I am retired and take educated guesses on all things financial.

November 11, 2010

November 11, 2010: Credit Suisse Nixes Housing Optomism

The monthly Credit Suisse Housing Survey was released for October. This dense, reliable document reports on each of the fifty largest real estate markets. Relying upon boots on the ground seasoned contributors, the monthly survey is considered essential for many real estate practitioners. The October results overall show continued snail's pace traffic and sales volume. With a score of fifty(50) being the norm, buyer traffic declined to 16.3 from September's 17.9 - a fresh multi-year low. This comes at a time when there are generally more homes on the market than in September.

Specifically, CS reports that the down tick in October prospective buyer traffic guarantees that the next several months will not foster any hope of a recovery in the non-commercial real estate market with seasonality factored in. Brokers cite buyer uncertainty, an anticipation of still lower price points and worries about the ramifications pertaining to the backlog of foreclosures as major issues. CS believes that home prices are apt to fall even through the Spring of 2011 as banks unload further inventory after the traditionally weak sales months of November-March. Of all the markets surveyed, Austin, Texas showed noteworthy improvement while Ft. Meyers, Florida and Washington, D.C. worsened from previously depressed levels. A strong majority of the regions have seen increased buyer incentives, perhaps mitigating even a larger market downdraft.

Here are a few markets in greater detail. A score of 50 is average:

New York-Northern New Jersey buyer traffic fell from 22 in September to 16 last month. This is the lowest level recorded since November of 2008. Home listing were marked at 23 vs. 15 with sales time increased - both negative indicators. "Sellers are unwilling to accept reality. Buyers know prices are falling", according to a CS source. Another source reports "Buyers know the economy is not improving and that scares them."

Seattle, Washington buyer traffic came in at 30, which was below brokerage expectations given the current price points. Home prices continue to fall, scoring a 25 which reinforces continued lower prices. Homes are taking longer to sell with a score of 25. A quoted source for CS states that "the poor job outlook does not sit well with buyers. They have little confidence."

Chicago, Illinois buyer traffic was unchanged from September at 12. Reports from the field indicate that "the foreclosure freeze dampened the market and the new investor guidelines have hurt substantially." The home price index checked in at 11, the lowest ever on record for Chicagoland. The time to sell a property was ranked a 18, indicating an almost stagnant market. As with many of the markets, "buyers are waiting for things to bottom out."

Miami, Florida buyer traffic decreased to 19 in October from 29 the previous month. The economy and consumer confidence topped the list of reasons not to buy. On the bright side, home listings remained stable compared to September. With increased time necessary to sell a home, further price declines appear to be in store for this area (and almost everywhere else).

Denver, Colorado showed slightly better traffic with a 16 compared to a 13 in September. Both numbers are abysmal. Lower mortgage rates in this area are listed as the primary reason to buy. Prices declined to a 18 from 22 the previous month. A weak employment situation and financial insecurity are high on the list of why homes are not moving in spite of continuing price cuts.

Dallas, Texas showed slightly improved buyer traffic, increasing to 14 from 12 in September. The home inventory appears stable, but CS believes that falling home prices and a more stable inventory rank of 46 may be a temporary statistic pop because of seasonality and the removal of foreclosed listings due to bank re-evaluations. Time to sell came in at 11 from 17 in September, so the data in total is poor.

The takeaway for October is that economic stability,consumer confidence,properties priced to market and low mortgage rates may not be enough to jump start the industry until the mass of foreclosures dwindles and the national mood is encouraged by positive workmanship from political leaders at all levels.