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Posts Tagged ‘Three Cents Worth’

[Curbed] Three Cents Worth: Bonus Babies

June 21, 2006 | 3:25 pm | | Charts |

Its Wednesday, so its that time of the week to provide my Three Cents Worth as a post for Curbed, and rumour has it that they are the largest trafficked real estate web log on this particular planet (re: earth).

Three Cents Worth: Bonus Babies

Previous posts can be found here.


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Measuring GDH (Gross Domestic Happiness), By Way Of Housing

June 16, 2006 | 12:01 am | | Columns |

[Economists have been trying to quantify happiness](Truck and Barter](http://truckandbarter.com/mt/archives/2006/06/the_hedonic_tre.html) or well-being in numerical terms for years.

The housing wealth effect has been one of the more important linkages between the housing market and consumer patterns in the current economy.

Can we infer that the more propserous a household is, the happier it is? (I can imagine a huge swath of the population shaking their heads “NO!” to that comment.) I do a lot of real estate consulting in divorce cases and I KNOW this to be a false statement.

So lets back up. Rather than prosperity, lets say we associate well-being on national basis with GDP and see if that ties into housing.

Gross Domestic Product (GDP) deals with output and the wealth effect deals with consumption.

The OECD report showed there is a correlation between GDP and leisure time [OECD]. They looked at a large array of countries and interviewed residents about their happiness and charted it against their nation’s GDP.

Work may drive growth, but for most people, more free time contributes to well-being, as long as it is not accompanied by lower income. Still, one often-heard remark about the gap in economic performance between OECD countries is that US workers may earn more money but they work longer hours, whereas Europeans prefer more leisure to more work, or indeed, more money, and so are better off.

To more accurately measure happiness using GDP, the OECD report [Yale Economic Review] compares multiple alternative measures of happiness:

  • “national accounts indicators,” such as net national income, more accurately reflect economic resources because they correct for transfer payments and other market factors.

  • “extended monetary measures,” integrates non-market factors such as leisure time into traditional monetary statistics.

  • neglected social influences which affect happiness and yet cannot be easily reflected in economic statistics. They separate social indicators into four rough categories: self-sufficiency, equity, health, and social cohesion, and identify proxies such as average years of schooling and infant mortality to help quantify the indicators and find that most correlate well with output data.

The authors conclude in their study that GDP, while flawed can be a pretty good indicator of happiness on a country-wide basis.

At the same time, GDP can be correlated with new home sales. I correlated GDP with the New York housing market to the same effect.

Therefore, since housing can correlate with GDP and GDP correlates to well-being (happiness), can we infer that (how we feel about our) housing, affects our happiness?

Sure its a stretch, just like an adjustable rate mortgage thats about to reset.


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[Curbed] Three Cents Worth: A Luxury Spread You Can’t Afford

June 14, 2006 | 5:58 pm | | Charts |

Its Wednesday, so its that time of the week to provide my Three Cents Worth as a post for Curbed, and rumour has it that they are the largest trafficked real estate web log on this planet (re: earth).

Curbed: Three Cents Worth: A Luxury Spread You Can’t Afford

Previous posts can be found here.


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[Curbed] Three Cents Worth: Absorption Makes Us Bloated

June 7, 2006 | 2:47 pm | | Charts |

Its Wednesday, so its that time of the week to provide my Three Cents Worth as a post for Curbed, who tells me they are largest trafficked real estate web log on the planet (re: earth).

Curbed: Three Cents Worth: Absorption Makes Us Bloated

Previous posts can be found here.


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[Getting Graphic] Explaining The Current Disconnect Between Economists And Consumers

June 5, 2006 | 12:03 am | | Columns |

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

Click here for full graphic [NYT]

Source:NYT

In Daniel Gross’ terrific article When Sweet Statistics Clash With a Sour Mood [NYT] he addresses the disconnect between the mood of the consumer and national economic statistics. I have been scratching my head lately at all the positive economic news and the inflation threat from an overheated economy.

Over heated economy? I have had many a discussion with various economists and despite the profession’s reputation for being worriers, lately I have found them to be just the opposite. I don’t feel their same optomism. Why?

