Real Estate Data for the Rest of Us

Home Prices and Population Growth: Cities vs. Suburbs

From some angles, it looks like the housing recovery has brought an urban resurgence: for instance, the most urban counties are growing faster now than during the housing bubble, and many dense cities are having a boom in apartment construction. However, the most recent data show that asking prices in urban neighborhoods are rising only slightly faster than in the suburbs, and the suburbs actually have higher population growth.

 The Trulia Price Monitor and the Trulia Rent Monitor are the earliest leading indicators of how asking prices and rents are trending nationally and locally. They adjust for the changing mix of listed homes and therefore show what’s really happening to asking prices and rents. Because asking prices lead sales prices by approximately two or more months, the Monitors reveal trends before other price indexes do. With that, here’s the scoop on where prices and rents are headed (see note #1 below).

Asking Prices Continue to Rise as Spring House Hunting Season Begins
Despite declining investor purchases and more inventory coming onto the market, asking home prices continued to rise at the start of the spring housing season. Month-over-month, asking prices rose 1.2% nationally in March 2014, seasonally adjusted. Quarter-over-quarter, asking prices rose 2.9% in March 2014, seasonally adjusted, reflecting three straight months of solid month-over-month gains.

Year-over-year, asking prices are up 10% nationally and up in 97 of the 100 largest metros. Albany, NY, Hartford, CT, and New Haven, CT, are the only three large metros where prices fell year-over-year, albeit slightly.

TruliaPriceMonitor_LineChart_Mar2014

March 2014 Trulia Price Monitor Summary

 

% change in asking prices

# of 100 largest metros with asking-price increases

% change in asking prices, excluding foreclosures

Month-over-month,
seasonally adjusted

1.2%

Not reported

1.1%

Quarter-over-quarter,
seasonally adjusted

2.9%

97

2.8%

Year-over-year

10.0%

97

9.5%

*Data from previous months are revised each month, so data being reported now for previous months might differ from previously reported data.

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Housing Barometer: Recovery Staggers Forward Visualization Preview

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Housing Barometer: Recovery Staggers Forward

Trulia’s Housing Barometer shows that 4 of the 5 key housing indicators improved over the past year: prices, the delinquency+foreclosure rate, non-distressed home sales, and young-adult employment are all in better shape than one year ago. However, despite improvement, young-adult employment still isn’t halfway back to normal; neither is the fifth indicator, construction starts.

How We Track This Uneven Recovery
Since February 2012, Trulia’s Housing Barometer has charted how quickly the housing market is moving back to “normal” based on multiple indicators. Because the recovery is uneven, with some housing activities improving faster than others, our Barometer highlights five measures:

  1. New construction starts (Census)
  2. Existing home sales, excluding distressed sales (National Association of Realtors, NAR)
  3. Delinquency + foreclosure rate (Black Knight, formerly LPS)
  4. The employment rate for 25-34 year-olds, a key age group for household formation and first-time homeownership (Bureau of Labor Statistics, BLS)
  5. Home-price levels relative to fundamentals (Trulia Bubble Watch)

The first four measures are reported monthly; to reduce volatility, we use three-month moving averages for these measures. The fifth, prices from our Bubble Watch, is a quarterly report. For each indicator, we compare the latest available data to (1) its worst reading for that indicator during the housing bust and (2) its pre-bubble “normal” level.

Housing-Barometer_Q12014

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Bubble Watch: Local Worries, National Calm

Although national home prices rose significantly in the past two years, they’re still 5% undervalued compared with long-term fundamentals. Home prices today look overvalued in 19 of the 100 largest metros, including 8 of the 11 large California metros.

Trulia’s Bubble Watch reveals whether home prices are overvalued or undervalued relative to their fundamental value by comparing prices today with historical prices, incomes, and rents. The more prices are overvalued relative to fundamentals, the closer we are to a housing bubble – and the bigger the risk of a future price crash.

Recent price changes, by themselves, cannot tell us whether this is a housing bubble; neither can a simple comparison of nominal price levels today to where they were in the past. Asking prices in Las Vegas, for instance, are up almost 60% from their lowest point during the bust, and asking prices in Pittsburgh and Dallas are now above their 2006 highs. But none of those facts takes fundamentals into account, so none can tell us whether those local markets are in a housing bubble.

Bubble watching is as much art as it is science because there’s no definitive measure of fundamental value. To try to put numbers on it, we look at the price-to-income ratio, the price-to-rent ratio, and prices relative to their long-term trends using multiple data sources, including the Trulia Price Monitor as a leading indicator of where home prices are heading. We then combine these various measures of fundamental value rather than relying on a single factor, because no one measure is perfect. Trulia’s first Bubble Watch report, from May 2013, explains our methodology in detail. Here’s what we found.

