February 2011 Case-Shiller Results Bring Markets Back to New Lows
After 4 months of increases that ended in July 2010, most of the Case-Shiller indices have now dropped for 7 consecutive months. Both the Tampa and Miami indices are at post-boom lows, erasing all the gains posted during last summer plus some. The 20 market national composite is .01 point above its low.
During February 2011, every market except Detroit of all places reported decreases (even Washington DC declined .1%) from the previous month. Tampa dropped 1.2% and Miami was one of 4 markets to drop 2% or more. Compared to February 2010, the Tampa and Miami markets have declined 6.0% and 6.2%, respectively.
Looking at the changes since the indices turned in July, the West and Midwest are certainly having a harder time than the rest of the country. The 2 worst performing markets during this period have been Chicago (down 10.2%) and Minneapolis (down 13.3%). The next tier is Seattle, Portland, San Francisco, and Atlanta (an exception ) all of which are down between 9 and 10 percent during the past 7 months. Tampa and Miami were down 7.1% and 6.4%, respectively, during this period.
In the press release that accompanied the release of this month’s Case-Shiller numbers, the analyst cited several factors that supposedly contributed to the poor results and, in the opinion of the analyst, meant that we were in for a long (or presumably longer) recovery. Those factors were:
- Existing home sales (they are slow nationally)
- New Home Starts (close to lows)
- Foreclosure Activity/Mortgage delinquencies (near highs)
- Unemployment (down but still high)
If these are the most important factors affecting home prices then the prospects for our local market looks much better than the national market. First, for Sarasota, home sales (condos and single family) for the past 12 months have exceeded every year back to 2005. In fact, Sarasota County single family home sales in the past 12 months were only 5% of 2005 levels. The numbers are much the same for Manatee County except that single family home sales did not surpass the 2006 sales. I don’t know if either county will ever beat 2004 or 2005 results just given all of the new construction sales during that period (many of which sold more than once before the home was even completed).
As for new home starts, I am working on a post for that and do not have any specifics on local housing starts at this time. However, I will say that, in the past year, Pat Neal has constructed a small town in the Central Park section of Lakewood Ranch. Similarly, the other great Lakewood Ranch builders have been on a tear in the new Country Club East section Lakewood Ranch. Builders can now build a new home that competes nicely with the average short sale or foreclosure. 2010 for housing starts in the area must look just like resales – I’d bet it was the biggest year since 2006 if not 2005.
As for foreclosure activity, read my market recap here – the short version is that there is very little distressed inventory remaining. For the past 2 years, sites like RealtyTrac have been warning of the next big wave and we are still waiting. The press release also says that the mortgage delinquency is near historic highs. If you look at the S&P/Experian Credit Default Indices you will see that defaults (different than delinquent) are high but rapidly declining. Read my earlier post on this topic.
The only real bad and irrefutable factor is unemployment. Even though much of the SW Florida Real estate market is driven by retirees or soon to be retirees, we still need low unemployment to thrive, especially in the Midwest and Northeast. The perceived ability to sell the northern homestead often plays a big role in the decision making process here – whether to buy at all or how much to spend.