Zillow: No Respite From Housing Recession in First Quarter

[knorthern knight]

Home values fell three percent in the first quarter of this year, marking a pace of decline not seen since 2008 when the housing recession was at its worst. Home values fell one percent between February and March and 8.2 percent from March 2010. The cumulative decline in home values since the market peak is now 29.5 percent (see Figures 1 and 2).

There was little escaping the housing downturn in Q1 2011. With only one metro showing positive year-over-year change (Honolulu MSA), and one remaining flat (Pittsburgh MSA), the vast majority of U.S. markets logged declines over the past 12 months. The metros hit hardest were geographically diverse with Ocala, FL, Pueblo, CO, Detroit and Atlanta experiencing the sharpest yearly declines.

For full article, see http://www.zillow.com/blog/research/2011/05/08/no-respite-from-housing-recession-in-first-quarter/

The business of hockey requires discretionary spending by fans on hockey tickets, parking, concessions, sweaters, etc. That type of discretionary spending requires some consumer confidence. Local house prices are one major factor in consumer confidence. And that factor is negative right now. The above URL points to an article on the Zillow real estate website. In addition to the article, there are some graphs/charts/tables/etc. One nugget in the numbers is the Year-Over-Year percentage change in housing prices. I've selected a subset that includes NHL cities. You'll notice that the numbers are all negative, i.e. house prices have declined March 2010 to March 2011. Here they are...

• New York -8.2
• Los Angeles -7.6
• Chicago -13.8
• Dallas-Fort Worth -6.9
• Philadelphia -10.3
• Miami-Fort Lauderdale -12.8
• Washington -7
• Atlanta -17.3
• Detroit -17.3
• Boston -5.3
• Phoenix -11.2
• Minneapolis-St Paul -15.1
• St Louis -9.6
• Tampa -10.9
• Denver -9.6
• Pittsburgh -0.1
• San Jose -5.9
• Columbus -11.9
• Nashville -7.3
• Raleigh -7.3

The decline is a symptom of a stalling/falling economy. This is a triple-whammy, cutting into the ability of...

• fans to buy tickets and stuff
• businesses to buy luxury suites and spend money on advertising and sponsorships
• team owners to absorb heavy losses

As noted in the first paragraph of the story, the decline is accelerating, and is at the same level as in the dark days of 2008. This is scarey. Unless some economic miracle happens, I expect several relocations, if not outright contractions, in the NHL (and possibly other sports) in the next 12 months. Depending on how bad things get, we may even see one or two foldings/relocations during the course of the season, unless the NHL bites the bullet and cleans house now. The bad days for the US economy are probably the last best hope for QC and Winnipeg, maybe even Hamilton.

I'm OK with including other sports MLB/NFL/NBA/CFL/MLS/etc in the discussion if the moderators don't mind. The NFL and NBA may even prefer to force lockouts this year to minimize their losses. Maybe I'm just cynical.

Click to read more...

 

[Killion]

Wow. Those numbers are staggering. I hadnt looked for a couple of years.

 

[htpwn]

The housing market never crashed in Canada, in fact it blossomed in some parts. Foreign investors turned away from New York and Chicago, which helped fuel the building booms in Toronto and Vancouver.

I'm not sure the CFL or Canadian franchises in any league will suffer unless the US goes through a double dip recession.

 

[sh724]

The housing market never crashed in Canada, in fact it blossomed in some parts. Foreign investors turned away from New York and Chicago, which helped fuel the building booms in Toronto and Vancouver.

I'm not sure the CFL or Canadian franchises in any league will suffer unless the US goes through a double dip recession.

Thats because Canada didnt have the fair housing act and unregulated banks who could write loans to anybody no matter what their credit was and sell the papers to other banks dumb enough to buy them.

 

[Dado]

There is a recent paper out of the Philadelphia Fed showing the real return of US ownership over the past 35 years has actually been negative. Interesting read, that.

Speaker Boehner a few hours ago opened the door to the possibility of the US defaulting on it's sovereign debt. If he's not just doing Congress Critter posturing for the debt ceiling debate, that would have an incredible effect on discretionary spending.

We need to find a big whack of cheap oil, fast...

 

[OthmarAmmann]

The housing market never crashed in Canada, in fact it blossomed in some parts. Foreign investors turned away from New York and Chicago, which helped fuel the building booms in Toronto and Vancouver.

You think the blossoming might have to do with extremely low mortgage rates? The CMHC isn't tightening up underwriting standards for no reason. Almost no residential mortgage in Canada has a term greater than 5 years. If mortgage rates were to spike 700 bps over a short period of time (don't say it can't happen) Canada is in a world of hurt.

Thats because Canada didnt have the fair housing act and unregulated banks who could write loans to anybody no matter what their credit was and sell the papers to other banks dumb enough to buy them.

Fair housing act? The fair housing act had nothing to do with the explosion in corporate debt. The LBO boom of the last decade was bigger than in the 80s. Similarly the fair housing act had nothing to do with the dozens of pre-approved credit card offers that stuffed my mailbox every week.

 

[BB79]

I hear Winnipeg's housing market is a lot better than Phoenix's...eat that for lunch, Bryzgalov!

 

[Dado]

If mortgage rates were to spike 700 bps over a short period of time (don't say it can't happen) Canada is in a world of hurt.

Vancouver in particular would be completely screwed.

It's been so long since we've had mortgage markets unencumbered by gov't subsidies either direct or indirect that people forget what a true "market rate" mortgage looks like - 50% down, 5 year interest only with a balloon payment for the entire loan amount at the end of the 5 years.

 

[htpwn]

You think the blossoming might have to do with extremely low mortgage rates? The CMHC isn't tightening up underwriting standards for no reason. Almost no residential mortgage in Canada has a term greater than 5 years. If mortgage rates were to spike 700 bps over a short period of time (don't say it can't happen) Canada is in a world of hurt.

Probably in part, but in Toronto's case, I don't think you can isolate one lone reason why a city goes on a building spree of this scale. It has been going on since 2006 and as evidenced by the last three days (proposals for 3 towers reaching 58 stories in height), it is still going strong.

 

[OthmarAmmann]

Probably in part, but in Toronto's case, I don't think you can isolate one lone reason why a city goes on a building spree of this scale. It has been going on since 2006 and as evidenced by the last three days (proposals for 3 towers reaching 58 stories in height), it is still going strong.

I own some Canadian real estate, but your comments about Toronto are making me consider taking money off the table.

 

[htpwn]

I own some Canadian real estate, but your comments about Toronto are making me consider taking money off the table.

It just seems like its asking for a crash, but you know what? People have been saying "it cannot keep going, its going to crash" for 3 years now.

I'm not exactly very knowledgeable on the subject (read: do your own research, don't take my word for it), but based on some articles I've read, experts are split. Some say that because of the Greenbelt legislation, not as many homes are being built, thus high rises are making up the difference. Others argue foreign investors, mainly from China and the Middle East, are buoying the boom.

It seems no one really knows where the market is going to go. I've read some people saying there is going to be an inevitable crash. I've also read that despite the boom, due to immigration and other factors, we need to build more.

It should be noted that condominiums are not the only ones that have been built during this time although some of the most prominent projects are residential (Ex. Aura/72 stories, One Bloor/65 stories). Three major luxury hotel brands set up shop in Toronto within the last five years (Ritz Carlton, Trump International, and Shrangri-la), along with Four Seasons building its flagship hotel. Several office projects have also been built, including the 51 storey Bay-Adelaide Centre and the 42 storey RBC Centre.