Radar Logic: The "End of the Beginning of the Housing Crisis"?

Radar Logic has headlined its SeptemberrnRPX 25-MSA Composite with the disquieting headline “We May be Witnessing thernEnd of the Beginning of the Housing Crisis.” rnThe report says that the RPX Index along with a few other housingrnindicators released over the past week (S&P/Case-Shiller and the FederalrnHousing Finance Agencies Home Price Index) all show more or less the samernthing; the long term trend in house prices remains negative.  The company says it expects the year overrnyear trend to remain negative but the rate of decline will slow until pricesrnfinally touch rock bottom.</p

Radar Logic quotes housing prices in thern25-MSA Composite on a per square foot basis (PSFT).  The national composite in September wasrn$180.76 PSFT, down 4.4 percent since September 2010 and down 1.7 percent fromrnAugust.  The year-over-year index hasrnconsistently declined by more than four percent on a year-over-year basis sincernlast February. </p

In the 25 MSA the index ranged from arnhigh of $323 PSFT in San Jose, California to a low of 64.33 in Detroit.  Only two MSA’s saw an increase in the indexrnover the last year – Detroit was up 7.1 percent and Washington DC increased 1.8rnpercent.  </p

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Home prices have been battered becausernof a persistent imbalance of supply and demand in the housing market but, evenrnas it remains severe, Radar Logic said there are signs that the two factors arernbeginning to equalize.  Demand, asrnmeasured by the 25-MSA transaction count from January to September 2011 wasrngreater than the change measured during the same period in 2010 and thernyear-over-year gain through September – 15.4 percent – was the largest seen forrnthis time period since 2003.  Transactionrncounts increased in all but one of the 25 MSA’s, Jacksonville, Florida which declinedrna mere 0.8 percent.  Increases inrntransactions in 18 of the MSAs were in double digits and were over 60 percentrnin both Minneapolis and Boston.  </p

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While demand is increasing, inventoriesrnof available homes for sale as reported by the National Association of Realtors®rnare decreasing slowly – its October figure of 3.33 million units was 3.6rnpercent below the previous month and 13.8 percent lower than the number a yearrnearlier.  </p

Supplies of distressed homes – REO andrnpotential short sales – are still in enormous supply but are also decreasing asrnare several measures of mortgage delinquency. rnWhat Radar Logic calls “motivated sales” represent 25 percent ofrntransactions, down from 40 percent at the beginning of 2011.  The average price of a motivated sale isrnaround 40 percent less than the RPX Composite number. </p

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Looking forward, Radar Logic hasrncomputed forward price fixings based on the September $180.76 PSFT.  Appreciation by the end of 2011 is expectedrnto be 2.3 percent.  At the end of eachrnsubsequent year the appreciation is projected as follows:  2012, 2.9 percent; 2013, 3.4 percent; 2014,rn3.9 percent and 2015, 4.5 percent.</p

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