MacroMavens Stephanie Pomboy Talks Real Estate In This Weeks Barron’s

Posted By on February 19, 2011

Here is an interesting piece on Real Estate in this weeks Barron’s column Up and Down Wall Street… by ALAN ABELSON

For most people, their house, be it ever so humble, is their largest single investment. (And all these years we’ve been suffering under the delusion that a house was, pure and simple, to live in. It came to wear an “investment” label during the wild years of the last decade, when it was viewed as an ATM and an asset that could only appreciate in value.)

As Stephanie Pomboy in her always lively MacroMavens dispatch points out, the acrid aftermath of the big bust in housing has failed to dissipate and adamantly hangs on. The average homeowner with a mortgage, she notes, has a scant 2.6% equity in his house, and the already towering delinquency and foreclosure rates seem headed for a new thrust upward, with interest rates creeping up and jobs remaining anything but easy to come by.

Hardly surprising, then, that demand for mortgages has sagged to a 27-month low, an evil omen for something even vaguely resembling a decent recovery in housing.

What’s more, if CoreLogic is right, things are a heck of a lot worse than most of us dreamed. CoreLogic, in case you wondered, is a demon data collector of, among other things, property and mortgage info that it peddles to business and Uncle Sam. Last week, it released a report that expresses grave doubts as to the accuracy of the widely followed calculations of home sales and other critical items by the National Association of Realtors, claiming they are seriously flawed, tending to understate the bad news, while inflating not-so-bad by 15% to 20%.

By way of example, according to the Realtors’ reckoning, existing-home sales last year declined 5%, to 4.9 million. By CoreLogic’s count, however, existing-home sales totaled a meager 3.6 million, a drop of 12% from the ’09 total. The disparity between the two is also graphically evident in their respective gauges of the size of the inventory of unsold houses.The Realtors figure the overhang is around nine months worth of supply, but CoreLogic counts the visible inventory of homes with a “for sale” out in the front yard at 16 months. Normal is six or seven months.

CoreLogic suggests the wide spread between itself and the Realtors is possibly explained by the difference in how the two gather the data and by out-of-date benchmarks (which the Realtors say they aim to recalibrate). The Realtors canvass multiple listing services and large brokerages. CoreLogic compiles its data from publicly available records stored in courthouses. Historically, CoreLogic adds, its survey pretty much agreed with 85% to 90% of the Realtors’ count, but began to diverge in earnest about 2006, when the housing market was smoking.

Home prices, meanwhile, have been caught in another downward spiral, reflecting a lack of demand and a huge supply, the bitter fruit of the great bust that followed the wild and woolly boom and a prime victim of the jobless recovery in the economy at large. If current trends persist, those already sharply lower prices,CoreLogic predicts, by spring will be down more than 10% from last year’s comparable stretch.

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