Saturday
22Sep2007
Futures market expects 5% annual price drops
Saturday, September 22, 2007 at 05:40PM The futures market is pricing in a 15 - 31% price decline in ten major US cities over the next four years, coming at a 4 - 5% annual rate.
These charts were posted on Housing Wire, courtesy of TSD Derivatives. I copied the West cities chart here. Click here for the East cities chart.
-14% for LA
-28 % San Francisco
-18% San Diego
The only city with a larger drop than SF is Miami, with a 31% drop.
Reader Comments (3)
Wow! Nice info, SB.
If you haven't seen it, here's Schiff on CNBC. I'm sensing his frustration regarding inflation. Great comment from the other person: "inflation is higher than official numbers, but we have to live with official numbers." HUH???
tinyurl . com/yt7rty (SB, can't post with normal URL)
I think if I'm not mistaken that the graph represent median price which can be very misleading, remember the explanation why median going up when prices and actually going down. In real life asking prices already dropped more then that and that before the lending tightening. The best way to judge actual value, up or down is to look at the price per square foot, very simple.
Schiff video
(Not sure why the tinyurl won't work, but you can just post without using tiny?)
Schiff is great!
Duboiz, the Case-Shiller index measures repeat sales. Read why median $/sq ft is just another distribution number, like median, in my Housing Basics (see left column) section. Bigger houses are cheaper per square foot; in the past year, the percentage of large homes sold has risen, making the median price/sq foot fall! This fall shows us the change in the mix of homes sold, and nothing more. What is happening, is that in every size range, people are paying more for homes now, but they are getting better homes: cul de sac instead of busy street, view versus no view, newer versus older, etc.
The Case-Shiller index is not perfect. It lags by 18 months. Our housing market slowed in the late spring of 2004, but the Case Shiller index kept rising until November 2005. It also does not allow us to track changes by zip code. But it is the best tool we have.
Also, we have areas where prices were still rising as recently as July, and others where prices fell 30%. Putting all that activity and pricing information into one number had a limited usefulness.
Case-Shiller is down 7% means some houses are up, others are down 30%. But when you are the buyer, you need to know more than "prices are down 7% in aggregate". You want to know about your neighborhood, your parcel, your condo.
The MLS had the data you need. You look at the following for your type and size of home: inventory, number of sales this year and month, prices of recent sold homes, number of pendings, how many sellers gave up (expired, cancelled, withdrawn listings).