Altos Research Real Estate Insights

REALTOR Magazine is out with their annual 30 Under 30 issue. I'm always a sucker for these types of articles highlighting the young and uncannily-good-looking - no matter the industry.

So I was browsing through this year's list of the preternaturally successful and - waitaminnit - I KNOW these guys! Check the Friends-of-Altos on the list:

Boston's Condo king Mike Dimella

East Bay AltosCharts hound Tyler Moxley

and the inimitable Jon Washburn of ActiveRain

(Even if I'm, ahem, a bit beyond the bounds for being included in the list, I'm ecstatic to see our friends on it. Look out, though, because next year Altos will be gunning for 25% reach.)

Congratulations on the attention, guys. It's well deserved.

Here's a funny Meebo-IM chat I had with a home buyer yesterday. This guy is looking for a negotiating angle with home sellers. Smart!

[15:37] meeboguest: hi

[15:37] mikesimonsen: hi

[15:38] meeboguest: will prices in Milpitas Area continue to fall?

[15:38] mikesimonsen:

[15:39] meeboguest: seriously....how do I negotiate with seller to factor another 10% reduction in price?

[15:40] mikesimonsen: well, you can bring our Milpitas report with you and use it to illustrate not only prices, but demand levels and days on market trends

[15:41] mikesimonsen: you can say, "Look at this, you've got easily another few months before this thing moves and I'm willing to buy now!"

[15:41] mikesimonsen: In the reports it even breaks up the data by price range in that zip code

[15:42] mikesimonsen: so you can say, "The market is even worse for sellers of homes like this. So you're lucky you found me!"

[15:42] meeboguest: thanks...I am even luckier if that report is free

[15:43] mikesimonsen: for $19 you're getting a bargain!

[15:43] mikesimonsen: I'll expect a thank-you bottle of wine when you get your price

15:43] meeboguest: how do i get the report?

[15:44] mikesimonsen: go to this page, register, and buy the basic report: http://www.altosresearh.com/research/CA/MILPITAS

[15:44] meeboguest: thanx

[15:45] mikesimonsen: you bet! good luck!

What do you think the chances are that the Seller's Agent is prepared with market data to counter-negotiate? My guess is that they'll get blindsided by this aggressive buyer's approach. Maybe, just maybe, we can motivate the seller's agent to prepare better in the future...

MacroMarkets released the monthly Case Shiller Index today. Case Shiller tracks repeat sales of single family homes. Like most real estate data (except ours of course) the Case Shiller lags the actual market by several months. This is data for March 2008.

Nationally we saw a less-steep price decline in the last few months than we did at the beginning of the year.

As a bonus, let's look at the Denver chart. The Denver metro actually defied the national carnage until October of last year. Case Shiller picked that up too and you can see that Denver is the smallest of the declines in the sample. We've actually seen a small uptick in Denver pricing this spring. (Don't be fooled by the scale on this chart. With the tight scale, it looks like a rocket, but it's only a few thousand dollars difference.)

Home price trends in the Denver metro market for the 12 months ending May 2008. The tight scale on this chart makes it look stronger than it is, but at least it's not falling through the floor.

See also:

• This post about trading real estate derivatives on the Case Shiller Index and our real time data.
• To inquire about our Weekly National Market Report: email us

A few short weeks ago there was no doubt in the press that recession was upon us. The perma-bears, who have been calling for the Big One for nearly two years now, have declared that it's finally upon us. I had a lunch with Nouriel Roubini in February gloating over his pilaf about his prescient call (the less charitable might describe it as "broken clock" prescience.)

All of a sudden, however, a recent flurry of economic news has led to speculation that we're not in recession after all. And we might even avoid one.

So who is right? Of course both side will claim victory. Are we in recession? Depends on how you define your recession.

By now, everyone is familiar with the 2-quarters-negative-growth = recession "definition" that "they" use. It turns out, though, that this definition is garbage. Woefully inadequate and misleading.

The idea originated in a 1974 New York Times article by Julius Shiskin, who provided a laundry list of recession-spotting rules of thumb, including two down quarters of GDP. Over the years the rest of his rules somehow dropped away, leaving behind only "two down quarters of GDP."

