Tag Archives: Real estate pricing

Minnesota’s Home Price Index drops -4.2 percent, Corelogic Report


Corelogic’s HPI August report came out today.  Minnesota is still leading the nation in property value declines, at least in the top 5 leaders.  I am hoping this really means that our market is correcting the quicker and not a sign that we have bigger problems.   It is too close to call at this point, so I lean towards the optimistic side that we correcting quicker.

––Prices Are 4.4 Percent Lower Than a Year Ago––

CoreLogic (NYSE: CLGX), a leading provider of information, analytics and business services, today released its August Home Price Index (HPI) which shows that home prices in the U.S. decreased 0.4 percent on a month-over-month basis, the first monthly decline in four months.  According to the CoreLogic HPI, national home prices, including distressed sales, also declined on a year-over-year basis by 4.4 percent in August 2011 compared to August 2010.  This follows a decline of 4.8 percent* in July 2011 compared to July 2010.  Excluding distressed sales, year-over-year prices declined by 0.7 percent in August 2011 compared to August 2010 and by 1.7* percent in July 2011 compared to July 2010.  Distressed sales include short sales and real estate owned (REO) transactions.

Including distressed sales, the five states with the greatest depreciation were: Nevada (-12.4 percent), Arizona (-10.7 percent), Illinois (-9.6 percent), Minnesota (-7.8 percent), and Georgia (-7.2 percent).

Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-8.8 percent), Arizona (-8.3 percent), Delaware (-4.9 percent), Michigan (-4.3 percent), and Minnesota (-4.2 percent).

Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, 80 are showing year-over-year declines in August, eight fewer than in July.

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Comparing the Minnesota Home Price Index to Inflation, are we at the bottom? Case Shiller, FHFA, and CPI


I pulled some stats from the St Louis Federal Reserve to see how real estate performs with inflation over time.  The result of this is not what I was expecting.  I wanted to show that home prices pace inflation proving it is a nice hedge against inflation.  That is true, however what I discovered is a little more interesting.

click to enlarge

The blue line is CPI, Core Inflation while the Red Line is FHFA’s Minnesota Home Price Index.  Up until the mid 1990’s the home price index tracked just above the CPI, just like I expected.  What I couldn’t help noticing is this Giant Bubble…  Home Prices are still approx 17% apart as of April 2011 (the latest Home Price Index on this chart).  We have dropped even closer since, so our spread is probably closer to 10% now, within negotiating terms.  Sellers are receiving approx 92% of their asking price now.  We are fairly close to the bottom when you look at it in those terms,  within 10% assuming the market doesn’t over-correct…

Going forward I believe we are going to see high inflation like we did in the later 1970’s and early 1980’s, probably more so.  (see Monetary Base chart from earlier post).   If inflation kicks in and home prices find their equilibrium with CPI again, the future may look something below (maybe with a few more peaks and valleys..):

Just a Guess at the Future

Interestingly enough, I spent some time downloading the CPI into excel and running that up against Case Shiller’s Index.  These are indexed at different reference points, so we are only really trying to gauge the separation between them not the actual index value.  The Case Shiller Index suggests to me that we are at bottom when compared to CPI, or at least very close to.  The Minneapolis Case Shiller Index is updated as of July 2011, probably more accurate than April 2011 from the FHFA Home Price Index…

What’s your prediction?  Care to take a guess?  Do you think we will over-correct first?  It is still anyone’s guess at this point…

Inventory has come down, rates are record lows, affordability all time high, rents increasing…  the only thing missing is jobs.

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Case Shiller Home Price Index 1890 – 2010 put to RollerCoaster video.


Came across this updated Roller Coaster to the home price index.  Similar to the infamous one done in 2007, this one takes us to 2010.

The original was adjusted for inflation, there is no mention if this one does or not.  I am not clear on how they obtained pricing index back to 1890, Case Shiller and FHFA didn’t exist  and I am not sure if they have indexed back that far – so I am not sure of the accuracy on it.  It is still a good representation of the real estate market…

 

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Orono ranks #1 in highest median home price in MN, Wayzata ranks #10


Lake Minnetonka 1

Image by yuan2003 via Flickr: Lake Minnetonka

Just some fun information.  Minneapolis/St Paul Business Journals ranked 14,214 Cities nationwide by median home value and upper quartile value. 

It appears the power Lake Minnetonka’s “Lake Affect” helped the cities near the lake rank high on this list.

 Orono ranked top of the list for median home price while Wayzata comes in 10th place in Minnesota.  For upper quartile house value  for Minnesota, Dellwood ranks 1, followed by Orono and then Tonka Bay.

