the United States in 2004 were vacation homes. This does not include buyers who purchased homes as investment properties, mostly to rent out. According to the NAR, investment buyers account for another 23% of home sales, bringing second-home purchases to 36% of the total.

He observes that to many, it has become the true meaning of life, to the haves and not on the radar for the have nots. The rising prices will eventually knock many out of the market but that this would spur development of higher density of vacation properties. Therefore the options for quiet vacations spots will evaporate for many.

He concludes, quitely gloomily
“But, for many of those who imagine relaxing in a place that offers a quaint life of undisturbed beauty, there is a strong risk that prices will rise out of reach in future decades. No economic strategy can change that, even if it produces spectacular GDP growth.”

Tags: Robert Shiller, NAR, National Association of Realtors

Comments Off on A Quiet 2nd Home May Be No Vacation In The Future

Frankly, I am getting a little tired of the spin that is being thrown at us seemingly every day about the changing real estate market. In the end, I think it erodes consumer confidence through confusion. This information needs to be delivered with with clarity.

The National Association of Realtors released their [2006 market forecast yesterday [NAR]](http://www.realtor.org/publicaffairsweb.nsf/Pages/DecForecastFor06?OpenDocument) which was chock full of information. However, this type of press release has been bothering me for quite a while, if not for most of the duration of the housing boom.

The use of clear and concise language is important to accurately inform those whom you are trying to reach. The [press release from the NAR](http://www.realtor.org/publicaffairsweb.nsf/Pages/DecForecastFor06?OpenDocument) says:

Historically Strong Home Sales Expected in 2006

Ok, quick tell me what this means?

A) Rising sales prices?
B) Rising number of sales?

(answer: B)

Sales activity in 2006 is expected to be the second best year in history

Ok, so it sounds like an incredible year for real estate is ahead of us.

…market conditions are still favorable for housing. “The slowdown amounts to a tapping of the brakes on a hot market,” said Lereah. “Home sales are coming down from the mountain peak, but they will level-out at a high plateau – a plateau that is higher than previous peaks in the housing cycle. This transition to a more normal and balanced market is a good thing.”

Wait a second…2006 is supposed to be the “second best year in history” but its going to be more normal and balanced?

Can’t we just read this as something like: The number of housing unit sales is supposed to drop slightly this year yet will still be the second highest in history. Housing prices are expected to see more modest increases this year as compared to last year.

Remember: Strong sales = high number of transactions

Tags: NAR, National Association of Realtors

Comments Off on Real Estate Spin: Its All Good (If We Knew What It Meant)

In George Chamberlin’s column [By George: Words for Investors [North County Times]](http://www.nctimes.com/articles/2005/12/11/business/chamberlin/19_31_2212_10_05.txt) in San Diego provides some plain language to the discussion of the current state of the real estate market. He is a TV and radio commentator.

• After the Fed release its quarterly household wealth report, CNBC ran alerts that Americans were deeper in debt than ever before but the report said that net worth rose to a record level.

• Foreclosures are lower today than a year ago

• As far as a slowdown in sales, the California Association of Realtors said it took 34 days to sell a house in October. A year ago it took 33 days.

• The NAR report that pending home sales dropped 3.3% in November and that was reported as a sign of collapse yet in California, they rose 0.8% indicating that real estate is local.

• The UCLA Anderson Forecast calls for a crash of Southern CA real estate prices over the next few years yet excludes San Diego county from their stats.

• Wall Street has a vested interest in seeing housing slide to prompt more people to return to the financial markets.

Although this commentary is California-orientated and I am not an advocate for the real estate industry, the lesson here is for the media to fairly interpret the information released.

Tags: CNBC, Pending Home Sale Index, PHSI, Radio, NAR, National Association of Realtors

Comments Off on Bubble Challenge: Just The Facts

The NAR released its [Pending Home Sale Index [NAR]](http://www.realtor.org/publicaffairsweb.nsf/Pages/OctPHS2005?OpenDocument) which showed that the real estate market was easing. “The National Association of Realtors said its index of pending home sales, based on contracts signed in October, declined 3.2% from September to a seasonally adjusted 123.8. The reading was down 3.3% from a year earlier. The index was 100 in 2001.”

Positive economic news seemed to offset the weak housing news. Productivity fell, suggesting the inflation pressure is weakening. The post [NAR stuck on spin cycle [Property Grunt]](http://propertygrunt.blogspot.com/2005/12/nar-stuck-on-spin-cycle.html) makes a strong case that the NAR phrasing of a soft landing does not correlate to the data that they released. Its shows how much spin we are subject to.

