July 2010 Case-Shiller report shows flat market

The S&P Case-Shiller Index is based on observed changes in home prices. It is designed to measure the increases or decreases in the market value of residential real estate.

For each home sale transaction, a search is conducted to find information regarding any previous sale for the same house. If an earlier transaction is found, the two transactions are paired and are considered a “repeat sale.” Sales pairs are designed to yield the price change for the same house, while holding the quality and size of each house constant.

Sales pairs from the following counties are included in the Portland index: Clackamas, Columbia, Multnomah, Washington, Yamhill, Clark (WA), and Skamania (WA).

The first graph shows all historical data for Portland, Seattle, and the 10 city index. The Portland residential real estate market has fallen 1.2% in the last year.

The second graph highlights the changes since the Federal Reserve stopped lowering interest rates in June of 2003. The Portland index is currently at 148.33; a decline of 19.90% since the market peak.

The final graph shows the year over year percent change since June of 2003.

Eugene RMLS Market Action Report – August 2010

The Regional Multiple Listing Service released October’s Market Action Report and the median sale price for August 2010 was $206,800 this is a 4% increase from the median sale price for August 2009.

The Eugene residential real estate market peaked in June 2007 with a median sale price of $243,300. Prices have now fallen 15.0% from that peak.

Months of supply (total inventory/monthly sales) is at 10.7 months compared to the 7.8 months of supply for the same month last year. A balanced market has about 7 months of supply.

The first graph compares the median and average sale price with the months of supply. Click on any graph for a sharper image.

The second graph shows the total supply of homes available for sale. This is simply a calculation of the months closed sales multiplied by the months of supply. There are currently 2,653 homes for sale; this is an increase of 27.9% from the same month the year before.

The third chart shows closed sales by month. There were 248 closed sales during the month; a decrease of 6.7% from the same month the year before.

The fourth chart shows new listings by month. There were 576 new listings during the month; a decrease of 1.5% from the same month the year before.

The final graph shows how affordable the median priced home is for a family of four. History indicates the ratio is usually between 2.5 and 3.0. Prices would have to fall 17% from the current median for the ratio to reach 3.0.

Vancouver RMLS Market Action Report – August 2010

The Regional Multiple Listing Service released the Market Action Report this week and the median sale price for August 2010 was $213,400 this is a 3% decrease from the median sale price for August 2009.

The Vancouver residential real estate market peaked in July 2007 with a median sale price of $269,900. Prices have now fallen 21% from that peak.

Months of supply (total inventory/monthly sales) sits at 11.9 months compared to the 8.0 months of supply for the same month last year. A balanced market has about 7 months of supply.

The first graph compares the median and average sale price with the months of supply. Click on any graph for a sharper image.

The second graph shows the total supply of homes available for sale. This is simply a calculation of the months closed sales multiplied by the months of supply. There are currently 3,831 homes for sale; this is an increase of 4% from the same month the year before.

The third chart shows closed sales by month. There were 322 closed sales during the month; a decrease of 30% from the same month the year before.

The fourth chart shows new listings by month. There were 866 new listings during the month; a decrease of 1% from the same month the year before.

The final graph shows how affordable the median priced home is for a family of four. History indicates the ratio is usually between 2.5 and 3.0, the current ratio is 3.05.

Portland RMLS Market Action Report – August 2010

The Regional Multiple Listing Service released the Market Action Report this week and the median sale price for August 2010 was $250,000; this is the same as the median sale price for August 2009.

The Portland residential real estate market peaked in August 2007 with a median sale price of $302,000. Prices have now fallen 17% from that peak.

Months of supply (total inventory/monthly sales) sits at 11.0 months compared to the 7.8 months of supply for the same month last year. A balanced market has about 7 months of supply.

The first graph compares the median and average sale price with the months of supply. Click on any graph for a sharper image.

The second graph shows the total supply of homes available for sale. This is simply a calculation of the closed sales for the month multiplied by the months of supply. There are currently 15,191 homes for sale; this is an increase of 6% from the same month the year before.

The third chart shows closed sales by month. There were 1,381 closed sales during the month; a decrease of 25% from the same month the year before.

The fourth chart shows new listings by month. There were 3,829 new listings during the month; an increase of 1% from the same month the year before.

