Beantown Bust: Boston CSI and RPX March 2009

Subtitle: 20% Down… Just 30% More to Go!

The S&P/Case-Shiller (CSI) Home Price index together with the Radar Logic (RPX) for Boston represent the most accurate indicators of the true price movement for both single family homes and the entire residential real estate market as a whole (singles, multi and condos).

For March, both the CSI and RPX showed continued weakness with the CSI declining 8.01% on a year-over-year basis while the RPX dropped 16.65% over the same period.

Further, both reports indicate that area home prices have suffered significant peak declines with the Boston CSI showing a decline of 20.07% since the peak set in September 2005 while the Boston RPX shows a 34.67% price decline since its peak of June 2005.

It's important to note also that with the March release the Boston CSI has registered over a 20% peak decline, well in excess (see peak charts below) of the than the peak decline seen during the 90s "savings and loan" housing bust.

Unfortunately for "homeowners" and housing speculators though, we are likely only just now reaching the cliff side for Boston area residential real estate prices.

The most obvious difference between the 90s housing bust and today is that during the 90s the home price decline occurred mostly in-line with the larger macroeconomic decline.

Today though, all of the home price decline seen prior to mid-2008 occurred within a backdrop of an (more or less) expanding economy.

Now that the economy has firmly taken a turn for the worse (particularly our local Boston area economy), home prices will suffer to the greatest degree seen in this cycle.

The following two charts compares the Boston CSI to the Massachusetts unemployment rate during the 90s bust and today.

Notice how early we are in the unemployment cycle today… there is lots more pain to go.

Recently S&P introduced a new line of data series that specifically track condominium prices in five select markets including Boston which showed that in March Boston condo prices declined 7.05% on a year-over-year basis and 16.76% on a peak decline basis (see chart below).

In all likelihood the still low consumer confidence and substantial increases in unemployment will work to place significant downward pressure on property prices, particularly condo prices, for the foreseeable future.

As you can see from the chart below (click for larger), although the RPX captures a greater degree of seasonality, both series are very strongly correlated.

To better illustrate the drop-off in home prices and the potential length and depth of the current housing decline, I have compared BOTH the normalized price movement, annual and peak percentage changes to the Boston CSI home price index from the 80s-90s housing bust to today's bust.

Notice that with today's release, Boston has now exceeded the number of months of annual declines seen in the 90s bust as well as fallen further on a peak percentage basis.

The "normalized" chart compares the normalized Boston price index from the peak of the 80s-90s bust to the peak of today's bust.

Notice that during the 80s-90s bust prices took roughly 46 months (3.8 years) to bottom out.

The "annual" chart compares the percentage change, on a year-over-year basis, to the Boston CSI from the last positive value through the decline to the first positive value at the end of the decline.

In this way, this chart captures only the months that showed monthly "annual declines".

The "peak" chart compares the percentage change, comparing monthly Boston index values to the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.

In this way, this chart captures ALL months of the downturn from the peak to trough to peak again.

As you can see the last downturn lasted 105 months (almost 9 years) peak to peak including 34 months of annual price declines during the heart of the downturn.

The final chart shows that the Boston housing market has been, in a sense, declining steadily since early 2001 when annual home price appreciation peaked and the intensity of the housing expansion began to wane (click on following chart for larger version).

It appears that that the main thrust of the housing expansion occurred "in-line" with the wider economic expansion that was fueled primarily by the dot-com bubble and that since the dot-com bust, the housing market has never been quite the same.

Case-Shiller Reports Portland, U.S. Home Prices Down

Portland home prices were down 15.3 percent, while U.S. prices fell 18.7 percent from March 2008 to March 2009, according to this morning's Case-Shiller report.

Case-Shiller also reports the pace of national month-to-month declines continues to slow which also marked the second straight month record drops were not posted.

Here are the depreciation rates in the latest report.

Rate = City

-5.5% = Denver
-5.6% = Dallas
-8.0% = Boston
-9.0% = Cleveland
-9.3% = Charlotte
-11.8% = New York
-15.3% = Portland
-15.7% = Atlanta
-16.4% = Seattle
-18.4% = Washington, D.C.
-18.6% = Chicago
-22.0% = Tampa
-22.3% = Los Angeles
-22.4% = Detroit
-22.9% = San Diego
-23.3% = Minneapolis
-28.7% = Miami
-30.1% = San Francisco
-31.2% = Las Vegas
-36.0% = Phoenix

S&P/Case-Shiller: March 2009

Today's release of the S&P/Case-Shiller home price indices for March 2009 again confirms the washout conditions seen in the nation's housing markets with ALL of the 20 metro areas tracked reporting significant year-over-year declines and ALL metro areas showing large and even shocking declines from their respective peaks.

