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Last Night’s KGW Real Estate News Story

I sent the following email to KGW last night after I had written last night’s post. The first two graphics are from June’s and May’s 2007 RMLS Action Report. The third is clipped from the news story last night. I got no reply:

Can you explain your graphic below?  Appears pretty clear where the $295,000 in your graphic came from (though June is reported as May) but how do you get a May/June ’06 number that is so different than the June ’06 number reported?  I had already blogged www.PortlandRealEstateBlog.com about the data and your story before I put two and two together and figured something didn’t read right to me. 

Rmls_median

 

May_rmls_3

Median_price_4

Not looking to pick a fight.  I spend enough time getting beat up on my blog for that!

Charles

23 Comments on “Last Night’s KGW Real Estate News Story

  1. Charles,
    Get used to the negativity. This market is toast.

  2. Doesn’t mean any of us can scream “fire” in a crowded theater. If the stats are inaccurate, they should at least have a reaction.

  3. Doesn’t mean any of us can scream “fire” in a crowded theater. If the stats are inaccurate, they should at least have a reaction.

    True, though there were inaccuracies and frankly, a huge amount of cheerleading by various media outlets on the way up too.

  4. Looks to me that KGW had predetermined the story before they aired and made up the numbres in 2006 to prove it.

  5. Mike: I don’t have much confidence in local TV media but I kind of doubt that they’re imaginative enough to cook up some numbers from scratch. Didn’t KGW’s numbers match the Oregonian’s ? (I’m thinking that KGW got their numbers from the Oregonian) Perhaps the divergence between the KGW/Oregonian numbers and Charles’ numbers can be explained by something as simple as the former including condos and the latter not including condos?

  6. I am not sure where the data that KGW used came from, but I will say that it parallels the data reported at:

    http://www.housingtracker.net/askingprices/Oregon/Portland-Vancouver-Beaverton/

    And while I do not mean to beat you up, I have been watching how you keep using the calendar year as the best metric. It may be just a coincidence, but the housing market was at a low point (a localized minimum) near January 1.

    When I look out my bedroom window, I see several properties for sale, and the last flyer I picked up said “Asking price is lower than purchase price 1.5 years ago.” The purchase price was $268k and the asking price, after several price reductions over the last 6 months, ended up at $264k. I do not know what the seller’s transactional costs are, but certainly when you sell below purchase price, there is no “profit.”

    Do I really care what the property was worth on January 1? No. Did I make a purchase on January 1? No. What is most important, as far as I am concerned, is how much of a change can we expect in the future? In other words, let’s not concentrate on sunk costs, but rather future opportunity. If the market for a given commodity is going down, then as a rational player, I seek to sell that commodity and shift to another opportunity. One thing is for sure, treasury bonds if held to maturity do not go down in value.

    I also find it interesting how trend analysis is used when it supports a positive position, but the simple random walk is used to cast doubt on negative information. In other words, it seems that the message is “Look at the positive trends, but we cannot predict losses based on history.”

    Investment opportunity is just one reason to buy a home. There are irrational reasons too. Remember the most important aspect might be “Wife’s opinion.”

    My question is simple, why buy at or near the top?

    Finally, in the interest of making it clear that I am not trying to “beat you up,” would you rather your blog community be full of comments only from those people who agree with everything you say, or would you like to hear a wider range of views and observations of others? If you do not appreciate my input, then I can certainly keep my comments to myself. I respect what you have to say, even if we disagree from time-to-time.

  7. There are irrational reasons too. Remember the most important aspect might be “Wife’s opinion.”

    JP, let’s not be sexist here: it’s just as likely for a husband’s opinion to be irrational 😉
    Plenty of folks of both genders made irrational decisions in home buying in the last few years, and now it’s coming back to bite the market.

    My question is simple, why buy at or near the top?

    Indeed. A lot of potential buyers are asking themselves that at this point.

    As far as the empty house update goes:
    2 houses on my little cul-de-sac in Beaverton are empty. One has been empty since at least January. I notice they’re putting a new roof on it today, so apparently they’re starting to work on getting it on the market. The other one has been empty since about March. I’ve noticed that a neighboring house (on the next cul-de-sac over) has been empty for some time as well. Looks like they’re changing the windows and painting it, so it’s probably going on the market soon. I’d guess that these folks all wished that they were selling in the summer of 2006 instead of selling in the summer of 2007.

    BTW: the Mortgage-Implode-O-meter passed 100 yesterday: 100 Subprime lenders have gone under since the beginning of the year.
    http://ml-implode.com/

  8. Constructive comments are the point here! Thanks to all that post them. RMLS reports data in a 12 month format.

    From my previous post regarding that:
    It looks like the appreciation numbers (8.9%) in the last twelve months are starting to make more sense. The effect of really strong months a year or more ago are getting dropped and I expect that by then end of the year we will settle into a number between five and six percent for 2007 but that is just one Realtor’s opinion. Annual appreciation numbers work in a consistent market but not so well in a shifting market. Shorter term stats, three or six months, would be more revealing.