The final graph shows how affordable the median priced home is for a family of four. History indicates the ratio is usually between 2.5 and 3.0. Prices would have to fall 16% from the current median for the ratio to reach 3.0.

CoreLogic Home Price Index Spells Top Five Trouble for the Greater Northwest Real Estate Market

We all know by now that the Northwest region of the country was late to the housing bubble. CoreLogic's latest report shows that NW states such as Idaho, Oregon, and Washington are showing up late to the bust, and we are now leading the way when it comes to declining prices.

"CoreLogic (NYSE: CLGX), a leading provider of information, analytics and business services, today released its Home Price Index (HPI) that showed that home prices in the U.S. remained flat in July as transaction volumes continue to decline. This was the first time in five months that no year-over-year gains were reported. According to the CoreLogic HPI, national home prices, including distressed sales showed no change in July 2010 compared to July 2009.

June 2010 HPI showed a 2.4 percent* year-over-year gain compared to June 2009. 36 states experienced price declines in July, twice the number in May and the highest number since last November when prices nationally were still declining."



"The top five states with the greatest depreciation, including distressed sales, were Idaho (-12.6 percent), Alabama (-9.7 percent), Utah (-5.6 percent), Oregon (-4.8 percent) and Washington (-4.3 percent)."




"Excluding distressed sales, the top five states with the greatest depreciation were: Idaho (-9.9 percent), Michigan (-6.7 percent), Arizona (-5.6 percent), Nevada (-4.8 percent) and Oregon (-3.8 percent)."



Whether your sale is distressed or you are holding out for bubble era pricing, it's become obvious that if you are going to sell a property, you're going to end up settling for an ever lower price the longer you wait to pull the trigger. Plan accordingly if you are trying to sell a home these days in the great Northwest. Sell now or be priced in forever!

If you're a potential buyer? My best advice is that you keep your powder dry, pay off any existing debts, stop borrowing money, and save as much as you can. Real home prices in OR, WA, ID have nowhere to go but downward as the pool of greater fools has all but evaporated at this juncture. Prudence takes immense patience in today's real estate game.

The days of EZ bank loans are long gone. All that matters now are savings and real wages when it comes to buying real estate. When the cost of capital funds are cheap, the capital asset appreciates in value. When the cost of capital funds become expensive, the capital asset declines in value. We are in the midst of a generational shift in that equation.

Equity's a cold hard bitch when it turns negative...


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Halfway There? Livin' on a Prayer?

Most employed in the FIRE economy are desperately spinning the bubble as done, over with, and gone. Bubble? That was soooooooo 2008-2009! They sleep well at night convincing all who will listen that there has never been a better time to buy, and that THIS must be the bottom. Michael David White is a mortgage broker who knows the game after 18 years in the business, and is rather happy to tell the cold hard truth about today's rather precarious housing market.

I have no affiliation whatsoever with Mr. White. But I do agree with his assessment that a true economic recovery for the middle class cannot be realized until the government stops meddling in the housing market, it forces bad bank loans to foreclose/default, and it allows free-market price discovery via parity with real wages when it comes to private real estate property in America. Real estate is suffering from "everybody gets a ribbon" disease. Nobody in America is allowed to fail anymore.

Mr. White has put together an interesting forecast for home prices by averaging four major data sets, including: Case-Shiller, FHFA, First American, and Freddie Mac. Here is his result:



The short version is this: Prices in 2010 will lose another 9%, and as of today the bubble is only about halfway done correcting. The "bottom" in housing prices is still a very long way down from here folks. The only question is timing; and how long all of this will drag out.


"A stat which may be of great interest is the prediction by the average of the indexes that our fall in prices is only half-way accomplished – a forecast which, if true, will elicit fear in the hearts of homeowners, buyers, bankers and government officials.

A natural fall-back in prices is a matter of the highest gravity to the Federal Reserve Bank and the Treasury and to current and future homeowners. The federal government has massively intervened in the housing market. It funds nearly 100 percent of new mortgage loans originated today.

Fed and Treasury are attempting to preserve bubble values for homeowners and save mortgage investors. Absent government intervention, housing prices would have fallen 50 percent or 75 percent by now."

