by Calculated Risk on 12/26/2007 02:01:00 PM

The first graph shows real house prices in Los Angeles based on the S&P/Case-Shiller house price index. Nominal prices are adjusted with CPI less shelter from the BLS.

Click on graph for larger image.

After the peak in December 1989, prices in Los Angeles fell 41.4% over about 7 years, in real terms (adjusted for inflation). (Note: using the OFHEO series, real prices declined 34% in LA in the early '90s).

So far, in the current bust, nominal prices have declined almost 9% in LA, and about 12% in real terms.

The second graph aligns, in time, the December 1989 price peak with the October 2006 peak.

The horizontal scale is the number of months before and after the price peak.

In 1990, real prices had declined 9.3% during the first 12 months after the price peak. For the current bust, real prices have declined 12% for the same period.

This suggests that price declines have just started, and that there will be several more years of price declines in the bubble areas.

by Calculated Risk on 12/26/2007 11:13:00 AM

The Case-Shiller data (previous post) shows three cities with year-over-year price increases: Charlotte (4.3% increase), Seattle (3.3%), and Portland, OR (1.9%).

Click on graph for larger image.

This graph shows the Case-Shiller prices for these three cities compared to the Case-Shiller composite 10 price index.

All three cities had less appreciation than the composite, the significant price appreciation started later than other areas, and prices appear to be falling in recent months. It appears that all three cities (and all 20 cities in the Case-Shiller index) will be showing year-over-year price declines by spring 2008.

by Calculated Risk on 12/26/2007 10:04:00 AM

Update: added table of price changes. S&P/Case-Shiller data.

Note that this is the year over year decline (October '06 to October '07) and only for 20 large U.S. metropolitan areas (not the entire U.S.)

From Bloomberg: U.S. Home Prices Fell 6.1% in October, Index Shows

Home prices in 20 U.S. metropolitan areas fell in October by the most in at least six years, a private survey showed today.

Property values fell 6.1 percent from October 2006, more than forecast, after dropping 4.9 percent in September, according to the S&P/Case-Shiller home-price index. The decrease was the biggest since the group started keeping year-over-year records in 2001. The index has fallen every month this year.

City	Year over Year Price Change
Charlotte - NC	4.3%
Seattle - WA	3.3%
Portland - OR	1.9%
Dallas - TX	-0.1%
Atlanta - GA	-0.7%
Denver	-1.8%
Chicago	-3.2%
Boston	-3.6%
New York	-4.1%
Cleveland - OH	-4.5%
Minneapolis- MN	-5.5%
San Francisco	-6.2%
Washington	-7.0%
Los Angeles	-8.8%
Phoenix - AZ	-10.6%
Las Vegas	-10.7%
San Diego	-11.1%
Detroit - MI	-11.2%
Tampa - FL	-11.8%
Miami	-12.4%
Composite-20	-6.1%

by Calculated Risk on 12/25/2007 09:09:00 PM

From the WSJ: Credit Downturn Hits the Malls (hat tip Houston)

The credit crunch ... is creating problems in commercial real estate, driving down prices of office buildings, shopping malls and apartment complexes ...

For the past few months, the sector has been in a state of near-paralysis ... The number of major properties sold is down by half, and many worry that the market will continue to deteriorate as property sales remain slow, prices continue to drop and deals keep falling apart.
...
The CMBS market was the engine that drove the commercial real-estate boom. Over the past few years, the issuance of CMBS allowed banks to get rid of the risk on their books, lend with cheaper rates and looser terms and that made it easy for private-equity firms to do huge real-estate deals.
...
Real-estate investors aren't the only ones feeling the pain. Many big banks issued short-term loans to buyers and planned to sell them off later, much the way they do with loans made to private-equity buyout shops. But the banks have gotten stuck with an estimated $65 billion in fixed- and floating-rate loans on their books, according to J.P. Morgan.

The typical pattern is for CRE to follow residential by about 4 to 7 quarters, so this slowdown is right on schedule. It's important to note that the impact on the economy will come from a slowdown in new CRE construction (non-residential structure investment) and from rising CRE defaults.

The October construction spending report, from the Census Bureau, showed a small decline in private non-residential construction spending, after several years of strong growth.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending since 1993.

Over the last couple of years, as residential spending has declined, nonresidential has been very strong. However it now appears that nonresidential construction may be slowing. This is just one month of data, and one month does not make a trend, but there is other evidence - like the Fed's Loan Officer Survey - that suggests a slowdown in nonresidential has arrived.

The November construction spending report will be released on Jan 2nd.

by Calculated Risk on 12/25/2007 07:28:00 PM

From Tanta. A Mortgage Pig™ exclusive. (Warning: this is a 2 MB Excel File)

Raindrops Keep Falling on My Pig

Happy Holidays to All!