Altos Research Real Estate Insights

Here are the Case Shiller Index numbers released today for July. No big surprise. Down of course. One percent more this month. Down 17% from July 2007. As I've been saying in the press lately, we've seen no signs of a bottom. Even before the crisis of the last couple weeks, pricing through September continues to be down sequentially.

As we've already measured, the next three months of the Case Shiller numbers continue their fall at the same pace. Price decreases through September have not accelerated. There are no signs of market inflection points yet either. Days on Market is climbing and Inventories are flat at best. Contact us if you want specifics on the CSI for a given future date or a given MSA market.

MSA	CSI July 2008	Change from June 2008	Year over year change
Boston	162.58	0.17%	-5.35%
Chicago	149.6	-0.35%	-9.95%
Denver	132.67	0.77%	-4.71%
Las Vegas	154.15	-2.75%	-29.90%
Los Angeles	192.55	-1.63%	-26.18%
Miami	186.84	-1.60%	-28.25%
New York	192.92	-0.76%	-7.41%
San Diego	172.2	-1.81%	-25.02%
San Francisco	156.88	-1.85%	-24.81%
Washington DC	195.49	-1.07%	-15.80%
10-City Composite	178.46	-1.09%	-17.49%

Our National Report for September data comes out later this week with the current view on the market rather than the backward looking stuff released today. Stay tuned for details

...what's going to happen to condo prices in Manhattan?

We've noted elsewhere that New York city real estate has managed hold up reasonably well while Rome burns, though 2009 is looking a bit smoky for condos in the financial services capital of the world. On the horizon watch the three confluential variables:

1. The layoffs be a-comin'
2. Bonuses are heading down for those who remain
3. The dollar is strengthening

Here's what we know about the Manhattan condo market as of September 12, 2008.

• Year over year, we see condo prices in Manhattan (all zips) basically flat at a median price right around $1.6 million.
• That buys you on average, incidentally, a 1200 square foot, 2 bed, 1 bath place in a 64 year old building. Of course the "average" condo in Manhattan is as elusive as the "average" family in the country. Let me know when you meet one. By the way, we're talking condos specifically here. NYC's bizzarro-world co-op structure is examined in different data.
• They've been on the market, on average, for over four months. My guess is that this number skews higher than it might feel like if you're actually shopping in Manhattan, because, more than anywhere else in the country, the best properties move with behind-the-scenes, my-broker-knows-someone kind of deals.
• [self promotional aside: if you want to dig into all these details yourself, start on our free data for New York, and register. Subscribe to the Condos report for NYC and dive into the parts of town you care about. end promotion]

Where do we go from here?

• Securities Industry employment fell by 11% in the last bubble burst. Bear Sterns, Lehman, Merrill, AIG: they're coming fast and furious this time too.
• It's well known that bonuses drive much of the seasonal demand, on the Street in the
  past couple years a very simple, very common trade has been to short the builders and go long commodities. The evaporated funds behind the long commodities positions alone are going to eat big chunks from the 2008 bonus pool.
• Other things eating at this year's bonuses - M&A is way down, IPOs are non-existent. New product innovation ("Hey," says some underwriter at AIG, "let's insure these sub-prime loans against losses! We can't lose!") is crushed by internal or governmental forces. The liquidity that leveraged it all. Sheesh, I get
  exhausted just listing the down forces.
• International money (particularly Europe and Middle East) has been a prop for New York real estate for over a year now. For some in the world, Manhattan real estate hasn't been this cheap in a long time. Likely a small percentage of over all transactions, these push the margins enough to keep a floor on demand and therefore prices. But now: The last couple months have seen a dramatic turn in the dollar as the European economy weakens also.

So, look, the top-end of most regional markets has weathered the storm so far (see the discussion on my Fox TV interview). And Manhattan is notably the top-end for the region. But the fact is we're just starting this recession and this time around it's a financials-led recession. The few factors keeping Manhattan condos afloat into 2008 are evaporating in front of our eyes. My guess: Median price for Manhattan condo will down 20% in 2009. That part is just a guess. I'm simply finding it difficult to identify any factors to be sanguine about.

We have another cool slide show up at BusinessWeek.com this week. They asked us to dig out the local markets where homes are selling the fastest. Here's a newsflash, folks, even the highest demand markets are moving like molasses. A fun look at the data nonetheless. We looked at 20 metros around the country and picked out one or two zip codes where the rate of turnover wasn't abysmal.

Also, in case you missed the bulletin to the Altos Research fan club: I'll be on the Fox Business channel tomorrow morning (September 9) between 8:00 and 8:30am California time with Brian Sullivan. We'll talking the housing market, natch. Check it out. Let me know if you find the live stream on the FBN site.

Our Latest National Housing Market Report is out. You can download the PDF here.

From the press release:

Mountain View, CA September 5, 2008 -- The Altos 10-City Composite Price Index showed a decline in asking prices of 1.5% in August and 2.3% for the past three months. Prices of properties listed for-sale fell in 20 of 25 major markets according to the Real-Time Real Estate Report,published by Altos Research, the premier source for real-time real estate research, and market analysis consultancy Real IQ.

Asking prices fell at the fastest rate in Las Vegas -- down 4.8% during August -- and 8.6% over the most recent three-month period for an annualized rate of nearly 35%. Listing prices rose at the fastest rate in Denver -- up 1.9% in August -- followed by San Diego where prices were up 1.4%.

"Many markets that had posted multi-month sequential price increases during the Summer months displayed fresh weakness in August," said Stephen Bedikian, partner and research director for Real IQ. "This could portend a general resumption of the downward trend in prices as most markets typically experience seasonal weakness in the Fall and Winter months."

Inventory levels declined in 21 of 25 markets. Inventory fell by the largest amounts in Seattle and Dallas with inventory contracting 6.0% and 4.8% respectively. Many markets showed inventory declines of more than two percent for the past month including: San Francisco, San Jose, Washington, D.C., San Diego, Phoenix, Charlotte and Houston.

"While seasonal weakness is typical in the Fall and Winter months, continued widespread inventory reductions like we saw in August could temper near-term price declines," said Michael Simonsen, CEO and co-founder of Altos Research.

Sixteen of 26 markets had an average days-on-market of 100 or more. Days-on-market declined in just three of 26 markets. By far, the market with the slowest rate of inventory turnover was again Miami at an average of 160 days-on-market. Both San Diego and San Francisco experienced the fastest rate of inventory turnover at an average of 84 days-on-market, followed closely by Austin at 86 days.

Data in the Real-Time Housing Market Report is based on analysis of over one million properties currently listed for-sale in 26 metropolitan markets across the country. The report is the most timely source of housing market data on current market activity.

The report examines housing pricing, inventory levels and market conditions in 31 major U.S. metropolitan statistical areas (MSAs): Atlanta, Austin, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Houston, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa, and Washington, DC. The Real-Time Real Estate Report is released every month.