Comments on: California Housing Still Over Priced: Examining Case Shiller Data and Seasonal Distortions. The Impact of Shadow Inventory on Price. http://financemymoney.com/california-housing-still-over-priced-examining-case-shiller-data-and-seasonal-distortions-the-impact-of-shadow-inventory-on-price/ Sun, 18 Oct 2009 12:44:37 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: WatchingMarcitz http://financemymoney.com/california-housing-still-over-priced-examining-case-shiller-data-and-seasonal-distortions-the-impact-of-shadow-inventory-on-price/comment-page-1/#comment-49 WatchingMarcitz Thu, 01 Oct 2009 06:22:37 +0000 http://financemymoney.com/?p=120#comment-49 As the old Real Estate aphorism goes "Only 3 things matter - location, location, location". So the issue with relying on Case-Shiller is that the "city" used for valuation is usually a multi-county location with each location being at a different stage in the price cycle. The "San Francisco" area ranges from Union Square to the Vallejo suburbs over 30 miles away. Vallejo has bottomed but it will take some time for the Silicon Valley and City by the Bay to follow it into the abyss. The recovery that Case-Shiller is talking about is allowing the suburbs to mask further falls in the inner-core. The net result is as Case-Shiller recovers people closer to the namesake city buy too soon under the false pretense that their little pocket of the world has improved with the broader index. Take a look at this chart which shows how wildly different the valuation story is WITHIN the the "San Fracisco" area: http://www.housingbubblebust.com/OFHEO/Major/NorCal.html Also look at this analysis as why Palo Alto is in for a fall (albeit 2 years later) like Vallejo: http://invisiblerenters.com/2009/06/23/why-palo-alto-housing-will-fall-30-or-more/ Or this one: http://watchingmarcitz.com/2009/05/22/rearranging-deck-chairs-on-the-peninsula/ As the old Real Estate aphorism goes “Only 3 things matter – location, location, location”. So the issue with relying on Case-Shiller is that the “city” used for valuation is usually a multi-county location with each location being at a different stage in the price cycle. The “San Francisco” area ranges from Union Square to the Vallejo suburbs over 30 miles away. Vallejo has bottomed but it will take some time for the Silicon Valley and City by the Bay to follow it into the abyss. The recovery that Case-Shiller is talking about is allowing the suburbs to mask further falls in the inner-core. The net result is as Case-Shiller recovers people closer to the namesake city buy too soon under the false pretense that their little pocket of the world has improved with the broader index.

Take a look at this chart which shows how wildly different the valuation story is WITHIN the the “San Fracisco” area:

http://www.housingbubblebust.com/OFHEO/Major/NorCal.html

Also look at this analysis as why Palo Alto is in for a fall (albeit 2 years later) like Vallejo:

http://invisiblerenters.com/2009/06/23/why-palo-alto-housing-will-fall-30-or-more/

Or this one:
http://watchingmarcitz.com/2009/05/22/rearranging-deck-chairs-on-the-peninsula/

]]> By: kevin http://financemymoney.com/california-housing-still-over-priced-examining-case-shiller-data-and-seasonal-distortions-the-impact-of-shadow-inventory-on-price/comment-page-1/#comment-47 kevin Wed, 30 Sep 2009 16:08:00 +0000 http://financemymoney.com/?p=120#comment-47 Let's also not forget the three hundred pound gorilla in the room, 'mark to market'. As long as banks can carry their real estate holdings on their books at the price they HOPE to get for them instead of their real value they will hold on to them and be disinclined to write them down. Also as long as banks refuse to forclose on the 1.1 million people in default inventory will remain artificially low. Let’s also not forget the three hundred pound gorilla in the room, ‘mark to market’. As long as banks can carry their real estate holdings on their books at the price they HOPE to get for them instead of their real value they will hold on to them and be disinclined to write them down. Also as long as banks refuse to forclose on the 1.1 million people in default inventory will remain artificially low.

]]> By: Nik http://financemymoney.com/california-housing-still-over-priced-examining-case-shiller-data-and-seasonal-distortions-the-impact-of-shadow-inventory-on-price/comment-page-1/#comment-46 Nik Wed, 30 Sep 2009 15:49:37 +0000 http://financemymoney.com/?p=120#comment-46 > That will change as more and more shadow inventory makes its way to market in 2010. Not necessarily, the banks can hold it off indefinitely (meaning until they are forced to sell it and realize loss). While the fed and gov are injecting money into the banks they won't be selling at a loss... > That will change as more and more shadow inventory makes its way to market in 2010.

Not necessarily, the banks can hold it off indefinitely (meaning until they are forced to sell it and realize loss). While the fed and gov are injecting money into the banks they won’t be selling at a loss…

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