Further, March brought a slight seasonal deceleration of the month-to-month price slide with the 10-city index dropping 2.06% and the 20-city index dropping 2.17% since February.

Even a cursory glance at the charts below should result in the firm understanding that what we are experiencing today is unprecedented.

Thirty three months into the decline and the bottom to the home price slide is nowhere in sight.

The most optimistic argument one could make at the moment is that the pace of the decline is currently slower than it was a few months ago.

That should come as little comfort though considering that this decline will more than likely continue for another two to three years.

It's important to consider that the 90s housing bust took roughly 50 months to reach the bottom in prices but as you can see from the charts below, our current housing bust literally dwarfs the 90s era tumult.

Further, the 90s housing recovery played out against the backdrop of a truly unique period of growth in the wider economy fueled primarily by novel and ubiquitous technological change (cell phones, internet, personal computers, telecommunications, etc).

In all likelihood, our current decline will play out at least as long as the 90s era (more than likely far longer) with a full recovery measured not in years but in decades.

The 10-city composite index declined 18.65% as compared to March 2008 far firmly placing the current decline in uncharted territory in terms of relative intensity.

Topping the list of regional peak decliners were Phoenix at -53.03%, Las Vegas at -50.40%, Miami at -47.00%, San Francisco at -46.07%, Detroit at -44.13%, San Diego at -42.25%, Los Angeles at -41.27%, Tampa at -40.62%, Washington DC at -33.88%, Minneapolis at -36.23%, Chicago at -27.44%, Seattle at -22.50%, Cleveland at -21.56% and Boston at -20.07%.

Additionally, both of the broad composite indices showed significant declines slumping -33.09% for the 10-city national index and 32.21% for the 20-city national index on a peak comparison basis.

To better visualize the results use the PaperEconomy S&P/Case-Shiller/Futures Charting Tool as well as the PaperEconomy Home Value Calculator and be sure to read the Tutorial in order to best understand how best to utilize the tool.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as compared to each metros respective price peak set between 2005 and 2007.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as on a year-over-year basis.

Additionally, in order to add some historical context to the perspective, I updated my "then and now" CSI charts that compare our current circumstances to the data seen during 90s housing decline.

To create the following annual charts I simply aligned the CSI data from the last month of positive year-over-year gains for both the current decline and the 90s housing bust and plotted the data with side-by-side columns (click for larger version).

What's most interesting about this particular comparison is that it highlights both how young the current housing decline is and clearly shows that the latest bust has surpassed the prior bust in terms of intensity.

Looking at the actual index values normalized and compared from the respective peaks, you can see that we are still likely less than half of the way through the portion of the decline in which will be seen fairly significant annual declines (click the following chart for larger version).

The "peak" chart compares the percentage change, comparing monthly CSI values to the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.

In this way, this chart captures ALL months of the downturn from the peak to trough to peak again.

As you can see the last downturn lasted 97 months (over 8 years) peak to peak including roughly 43 months of annual price declines during the heart of the downturn.

Notice that peak declines have been FAR more significant to date and, keeping in mind that our current run-up was many times more magnificent than the 80s-90s run-up, it is not inconceivable that current decline will run deeper and last longer.

Kirsten Dunst Lists Nichols Canyon Crib

SELLER: Kirsten Dunst
LOCATION: Nichols Canyon Road, Los Angeles, CA
PRICE: $1,700,000
SIZE: 2,062 square feet, 3 bedrooms 2.5 bathrooms
DESCRIPTION: An inviting Mid-Century home awaits atop the much desired Nichols Canyon area of the Hollywood Hills. Behind massive gates and a state of the art security system sits a home updated by Brian Murphy and designed by Hallworth Designs. This celebrity retreat comes complete with 3 bedrooms and 2.5 baths. The living room hints at just a few of the luxuries of this home with heated floors, a pitched ceiling and exposed beams. Curl up with a book in front of the fireplace in the reading nook adjacent

YOUR MAMAS NOTES: This morning, while swilling sugared up coffee and waiting for our afternoon appointment to roll around, we absent mindedly perused all the new listings around the dog friendly Runyan Canyon area–where Your Mama and the Dr. Cooter often walk our long bodied bitches Linda and Beverly–and came across a modest if not cheap Nichols Canyon property listed at $1,700,000 that we immediately identified as being owned by actress Kristen Dunst who, for some reason, Your Mama likes to call Little Miss Kiki.

