A press release from Nielson Wire has an interesting map of home equity that also reads as a map of the housing bubble’s deflation.
Today’s featured property is riding the updraft of FED interest air and overtopping its peak value.
The boys from North Dakota
They drink whisky for their fun
And the cowboys down in Texas
They polish up their guns
Why would someone write a song about North Dakota? Why would someone live in North Dakota? Why would someone visit North Dakota? I will ask Shevy when he gets back….
I believe North Dakota is the only state to show economic growth during the recession – I guess North Dakota kept on grazing cattle while California developed sophisticated financing Ponzi Schemes those rubes in North Dakota could never understand. For whatever reason, northern states still have housing equity, and southern states do not. They are doing something right in North Dakota.
Housing Bubble demography?
A forgettable post with shoddy analysis, Homes Below the 37th Parallel Most Likely to Have “Underwater” Mortgages, contained a useful map of % equity by zip code. The report itself contained this gem:
“In a way, the housing boom and subsequent bust is similar to the stock market boom and bust of the late 1990s,” notes Greg Fisher, Sr. Data Product Manager, Nielsen Claritas. “Just as unprofitable company stocks soared, new home markets soared without regard to real value. In other words, in many new home markets, the prices skyrocketed and became disconnected with the value of the land the homes physically sat on. Salary increases were far outpaced by home price increases, which was unsustainable. At the same time, established and profitable companies’ stocks endured slower growth and suffered far less damage when the market corrected, just as older housing markets are weathering today’s real estate downturn. These housing markets already had the fundamentals to protect against the worst of the housing bust – stronger incomes and more valuable land.”
This analyst’s statement makes no sense. Older housing markets are not weathering today’s real estate downturn better than new markets. The real distinction is between subprime — which went through the foreclosure mill — and everything else — which is in shadow inventory and yet to be crushed. This downturn is not due to fundamentals; it is caused by improper asset valuations and the market’s need to readjust. The fact that some areas have stronger incomes means that some areas will have higher prices, once markets balance price with income, something yet to occur here. Also, land value is a function of house price, not the other way around.
Map of Housing Market Deflation
The graphic below was developed to present the author’s prepositions about migration patterns. Quite honestly, I didn’t find much value in silly conclusions spit out by computer models when the authors displayed no functional understanding of the action in the mortgage market that created the effects visible in the graphic below.
The map above is best interpreted as a housing bubble deflation map. The green areas are those where prices have not crashed, where affordability is still low, and where prices are most perilous.
The red areas represent areas where subprime financing dominated, or where prices did not appreciate wildly during the bubble, so any decline submerges borrowers. For instance, Inland California, Florida, Nevada and Arizona were subprime lending dominated markets, and since these markets collapsed before amend-extend-pretend, prices there have been pounded back to the stone ages. Texas and the South saw little bubble appreciation, so price drops there redden the map.
The green areas have lenders worried, particularly in Coastal California and the Northeast, because the dollar amounts involved are so much larger that complete collapse of their Ponzi Scheme, similar to what happened to subprime, would deflate the entire capital base of our banking system. Our Government is intent upon keeping this remnant of the Housing Bubble inflated as well as the enormous commercial bubble they inflated.
From the same article:
What Do Severely Underwater Homeowners Look Like?
- They earn $23,000 less than the U.S. average.
- Severely Underwater Income: $35,000
- U.S. Income: $58,000
- Their homes are worth $113,000 less than the U.S. average.
- Severely Underwater Home Value: $103,000
- U.S. Home Value: $216,000
- They have 58% less home equity than the U.S. average.
- Severely Underwater Home Equity: -43%
- U.S. Home Equity: 15%
- Their mortgage balance is $7,000 higher than the U.S. average.
- Severely Underwater Mortgage Balance: $187,000
- U.S. Mortgage Balance: $180,000
- They are located in areas where the home ownership rate is 25% lower than the U.S. average.
- Severely Underwater Homeownership Rate: 46%
- U.S. Homeownership Rate: 71%
- They are 21% less likely to be located in areas where the prevalent house type has 1 or 2 units.
- Severely Underwater 1 & 2 Unit Housing Rate: 52%
- U.S. 1 & 2 Unit Housing Rate: 73%
- They are 17% more likely to be located in areas where the prevalent house type is a multi-family unit.
- Severely Underwater Multi-Family Unit Rate: 34%
- U.S. Multi-Family Unit Rate: 17%
- They are 2.3 years younger than the U.S. average.
- Severely Underwater Householder Age: 47.9
- U.S. Householder Age: 50.2
- They have lived in their homes 2 years less than the U.S. average.
- Severely Underwater Year Moved In:10.4 Years Ago
- U.S. Year Moved In: 12.4 Years Ago
For more info: Contact The Nielsen Company
Those poor poor people; we have good incomes here, so Irvine must be immune, right?
By virtue of having purchased in some bygone era when prices match incomes, owners of properties like today’s can get $500,000 for a shoebox. Is this our new reality?