Again, I ask the question: What's better for the American middle class over the long term- expensive houses with cheap money/bank loans -or- cheap houses with expensive money/real wages?

What's better for the banks?

Sadly, our elected officials have clearly continued to support the banks who fund their campaigns, as opposed to supporting a free market and the American middle class when it comes to "affordable housing".

Source: Michael David White

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Prime Mortgages - The New Subprime?

The default of subprime mortgages and their corresponding MBS provided the spark that ignited a firestorm of bubble era housing price corrections, but it should be obvious to all observers by now that subprime loans were just the tip of the iceberg that is sinking the USS Housing Titanic. The number of prime home loans blowing up these days far outweighs the number of subprime loans gone bad:

"The volume of these loans is depleting and the subprime universe now makes up roughly 5.4% of the total active loan market. Prime loans on the other hand, dominate the market in terms of loan type.

Prime loans, however, made it past the housing bubble without much default or trouble because or they were not susceptible to price fluctuations. Fleming warned that the impact percentage of delinquent loans in the prime space have been masked because the volume is so huge. Compared to the less than 3.5 million subprime, there are about 40 million prime loans in the marketplace, 6.2% of which were 60 days delinquent in June 2010 and 3% of which were 90 days delinquent.

"If you're looking at delinquencies and foreclosures by data type you're comparing 16% versus 40%," said Fleming in an interview. "But that's 16% of 40 million loans (prime) versus 40% of only 2 million loans (subprime)," which equals 6,355,506 delinquent prime mortgages versus 950,448 delinquent subprime mortgages." "

For those who are not mathematically challenged when it comes to loan underwriting standards, what really matters with respect to loan risk is verifiable income, solid credit history, and a substantial down payment that assures the borrower has skin (equity) in the default game.

What has happened in America and Portland with respect to substantial down payments when it comes to 'buying' a house? Bueller? Beuller?

"Substituted was a scam of liberalized lending standards that turned out to be no standards at all. In 1990, one in 200 home-purchase loans (all government insured) had a down payment of less than or equal to 3 percent. By 2003, one in seven home buyers had such a low down payment, and by 2006 about one in three put no money down.

These policies led millions of Americans to buy homes with little or no money down, impaired credit and insufficient income. As a result, our economy has been brought down and the taxpayers have had to foot the bill for bailout after bailout"

That's right, at the peak of the bubble, 1 out of 3 borrowers put ZERO CAPITAL down toward their 30+ year lease on borrowing money from the bank. That's "affordable home ownership"? It's actually a lot more like debt/tax slavery at the feet of the money changers (banks).

Meanwhile, our elected officials continue to juice the easy loan money spigot, at which the same mathematically challenged masses continue to drink and borrow at 95% loan to value. Not to worry, these new loans are guaranteed by your future taxes due, and Freddie/Fannie have an UNLIMITED bailout backing from the US Treasury through the end of 2012. Thank you Christmas Eve CONgress!

Whether you rent, own outright, or 'own' a loan payment that's due to the bank -if you pay any sort of taxes you will be paying for the housing bubble's largess. This includes the bonuses for the winners, and the bad debt for the losers. We're all gonna pay suckas!

The banks are too big to fail, they have achieved regulatory capture over our elected officials, and they will not be allowed to lose on the loans they made on our behalf (prudent or otherwise). The banksters have bonuses due that YOU need to pay via ever increasing taxes and fees on your labor/consumption -past, present, and future.

"And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place."

- US Senator Durbin, April 2009

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The FED Game: Quoting Bernanke on the Housing Bubble, Mortgage Rates Set Yet Another Record Low

For those that are unaware, the privately owned Federal Reserve Bank has controlled the money supply of the United States since 1913. What does this have to do with Portland housing prices and asset values? Let's review some fairly recent quotes from the current chairman of the privately owned Federal Reserve Bank -Mr. Ben Bernanke:

Ben Bernanke - 5/17/07:

"We believe the effect of the troubles in the subprime sector on the broader housing market will be limited and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system"

Ben Bernanke - 9/2/2010:

"Even if monetary policy was not a principal cause of the housing bubble, some have argued that the Fed could have stopped the bubble at an earlier stage by more-aggressive interest rate increases," he said. "For several reasons, this was not a practical policy option. In this case, to significantly affect monthly payments and other measures of housing affordability, the FOMC likely would have had to increase interest rates quite sharply, at a time when the recovery was viewed as "jobless" and deflation was perceived as a threat"

If there's one thing the FED is concerned about it's deflation. In deflation, bad debt implodes, asset values drop toward parity with real incomes (cash purchasing power), and the banks lose big time on defaulted loans. Remember that the FED is owned by the largest of large banks.