Barry Ritholtz, in his recession declaration, uses the two-quarter rule, but does his own adjustment to the data to make it illustrate negative growth.

Is there a better way to look at it? You bet. Long time readers of this blog will know that I refer to the weekly data published by ECRI, and it is to them that we turn for the clearest, most data-driven view. Economic data ebbs and flows. Some is useful for looking forward, some looks backwards. Employment levels, for example, tend to lag the economy. (It's hard to lay people off, so the jobs go only after the rest of the pain has already set in.) If you bundle up enough of the leading indicators, coincident indicators, and lagging indicators you can see when recession is coming, when it is upon us, and when we've climbed back out. Today, the picture looks like this:

Leading, coincident, and lagging economic indicators. Horizontal dashes near the bottom illustrate recessions. Source: ECRI

The bad news: the ECRI leading indicator has never been this low for this long without hitting recession. This data leads the economy by 6 or so months.

The good news: the weekly leading indicator's negative trend hit it's nadir at the end of March and has been ticking up since.

All in all, the three bundles of data show that we're only just now about to start the recessionary vicious cycle (when the blue line starts heading negative, then the contraction forces have pervaded across the economy - the April 2008 number sits at -0.1%). If the leading indicators climb positive quickly then the pain will be short lived.

So despite a few pundits this week implying we might actually skirt a recession, don't bank on it. The data shows that the next couple of quarters are going to be rough. By the way, you can now follow this data for yourself for free at the ECRI website. I've been paying for the data for years, but it's now open to the public. Just go to BusinessCycle.com, and select the "Recession Watch" menu.

In early February I gave a presentation at the O'Reilly Money:Tech conference in New York. The show is about applying all these powerful new Web 2.0 technologies and data streams in financial markets. Just a fabulous few days. Anyway, with my presentation I wanted to do more than talk about hand-waving hypotheticals. I wanted to share something actionable. Something concrete.

So I made a trading call for the Chicago Mercantile Exchange Housing Futures Markets. The argument went something like this:

1. In the Fall of 2007 all the housing news was obviously, strongly bearish.
   
2. The futures markets (specifically the S&P Case Shiller Index traded on the CME) consumed all this news and traded accordingly: Down, down, down. The San Francisco MSA index that we cited for this case traded down to 203 for the November expiration Futures.
   
3. However in September and October of 2007 the Altos real-time real estate data showed that the November-announced number should come in around 206. That is, despite the in-fact crashing housing market, the futures market was too bearish!
4. Ahah! Had you acted on the Altos data, you'd have made money. As of end-of-January, though, this was looking backwards. For the punchline of my presentation, I wanted to look forward four months to May.
5. And, just like the fall, the bearish news dominated the headlines in December and January too. The markets digested the bad news and continued to trade down heavily. By January 31, the May 2008 expirations for the S&P CSI for San Francisco were trading around 185! Down 10% in two months!
6. So when we looked at the real-time Altos data, was the pattern the same as the fall, too bearish?
7. No! As it turned out, the futures markets weren't bearish enough! When I put the presentation together on January 31, the real time data was looking like May at easily less than 175. The number we put in the presentation was 170 for May.

Slide from my Money:Tech presentation February 6, 2008

Looks like we nailed it.

So, I hear you cry, how do I get in on this Altos action?! Two ways:

At the Money:Tech conference, while I gave the presentation, Fred Wilson twittered: "Simonsen says Sell Housing Futures!" So follow Fred or me on Twitter and maybe you'll be lucky to over hear a live market call

Or

[blatant sales pitch following] Subscribe to our brand new Real-Time Real Estate Derivatives Report. Data is updated every week and you can construct your own analyses to project trades for all 20 Case Shiller Markets AND all 25 Radar Logic RPX markets (which seems to have better liquidity, though it's OTC). No derivatives pro should leave home without it. Now, this report isn't available to just any average wannabe. This is for the playas. As of right now, you can't just grab it from our website. You have to inquire directly. email me and I'll send samples.

Our latest National Real Estate Report is out this morning. The headline this month is that while the Altos National 10-City Composite price fell by 0.6% from last month, prices only fell in 7 of the 25 markets covered in the report. Maybe some signs of life? Too soon to call. Probably just spring.

Here's where you can download the full PDF May 2008 National Real Estate Report.

