Home prices in California are stupid high, right? It must be a better deal to rent. At least in the big metros. Well not according to our friends at Movoto.com.

Movoto looked at home prices in 11 counties across the state of California and compared them to the average rents in those counties. In eight of the 11 counties, renters end up out of pocket more than buyers, sometimes a lot more.  From their press release:

• Alameda County renters pay an additional $332/month;
• Contra Costa County renters pay an additional $905;
• El Dorado County renters pay an additional $330;
• Los Angeles County renters pay an additional $174;
• Riverside County renters pay an additional $867;
• San Bernardino County renters pay an additional $507;
• San Mateo County renters pay an additional $479; and
• Yuba County renters pay an additional $248.

To complete the cost analysis, Movoto.com compared the average monthly mortgage cost and associated taxes of a 3-bedroom, single-family residence to the average monthly cost of renting an apartment. Information on the average monthly rent cost was provided by real estate data and analytic firm Altos Research, which offers the largest housing and apartment rental database in the United States.

The analysis assume a 35 percent marginal income tax rate, a 1.5 percent property tax rate, a 20% down payment and a mortgage interest rate of 4%. The analysis only compared the current cost of renting to the current monthly cost of buying and does not include the benefit of avoiding future rent increases or gaining property appreciation over the ownership period.

It’s a fascinating dynamic and something that we’ve been talking about for a while. Both home prices and rents are climbing in most of this state. It’s always a tough comparison, difficult to control for quality of dwelling and maintenance costs, etc. And of course the big assumptions are that A) you can qualify for a loan and B) that you have 20% for that downpayment. The observation, and this is true around the country, is that if you’re well financed, mortgage money is so ridiculously cheap. And that makes these “affordability” analyses look very favorably at the costs of buying a home.

Full press release here.

Altos Research Rental Intel (sm) market data info here.

Altos 20-City Composite: Days-on-market (red) is now declining with the lowest active market inventory (green) in the seven years

Altos 20-City Composite: The price of new listings (red) entering the market each week are pricing higher while existing sellers are taking few price reductions (green)

From yesterday on Calculated Risk -”House Prices & Lagged Data” -

But sometimes the lag can be much longer. Tomorrow morning the January Case-Shiller house price index will be released. This is actually a three month average for house sales recorded in November, December and January.

But remember that the purchase agreement for a house that closed in November was probably signed in September or early October. So some portion of the Case-Shiller index will be for contract prices 6 or even 7 months ago! [emphasis added]

Signed,

April

P.S. The weather’s been unseasonably warm this Spring.

P.P.S. Go to Las Vegas right now immediately and take whatever odds you can get on the Giants to win the Super Bowl.  Trust me on this.

Business Insider Pop Quiz: Which is the only housing market that showed gains in 2011 (using the Case-Shiller Home Price Index)?

Answer: Detroit

…which is what we’ve been saying for months:

Trend Chart of the Day: Detroit Home Prices on the rise? (Aug 15, 2011)

Top 3 US Housing Markets (Oct 20, 2011)

Imported from Detroit: Chryslers & Housing Strength (Oct 25, 2011)

“Geez, it’s almost there. If we could just get another 851,489 houses for sale in the market, we’ll have it juuuuuust right…”

We released our February National Housing Report yesterday – “US Home Prices Already Climbing in February,” in which we highlight the role of declining active market housing inventory in this year’s home price stabilization.

Ironically, Jonathan Miller (author of Matrix Blog) wrote on Monday – “The Decline In Inventory Right Now is NOT a Good Sign.” Jonathan and I disagree on this point, which we delightfully and civilly discussed via email this morning.

Here’s the way I see it: It wasn’t long ago that the world was worried about millions and millions of foreclosed homes hitting the open market and crashing home prices another 30%.  Now we’re worried there’s not enough supply. Huh?

