Reports: Rise and fall of home values has a lot to do with original value
By Glenn Roberts Jr., Monday, March 31, 2008.A March economic report by PMI Mortgage Insurance Co. includes a brief analysis: "House Price Declines Have Been Bigger for Lower Priced Homes." This item in the report cites data from the Standard & Poor's/Case-Shiller house price index, which provides price data in two tiers -- upper-value homes and lower-value homes -- for 17 metro areas.
Twelve of these 17 areas experienced larger declines in the value of lower-priced homes compared to higher-priced homes from December 2006 to December 2007, according to the report, while two metro areas had nearly identical declines among both the high-value and low-value home categories, and two markets (Las Vegas and Miami) had larger declines in the price of expensive homes.
The report, by LaVaughn M. Henry, director of U.S. economic analysis for PMI, suggests that "the greater use of subprime lending in the bottom price tier of homes, coupled with the poor credit performance of those loans, are the primary reasons why house prices are falling more rapidly for homes in this price segment."
And the falloff in investor activity in Las Vegas and Miami "may have contributed significantly to a larger drop in more expensive homes in these two cities."
Meanwhile, a separate study released today (see Inman News) by real estate valuation and marketing company Zillow concludes that on a national scale, price declines were slightest among the lowest-value homes and highest among the highest-value homes in fourth-quarter 2007 compared to fourth-quarter 2006. That report splits homes into five value segments, each representing 20 percent of the total market.
Zillow acknowledges in its analysis, which is based on a compilation of value estimates for homes, that local markets can exhibit characteristics that run counter to this national trend. In markets like San Francisco and New York, "higher-priced homes have actually performed better" than lower-priced homes, as home values near city centers can hold their value better than in remote suburban areas where homes tend to be less expensive.
The seemingly contradictory reports had at least one Inman News reader scratching his head, though both reports are based on different sets of data.
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Submitted by Mark Daugherty on March 31, 2008 - 4:58pm.
We are getting back to the fundamentals of real estate value, location and quality of construction. Common sense may actually prevail in spite of all odds.
Submitted by Debbie Ferrari on April 1, 2008 - 5:10pm.
It never fails to amaze me how IRRELEVANT these NATIONWIDE studies are when it gets right down to where an individual Realtor like me markets herself.
Here In South Orange County, California's prized 4-city beach area, ---San Clemente, Dana Point, San Juan Capistrano, Laguna Niguel---homes across the board declined only 2.9% in January over last year.
Here, yes, much of that decline was IN the lower priced homes, actually ones under $700,000, but that MEDIAN drop ended up at 2.9% overall only because the more EXPENSIVE homes here had fairly good INCREASES in price.
I guess it is the same old story...if you HAVE lots of money, now is a great time to get a deal on a lower priced home, maybe a bank-owned one, say to rent it out.
Those who have money to burn are never impacted much by these hard times and so their buying of upscale homes is a routine thing, even as those homes are increasing all the time in price.
The point is, if you live in a highly desirable, say, beach area that most people covet and which is mostly built out, residentially, with very high employment, your home prices will drop radically far less than those homes in Detroit where the auto industry slumb AND the real estate problems combine to create almost 10% unemployment in many parts of Michigan.
And then there's Zillow with findings that contradict the earlier Standard & Poor's/Case-Shiller study.
Given the choice, I would always put more trust in data from the Standard & Poor's/Case-Shiller house price index, which provides price data in two tiers -- upper-value homes and lower-value homes -- for 17 metro areaa, than in Zillow.
But Realtors might better look askance at nationwide studies about home prices. What counts nationwide should be viewed as only an average or median way of looking at the market.
What ALWAYS means more, survival-wise, to us as Realtors, and to our survival as humans, is what goes on in our OWN JUNGLE. DF
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Debbie Ferrari, "The Internet Broker"
****For South Orange County, CA****
Search the Local MLS Right from My Giant Web Site at:
http://www.debbieferrari.com
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Submitted by Barry Preusz on September 30, 2008 - 6:46pm.
Although the most important three factors are location, location, location, there is a bit of a "tilt" with upscale properties when the economy falters. Park City, Utah is a great example.
Barry Preusz
Realtor | Residential Specialist
Equity Real Estate – Burgundy Canyons Group
http://www.realestatehomesutah.com