The problem is that the more the FED increases the money supply to support debt based asset values, the more expensive commodities like food and energy (not part of the core CPI) increase in cost. Do you buy food or energy on a regular basis? Have you ever asked why those two items are no longer part of the core CPI (consumer price index) used by our government to measure price inflation?

Meanwhile, we have the FED executing QE (quantitative easing) to purchase US treasury debt, MBS (mortgage backed securities), and other 'assets' with freshly printed money to support debt based valuations on the balance sheets of the biggest of "too big to fail" banks. Just how much money has the privately owned Federal Reserve Bank printed recently to support asset values like houses and real estate?



The above graph suggests that debt backed asset values would be almost HALF of their current value were it not for the FED's intervention throughout the financial crisis. Meanwhile, in a shorter timeframe, the M2 money supply has been steadily goosed over the last year as well:



What does all this mean to housing and other debt based asset values? What does it mean for the purchasing power of the US dollar? It's really anybody's guess. Obviously the FED has made 'money' as cheap as possible by purchasing MBS / US treasuries and driving down interest rates to support the nominal value of debt based assets like real estate. Nominal valuations are one thing. What do real wage based valuations look like? Meanwhile...mortgage rates set yet another record low today!

Bernake's printing of more paper/pixel money out of thin air can only work until the price of necessary commodities like food and energy rise to the point of economic pain (to reflect the devaluation of the currency due to the proportional increase in the freshly printed money supply). Every time the FED prints/QE's another dollar, the greenbacks in your wallet/bank account lose some purchasing power.

For the time being, the FED has printed in tune with what has has been destroyed by bad debts defaulting and blowing up on the balance sheets of banks. We currently have a slow controlled deflation not unlike that of Japan for the last 20 years. However, the value of the US dollar is precarious in that the more dollars the FED creates, the less valuable dollars become. That math cannot be avoided, regardless of the politics involved. Folks who ship oil and other hard assets to the US understand the game all too well. As do our foreign bond holders.

How many US dollars can the Federal Reserve Bank print out of thin air to support leveraged asset values before the purchasing power of the dollar causes economic pain via very high food and energy prices? Food and energy are divinely intertwined, and remember that the majority of America's oil is imported, and subject to foreign exchange rate arbitrage.

Ever heard the phrase "Don't fight the FED"? If the bankers have their way, inflation will rule the day. In the mean time, the free market is screaming deflation. Will the FED defend wages and the purchasing power of the US dollar, or will they support the leveraged asset values on the balance sheets of the banks by printing more money via QE 2.0?

Folks who are in debt will generally favor money printing and more inflation. Folks who are not in debt and have been prudent savers will generally favor deflation. Which will we have and for how long? Which is based on a free market? Do we have a 'free' market for assets anymore?

What will be best for the big banks? The FED? Follow the money!

Again I ask the question: Is Portland better off buying cheap houses with a strong currency, or expensive houses with a weak currency? How does your answer square up with food, energy, and housing prices? Does that answer reflect median free market wages in Portland today?

Is "affordable housing" better reflected by low interest rates (cheap money) and high home prices - or higher interest rates (strong money) and low home/food/energy prices?

We've all gotta eat to survive, we've all gotta stay warm through the winter, and we all need a roof over our heads when the rains come with the turning of the autumn leaves in the great Northwest. What's more important: the value of our debt, or the value of our money?

Seasons change, and so do debt based fiat paper currencies. Bernanke is dreaming if he thinks he can print his way out of this mess. Food and energy inflation would cripple any recovery, and there's just too much bad debt in the financial system. This is why home prices will continue to decline. The best we can hope for is a soft landing and a slow, steady, and controlled deflation. We'll be lucky if we slowly deflate like Japan.

Bernanke's dreaming of inflation, but dreams have never made my bed.