The problem with the housing market in the first place was too much supply at bubble prices and demand levels. Because housing supply is difficult to destroy or spoil (Greenspan’s suggestion to burn down houses and rotting REOs aside…), I’d much rather be in a place with very low supply – even a shortage in terms of “homes for sale relative to demand” – that causes prices to rise in the short-to-intermediate term. Trying to fine tune the “right” supply level is very dangerous.

Plus, other factors are influencing active market inventory:

1. Short Sales: Some of the “lowness” in the active market inventory is due to the shadow/distressed inventory which will leak out this year via the continued short sale push from the GSEs and banks. These institutions have very large NPV functions and are concluding that a short sale at today’s price > 6-36 month foreclosure process in many cases.  This will nag home prices to the dismay of non-distressed home sellers, but it’s a realistic way to handle the problem.  Much better than foreclosing on another 6-10mln people behind on their mortgage. You can’t have it all…

2. REO-to-Rental: Bulk REOs on the GSE/bank balance sheets are converting to rental housing with recent program announcements from Freddie Mac, Fannie Mae, the FHFA, and Bernanke.  This means that this subset of inventory won’t hit the active listings in the short-to-intermediate run. Investors buy and convert these properties to rental. Eventually when home prices rebound significantly, investors may attempt to re-sell into the market, especially if price-to-rent ratios make it economically sensible for renters to enter or re-enter the marketplace, but that is 5-7 years down the road.

3. Supply & Demand: One can use either an upward-sloping supply curve or a vertical/no slope supply curve to depict active market inventory.  An upward sloping housing supply curve says that as prices rise, the quantity supplied along a fixed supply curve will also rise. However, in this scenario, prices will also drop because a rise in supply creates a surplus gap at a given quantity demanded along a fixed demand curve.

The good news is that the opposite also happens – when prices fall, the quantity supplied falls along the fixed upward-sloping supply curve, as home sellers and firms withdraw or stay out of the market. This is the argument that Jonathan makes as to why supply that is “too low” is a bad sign for the market – low supply is due to low prices.

But… if that happens for a prolonged period, then a shortage develops in the market which causes prices to rise. This is what we’re seeing now. Then, home sellers and firms will re-enter the market as suppliers when they see prices stabilize and rise.  Part of this supply re-entering will be home owners on the underwater mortgage margin.  They’re current on their mortgage so they don’t qualify for a short sale or modification in most cases. They want to sell but can’t sell because they are LTV=101 to 120 and don’t have the cash on hand to bring to closing.  If the market pops 5-10% because of a supply shortage, then it becomes feasible to enter the market.

(Personally, I assume  a vertical/no slope supply curve and a fixed demand curve. On the supply side, there are a discrete number of homes for sale at any one point in time, and there is a baseline number per year with seasonal fluctuations that enable the supply curve to move more nimbly back and forth. Principally, demand curves are fixed and are very hard to shift, though the market is seeing the demand curve shift downwards with a preference change to rentership – both by choice and by force – as the homeownership rate falls back into the mid-to-low 60%, and heads lower every quarter.)

In either an upward sloping supply curve or vertical supply curve, the supply curve moves  back and forth on expected future prices (i.e. market conditions) and the number of firms (i.e. individuals, homebuilders). When these market suppliers sees a sustained recovery and expect future prices to rise, then a chunk of sellers enter the market and homebuilders start building homes.

It’s dangerous and Keynesian (worse) to think that anyone can decide the “correct” amount of active inventory, particularly when using history as a guide.  Looking backwards too much for too long got us here in the first place.  I’m not advocating a free-for-all in the housing market – it’s way too screwed to extract the government programs now.  And it seems that HARP II might actually be working.

I do think that the market is responding appropriately right now with low supply and I’d really like to see the current situation play out in 2012 before a bunch of politicians or lobby groups decides on the optimal housing supply that should be available to buyers.

