DataPoints: Time Marches On
Time magazine gets ahead of itself with our data:
New Data Says House Prices May Be Nearing a Bottom...At TIME's request, Moody's Economy.com ran numbers on price-rent ratios for a few dozen markets... At first pass, the data suggests that we've largely come back to earth. The average price-rent ratio for the 54 metro areas Economy.com broke out was 19.8 for the three months through September, a couple of points higher than the 15-year average of 17.7, but significantly lower than where the ratio stood three years ago, 24.4.
Note the story actually plays it straight, appropriately hedging any inferences about how much more house prices are likely to sink and where.
How that translates into actual home price declines is a little tricky. After all, the price-rent ratio is based not just on home prices, but on the cost of rentals, too. So to figure out what will happen to home prices, you first have to make some assumptions about what will happen in the apartment market.
But the headline folks evidently weren't satisfied with squishy data; they wanted a grabber for the newsstands. (Hey, I fully understand how that works -- did it myself for years.) Let the readers argue about what "Nearing a Bottom" might actually mean after they've paid their $3.50 for a copy.
If you want the straight stuff, no fluff, go straight to the source: Our Celia Chen, who writes in the latest Moody's Economy.com Macro Precis:
Even with the government intervening further, the recession will keep the housing market from fully recovering until the second half of 2009. Even then, housing activity will remain tepid. Sales are likely at bottom, stabilized by foreclosure sales. Construction will stabilize by the middle of next year. From peak to trough, Moody’s Economy.com expects that total single-family home sales will decline by 36%, and housing starts will drop by 63%. Even with policymakers working hard to forestall at least some of the foreclosures, mortgage credit quality is expected to remain impaired well into next year. The record pace of mortgage foreclosures will keep inventories of homes on the market bloated, despite weakness in new construction, and will consequently keep house prices descending until the second half of 2009. From peak to trough, both the median existing house price and the Case-Shiller index are expected to decline by about 30%.