Daniel Gross attempts to explain this abstract disconnect. Here are his major points:

The median net worth of a US family remained unchanged from 2001 to 2004

Only 6 percent rated the economy as very good, while 46 percent said it was fairly bad or very bad. And consumer confidence plummeted last month, according to the Conference Board. This strange and unlikely combination — strong and healthy aggregate macroeconomic indicators and a grumpy populace — has been a source of befuddlement to the administration and its allies.

Average net worth increased 6% from 2001 to 2004 while median net worth was flat suggesting that only the upper demographics have seen real improvement. These numbers are fairly shocking to me since housing prices have increased significantly over this period. This would seem to indicate that property owners have taken on a lot more debt. With home equity loans generally tied to adjustable rates and the fed posturing for another rate increase after two years of them already, the future doesn’t look so bright.

CPI is one of the main culprits

“It has no direct relationship to what people perceive as inflation,” he said. Mr. Baker notes that the index doesn’t take account of rapidly rising co-payments and higher insurance deductibles when it calculates health and medical costs. And to gauge inflation in housing, the index approximates a measure of rent instead of looking at home purchase prices.

“We’ve had a huge run-up in the price of housing, and that doesn’t show up in the C.P.I.,” he said. So while the index shows that inflation is elevated but still under control — up 3.5 percent from April 2005 to April 2006 — many Americans find themselves paying sharply higher prices for essential goods and services.

I have posted about CPI calcs on a number of occasions.

Statistical aggregates and averages are also to blame

Many of the macro stats that are presented monthly don’t apply to individuals. Mark Zandi of Economy.com provides a great quote:

“If you put one foot in a tub of hot water and the other in a tub of cold water and take the average, everything is fine.”

My junior high school gym teacher once told me, “If you are running 4 mph with a friend and he jumps on your back, you don’t go 8 mph” (perhaps this is why I didn’t become a gym teacher).

I get this sort of feedback from my market reports and my weekly Three Cents Worth posts on Curbed. The readers want to know what the numbers means to their specific properties and not just to the market in general, something that aggregate statistics can not provide (thats what a property appraisal does.)

Timing is also a key factor

The OFHEO housing index that was released last week was a 1st quarter closed sales report so its based on contracts from November to February. Its hard to relate that to today’s market. On the other hand, and probably even more misleading, is the attempt to issue market reports in shorter time frames with inadequate data. We often see attempts to issue real time, weekly or monthly reports, for the sake of being current. However, the size of the data set drives the frequency of the report. The report does not drive the data. I see this on a local and national level and it only serves to confuse the consumer.

Now consider the fact that the housing market slow down will be just hitting the national stats in the coming months. The Fed is pondering its next move this month. That does not provide much confidence to consumers that they will make the right move, does it?


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Please Show Us Which End Is Up

June 1, 2006 | 7:37 am | | Columns |

In Carol Lloyd’s Surreal Estate column last week Bubble Trouble? What to make of all the real estate trend news [SFGate] she explores the vast outpouring of real estate information and its interpretation available to consumers.

Some economists — typically, those who have staked their professional reputations on being dark-horse skeptics — are predicting nothing short of a global economic apocalypse. Others — often those on the take from the real estate industry — scoff at such dire visions. Don’t listen to the doomsayers, they say, “we’re in for a soft landing.”

But what does all this news mean to the average home buyer and seller? Not much other than to signify that things have changed since last year, at least up to this point.

Across the country, it is generally been reported that, prices are flat or up, yet volume is down.

Yet we eagerly await more data. The Walk-through announced two days ago that OFHEO is releasing their quarterly stats which is used by many government agencies and the numbers may be negative for the first time since its history, as speculated by the well-reguarded blog Calculated Risk (who subsequently put strike-throughs in all references to depreciation).

Economists and market commentators eagerly await new material to discuss (self-included), but the usefulness of the OFHEO report is questionable in a changing market.

Today’s OFHEO report release at 10am contains:

  • the first quarter 2006 (its now June)

  • only closed sales (a 30-60 day lag so it includes November-December contracts)

  • a significant amount of non-sale data (ie appraised value of refinances)

  • only data from conventional mortgages (UPDATE: less than or equal to $417,000), which therefore omits a large swath of data from the east and west coasts.