“Or maybe it should be 853,109 more homes…”

Lots of headlines around the web today about what the Facebook IPO means to Silicon Valley real estate. They all get it wrong. The short answer is that the Facebook IPO will have essentially no impact on the Silicon Valley housing market. Why? Because the market is already hot and has weathered the housing crisis better than maybe anywhere else, driven by infinitesimal supply and *tons* of other successful wealth creating companies of the last 10 years.

Take for example, Apple. In 2006, Apple’s market cap was about $35B. Now it’s $450B. That’s 400% of the wealth created potentially to be added by Facebook. Here’s another: VMWare. Here’s a company, based in Palo Alto, that created $40B in equity wealth since 2008. Here’s how local home prices have acted since then.

Home prices in four central Silicon Valley towns. 2005-2012

No surprise, this is an expensive part of the world to live in. Guess what? Facebook doesn’t make it moreso. What’s more interesting than perpetually high prices, in my opinion, are perpetually low inventories.

Inventory of homes for sale in Palo Alto, Los Altos, Mountain View, and Menlo Park, California 2005-2012

There are just over 100 homes for sale in these four towns. That’s it. (Why this is true is a topic for another post). If there are 5000 people vying for 100 homes, adding another 1000 millionaires from Facebook, while awesome and wonderful, doesn’t add any marginal demand to the local housing market.

The bottom line is that Silicon Valley consistently creates big stock wealth (thank god) and it consistently has few homes for sale. Home prices have held up quite fine since the bubble burst. They will continue to do fine. But Facebook is not a significant outlier event for homes in this market.

For better or worse.

Last week I highlighted the bullish signal that the price of newly listed homes after the first of the year were ticking up. This week I have another hint of good news. Rents.

In addition to the active housing market, Altos Research now tracks the active rental market. Our set of 750,000 – 1 million rental units a month is the largest set available anywhere. And it’s powerful.

US Rental Prices, weekly sample, single family homes and apartments for rent. Sample size is approximately 600,000 per week.

This chart illustrates rents across our Altos 20-City Composite and 10-City Composite as of January 27, 2012 so it’s a national view. This data is a blend of both single family homes and apartments on the market.  The weekly upticks in rents is one of the signs we’re using to underpin our mildly bullish home price scenario for 2012. The argument goes like this:

1. Rents are rising because mortgages are harder to get and because the conventional wisdom that “owning always wins” is diminishing.  Percent of American households who own their homes has fallen to 65%. It’ll likely keep falling to closer to 60% over the next few years. This bodes well for rents.
2. As rents rise, home prices fall, and mortgage money remains unnaturally cheap, we’ve reached the point where investors see growing returns on investment properties. There’s a well-funded investor pool who can take advantage. They’re buying.
3. As rents rise, those non-investor home buyers see more opportunity buying vs. renting. As long as they can get a mortgage, there are relative opportunities.

So rising rents help provide a floor to home prices. Keep an eye on this space for more as Q1 2012 progress.

We track hundreds of local housing market stats here, but one of my favorite (because you can’t find it anywhere else, and because it’s so insightful) is the Median Price of Newly Listed Properties.

It turns out that if you watch the prices of the properties that enter the market each week, you can get a real sense for the quality of the demand in a local market.

Also notable is that the spring housing market starts the second week of January. Like clockwork.

Realtors, it turns out, in aggregate are quite sensitive to where homes should be priced. They tend to price homes very close to where they’ll sell. When they’re sensing healthy demand, they price more aggressively. When they sense weakness, they’ll price lower so the property will move. They’re pretty clever, those Realtors. Here’s what they’re telling us today:

Median price of new listings. Single Family Properties across 20 major US metro markets. Source: Altos Research

The data-point we’re looking at is at the far right side of the red line, that’s the weekly number, for January 13, 2012. Notice every 2nd week of January we get an uptick. This year is a nice strong move above the recent trendline (that’s the green). This move, while admittedly only one data point, is the very first signal of the new year.

It’s not aggressively bullish, mind you. But it implies US home price stability through the first quarter. And that’s encouraging.

Stay tuned.

