The Swamplot reader who’s been focusing on Greenwood King Properties’ monthly market reports has spotted some problems in the latest sales data. The latest report, for the first time, provides separate totals for new homes and resales:
If dollars fall by more than units, then price has fallen.
If you add together 2 significant segments and one is lower and one is flat then the total is lower.
The quick math doesn’t work!!!
How can Flat+Down=Flat??
How can -38% dollars and -33% transactions = Flat??? It implies lower prices…
So now I have a report that raises more questions than answers. Total sales prices are flat? Resale prices are flat? ALL of the pain is in new construction?
Price has always followed volume in every market around the country. So are the price drops for resales ahead of us now? The average resale high end home in Houston is now $585,000??? Isn’t that LOT VALUE in most of these neighborhoods? We never got the news on what happened over the past 3 or 4 years on resale only. Were prices actually flat on the way up?
A few more comments on looming problems in the market for high-priced homes:
Swamplot’s Greenwood King-watching reader informs us that the real-estate firm’s March survey of home sales in Houston’s tonier neighborhoods is already out — early, this time. And this month the report details separate data for new construction and resales. Snarks the GK watcher:
This is a typical reaction of the Realtors to falling prices. Find a way to re-segregate the market to make the bread and butter look OK. Last year it was “Inside the loop never goes down!” Pretty soon we will see the market cut into “Three Story (-34%) Two Story (-2%) and One Story (-26%) homes.”
Hmmm . . . not a bad idea! But what about the new numbers?
“. . . it is amazing how that works in Houston. Same house, probably same builder, same sort of subdivision when it was new. If that same oil and gas junior executive had bought the same new house back in ‘70 in Nottingham Forest, he’d be looking at a $450K + pay day. It will be interesting to see which areas developed in the most recent boom will be the Nottingham Forests and which ones will be more like this subject. Any speculations out there??” [subprimelandguy, commenting on Neighborhood Guessing Game Over: The Houston Highlands]
The Houston Chronicle’s annual neighborhood-sales-data extravaganza came out this weekend. Since it covers the 2008 calendar year, the survey is timed just right to document the continuing drop in sales and prices of far-flung lower-priced homes — but maybe a bit early to catch the extended Wile E. Coyote-style midair hang a fair number of closer-in half-a-million-plus homes on the market are currently experiencing.
A few highlights:
Sales activity dropped in all counties for non-foreclosure transactions. All counties showed a rise in sales of foreclosed homes.
And those foreclosures are also clearly missing the bullseye: In 2008 there were only 362 foreclosures inside the Loop and 2,556 between the Loop and Beltway 8 — but a whopping 9,342 outside the Beltway. In total, foreclosures were only up about 11 percent over the previous year. But the number of non-foreclosure sales dropped by almost 22 percent. So in 2008 foreclosures accounted for just under 22 percent of all sales.
One of the last two trailer parks left in the Heights may not last much longer. Marian Floyd, owner of the Floyd Trailer Park — camped on a double-wide lot a couple properties west of Studewood on 9th St. since 1972 — has been having a tough time keeping up with rising property taxes. “Floyd said she needs to make a living, and she’s not willing to kick out her residents. She knows they don’t have much money, so she’s kept rent low over the years. But as property values — and the taxes she has to pay — have soared, Floyd has struggled to make ends meet. Between 2004 and 2008, the value of the park’s land soared from about $155,000 to $362,600, according to county records. . . . When Floyd threatened to close the park last month, the residents offered to pay more rent. Gloria Aguilar who lives in a nearby trailer with her husband and three children said she’d pay $300 per month instead of $200. Carlos Salgado, who lives with three friends, offered $300 instead of $225. Gutierrez, too, said she’d pay more. The landlord relented. But the trailer park’s residents worry for the future.” [Houston Chronicle]
45 percent of the 860,000 single-family-home appraisals completed by HCAD so far this year show a lower market value than last year; 39 percent are the same, and 16 percent have gone up. “‘Appraisal value is down about 2.5 percent (overall),’ said Assistant Chief Appraiser Gus Griscom of the completed figures. . . . Homes valued at $500,000 or more received the highest percentage of actual value increases. Homes valued at $250,000 or less were given the highest percentage of value reductions. Overall, of the statements currently being mailed, homes valued at more than $500,000 saw their market values increase on the average anywhere from 5.17 percent at the lower end to 5.81 percent for homes valued at $1 million or more. The above-$500,000 valuation group accounts for a little more than 3 percent of the appraisals being mailed.” [River Oaks Examiner]
Looks like HAR has responded to some Swamplot reader criticism and added a bit of needed real estate to the bottom of the charts in its latest report — as well as a thin white line to indicate actual, non-adjusted values. The changes and the addition of the latest numbers show a market that doesn’t seem quite so steady as last month’s HAR report made it seem.
There were 25.9 percent fewer property sales this February than last, according to the report. But our reader’s 3-month-moving average chart doesn’t look any worse than last month:
“You can see the collapse happening in West U. Noticed what I thought were an unusually high number of for sale/for rent signs there in late January, so started keeping an eye on the number of listings. (There’s an easy link on the chron.com site and then you can click on a neighborhood.) At the beginning of Feb. there were 297 residences listed. It has climbed more or less steadily over the past 6 weeks and stood at 353 today. A drive down Edloe from Westpark towards Holcombe is almost scary. There is a combination of developers finishing the last of the giant McMansions for this cycle and likely reseting of adjustable rate mortgages and job losses. There will probably be a cascading effect as very expensive places that can’t be sold get reduced and put pressure on prices of smaller places that have to be cut in turn. . . .” [MikeRG, commenting on Those Wet and Wild Houston Mortgages: 18 Percent Now Underwater, 7 Percent More Still Paddling for Air]
Sure is nice for us Houston didn’t get caught up in that big price run-up housing markets in the rest of the country fell for! That’s why in Houston real estate is in much better shape than it is everywhere else, right?
