February 19, 2009 · 2:14 pm

Attn. Greenwich Realtors: Don’t Look!

Thanks to a reader I was reminded to check out “Seeking Alpha” and this article by a James Quinn. Fun bedtime reading and if you want to stay up tonight, take a gander at this chart from Shiller. Bummer.

history-of-home-values

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9 responses to “Attn. Greenwich Realtors: Don’t Look!”

  1. SizeBuyer
    February 19, 2009 at 2:26 pm

    You mean to tell me there is more to come?

    That’s awful!

    Now do emotions run just as wild when your home is imploding in value as they do when you have found the home of your dreams?

  2. FlyAngler
    February 19, 2009 at 2:47 pm

    Chris (and CEA if she is reading this):

    Here is a link to the chart itself so that the context can be appreciated.

    I believe one would have to get Shiller’s 2006 book to understand how the pricing data was adjusted for inflation since that would be material to the progression of index values.

    Also, the description of the data suggests that the data is based on “existing standard houses, not new construction” so does this take into account improvements in the nation’s housing stock due to new construction and renovation? That is, does the data compensate for improvements in the quality of “standard housing” in excess of the inflation adjustment. What about new cities and south-westward expansion? New developments in older regions?

    According to Amazon, the 2nd edition of Shiller book was published in May 2006 so it likely reflects data through early 2006 at best. Thus, the peak shown could be higher than that in the chart or not.

    Also, the graphic you pull from David Walker’s SA post has been manipulated by someone to “update” it for recent years’ downward price movement. What was the basis of this “updating”? Was it additional Shiller index data or has someone used anecdotal data to extend the original data set.

    Not looking to dispute the data but the author (Walker) clearly has a view and I would like to know how that impacted the updating of the graph.

    FA

    BTW, David M. Walker is no crank and is president and CEO of the Peter G. Peterson Foundation and former comptroller general of the United States.

  3. FlyAngler
    February 19, 2009 at 3:03 pm

    I goofed, Walker is not the author of the SA piece. It is Quinn as Chris noted. Walker was just responsible for the opening quote.

    If you want more Quinn, check his archive (reader beware):

    http://seekingalpha.com/author/james-quinn/articles

  4. pulled up in OG
    February 19, 2009 at 3:07 pm

    A picture is worth a thousand words . . . even more in the blogosphere.

    I handed out many copies the last time you posted it, where it stopped at the peak. Get’s the point across quick.

  5. Peg
    February 19, 2009 at 3:09 pm

    Let me know when it’s safe to come out from under the comforter, Chris. Perhaps in 4 or 5 years, maybe?

  6. anonymous
    February 19, 2009 at 3:20 pm

    IIRC, Shiller’s data is best he could find…but has much slop….as doesn’t adjust for certain suburban areas’ premia, differing land costs, changes in new house size/features/amt of land per house, capex invested in older houses, etc

    Prob need to do own case-specific analysis of houses in comparable suburbs over past 10-20yrs to best judge appreciation (or lack thereof)

    Anecdotally, have been most struck by how much land costs have increased over past 10-20yrs in many elite suburbs of allegedly cheaper cities like Dallas (HighlandPark/PrestonHollow) or Chicago (Lake Forest) or Detroit (Bloomfield Hills), etc…..Greenwich land might be cheapest of any major affluent suburban region in US, even after the most recent Bubble

  7. CEA
    February 19, 2009 at 4:27 pm

    This is interesting. It is awfully hard to know how much is supply/demand (population today is much greater than it was in 1890, plus it is concentrated so certain areas are more expensive than others), and how much is just the craziness of the last few years. Also remember that there really wasn’t “credit” in the old days like there is today – though whether that’s a + or a -, who knows.

    Would also love to graph the Dow against it.

    Anyhow, I studied with his buddy Chip Case (of Case-Shiller) and remember him starting this real estate thing. I’m glad he did it.

    Finally, the one thing about the “prediction” part of the graph: who is to say that 110% of the 1890s price is “steady state”? Maybe it’s 100%, maybe it’s 120%.

    Interesting, but just tough to draw conclusions that we can use today (since we don’t know what the “right” level is, or how long it will take to settle there – 6 months? 3 years?). But very interesting, thanks FlyAngler for posting.

  8. Anonymous
    February 19, 2009 at 9:22 pm

    I attended a conference a few months ago and was able to ask Dr. Shiller if he would support a tax credit for homebuyers as a means of ending the housing crisis. He said that he would not support a credit as it would drive home values up. Now that the tax credit legislation has passed, it will be interesting to see what happens with prices.

    • christopherfountain
      February 19, 2009 at 9:33 pm

      If I have the details right (and I’m not sure I do) it’s an $8,000 credit for first time home buyers. That wouldn’t seem enough to help any market and certainly not Greenwich, even if its prices drop a hell of a lot further. But I don’t really claim to know what’s in that damn bill so if there’s something more significant for home buyers that I missed, maybe it will help. In which case, I’d agree with Shiller because I think prices have to fall, a lot, if were going to get real estate moving again.