[NAR Pending Sale Index [pdf]](http://www.realtor.org/Research.nsf/files/PHS0510.pdf/$FILE/PHS0510.pdf)

Note: “The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 closely parallels the level of closed existing-home sales in the following two months.”

Tags: Pending Home Sale Index, PHSI, NAR, National Association of Realtors

Comments Off on NAR Says We Cooled It: Pending Home Sales Index Dropped

The Real Estate Home Show began [making their listings available in the MPEG-4 format [Playlist]](http://playlistmag.com/news/2005/12/01/realestate/index.php) which would allow brokers to carry current clips of listings.

“The videos display the listing realtor’s name, a written description of the property, then a video showing the property’s highlights, with information provided by a narrator.”

[Its costs less than a 360 tour! [ipodnn]](http://www.ipodnn.com/news/05/12/01/real.estate.home.show/)

[Click here for listings](http://www.therealestatehomeshow.com/)

Tags: NAR, National Association of Realtors

Comments Off on Video iPods: Its Fun To Be A Real Estate Agent Again

It depends on who you listen to…

Today the US government reported [a record number of new-home sales [MarketWatch]](http://www.marketwatch.com/news/story.asp?guid=%7B4EC23421%2D171A%2D40BF%2DB72F%2D9CFFCEBF35D3%7D&siteid=mktw) which seemingly contradicted [yesterday’s release of existing home sales [WSJ]](http://online.wsj.com/article/SB113318905850108049.html?mod=djemTAR) by NAR.

This has brought further debate to the housing market interpretation. The media seems to be betting on [a burst of the bubble [MarketWatch]](http://www.marketwatch.com/news/story.asp?g=37D276C5905045B9B001A0BF686A184C&siteid=mktw&dist=nbk) while the NAR seems confident in a soft landing next year.

The MarketWatch article suggests three paths are possible:

1. “any further acceleration in housing could fuel a spurt in consumer spending, but at the risk of forcing the Federal Reserve to continue raising interest rates beyond what’s now expected.”

2. “a collapse in housing, if it were to happen, could slow job growth, shatter consumer confidence and lead to a significant retrenching in their spending.”

3. “a gradual decline in housing would likely keep the U.S. economy growing at a slower but healthier pace, allowing the Fed to conclude its rate hikes. Most economists expect this third option to come to pass.“

“Being the first to call the end of the housing boom has become a favorite parlor game for economy watchers. As evidence, they’ve gleefully pointed to the reduction in mortgage applications, to an increase in unsold homes on the market, to a slowing in home price appreciation and to a drop in home-builders’ confidence.”

This is interesting because the existing home report and the new-home report are based on [a different data set and mean very different things in a changing market [Matrix].](http://matrix.millersamuel.com/?p=195)

Existing home sales lag the market by 30 to 60 days or more because they reflect closed sales. New home sale stats are based on contracts.

So if there is a change in the market, new home sales would be considered the leading indicator. However, its reliability should be tempered by the fact that new home sales represent about 10% of existing home sales.

In other economic stats released today:

At the same time, [consumer confidence spiked [Forbes.com]](http://www.forbes.com/business/manufacturing/feeds/ap/2005/11/29/ap2359063.html) reversing a 2-month slide.

[US Factory orders rose 3.4% and durable goods orders posted strong gains as well. [ABCNews]](http://abcnews.go.com/Business/wireStory?id=1356003)

Tags: Pending Home Sale Index, Forbes, PHSI, NAR, National Association of Realtors

Comments Off on New Housing Data: Is The Glass Half Empty Or Half Full?

Over the past 18 months, affordability has [dropped despite increases in income growth and low mortgage rates [FNMA].](http://www.fanniemae.com/media/berson/weekly/index.jhtml) “The National Association of Realtors’ (NAR) housing affordability index is at its lowest level since 1991 (and, using our own calculations, affordability has fallen to the lowest levels since the early-to-mid 1980s in some high cost areas). The NAR first-time homebuyer index is at its lowest level since 1985.”

Fannie Mae’s economists note the cause for the drop in affordability is:

• The rise in home prices.
  
• Increases in investor/second home purchases
  
• Looser overall underwriting
  
• Popularity of low initial-payment ARM mortgages
  

Well, affordability is weakening, not because of the fact that mortgage rates are low, but because mortgage rates have been rising since mid-summer until a few weeks ago. Every notch upward that mortgage rates increase, knocks someone out who was on the fence (sorry, I wanted to say “who were on the bubble” like the Indy 500 qualifiers but that would be too dramatic.)

