Wednesday, June 01, 2011

I'm shocked, shocked to find that housing appreciation is going on here!

First off, I'm shocked that nobody could find any way to spin some recent real estate news as a downer.  Given the national news of continued real estate price declines most everywhere*, some of the recent local data showing continuing price appreciation was reported as being a good thing.  None of the discounting that most all similar stories of late have generally focused on such as the generally lower trend in the number of transactions which may not be good for real estate agents, but may or may not be a bad thing for the regional economy as a whole.

But just how much of a story is it that real estate prices are going up? Here is something I compiled quickly.  The OFHEO's Housing Price Index is one general measure of real estate price trends that is reported for MSA's, States and the US.  I created two time series for the year-over-year housing price appreciation in Pittsburgh and for the US.  The footnote is this is the seasonally-adjusted purchase-only data for those who want to check me. Then I computed the difference between the two time series (Pittsburgh appreciation minus US appreciation) over the last two decades and this is what it looks like. 

So basically since 2007 or so we are in some unprecedented territory when it comes to how local real estate is performing compared to a national norm.  While I should knowbetter than to presume, I think it is a safe bet there can be only rare and short (if any) periods in the decades before 1990 where local real estate outperformed the nation's.  I bet you have to go back quite a few decades to find a comparable period where local real estate price appreciation has topped national trends for so many consecutive months.  You can't just correlate it as a recession impact either.  Quite a few recessions over the last few decades where it looks like local real estate prices did not compare so favorably to the US.  This is an even more extreme case than the labor market trends which we also just learned April's unemployment rate for the region was 6.8 percent, or 2.2 percentage points below the nation which is tied with one other month in 2009 as the largest gap by which the local unemployment rate has dipped below the nations in at least 40+ years if not significantly longer.  No small bit of news in that, not that anyone will notice.

The real estate time series is even more remarkable when you consider that we went from trailing the US trend by 6-8% points a year to gaining on the US by 6-8% points a year in such a quick period of time.  There was an inflection point you would have missed if you blinked.

* On a side note, that national real estate story linked there is from the same reporter who wrote the story on Pittsburgh that I really do believe was the spark that brought the G20 to Pittsburgh:  Remember: For Pittsburgh, there's life after steel.


Anonymous DBR96A said...

Is it OK for Pittsburgh to LOL at the rest of the United States? After all, 12 years ago I kept hearing about how the economy was fundamentally sound everywhere in the United States except western Pennsylvania, and that all turned out to be a bunch of horseshit, to put it mildly. Where's their sound fundamentals now? Selling for half-price, that's where! No sympathy for them, and especially no sympathy for any Pittsburghers who believed all the lies coming from the rest of the country.

Wednesday, June 01, 2011 4:51:00 PM  
Anonymous MSL said...

Yes, people have lost their homes, their jobs, their savings, but let's not let that stop us from laughing at their misery. Stay classy.

Thursday, June 02, 2011 11:27:00 AM  
Anonymous MH said...

Can I laugh at the people lived in much bigger houses my own, pulled out a quarter of a million in home equity loans, and then complained about how rough life was treating them when it turns out you can't actually pay off a million in loans on an annual income of $75k?

Thursday, June 02, 2011 11:47:00 AM  
Anonymous DBR96A said...

If they bought stuff they couldn't afford with money they didn't really have, then they deserve to be laughed at when they lose it all. Besides, everybody's laughed at Pittsburgh since the 1980's, so if they don't like the taste of their own medicine, then we can give it to 'em in suppository form.

Thursday, June 02, 2011 5:35:00 PM  
Anonymous Chris said...

I wonder, as I look at this graph, if the Pittsburgh housing market actually _did_ stabilize in the first half of the last decade and the national bubble simply obscured that stabilization. Then, the massive gains in this recession might further reinforce that the national housing market is correcting itself whereas no local correction (in the macro sense) is needed?

Also, at the left-hand side of the graph, you could make a similar argument. There was a bit of a real estate bubble in the late 80s that could have had an impact.

Saturday, June 04, 2011 10:32:00 AM  

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