Yes, home prices are down… Back in October…

…but getting less bad because inventory is down and still declining. The foreclosure pipeline is clogged in Florida, while New York and New Jersey still have their robo-signing hangovers:

Year-over-year Ask Prices & Active Market Inventory: Altos 20-City Composite, weekly averages

The constrained supply is also keeping days-on-market in check – sellers are still able to unload their for-sale properties in a tolerable period of time:

Days-on-Market: Altos 20 City Composite, 90-day rolling average

Still don’t inventory or days-on-market matter?

Take the extreme case – what if there were only 100 homes for sale in the entire country?  Then prices would be higher regardless of how many houses are in foreclosure or how poorly consumer expectations remained.

If you want to know if new home starts are going higher, watch the active market listings.

Residential housing reported higher numbers for November today. What do homebuilders know about housing that surprised the stock market today?

Home prices are getting less bad:

Year-over-year Housing Market Ask Prices: Altos 20-City Composite

How? Inventory is down.  While the foreclosures are clogged somewhere in the pipeline, there’s just not much available for Joe & Sally Homebuyer:

Year-over-year Inventory: Altos 20-City Composite

The homebuilders see what we see – when sellers get more confident on pricing, builders pick up their new home construction.  (Data measures at a 77% correlation):

Monthly Single-Unit housing starts (July 2010 - Nov 2011): US Census, November 20, 2011

Looking at quarterly data since 2007, there’s more of the same. (Data measures at a 76% correlation):

Quarterly Single-Unit housing starts (2007-2011): US Census

Link for US Census/HUD press release.

In August 2011, the United States Federal Housing Finance Agency offered its “Request for Information” (RFI) for REO Asset Disposition including a transition to a rental-based solution, soliciting ideas from the private sector, academia, and research groups on the handling of the existing REO inventory.  From the August release:

The Federal Housing Finance Agency (FHFA), in consultation with the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development, is issuing this Request for Information (RFI) to solicit ideas for sales, joint ventures, or other strategies to augment and enhance Real Estate-Owned (REO) asset disposition programs of Fannie Mae and Freddie Mac (the Enterprises) and the Federal Housing Administration (FHA). The agencies are exploring alternatives that will facilitate the current and future disposition of REO, improve loss recoveries compared to individual retail REO sales, help stabilize neighborhoods and local home values, and where feasible and appropriate, improve the supply of rental housing.

Two weeks ago, the FHFA posted a summary – FHFA REO Initiative: RFI Response Summary. A couple of the solutions offered by the respondents:

• Joint venture partnerships, outright sales, and auction methods.
• Adoption of approaches similar to the Treasury Department’s Public-Private Investment Partnership program. That program, which included risk sharing with the U.S. government, involved the use of Treasury financing, along with private equity, to purchase troubled loans from banks.
• Proposed the use of Real Estate Investment Trust (REIT) structures. REIT structures give investors unique tax advantages, support longer term investment capital, and require controls to prevent practices such as property “flipping.”

It’s always nerve-racking to hear of government involvement with private equity, REITs, or any private sector investment vehicle.  But, from the looks of it, the FHFA is taking legitimate steps to involve the private sector, which is good for taxpayers, and the process is moving quickly.  RFI submissions were due in September and the FHFA posted the initial summary document on November 29, 2011.

I’ll happily take a sip of eggnog with an optimistic toast – “Here’s hoping that we’re on the right path…”

The timing could be better for Altos Research – we’ve just launched our Rental Intel products – real-time rental market analytics and listings.  [Author acknowledges shameless plug]

You want to understand the housing market. You’ve always tracked what sold, if you hang with Altos, you know what’s for sale and all that implies. What’s missing from this picture? Forty percent of this country doesn’t own the home they live in. So tell me, What’s for rent?

Today Altos Research is announcing the next stage in our little real-time market data revolution. With the release of our new Rental Intel system We’ve added 700,000 currently for rent apartments and homes into our giant database.