Not according to a study released yesterday by First American CoreLogic. The research firm estimates that 18.3 percent of all mortgaged properties in the Houston-Sugar Land-Baytown region are in a “negative equity position,” and another 6.7 percent are within just 5 percentage points of being there. “Negative equity,” AKA “I’ve fallen down and I can’t get up,” means a mortgage holder owes more than the underlying property is worth.
In other words, 1 in every 4 Houston-area mortgages is already in deep doo-doo.
But hey, all it’ll take to recover is for prices to rise a little! And the rest of the country is doing much worse, right?
“What I see on my bike rides,” writes 2-wheeled real-estate observer Lou Minatti, “is that construction has ground to a halt in Katy.” A few more louminating observations on the cycles of West Houston real estate:
The main upscale neighborhoods in the Houston metro area lie between downtown Houston and Katy, in the corridor south of I-10 and north of Westheimer/FM1093. Houston residents know what I am talking about. That narrow 30 mile x 8 mile corridor contains the trendy new “lofts” near downtown, expensive new condo towers in the Galleria area, River Oaks, Memorial, the Villages and Cinco Ranch. . . .
Me? I live north of I-10, the crappy side. It was a nice quiet place when we moved out here in 1995. It’s still an OK place, no real problems. But property values have been flat since 2000. The houses on this side of the freeway are between $100k-$150k. Here’s the thing: Long-time readers here have seen my videos and have seen the inventory and foreclosures from my bike tours. The new houses in these videos [both featured in this Swamplot post from last fall] have all been sold, and this is AFTER the shady lending was stopped. I did a video update three weeks ago [above] and didn’t post it on YouTube because there’s almost nothing on the market! In my subdivision of 900 houses there are two houses for sale and one foreclosure. That’s it.
A reader writes in to poke fun at a few “awfully massaged” charts included in last week’s monthly MLS report from the Houston Association of Realtors, calling them “the unintended consequences of crazy average-it-all-together-to-create-a-veneer-of-stability reporting”:
….the latest monthly sales numbers for single family and condo/townhomes are ACTUALLY OFF THE BOTTOM OF THE CHARTS!!
HAR’s sales-volume charts show 12-month moving averages, but even that isn’t enough to keep the latest numbers from dropping through the floor:
The unintentional comedy arises from the fact that the latest values very prominently highlighted in the boxes (2,827 & 203) are well below the scale on either of these sales volume graphs. . . .
It also reveals WAAY TO MUCH data smoothing on their part which calls into question their credibility. Their charts convey almost no information -on purpose.
Okay, but if you’ve got any actual information to share, break it to us gently, please:
A quick back-of-the-air-mail-envelope real estate comparison of greater Tanglewood and Colaba, a commercial district in South Mumbai: “My friends house was about 2 blocks away from Nariman house - the sight of the infamous siege on the Jewish community on 26/11. For a 600 sq ft 1 bedroom hall kitchen, my friend and his room mates were coughing up Rs 45,000 /- a month. My friend corrected me that the real rent is actually Rs 50,000 / month but he is getting a discount because of some renovation going on in the building. Judging by the fortune he paid for the apartment, you would imagine it to be an ocean facing villa with modern amenities like swimming pool, gym and manicured garderns. Horror behold! His apartment was actually in a very busy market area, in a dilapidated building which was probably more than 40 years old and might come down any minute. Once inside his compact apartment, I immediately started comparing this with my $700/ month (Rs 34,000 month), 800 sq ft 1 BHK in Houston in a very wealthy neighborhood. If Senior Bush could live a mile away from my apartment, I am sure my neighborhood must be really good! So even if I earn in rupees, it is much easier for me to afford a place in Houston than in Mumbai!!” [Continued Unnoticed]
A Swamplot reader requests a long hard look at the Houston housing market crystal ball: “Do any ‘experts’ lurking among Swamplot’s readership have any thoughts on long-term residential price trends in Houston? Me and the missus were trying to sell our home in Vegas (good house, great neighborhood, bad timing). Now we will be holding on to it until the Vegas market starts coming back — whenever that is. I’m trying to get an idea on what prices could look like when we finally have the funds to buy locally (6 months - 1 year, depending). Any info or sites that might help us answer those questions would be greatly appreciated.” [Swamplot inbox]
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Comment of the Day: West University Homes for Sale
“You can see the collapse happening in West U. Noticed what I thought were an unusually high number of for sale/for rent signs there in late January, so started keeping an eye on the number of listings. (There’s an easy link on the chron.com site and then you can click on a neighborhood.) At the beginning of Feb. there were 297 residences listed. It has climbed more or less steadily over the past 6 weeks and stood at 353 today. A drive down Edloe from Westpark towards Holcombe is almost scary. There is a combination of developers finishing the last of the giant McMansions for this cycle and likely reseting of adjustable rate mortgages and job losses. There will probably be a cascading effect as very expensive places that can’t be sold get reduced and put pressure on prices of smaller places that have to be cut in turn. . . .” [MikeRG, commenting on Those Wet and Wild Houston Mortgages: 18 Percent Now Underwater, 7 Percent More Still Paddling for Air]