Affordability is basically a mortgage payment and how it relates to personal income. If income is stable, then affordability is all about the payment. As the payment rises due to mortgage rates, then people get knocked out for lack of qualifying. Its as simple as that.

As more and more people fall out of the market because they don’t qualify for their mortgage, there is less pressure on prices. That would be the expectation. However, in much of November, mortgage rates actually fell bringing more people back into the market as affordability increased.

Tags: NAR, National Association of Realtors

1 Comment

[Daniel Gross](http://www.danielgross.net/) wrote an excellent article on potential job loss caused by the cooling of the real estate market called [As the McMansions Go, So Goes Job Growth [NYT].](http://www.nytimes.com/2005/11/20/business/yourmoney/20view.html) The decline in housing starts and building permits are perhaps an indication that the housing market is cooling and with that, the jobs they have provided may be affected.

Source: NYT

Since the last recession in 2001, the real estate industry has provided 36% of all private-sector payroll job growth or 836,000 jobs. Real estate provides 9.7% of total domestic employment. There has been an unprecedented surge in membership to the National Association of Realtors over the past year as people [try to make their fortunes as brokers in the housing boom [Matrix].](http://matrix.millersamuel.com/?p=103)

If we actually lose a few hundred thousand real estate related jobs and the Fed drops its concern about inflation with a weakening economy, it may be plausible that mortgage rates could actually trend downward as a result.

Tags: Dan Gross, NAR, National Association of Realtors

Comments Off on Its More Than Shelter: Nearly 1 Out Of 10 Jobs Related To Real Estate

There is interesting article called [Where The Affordable Homes Are [BW]](http://www.businessweek.com/print/bwdaily/dnflash/nov2005/nf20051117_7966_db035.htm?chan=db) that provides suggestions on how to find affordable housing and what to focus on.

The article contends that if we are truly at the peak, “the risk is high risk that you’ll get zero or negative returns on your investment over the next few years” so you should focus on affordability (and therefore stay away from the coast line) and there are plenty of options.

The premise of the article largely depends the buyer’s flexibility to move anywhere in the country for the sake of affordable housing.

One of the problems with these options for many consumers is simply the reason these housing options are cheaper to begin with. The income potential in many of these areas is lower which keeps housing prices down. Career opportunities could be more limited. Areas on the fringe that require a 2 1/2 hour commutes often see limited appreciation because its more difficult to find buyers for properties in these areas. Quite often, the employment base is weaker and opportunities for someone to pack up and move to a new job in that area are more remote (no pun intended).

Today’s New York Times had a real estate article called [What You Can Get for $220,000](http://www.nytimes.com/2005/11/20/realestate/20cov.html) that took a different tact. In a housing market like New York, which is among the most expensive in the US, the article covered the options to buyers to find housing that was priced at about the national median sales price for US housing at the moment, as defined by the National Association of Realtors (ok, ok I was quoted in this one).

Resources to find an affordable markets
[3Q 05 Existing Home Sales [NAR pdf]](http://www.realtor.org/Research.nsf/files/REL05Q3T.pdf/$FILE/REL05Q3T.pdf)
[House Valuations In Major US Metro Areas [National City pdf]](http://www.nationalcity.com/content/corporate/EconomicInsight/documents/Final101305v2.pdf)

Tags: NAR, National Association of Realtors

Comments Off on Affordable Housing Is Remotely Available

There is a good overview of the ongoing court case United States of America v. National Association of Realtors found in the article [Regulatory Body Grappling With Online Real Estate Businesses [E-Commerce Times]](http://www.ecommercetimes.com/story/8twGIEfyux8J3b/Regulatory-Body-Grappling-With-Online-Real-Estate-Businesses.xhtml)

In the 1990’s, real estate brokers began creating password protected web sites that allowed customers to search private databases called Virtual Office Web Sites (VOWs). They replace the broker in the searching of potential listings, allowing the customers to educate themselves before contacting a broker.

The recent NAR policy of requiring a broker to opt out is they present listings on the internet without the permission of the listing broker.

“The DOJ presents a convincing argument in favor of technological innovation. With the increase in the use of the Internet in business transactions, the time has come for real estate licensing and regulatory bodies to embrace technology. Rather than fighting the inevitable, they should incorporate technology into industry so as to conserve resources and encourage competition while at the same time, adopting measures to safeguard the public.

Whatever the outcome of this case, it is sure to have broad implications on e-commerce and the ability of industry regulatory bodies to maintain their traditional grip on their industry when their members are doing business online.”

Tags: NAR, National Association of Realtors

Comments Off on NAR Grappling With VOWs