If you’re a institutional investor, lender, servicer, trader and suddenly find yourself with a giant portfolio of properties (distressed loans, pre-foreclosure, REO), you need to understand all the market dynamics to make smart valuations and disposition strategies. In general, to understand a property’s value, you need to investigate three angles:

1. Recent local closed transactions (Who bought what and how much did they pay?)
2. Current local asking prices, inventory, and demand trends. (Are there a lot on the market like it? How quickly are they selling? Are asking prices above or below the handful of transactions?)
3. Current rents and rental availability. (What does an equivalent property rent for? Is there a lot of competition? How much return can an investor expect?)

Altos has always been the leader in the current for sale market. The Rental Intel is a powerful additional view for our clients. As banks and financial firms grow the number of properties they own, they need to make decisions about what to do with all these properties. Sometimes they’re difficult to sell. Sometimes you get an offer, but it seems like a low-ball. What if you can help the borrower stay in the home, how much rent should you charge? The current local rental market informs all of these decisions.

Or consider the cash-for-keys strategy. Often, it is most effective for everyone to pay the distressed borrower a compelling chunk of money to hand over the home. But how much money is compelling? One strategy is to offer several months equivalent rent. If you’re in the cash-for-keys world, you better understand rents.

We created Rental Intel to help address these needs. It’s surprisingly tough technical challenge but it fits well in the Altos market analytics platform.  Here are more details about Rental Intel:

• Weekly Tracking: 700,000 apartments and homes on the market for rent each week. (Roughly 70% of the units for rent at any given time in the US.)
• Property Details: Pricing, market time, and property characteristics (property types, square footage, beds, baths, etc)
• Analytics and Trends: Market prices, current inventories, local rent vs. own ratios. Like all our analytics, we track over 20,000 zip codes, by price range and  property type.
• Available now as part of our AltosEvaluate suite, via bulk file transfer, or via the Altos Research Market Analytics API.

If you’re interested in understanding the current US rental market, contact our Market Analytics team for samples and pricing. analytics@altosresearch.com

Affordability measures price, but Capita per Inventory measures housing demand relative to supply, and isn’t that the point? RIM’s Playbook tablet, originally priced at $499 is now selling for $200. Very affordable compared to Apple’s iPad at $499-800+.  But which tablet do you want for Christmas?

And that’s the point – affordability doesn’t mean “good” or “time to buy,” yet there’s insistence on using this measure to feign the housing market’s recovery with headlines like these.

From the National Association of Homebuilders/Wells Fargo Home Opportunity Index (HOI) report:

The least affordable state is California, as Los Angeles, San Francisco and Orange County all made the top ten least affordable cities on the big metro list. Santa Cruz, San Luis Obispo and Santa Barbara made the top ten least affordable cities on the small metro list.

Calculating Capita per Inventory for a cross-section of the 225 HOI metros shows that the “unaffordable” markets have less supply per capita. Notice how the “unaffordable” California metros (Santa Barbara, San Jose, San Francisco, Los Angeles, and Santa Cruz) have tight housing supply relative to “affordable” metros like Ocala, FL and several of the Rust Belt metros (Flint, Toledo, Lansing, Flint, and Canton).

Plot of median home prices and the number people per available home for sale ("Capita per Inventory") for 35 metros reported in the NAHB/Wells Fargo Housing Opportunity Index Q3-2011

Altos Research Capita/Inventory vs Wells Fargo Home Opportunity Index Ranking (35 Metros)

So what does this mean?

San Francisco only needs 1 out of 456 people to be able to afford a house.  San Jose only needs 1 out of 408. Heck, Honolulu only needs 1 out of 530 people to be able for afford a house to support home prices at their current level.  But Ocala, FL needs 1 out of 92 people while Portland needs 1 per 46 people.  Ouch.

