Saturday, March 20, 2010

CNN - MONEY doesn't live here.....

From KTVZ.com.

Bend-area home-price gain predicted No. 10 in U.S.

Posted: March 19, 2010 10:26 AM

Experts see us hit bottom in Q2 of this year, 3.3% gain for 2010



Got to admit -- that's a surprise.

I have two questions:

1.) Is such a thing likely?

and

2.) Is it meaningful?

Question #1. I bopped over the Bend Economy Bulletin Board, and out of the last 148 listings of house price changes, only 5 of them were up rather than down. And those five were up a minuscule amount -- price adjusting, it looked like, tucking in their shirt and straightening their bow ties.

Looking at these numbers, it seems pretty unlikely that prices are going upward anytime soon.

There were, what? 430 NOD's in January.

Are they perhaps saying that more expensive houses will start to sell, thus pulling up the average? If so, Question #2, is that meaningful, or is the per foot average a more accurate gauge?
Again, looking at the listings on the BEBB -- it's the more expensive houses that are seeing the biggest downward adjustments.

Also from Question #2; if we've had the largest drop in housing prices in the U.S.A. -- which we did in 2009 -- is a 3.3% increase going to mean a whole lot? In a way, it's a reflection of how far we dropped, and says nothing about the relative affordability of living here. At that rate, we'll be back to 2007 prices in another 20 years or so...

Hey, but good news is good news, even if I'm pretty doubtful of it. Much like downtown filling with businesses, I welcome it, even as I doubt that existing businesses are doing much more than holding their own.

Finally, the most meaningful number of all in my eyes is housing starts, in that it produces income for the local economy. Again, from the tiny number of housing starts we've had in the last couple of years, it wouldn't take much of an uptick to have a dramatic effect on the PERCENTAGES.

Remember that little quirk of statistics, that 50% drop is the equivalent of a 100% increase. 150k house increase 100%, is a 300K house; a 300k house dropping 50% is a 150K house. See?

Besides, would you rather have a market that drops 3.3% a year for 8 years, or a market that drops 33% for 2 years, and then upticks 3.3%?

So, well -- I'm not buying it.

There is one possibility -- that the predicting helps create the situation. But I think both the REALITY and the REALTY is just too heavy right now for that to happen.

4 comments:

blackdog said...

Latest IHS Global Insight report (Q4 2009) says homes in Bend finally are "fairly valued." Does this mean we have bottomed out? Not necessarily -- homes here could become undervalued. But at least it seems to indicate prices finally have returned to a realistic level.

blackdog said...

"Besides, would you rather have a market that drops 3.3% a year for 8 years, or a market that drops 33% for 2 years, and then upticks 3.3%?"

In the first scenario, your $200,000 house would be worth $152,912 at the end of eight years. In the second, it would be worth $138,422 after two years. So the first scenario obviously is a lot better.

Duncan McGeary said...

That's what I was thinking -- then after I wrote it, I thought maybe it would be better to have the big drop and recovery rather than slow decay....

But I think it's a false choice -- our prices have dropped, and were going to drop, and the price increase seems very, very doubtful.

It's a forecast,after all.

IHateToBurstYourBubble said...

In the first scenario, your $200,000 house would be worth $152,912 at the end of eight years. In the second, it would be worth $138,422 after two years. So the first scenario obviously is a lot better.

Not necessarily. As to whether I would rather have $138K in two years, or $153K in eight, personally I would rather have the $138K in 2. It's only about 10% less, and I'd have 6 years to make that 10% back... I'm hoping I could manage to make just under 2%/yr...