by Calculated Risk on 6/21/2009 11:10:00 PM

Click on photo for larger image in new window.

Photo Credit: Rander (thanks!)

Up to $2500 today!

No Credit Needed!

We Say Yes!

This photo is in Bedford, TX.

Interesting - "FedCash" appears to be a registered trade mark of the Fed.

by Calculated Risk on 6/21/2009 07:32:00 PM

Yesterday I posted a comparison of national real house prices and the unemployment rate. Today I'm posting the comparison for various cities.

Previous posts in this series:
National Real House prices and the unemployment rate.

Washington, D.C. real prices and unemployment.

Miami, Chicago, Dallas: Real House Prices and Unemployment Rate

Notes: House prices are from Case-Shiller (back to 1987) and Freddie Mac's Purchase index (back to 1975). The Case-Shiller index was set equal to the Freddie Mac index in the first quarter Case-Shiller is available for each city, and then both indexes adjusted by CPI less shelter for each region.

The red unemployment rate is for each state and goes back to 1976. The orange unemployment line is for the metropolitan statistical areas (MSA) (most go back to 1990)

Note the scale of unemployment rate doesn't start at zero (to better compare to house prices) and scales are different for each city.

Click on image for larger graph in new window.

The first graph is for Los Angeles and shows the well known late '80s housing bubble.

There was a much smaller price bubble in the late '70s.

This is a good example of house prices still falling in real terms after a housing bubble, until sometime after the unemployment rate peaks.

The second graph is for San Francisco.

San Francisco had a similar bubble as LA. The purple lines show the peaks in the unemployment rate after a house price bubble.

And the third graph is for New York.

New York had a bubble in the late '80s too.

And just like in LA and SF, real house prices continued to fall even after the unemployment rate peaked.

New York didn't have a bubble in the late '70s.

The fourth graph is for Boston.

Boston had a serious housing bubble in the mid-to-late '80s - in some ways this was the worst of the late '80s housing bubbles.

Once again (sorry no line), real prices continued to drift downwards for a few years after the post-bubble unemployment rate had peaked in the '90s.

The fifth graph is for Seattle.

Seattle has a changing economy - back in the '70s it was driven by the fortunes of Boeing, but by the '90s, it was more Microsoft and other tech companies and that shift probably kept house prices from falling in the early '90s.

For the late '70s bubble, we see house prices fell until the unemployment rate peaked (see dashed purple line).

And finally Detroit (note the price index is on a different scale).

Detroit had a mini-bubble in the late '70s, and once again real prices fell, until the post bubble unemployment rate peaked.

Although there are many other factors influencing house prices, I expect real house prices to decline until the unemployment rate peaks - and maybe even decline slightly (in real terms) for a few more years.

by Calculated Risk on 6/21/2009 03:42:00 PM

Yesterday I posted a comparison of national real house prices and the unemployment rate. Today I'm posting the comparison for various cities.

Previous posts:
National Real House prices and the unemployment rate.

Washington, D.C. real prices and unemployment.

Notes: House prices are from Case-Shiller (back to 1987 for Miami and Chicago, and 2000 for Dallas) and Freddie Mac's Purchase index (back to 1975). The Case-Shiller index was set equal to the Freddie Mac index in Q1 1987 (Q 2000 for Dallas), and then both indexes adjusted by CPI less shelter for South Urban cities (Chicago used Midwest urban cities).

The red unemployment rate is for the states and only goes back to 1976. The orange unemployment line is for the metropolitan statistical areas (MSA)

Note the scale of unemployment rate doesn't start at zero (to better compare to house prices).

Click on image for larger graph in new window.

In Miami, real house prices increased in the last '70s, but those increases were dwarfed by the current bubble.

Miami doesn't have a good example of a previous bubble to compare falling house prices and the unemployment rate.

Maybe if we had data back to the great Florida housing bubble of the 1920s!

The second graph is for Chicago.

Chicago has an example of a previous housing bubble in the late '70s. And house prices fell basically until the unemployment rate peaked (see dashed purple line).

And the third graph is for Dallas.

Dallas had a housing price bubble in the early '80s because of high oil prices during that period.

House prices and the unemployment rate appear unrelated, and we would probably have to look at net migration to understand why prices fell.

The pattern I expect is for house prices to fall (after a bubble) until the unemployment rate peaks - and possibly for some time after the unemployment rate peaks.

Some serious bubble cities to come ...

by Calculated Risk on 6/21/2009 12:28:00 PM

Yesterday I posted a comparison of house prices and the unemployment rate on a national (U.S.) basis.

I'm working on a series of graphs for individual cities. Each graph takes some work and a few assumptions (I will outline the assumptions for each city).

Notes: House prices are from Case-Shiller (back to 1987) and Freddie Mac's Purchase index (back to 1975). The Case-Shiller index was set equal to the Freddie Mac index in Q1 1987, and then both indexes adjusted by CPI less shelter for North Urban cities.

The red unemployment rate is for Wash, D.C. (as statewide) and only goes back to 1976. Update: the orange is for D.C. MSA

Click on image for larger graph in new window.

Washington D.C. participated in the late '80s housing bubble, and only somewhat in the late '70s bubble. The dashed purple lines line up the peak unemployment rate - following the housing bubbles - with house prices.

Note the scale of unemployment rate doesn't start at zero (to better compare to house prices).

It appears real house prices declined until the unemployment rate peaked, and then remained stagnant for a few years. Following the late 1980s housing bubble (with a double unemployment peak in D.C.), house prices declined for a few years after the unemployment rate peaked for a 2nd time.

Although there are periods when there is no relationship between the unemployment rate and house prices, this graph suggests that house prices will not bottom (in real terms) until the unemployment rate peaks (or later, especially since the current bubble dwarfs those previous housing bubbles).

More to come ...

by Calculated Risk on 6/21/2009 09:56:00 AM

From The Observer: Goldman to make record bonus payout (ht Jonathan)

Goldman Sachs staff can look forward to the biggest bonus payouts in the firm's 140-year history after a spectacular first half of the year ... Staff in London were briefed last week on the banking and securities company's prospects and told they could look forward to bumper bonuses if, as predicted, it completed its most profitable year ever.
...
In April, Goldman said it would set aside half of its £1.2bn first-quarter profit to reward staff, much of it in bonuses. It is believed to have paid 973 bankers $1m or more last year, while this year's payouts are on track to be the highest for most of the bank's 28,000 staff, including about 5,400 in London.

Usually I don't post on compensation issues, but record bonuses in a recession is pretty amazing.