The NAHB/Wells Fargo HOI uses the measure Median Household Income-to-Median Prices as the key factor in affordability.  For this 35 market sample, the correlation coefficient has a predictably high value of 0.71 for these two measures. However, the correlations for Median Price-to-Capita per Inventory and HOI Rank-to-Capita per Inventory measure at 0.57 and 0.54 respectively, also very solid.  Most importantly, Capita per Inventory captures both housing supply and can be used as a basis for demand when folding population and unemployment rates into a market’s analysis.

Now, add population changes from 2000 to 2010 (US Census Bureau) and September 2011 unemployment rates (US Bureau of Labor Statistics) to the analysis for a complete picture:

Altos Research Capita per Inventory with Population and Unemployment figures

A few things to notice:

• Honolulu looks very favorable – high Capita per Inventory, increasing population trends, and low unemployment. Let’s all get a house on the island while we still can.  They ain’t getting any cheaper.
• Markets with relatively low Capita per Inventory can be buoyed with lower unemployment rates – Austin, TX, Harrisburg, PA and Springfield, IL for example.  None of these were bubble and bust markets.
• Carson City (6th in the Wells Fargo HOI), Lakeland (9th), and Rockford (10th) all have double-digit unemployment, low Capita per Inventory, relatively low population increases (Flint’s in negative).  All are “affordable” but lack the economic fundamentals for anyone to actually buy the houses for sale.
• The Rust Belt metros all have negative population rates and unemployment rates at or above the national average. But hey they’re “affordable.”
• Ocala, FL is in big trouble – a 28% population increase AND a high unemployment rate AND a very low Capita per Inventory.  Sure, Ocala is “affordable” but there’s a bunch of people that weren’t living there 10 years ago that need a job. You think they’re going to buy a house right now? (Not to mention that Florida is still in the first inning of their recovery as a judicial state with 900+ days in their foreclosure pipeline.)
• Bridgeport is a little troubling.  Low unemployment but the Capita per Inventory is low – that could put pressure on home prices very soon.

So are all low-priced markets bad and high priced markets good? Of course not.  But using Capita per Inventory, you get an composite look at housing supply, prices, and a comparative measure for demand by utilizing basic macroeconomic measures like population rates and unemployment.

As for RIM’s playbook, the company is taking a $485 non-cash write-down.  Hmmm… Any ideas for the housing market?

(Self-aggrandizing statement alert: This isn’t the first time we’ve talked about Capita per Inventory.  Mike Simsonen blogged about this waaaaay back in 2006 and again in 2009.)

Last week I entered four apartment units, for five short minutes each, and had to pick one to live in for the next year.  Aside from the great downtown location, here are the “Top 5 Reasons” I chose my 600 square foot one-bedroom apartment…

1. Natural light. I don’t need to turn on the lights until the sun goes down. From the kitchen window, two dining room windows and sliding glass door, in the bulk of the apartment, to the wall-width window in the bedroom and the neutral-white walls, the space feels larger than 600 square feet (I know because I measured!).
2. No dishwasher? No need with a double-wide, undivided sink. I can stick to delaying dish-washing duties until the deep sink fills up and then work up the motivation to wash them. Who couldn’t use a little extra motivation?
3. Peace and quiet. I was lucky to find an apartment that shares no walls, only the ceiling. With the one unit above me, there is virtually no noise.
4. Larger-than-needed parking spots! You could fit a Chevrolet Heavy Duty 2500 truck in my designated underground carport. I don’t own that truck, but if I did, I’d be able to park it there. Wishful thinking…
5. Deep closets to hide the stuff I rarely use. I need all the help I can get when storing surfboards, golf clubs, bikes, skis, a lacrosse bag, etc.  The amount of sporting equipment I have may be a little excessive  but it’s so nice to have storage space.

If you are an investor, consider these things because they matter to regular apartment-renting people like me. Lighten the paint, add a bigger sink, soundproof the walls, provide decent city-parking and add some storage options.

Happy renting!