    RMLS’s numbers could be crunched manually into another format but then everyone would be comparing apples and oranges.

    My use of Jan. 1 is arbitrary. I don’t know what the best metric is. Looking a year back includes months of double digit appreciation. Looking back too short term doesn’t give us enough data (or does it?).

    We’d all be rich if we knew where we are in regards to the top of the market. Even if it stalls there is still should opportunity to make some money. I didn’t experience double digit interest rates but my understanding is that houses still sold. There has to be a shift to make that work.

  9. Tip-

    Rather than be sexist, I was actually referring back to a former blog post:

    Whose in Charge? (sic)
    https://www.portlandrealestateblog.com/realestate/2007/06/what_matters_in.html

    Maybe I should have expanded the discussion to include singles, husbands, widows, and so on, but I was really just working within the past blog entries.

    Charles-

    Starting with your bold quote above, “Annual appreciation numbers work in a consistent market but not so well in a shifting market. Shorter term stats, three or six months, would be more revealing,” I am not sure what a consistent market is. I often considered price fixed government regulated commodities to be fairly consistent, but just recently my electric bill went up approximately 10% as a result of rate increases. Could you elaborate as to what factors are used in determining a consistent market? While I am still not sure what you mean by shifting market, how much time is needed to recognize such?

  10. If you have 13 months of 15% appreciation, you’ve got consistency and 15% annual appreciation. If the market dives next month drops -15%. You’ve got annual appreciation of 12.5%. That’s a great number until you look at the details.

    Does that explain it?

  11. I didn’t experience double digit interest rates but my understanding is that houses still sold. There has to be a shift to make that work.

    The thing is, you can’t get blood out of a turnip, as the old saying goes. When interest rates went double digit we saw that prices generally needed to fall in order for buyers to have a monthly payment they could afford. Can you imagine what would have to happen to prices in order for buyers to be able to afford a monthly payment on a loan with a 10% interest rate now? It wasn’t that long ago that we had such rates – when I bought my house in the early 90’s my mortgage rate was 10%. Then again, the price of the house was around $90K. In the early 80’s when rates went up to close to 15% prices dropped quite a bit here in Oregon…

    Rates are still close to historical lows. It wouldn’t be surprising to see them back around 8% in the next year or so. There’s lots of turmoil in the credit markets now – the two Bear-Stearns hedge funds that blew up in the last month, another one in Austrailia is blowing up now, Huge LBO deals (like the Chrysler buyout) are in doubt, and of course the whole subprime debacle – this kind of turmoil will likely make borrowing more expensive.

  12. Charles-

    I am not too sure about what you are suggesting.

    I look at data here:

    http://www.housingtracker.net/askingprices/Oregon/Portland-Vancouver-Beaverton/

    I see the following:

    Median price change:

    1 month = 0.0%
    12 months = -0.0%

    It looks like the 12 month price change is essentially the same as the 1 month price change.

    Are we in a “consistent 0% market?” By the way, the underlying news broadcast that we are discussing suggested that we are in a flat market (the data suggest a change of less than 1% both on a monthly basis as well as an annual basis). Using your definition of consistent, it seems very reasonable to conclude we are in a consistent market, or so it seems to me.

    I wonder what direction this ‘consistent’ market is heading.

    Have I gone wrong somewhere?

  13. BTW-

    Looking at both your data and the KGW data, I think the KGW graphic should read:

    “Metro Median Home Price

    $297,000 May 2007
    $295,000 June 2007”

    Thus the median price has gone down by $2,000 over one month–slightly down, but essentially unchanged. I am not sure that it is statistically significant. In other words, I think the KGW problem is that they used strictly two months worth of 2007 data.

    Agree?

  14. It appears that the Oregonian got it right!

    “Economy – Portland home prices are down from last month but higher than in June 2006

    Tuesday, July 17, 2007
    DYLAN RIVERA
    The Oregonian Staff

    The Portland-area housing market continued its slow drift downward in June.

    The median home price for the Portland area dropped to $295,000, from $297,000 in May, according to the Regional Multiple Listing Service. That marked the first May-June decline since 2000, and indicated to economists who follow the local market that housing is weak and could become weaker through the end of the year. ”

    http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/1184642711268910.xml&coll=7

  15. I think I can safely agree with all just having returned from an evening “broker’s open” at one of our listings. Catered food, beer and wine a good turnout.

    KGW made an honest mistake but why not reply?

    We need a new topic… Anyone?

  16. We need a new topic… Anyone?

    I think the big news right now is widening spreads in the credit markets as the credit crunch now seems to be in full swing. For example, the Chrysler LBO deal: they just ‘sweetened’ the rate to try to attract lenders. The rates they’re offering are now up in the 11% range.

