Radar Logic: The "End of the Beginning of the Housing Crisis"?


Radar Logic has headlined its September
RPX 25-MSA Composite with the disquieting headline “We May be Witnessing the
End of the Beginning of the Housing Crisis.”
The report says that the RPX Index along with a few other housing
indicators released over the past week (SP/Case-Shiller and the Federal
Housing Finance Agencies Home Price Index) all show more or less the same
thing; the long term trend in house prices remains negative.  The company says it expects the year over
year trend to remain negative but the rate of decline will slow until prices
finally touch rock bottom.

Radar Logic quotes housing prices in the
25-MSA Composite on a per square foot basis (PSFT).  The national composite in September was
$180.76 PSFT, down 4.4 percent since September 2010 and down 1.7 percent from
August.  The year-over-year index has
consistently declined by more than four percent on a year-over-year basis since
last February.

In the 25 MSA the index ranged from a
high of $323 PSFT in San Jose, California to a low of 64.33 in Detroit.  Only two MSA’s saw an increase in the index
over the last year – Detroit was up 7.1 percent and Washington DC increased 1.8

Home prices have been battered because
of a persistent imbalance of supply and demand in the housing market but, even
as it remains severe, Radar Logic said there are signs that the two factors are
beginning to equalize.  Demand, as
measured by the 25-MSA transaction count from January to September 2011 was
greater than the change measured during the same period in 2010 and the
year-over-year gain through September – 15.4 percent – was the largest seen for
this time period since 2003.  Transaction
counts increased in all but one of the 25 MSA’s, Jacksonville, Florida which declined
a mere 0.8 percent.  Increases in
transactions in 18 of the MSAs were in double digits and were over 60 percent
in both Minneapolis and Boston.  

While demand is increasing, inventories
of available homes for sale as reported by the National Association of Realtors®
are decreasing slowly – its October figure of 3.33 million units was 3.6
percent below the previous month and 13.8 percent lower than the number a year

Supplies of distressed homes – REO and
potential short sales – are still in enormous supply but are also decreasing as
are several measures of mortgage delinquency. 
What Radar Logic calls “motivated sales” represent 25 percent of
transactions, down from 40 percent at the beginning of 2011.  The average price of a motivated sale is
around 40 percent less than the RPX Composite number.

Looking forward, Radar Logic has
computed forward price fixings based on the September $180.76 PSFT.  Appreciation by the end of 2011 is expected
to be 2.3 percent.  At the end of each
subsequent year the appreciation is projected as follows:  2012, 2.9 percent; 2013, 3.4 percent; 2014,
3.9 percent and 2015, 4.5 percent.


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