The New York Fed estimates that home prices rose just under 12% nationwide
The New York Fed publishes a national house price chart monthly that contains something of a “heat map” to show where home price appreciation is the highest and lowest. It uses a repeat-sales methodology, which means it compares the price appreciation of a single address, like 123 Main Street, and uses a basket of these sales to construct an index.
The dispersion of the gains is huge
It’s an old saying that “all real estate is local” and nowhere is that more evident than the chart above. You can see the heat map is centred in the West, with places like San Diego, Phoenix, San Francisco, and Las Vegas all appreciating over 20%. On the other hand, the Midwest and the Northeast are languishing with low single-digit gains. However, large swaths of the Midwest and the East are flat or only up modestly. One of the big drivers of weakness on the East Coast has been elongated foreclosure timelines. In states like New York and New Jersey, a judge must approve all foreclosures. This means that there’s still a rather large shadow inventory of homes that’s depressing prices a bit. Places like Phoenix and Las Vegas have been ground zero for the distressed professional investor, where large investment firms like Blackrock (BLK) have raised capital pools devoted to purchasing distressed properties for rentals.
Impact on homebuilders
We’ve seen how geography has affected homebuilders in earnings reports. West Coast–based builders like KB Homes (KBH) and Meritage (MTH) have reported huge increases in revenues and pricing power. East Coast–based builders like NVR have reported slower growth. Like the different metropolitan statistical areas, for homebuilders, location has been the biggest factor. But we’re now seeing price points factoring in as well. Builders that focus on the entry-level first-time homebuyer, like PulteGroup (PHM), have noticed the biggest decline in traffic, while the luxury end—think Toll Brothers (TOL)—hasn’t been affected as much. The overwhelming factor, however, is location.
© 2013 Market Realist, Inc.
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