Posts filed under “Data Analysis”

Buy vs Rent?

Now that the Spring home buying season is in full swing, I spoke with our real estate agent to see how the "surge" was going. She’s one of the good ones — charming, helpful, knowledgable, honest, a pleasure to work with.


That was her initial response. "Depressing" was the second word out of her mouth.

What seems to be the problem? I asked her. "Sellers haven’t gotten realistic yet. They are still pricing things as if it were 2005."

Granted, this is one agent, in NY, on the toney Gold Coast of Long Island’s North shore. She mostly sells houses from half a million up to quite a few million, but I would guess her sweet spot is from $500k to $800k. But her comments echo what we have heard from Home Builder CEOs recently, and I daresay they are probably typical across many areas.

That conversation put a few of today’s more interesting columns into perspective today. The first comes from the NYT’s David Leonhardt, with the inflammatory title A Word of Advice During a Housing Slump: Rent:

"With the spring moving season under way, The New York Times has done
an analysis of buying vs. renting in every major metropolitan area. The
analysis includes data on housing costs and looks at different
possibilities for the path of home prices in coming years.

It found that even though rents have recently jumped, the costs that
come with buying a home — mortgage payments, property taxes, fees to
real estate agents — remain a lot higher than the costs of renting. So
buyers in many places are basically betting that home prices will rise
smartly in the near future.

Over the next five years, which is about the average amount of time
recent buyers have remained in their homes, prices in the Los Angeles
area would have to rise more than 5 percent a year for a typical buyer
there to do better than a renter. The same is true in Phoenix, Las
Vegas, the New York region, Northern California and South Florida. In
the Boston and Washington areas, the break-even point is about 4

The interactive graphic belies the title, however: Its pretty clear that except under the worst circumstances (falling rents, high mortage rates, very high prices) and a short time line, its a better long term deal to own than rent:

click for interactive feature



Elsewhere, the coverage of the ongoing Housing mess continues. This WSJ column (Digging Out of Delinquency) noted the increasing delinquency rate of mortgage holders. The accompanying chart show former hot areas such as California, Florida and Las Vegas leading the way delinquency rate increases.

click for sortable map


Lastly, we come to this Washington Post article: Housing Boom Tied To Sham Mortgages. It discusses, in brutal detail, how a crooked mortgage broker was able to game the enire system to scam a $100 million dollars worth of bogus loans. He was able to accomplish this due to the lax lending standards, (especially the no-doc "liar loans"), scam appraisals, a lack of regulatory oversight, hungry real estate agents, and naive buyers. He drove up the prices in entire neighborhoods.

After the scam unraveled, prices collapsed as 100s of homes fell into foreclosure. Its an ugly
ugly tale.


As you can see, it is no longer Positivity Day here at The Big Picture. Sorry, Larry!


UPDATE: April 11, 2007 10:01am

The Times uses as an example a home in Hollywood Florida, that with a few changes in variables, makes owning much less desirable:


click for larger graphic


A Word of Advice During a Housing Slump: Rent
NYT, April 11, 2007

Digging Out of Delinquency
WSJ, April 11, 2007; Page D1

Housing Boom Tied To Sham Mortgages
Lax Lending Aided Real Estate Fraud
David Cho
Washington Post, Tuesday, April 10, 2007; Page A01

Category: Data Analysis, Psychology, Real Estate

Liscio Report on NFP

Category: Data Analysis, Economy, Employment, Psychology

Real Estate Day Synopsis

Category: Data Analysis, Markets, Real Estate, Weblogs

Shiller on Housing

Category: Data Analysis, Economy, Psychology, Real Estate

Real Estate Roller Coaster

Category: Data Analysis, Real Estate

The Pending Home Sales Contract Rally?

Category: Data Analysis, Investing, Markets, Psychology, Real Estate

Cheapest Stocks in Two Decades based on Flawed Fed Model

Category: Data Analysis, Earnings, Investing, Markets, Psychology, Valuation


Category: Data Analysis, Economy, Investing, Psychology

Final Q4 GDP: Goldilocks has left the building

Category: Data Analysis, Economy, Markets

Q4 ’06 GDP: 2.5%

Category: Data Analysis, Economy