Here's a chart of our two national housing market composite price metrics.

National Real Estate Prices as measured by the Altos 10-City and Altos 25-City Composites. Data through the first week of May 2008

Here's the full press release:

Housing Prices Down by 0.6% in April 2008

National real estate report sees prices falling in only 7 of 25 metropolitan markets. Real-time real estate data also indicates rising inventories and stabilizing market time in many parts of the country.

Mountain View, May 8 2008 - The Altos 10-City Composite Price Index showed a decline in asking prices of 0.9% over the past three months and continued that decline in April with a decrease of 0.6% for the month. Prices of properties listed for-sale fell in only 7 of 25 major markets according to the Real-Time Real Estate Report, jointly published by Altos Research, the premier source for real-time real estate research,

Asking prices fell at the fastest rate in Las Vegas down 2.7% during April. The largest three-month declines occurred in Las Vegas and Philadelphia, off 5.1% and 4.5% respectively. Listing prices rose at the fastest rate in Denver up 2.6% and Charlotte up 2.1%. Prices also increased by more than one percent in April in Boston, Houston, Dallas and San Francisco.

"While this is not shaping up to be a typically strong spring selling season," said Stephen Bedikian, partner and research director for Real IQ, "we are now seeing price stability or price increases in most markets. During April, only the most troubled markets such as Las Vegas, Miami, Tampa, Philadelphia and Phoenix, continued to show asking price declines."

For-sale property inventories increased in 19 of 25 markets during April. Inventory in the Altos 10-City Composite markets rose just 0.8% for the month and 5.6% during the most recent three-month period. Data in the Real-Time Housing Market Report is based on analysis of over one million properties currently listed for-sale in 31 metropolitan markets across the country.

The report is the most timely source of housing market data on current market activity. For the Altos 10-City Composite, the average days-on-market was 111 an improvement from 119 in March and 122 in February. Miami and Detroit experienced the longest time-on-market spans with an average days-on-market of 153 and 143 respectively. Austin led all markets with the fastest rate of inventory turnover at an average of 67 days-on-market.

"Inventory buildup is typical during the spring selling season but so far it has been fairly modest and that is reflected in the decline in average days-on-market," said Michael Simonsen, CEO and co-founder of Altos Research. "Tight mortgage credit, foreclosures, and economic fears continue to put pressure on the real estate market but if inventory growth remains restrained, we may see supply and demand balance out. "

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.

Two very cool announcements today from Friends of Altos - both are great examples of real estate data helping people make better decisions in this crazy housing market. I just love this kind of innovation.

Krunching.com

First up is Krunching.com: These guys built an investor-focused site with tons of data about properties for sale, investor metrics, property analysis. You can tell it was built by real estate investors answering their own property analysis questions. The site is super-fast and really pretty (in a web 2.0 sense.)

If you're an investor, Krunching is going to be a powerful tool for you. They're taking a freemium business model - they give away a bunch of great data for free and their power users sign up for paid services. They've built Altos local real estate data and analysis into their premium services, so if you don't buy from us, you can get our data in your Krunching subscriptions. My only complaint is that they've used an OFHEO regional chart on their investment summary page. The feds are telling us what happened to home prices in September. Thanks guys. (Hey Brian - you need an AltosChart on that page! Get with the program!) Krunching is only available in California right now, but it's a great start for a national product. Great job guys.

Homethinking Mortgage

Also launched today is a really cool mortgage market analysis product from longtime Altos partner Homethinking.com. I get questions every day from people trying to understand the scope of the mortgage crisis. The Homethinking guys have taken a huge pile of mortgage data and presented it in a super-clean, very powerful visual interface. Want to know how much exposure your town has to sub-prime loans? Homethinking will tell you. Want to know what percent of mortgage applicants are rejected? Check it out. Huge amounts of information in here. Again, thanks to the feds, this data is a year old. Still, it's better information than the world had access to yesterday. So kudos to Niki and team at Homethinking. Looks fantastic. And it comes in cool embeddable widgets!

What we found mirrors much of the rest of the country: the close in, nice neighborhoods are where the demand is. Go further out and time-to-sell a home climbs into the many months range.

Click on any city name for the real estate report for that town.