The Never Ending Case-Shiller Bummer
It's been a rough few days for housing statistics. First and foremost, the Standard and Poors Case-Shiller Home Price Index, issued on March 29, 2011, was downright depressing. As indicated in the press release, January 2011 home prices slipped below December figures in all but 2 of the 20 major cities tracked in the report. Economists crunch numbers for a living and I have no real doubt about the accuracy of the calculations. But after more than three years of unrelenting doom and gloom in the housing market, one starts to wonder what it all means for the owners of those homes on which the data is based.
Housing's Dirty Little Secret
Even if the housing market starts to improve throughout the country in the next few months, and actually begins an upward trend, the damage done to middle class homeownership can't be estimated even by using the most sophisticated algorithms. As a result of changing business models, many Americans looked to the equity in their home as their 401K plan and the foundation for retirement. For many homeowners, equity equaled net worth. With that equity evaporating, and an inability to sell a home even at drastically reduced prices, lives have been so dramatically impacted financially, that a "housing recovery," if and when it happens, may not really matter.
The Migration is on Hold
Remember those 80 million baby boomers who were about to retire and move all over the country? In places like Arizona, Florida, Nevada and North Carolina, builders counted on that wave of retiring boomers to sell their homes in high property tax states and to move to cities with lower taxes, attractive lifestyles and better weather. But if you can't sell your home, and if your equity has disappeared even if you can sell your home, you won't be relocating any time soon and the oversupply of inventory can't be absorbed. That inability to sell has resulted in a paralysis taking over the housing market that the monthly movement in housing statistics doesn't really capture. Unfortunately, the gears of the real estate economy that have always been counted on to churn out the jobs are now frozen.
New York Goes "Crazy Eddie"
That's not to say that all markets are suffering the same fate. At least in the New York metropolitan area, the data shows that trading volume has improved and the market appears to have stabilized. One could even argue that the upward trend hoped for by the City's real estate professionals may have started to materialize. But market stability has been achieved through deep discounting. Paraphrasing the guy in the Crazy Eddie commercials, the housing prices in New York "are insane!" As Vivian Toy's recent article in the Times pointed out, the prices of studio apartments have plummeted to a point of absurdity, creating a window for entering the New York market that is unprecedented in recent memory. Celebrity real estate does not fare much better. Although the glitterati continue to throw millions of dollars at a small number of high end properties, the pricing in many cases is as depressed as more modest properties. There are just bigger winners and losers. And a few large transactions can't revitalize the market and incentivize continued buying and selling. So even in New York, the cycle of immobility continues.
And Now for A Double Dip...
Just to make things interesting and add to the woe pile, Robert Reich in his Huffington piece on March 31, asked why Americans "aren't being told the truth about the economy?" Citing a gaggle of scary statistics, he took stock of the dismal state of things and dared to speak the phrase that haunts the policy makers: the double dip recession. Although the double dip alarm needs to be sounded, I have to ask, are Americans really that dumb? After more than three years of catastrophic unemployment, a decimated housing market and the downward spiral of dwindling net worth, is anyone really counting on the truth being told about how badly things are going? I don't think so. Just ask any homeowner... they already got that memo.