  • data provided by the agency that is directly responsible for oversight of the GSEs (Fannie and Freddie) of which Fannie has serious issues with accounting violations.

  • UPDATE – only includes 1-family houses

Not a lot of reliability here to feel comfortable about.

Carol correctly summizes about whether to buy or not:

I think the best answer is it that it all depends on what you’re buying or selling and how it’s priced.

Thats sounds like a completely caveated answer but its the only one that can be made and still have integrity. In other words, whats happening in San Diego, CA or Fargo, ND doesn’t necessarily (or likely) correlate with national housing statistics.

Are national statistics helpful? I think they are but only when used for general discussion. For me, its fun to see what goes into the process of collecting the information and the national ramifications. On a local level, the commentators need to connect the relevance, if any, to local conditions.

The analogy I can draw from are the local reports I prepare in New York. My reports can’t be taken down to the baseline level for pricing a specific property. Thats what an appraisal is for. In other words, market reports provide the aggregate of all sales. All 2-bedroom condos in Manhattan are not identical, therefore, the 2-bedroom Manhattan condo stats I provided are merely a starting point and a general indicator of trends. Sub-markets of this 2-bedroom category can be broken up into many smaller segments such as building type, location, size, etc.

Yesterday, a few early comments were made to my weekly Three Cents Worth post on the real estate blog Curbed were critical of my stats, saying they tell us nothing, that I can’t look at historical by going back in time, I can’t use a short term window because it doesn’t show a trend. Therefore this leaves me one remaining option, to chart the future. I haven’t figured that out yet.

In the Inman article Why housing forecasts are (almost) worthless [subscr], writer Marcie Gefner draws this conclusion about predicting the future:

Forecasters, prognosticators, pundits, analysts and others of their ilk are able to predict the future — or so they would have real estate professionals and the home-buying and home-selling public believe. It’s bunk, of course.

I agree with her. The simple fact is that there are many people who do not seem to grow tired of the topic, and are looking to absorb as much information as possible, whether reliable or not, until the next hot topic come along.


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[Curbed] Three Cents Worth: Co-ops Move and Shake With Rates

May 31, 2006 | 8:46 pm | | Charts |

Its Wednesday, so its that time of the week to provide my Three Cents Worth, as a post for Curbed, a real step-mother of a real estate web log.

Curbed: Three Cents Worth: Co-ops Move and Shake With Rates

Previous posts can be found here.


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[Curbed] Three Cents Worth: Spreading ARMS Around Prices

May 24, 2006 | 8:05 pm | | Charts |

Its Wednesday, so its that time of the week to provide my Three Cents Worth, as a post for Curbed, a real distant cousin of a real estate web log.

Curbed: Three Cents Worth: Spreading ARMS Around Prices

Previous posts can be found here.


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[Curbed] Three Cents Worth: It’s (Kinda) Volatile at the Top

May 17, 2006 | 10:52 am | | Charts |

Its Wednesday, so its that time of the week to provide my Three Cents Worth, as a post for Curbed, the long lost relative of a real estate web log.

Curbed: Three Cents Worth: It’s (Kinda) Volatile at the Top

Previous posts can be found here.


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[Curbed] Three Cents Worth: Radar Love

May 10, 2006 | 9:51 pm | | Charts |

Its Wednesday, so its that time of the week to provide my Three Cents Worth, as a post for Curbed, a kissin’ cousin of a real estate web log.

Curbed: Three Cents Worth: Radar Love

Previous posts can be found here.


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Curbed: Three Cents Worth: The Manhattan Solar System

May 3, 2006 | 4:44 pm | | Charts |

Its Wednesday, so its that time of the week to provide my Three Cents Worth, as a post for Curbed, a real sister-in-law of a real estate web log.

Curbed: Three Cents Worth: The Manhattan Solar System

Previous posts can be found here.


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[Curbed] Three Cents Worth: Wavy 5-Year Price Cycles

April 26, 2006 | 3:36 pm | | Charts |

Its Wednesday, so its that time of the week to provide my Three Cents Worth, as a post for Curbed, your long lost niece of a real estate web log.

Curbed: Three Cents Worth: Wavy 5-Year Price Cycles

Previous posts can be found here.


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