    I watched “The Crash of ’29” last night on PBS and was amazed at the parallels – I didn’t realize that they had a real estate crash in FL in 28 – 29 for example. This time we’re facing a real estate crash that’s more widespread. I don’t mean to be melodramatic by mentioning ’29; I don’t think we’re seeing an exact repeat, however history does seem to rhyme.

  17. Follow up to my last post concerning the credit crunch that is now upon us:
    http://tinyurl.com/36rtpx

    Bonds fall on subprime concerns (Reuters)
    Some choice quotes:
    Sentiment worsened on Thursday when the chief executive of homebuilder KB Home (KBH.N: Quote, Profile, Research) said he does not expect the overall home market to bottom out until the end of next year. …

    In the credit derivative market, the main index of U.S. high-yield credit default swaps widened by about 6 basis points to a record wide of 490 basis points.

    “Whereas before the market was awash with liquidity, the market is now trying to find buyers,” said KDP’s Penniman.

    Wall Street dealers, instead of providing liquidity by buying bonds, are “just watching prices go down,” he said.

    Some may be exacerbating the downward moves by shorting bonds to protect their proprietary trading positions or to hedge new deals they hope to bring to market, he said.

    One corporate bond trader said he was not seeing massive amounts of selling, but buyers had evaporated.

    “We’re just seeing a repricing of the credit market,” he said. “It’s astounding. It’s a complete reset.”

    This is epic. A tipping point.

    What does all of this mean for housing? It means mortgage rates are going up – even while the 10 Year treasury yield is going down (the yield on Treasuries is going down because there is a classic “flight to quality” going on now). Even the standard 30-year fixed rate prime mortgage rate will be heading up.

  18. *sigh*

    When the price has gone up but the number of sales has gone way down, that’s an indication of many people overpricing their homes. Imagine that!

    Good news – W Burnside is finally getting some repaving.

  19. JJ: You’re right, there’s still a lot of over pricing out there and that will likely be with us for a while (housing slumps are slowmotion train wrecks as is often noted). However, that’s not the entire story of what’s going on: median prices up on slowing sales can also indicate that there’s trouble at the low end of the market. Due to tightening lending requirements (a return to sanity, really – we’re not there yet, but maybe soon) there are a lot of folks who would have qualified for a loan a year ago but can’t qualify now. These tend to be your first time buyers who tend to buy the so-called “starter” homes. People looking to move up need to sell those “starter” homes to those first time buyers. When those first time buyers have a tough time qualifying it means that the starter homes don’t sell.

    If you take a look at various California markets that have been in decline for about a year now, that’s what tended to happen there – sales volumes were down, yet median prices were up an apparent paradox, but that’s exactly what’s happened there. At some point the lack of sales on the low end starts to show up at higher levels and then you see median prices move downwards.

  20. The ABX spreads just dropped off of a cliff. Spreads on riskier CDOs and corporate bonds are also in free-fall. If BB raises interest rates all hell will break loose.

    What does this mean for good old PDX. Well it has one of the highest percentage of neg-am loans on the west coast. If housing prices flat-line there are going to be alot of hipsters with no other option than a short sale or (gasp!) foreclosure.

    I’m keeping my cash in €s and £s at everbank. LOL!


  21. If BB raises interest rates all hell will break loose.

    Even if he doesn’t raise rates all hell is breaking loose. The market is raising rates for him. (such as the ABX spreads you noted).

    And the really scary thing is that if BB lowers rates all hell will break loose as well – It’ll just break a different way.

    Raising rates will kill what’s left of the housing market. Lowering rates will kill the US$ which will lead to lots of inflation ($100/barrel for oil, anyone?) which will eventually lead to rising interest rates which will kill what’s left of the housing market. So we end up in the same place, just by a different route.

    I definitely wouldnt’ want Bernanke’s job. Greenspan left him a big mess that’s going to be tough to clean up.

    What does this mean for good old PDX. Well it has one of the highest percentage of neg-am loans on the west coast.

    SE_renter: this doesn’t surprise me. Do you have a source for this?

  22. RMLS’s numbers could be crunched manually into another format but then everyone would be comparing apples and oranges.

    I’ve finally gotten off my lazy butt and put together a spreadsheet for “Portland Metro” numbers and RMLS areas 141, 142, 143, and 148 back to Jan 2004. (I can’t seem to find any “Market Action” reports online any further back, so any help would be appreciated).

    With that said, I would take this slight dip M-o-M with a grain of salt. In the past year alone, the median sale price reported on the RMLS reports dipped compared to the previous month 5 times:

    Jun to Jul 2006: 280000 to 274700 (-1.93%)
    Sep to Oct 2006: 275500 to 270000 (-2.04%)
    Nov to Dec 2006: 278000 to 273500 (-1.65%)
    Mar to Apr 2007: 286200 to 285000 (-0.42%)
    Jun to Jul 2007: 297000 to 295000 (-0.68%)

    Y-o-Y Jun 2007: +5.08%

  23. Oops:

    May to Jun 2007 not “Jun to Jul 2007”.

    Disclaimer: I do not have a time machine.

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