Starting in March, Detroit’s listing prices (a.k.a “asking prices”) began rising in our weekly numbers, with a full-fledged upswing by the summer months:

Listing Prices: Detroit MSA Housing Market (January 2011 - October 2011)

As reported in DSNews about today’s Case-Shiller numbers – Detroit and Washington D.C. were the only two cities to see positive annual returns of +2.7 percent and +0.3 percent, respectively.

Just last week, our very own Jon Sterling pointed to Detroit as a top investor market based on our October National Housing Report.

If you’re not subscribed to our National Report, now would be an excellent time.  It’s free and delivered to your inbox every week. Click here to add yourself to our list of VIPs who watch what’s happening in the housing market in real-time, so you don’t have wait two months for the Case-Shiller numbers.

But beware – our the weekly number (black line above) is now moving down now because of seasonality effects.

Dorkbot is a semi-monthly meeting of “people doing strange things with electricity.” They have been chugging along in several cities for a decade-or-so. Back in 2005 I presented at a Dorkbot in London, so I have an enduring soft spot for these quirky gatherings. At this month’s Dorkbot in San Francisco, a meteorologist named Tim Dye presented a brilliant visualization called WeatherDots. It summarizes the weather data he collects near his home in wine country.

Inspired by how much time-series information Dye was able to squeeze onto a few pretty circles, I spent the plane ride to ABS East in Miami throwing together a “dot” visualization of the Altos Research weekly active market data. Here is a visualization of a year’s worth of real estate data:

http://www.altosresearch.com/customer/labs/redots.html

My Redots updates every week, and can be pointed at any of the Altos Research local markets by entering a city, state, and zipcode. Your web browser needs to play nicely with the amazing Raphaël visualization library, or you will just get a blank screen. I recommend using Google Chrome.

The Legend, or What Is It?
Each dot of color represents a week in a local residential real estate market, so each column is a month. The main color of the dot shows the week-on-week change in the median price of single family homes in a particular zipcode. A red dot means house prices have decreased since the previous week (or dot), while green dots are increasing weeks. The summer seasonality effect is pretty clear in our Mountain View, CA example.

The “halo” of a dot is the ratio of new listings to listings in general. If the newest listings coming onto a market are priced higher than the typical listing, then the halo will be green. This suggests a seller’s market, when new listings are asking for a premium. The price of these new listings will be absorbed into the market the following week, so you might imagine a dot’s halo merging with the main color.

A dot’s angle is the year-on-year change in market prices. Aiming northeastward means prices have increased since the year before, while southeast is a decrease. These angles strip away seasonality from the market, and show how secular real estate trends. Our Silicon Valley example is a bit down year-on-year. The thickness of a weekly dot represents the week-on-week change in the number of listings, put more simply, the inventory. Thin dots that are more ellipsoid are a shrinking market, where fewer listings are available for sale at any price.

A Thousand Words
Information visualization is a buzzy field with smart people doing striking work. For me the line between the big data and infovis communities blurs when a pretty picture enables statistical inference without necessarily running the numbers.

Disclaimer: Our lawyers like to make sure we don’t have any fun (shocking, we know). We are not investment advisors, tax professionals, or legal professionals and nothing contained in this post should be considered professional investment advice. We’re just the data whisperers.

We’ve been watching the US housing market on a weekly basis for the past five years. When you run in-depth analysis with a few million data points on a regular basis, you pick up a few things.  Our Mid-Cities Report, published today, confirmed what the trends from the past few months were indicating.  We want to be very clear.

It’s a great time to invest in residential real estate.

Not after the holidays, not after the election, not after you hear it’s a good idea on the nightly news…RIGHT NOW.

There are a variety of online tools to help you understand mortgage math, and finding a local REALTOR who has experience with investment properties is valuable.  We did some number crunching using housing market metrics, rental data, and employment data to determine the top US housing markets for investors.  There are good investment opportunities in most markets right now, and we listed our top three picks below.

Our assumptions:  A median home price, median rental rate, 25% down payment, and a 30-year fixed rate loan at a 6% interest rate.  Given those assumptions, the following markets provide cash-positive investment opportunities.  Great deals can be found in any market, but we’re trying to keep it simple.