Along with her long and impressive list of film credits (The Virgin Suicides, Bring It On, Mona Lisa Smile, Marie Antoinette and, of course the Spider-Man franchise), Little Miss Kiki also has a long and impressive list of hook-ups, romantic liaisons and relationships with high profile males including but not limited to Drew Barrymore’s on and off again boytoy Justin Long, actors Josh Hartnett, Ryan Gosling, Orlando Bloom, Andy Samberg, Zach Braff and Tobey Maguire, rock stars Johnny Borrell , Fabrizio Moretti and Adam Levine. But then again, what single Hollywood acktress of note hasn’t Mister Levine laid?

Anyoo, property records show that Miss Dunst purchased her Nichols Canyon Road residence in December of 2003 for $1,250,000. This was back when Little Miss Kiki was paired up with up an up and coming superstar named Jake Gyllenhaal, who reportedly lived in sin with out Little Miss Kiki in this very house.

Listing information and property records indicate the modest house measures 2,062 square feet with 3 bedroom and 2.5 bathroom. The house hides behind solidly impressive gates and up a curving driveway to a small motor court with a small front facing two car garage where Little Miss Kiki and her current male companion–whomever that may be–can enter and exit without being snapped by the paps. Listing information also reveals the property is protected by a state of the art security system so any of you idiots who think it might be cute to go ringing up on Little Miss Kiki’s bell should expect to be electrocuted, sprayed with mace, hosed down with boiling water and/or even worse.

For a small house, the the front entrance hall is large and is separated from the sunken formal living room by a pretty pair of capiz shell curtains painstakingly made by the lightening quick hands of a gal named Gwen who happens to be one of Your Mama’s good pals back in the En-Why-Cee. The living room appears to have heated terrazzo floors, a peaked and beamed ceiling painted an airy white, navy walls (which sounds awful but does not look nearly as horrid as we might imagine), and a paned sliding glass door that opens to a large multi-level entertainment deck sitting in the tree tops at the front of the property.

The dining room sports glossy white floors, an even more shiny dining room table surrounded six dining room chairs and two wing back chairs on the ends, and the rear wall has been fitted with custom cabintery which makes for perfect storage for things like linens, board games and bongs. We’re not saying Little Miss Kiki stores her bongs there, we’re just saying that if she did have bongs to store, this would be an excellent spot for them.

The glossy white floors continue into the all stainless steel and marble kitchen which already has our imperious house gurl Svetlana turning cartwheels with conniption and looks nice if you don’t have small children with filthy hands or canines with wet noses. A sky lit and all white breakfast area would feel a little bit surgical suite if it were not for the large teak table and chairs that provide a welcome relief to all the blinding stainless steel, glistening white floors and sleek white cabinetry.

In the family room, an entire wall has been custom fitted with gorgeous wood cabinetry that hides all the electronics and one of the Little Miss Kiki’s many wing back chairs sits in the corner by the paned slider that opens to the front deck.

The high-gloss and slippery looking white wood floor is continued into the master bedroom where Little Miss Kiki and her team of nice gay decorators have kept in clean with just an over-sized upholstered headboard, heavy ivory curtains with a navy blue palm tree patten and another of wing back chair from Little Miss Kiki’s collection. A secluded court yard area off the master bedroom has a patch of lawn for and an in ground spa for romantical evenings with whatever man-friend Little Miss Kiki currently fancies.

Property records and previous reports indicate that Miss Dunst will go far from homeless once someone snatched up her Nichols Canyon hideaway. In 2001 Miss Dunst purchased a 4,333 square foot house on Toluca Lake Avenue which we believe is occupied by her family. On the east coast, records show that in July of 2007 she forked over three million Spider Man dollars for an 8th floor co-operative crib in the same Canal Street building where rock star Michael Stipe forked over $5,750,000 for Caleb Affleck’s 8th floor unit in January of 2007.