For Minnesota’s highest median home value, the list ranks in this order:

Orono, MN  Median Home Value:  $732,600

Dellwood, MN   Median Home Value:  $686,500

North Oaks, MN  Median Home Value:  $651,700

Tonka Bay, MN  Median Home Value:  $588,200

Independence, MN  Median Home Value:   $542,400

Deephaven, MN  Median Home Value:   $532,700

Minnetrista, MN  Median Home Value:  $512,700

Medina, MN  Median Home Value:  $479,500

Grant, MN  Median Home Value:    $460,600

Wayzata, MN  Median Home Value:   $452,700

This is just a very short summary of the full story by Minneapolis St Paul Business Journals.

Read Full Story from Mpls/St Paul Business Journals

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CoreLogics Home Price Index, how Minnesota ranks nationally July 2011


CoreLogic released their July Report for their Home Price Index.  The Lead on their report is July Home Price Index Shows Fourth Consecutive Month-Over-Month Increase.  Except for Minnesota…

Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-9.6 percent), Arizona (-8.1 percent), Delaware (-6.5 percent), Minnesota (-5.7 percent), and Michigan (-4.7 percent).  

Including distressed sales, the five states with the greatest depreciation were: Nevada (-12.2 percent), Arizona (-11.9 percent), Illinois (-10.0 percent) Minnesota (-8.6 percent), and Idaho (-7.8 percent).

CoreLogic Home Price Index July 2011

I believe our region has something else going on other than the mortgage collapse and housing bubble.  If you look at this data, and other data comparing us nationally we are not doing well at all.  Our unemployment rate is better than nationally, however we are still losing jobs.  We are also losing households in the 7 county metro region, which has a big impact. 

The funny things about these reports is the true meaning of the data gets lost in translation.  For example, regionally our median and average home prices are way down.  That doesn’t mean that all home prices are down by that percentage, it is more reflective the price ranges that are selling bringing the average and median price down.  That is part of this, but I would assume that would be the same in other markets but maybe not.

Now it may also be that we are the market that is actually correcting quicker so it looks bad right now, but in the long-term is a healthier market.  This is a theory I don’t know how to prove other than with 20/20 hindsight.  In other words, time will tell.

(Or for another perspective on this, check out A Cold Detroit post.)

Look how we make the top 5 list…                   (view CoreLogic’s  full report).

CoreLogic HPI July 2011 (including distressed sales)

CoreLogic HPI July 2011 Excluding Distressed Sales

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S&P Case Shiller Home Price Index 2nd Qtr 2011, Minneapolis vs Composite 20


There are some bright spots on the horizon from the 2nd Quarter report from Case Shiller Home Price Index.  Nationally we are up 3.6% back getting back to 2003 price levels.  A little bit of bad news, Minneapolis has led the decline by double digits posting a -10.8% year over year decline in values.  On the surface this sounds bad, but from my perspective I believe this is a good sign;  This number is partially reflective of the lower price points are selling in the Twin Cities which drops the overall Median and Average price, I don’t believe everyone’s home values dropped by 10.8% this year (maybe in some neighborhoods..)  Our inventory levels are shrinking and our pending sales are up 43% from last year, so we are in the recovery mode starting with the lower price points which will work its way up.  While the composite 20 is boasting “back to 2003 levels” for pricing, the Minneapolis region is still bouncing around 2001 pricing.   It sounds bad, but I believe this is the initial pain involved with healing our market.  To summarize, I believe our region has going through the painful correction quicker than the other areas and is poised for quicker recovery.  Our inventories are down, our prices are down making our affordability favorable to buyers – our current market activity is strong so pricing should be stabilizing if not increasing soon.  Of course, this theory could be wrong if our region doesn’t start producing jobs…

Data through June 2011, released today by S&P Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index increased by 3.6% in the second quarter of 2011, after having fallen 4.1% in the first quarter of 2011. With the second quarter’s data, the National Index recovered from its firstquarter low, but still posted an annual decline of 5.9% versus the second quarter of 2010. Nationally, home prices are back to their early 2003 levels.

As of June 2011, 19 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were up versus May – Portland was flat. However, they were all down compared to June
2010. Twelve of the 20 MSAs and both Composites have now increased for three consecutive months, a sign of the seasonal strength in the housing market. None of the markets posted new lows with June’s report. Minneapolis posted a double-digit 10.8% annual decline; Portland is not far behind at -9.6%.  Thirteen of the cities and both composites saw improvements in their annual rates; however; they all are in negative territory and have been so for three consecutive months.

Case Shiller Composite 20 vs Minneapolis August 30, 2011

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