Las Vegas
Median home price: $137,930
Median rental rate: $983
Las Vegas got hammered with the housing collapse, and there are some good deals to be found there now.  There’s no state income tax and it’s a popular tourist and convention destination even in poor economic times.  Plus, you gotta love that sunshine.

Chicago
Median home price: $279,385
Median rental rate: $1681
The Windy City has a very large and diverse economy.  While the median home price is fairly high, the numbers still work.  If you can handle the winters, Chicago is a very strong market for investors.

Pittsburgh
Median home price: $157,544
Median rental rate: $915
Pittsburgh never experienced a large spike in home prices and has fared well over the past few years as the housing bubble deflated.  The city has a strong economy and also serves as a regional technology hub, providing a steady supply of renters.

Forbes 500 most expensive zips.

The 2011 Forbes 500 is out!  Each year we work with our friends at Forbes to help them compile the most expensive real estate markets. Forbes likes their lists.

They come to Altos, because we can pull the data together, and Forbes has a particular way they like to run the methodology. For example, for this list we blend together condos and single family homes into one “price.” The benefit of this approach is that it gives a view of a super-high-end luxury markets that have lower-price condos that you could get into. The ski towns in particular fit this description. Because there are some cheaper condos available in Aspen, it slides down the list a bit. The downside of this approach is that if you go into Aspen with only $2.5 million to spend on your ski house and you don’t want a condo, you’re going to be disappointed with your selection.

I’m happy with how this year’s list turned out and with the reporting by Morgan Brennan over at Forbes. Check it out and see where your neighborhood lands!

See the Forbes 500 Luxury Real Estate Markets.

A shout out to Rick Sharga for working in our “Catfish Recovery” meme into his recent presentation. From HousingWire:

“We’re looking at a catfish recovery,” he [Rick] told attendees at the Asian Real Estate Association of America conference in San Francisco Friday, saying the market will bump along the bottom for some time before starting to revive.

More than a million foreclosure actions that should have taken place this year have not yet moved forward, and that delay pushes a resolution of the housing market’s problems into next year and beyond…

Indeed, it’s an inventory problem, and not because there’s too much of it. Check out our October 2011 National Housing Report:

The mass liquidation of foreclosure portfolios is best described as a trickle.  The inventory is coming on the market slowly as more loans are modified to keep homeowners in their homes.  Although the millions of properties in the shadow inventory are still looming, there is nothing that indicates a flood of foreclosures hitting the market anytime soon.

(And hey, we’re not the only ones seeing the market’s volatility – Clear Capital’s recent report talks of a “triple dip” in housing.)

October, 2011

“Oh, you liquidated her, eh? Very resourceful!”  -The Wizard Of Oz, congratulating Dorothy and crew for melting the Wicked Witch of the West

The mass liquidation of foreclosure portfolios is best described as a trickle.  The inventory is coming on the market slowly as more loans are modified to keep homeowners in their homes.  Although the millions of properties in the shadow inventory are still looming, there is nothing that indicates a flood of foreclosures hitting the market anytime soon.

Housing inventory decreased in all the composite markets this month.  This is a significant change from last month, when half reported increased inventory and half reported decreased inventory.  The decreased inventory follows a seasonal pattern seen every year around this time.

Follow the link to the complete National Housing Report.

Lots of yawns and snoozes as expected (see: CNBC Recap & Analysis: Tax Assessment, Morgtage Refis, Valuations, Conforming Loan Limits).

The upper end price tiers have been adjusting their ask prices since the early Spring in anticipation of the FHA Loan Limit changes that took place on October 1:

Chart illustrates the percentage of active listings, by price quartile, with price reductions since Jan 2011. Moving up the price tiers shows an increasing percentage of sellers taking price reductions relative to previous levels. Reductions even flattened out by August 2011, indicating sellers preceded the loan limit changes prior to the deadline.

Nothing to see here.  Move along…