Bubbles Haven’t Broken the Surface Nationally
We estimate that home prices nationally are 5% undervalued in the first quarter of 2014 (2014 Q1), which means we’re not in a nationwide housing bubble. Remember that prices reached a high of 39% overvalued in 2006 Q1, then dropped to being 15% undervalued in 2011 Q4. One quarter ago (2013 Q4) prices looked 6% undervalued, and one year ago (2013 Q1) prices looked 10% undervalued (see note at end of post about the trend over time). This chart shows how far current prices are from a bubble:

bubblewatch

Local Warning Signs Bubbling Up, Especially Along California Coast
Turning from the national view to the local scene, home prices are above their fundamental value in 19 of the 100 largest metros. Three of the five most overvalued housing markets are in southern California: Orange County, Los Angeles, and Riverside-San Bernardino; these three markets have also had sharp price increases over the past year. Looking across the whole state, prices in 8 of the 11 large California metros are overvalued now; the 3 exceptions are the undervalued inland metros of Fresno, Bakersfield, and Sacramento.

Top 10 Metros Where Home Prices Are Most Overvalued

# U.S. Metro

Home prices relative to fundamentals, 2014 Q1

Year-over-year change in asking prices, February 2014

1 Orange County, CA

+16%

16.9%

2 Los Angeles, CA

+13%

18.9%

3 Honolulu, HI

+13%

12.1%

4 Austin, TX

+11%

11.3%

5 Riverside-San Bernardino, CA

+10%

24.1%

6 San Jose, CA

+8%

14.5%

7 San Francisco, CA

+7%

16.5%

8 Miami, FL

+6%

12.4%

9 Fort Lauderdale, FL

+6%

18.0%

10 Ventura County, CA

+6%

17.1%

Note: positive numbers indicate overvalued prices; negative numbers indicate undervalued, among the 100 largest metros. Click here to see the price valuation for all 100 metros: Excel or PDF.

Prices are most undervalued today in several Midwest and Connecticut markets. Eight of the 10 most undervalued housing markets had single-digit price gains or slight price drops in the past year, though Detroit and Chicago had double-digit price gains. … continue reading

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How Special Are Million-Dollar Listings?

Homes that cost a million dollars or more are rare in most of the country but make up more than 20% of the for-sale market in San Francisco, Fairfield County, and San Jose. The typical million-dollar listing in New York is smaller than the average American home.

Close your eyes and imagine a million-dollar home. Depending on where you live, you might be picturing the modest three-bedroom down the street, or you might be thinking of a sprawling mansion. You might even be drawing a blank if you live in a market where million-dollar homes are almost unheard of.  While a home listed for a million dollars might cause just a shrug in some parts of California and New York, million-dollar homes are few and far between once you get more than a couple hours’ drive from an ocean. To see what a million bucks buys across the country, we calculated the share of for-sale listings on Trulia priced at or above $1,000,000 in each of the 100 largest metros, as well as the typical size of homes priced at or near the million-dollar mark, all as of March 3, 2014.

MillionDollarHomesComparison

In Most Metros, Million-Dollar Homes Represent Just a Sliver of the Market
Nothing drives home the huge differences in housing costs across the country more than how rare or common million-dollar homes are. Million-dollar homes account for more than 20% of listings in New York, neighboring Fairfield County, CT, and Long Island; in Orange County and Ventura County, on the southern California coast; and in San Francisco and San Jose. In fact, million-dollar homes make up close to half the San Francisco market, at 44%.

# U.S. Metro Share of for-sale listings priced at or above $1,000,000
1 San Francisco, CA

43.5%

2 Fairfield County, CT

29.7%

3 San Jose, CA

25.7%

4 Orange County, CA

24.4%

5 Ventura County, CA

21.5%

6 New York, NY-NJ

20.8%

7 Long Island, NY

20.5%

8 Honolulu, HI

19.8%

9 Los Angeles, CA

18.4%

10 San Diego, CA

18.0%

For the share of listings priced at or above $1,000,000 in all of the 100 largest metros, click here.

But in 68 of the 100 largest metros, million-dollar homes make up less than 5% of the for-sale market, including the major metros of Philadelphia, Chicago, Dallas, Houston, and Atlanta. Furthermore, million-dollar homes are less than 2% of the market in 44 of the 100 largest metros. … continue reading

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America’s Most Unequal Metros

Income inequality is highest in Fairfield County, CT, San Francisco, New York, Boston, and Detroit. Overall, the most imbalanced U.S. metros tend to have worse housing affordability and slower job growth. But the trend is clear: the gap between the rich and poor has increased in 94 of the 100 largest metros since 1990 – and has even accelerated in the past few years.

Income inequality has been growing in America, driven by technology, globalization, and other factors. It’s caused tensions between the haves and have-nots, which often get played out at the local level, and these tensions have erupted into fights over housing affordability and public services.

Are growing income gaps limited to particular metros, or is this trend widespread? To untangle the facts about local income inequality, we compared the incomes of rich, median, and poor households in the 100 largest metros in 2012, 2006, 2000, and 1990, using Census data (see note below). A rich household is defined as being at the 90th percentile – which means being above 90% of all households in the metro; the median is at the 50th percentile, while poor is defined as at the 10th percentile. Our main inequality measure is the ratio of incomes at the 90th and 10th percentiles (the “90/10 ratio”), which shows the size of the gap between the rich and the poor. A higher value of the ratio means incomes are more unequal; among the 100 metros, the 90/10 ratio ranges from below 9 to above 18.

Taking this approach, we found that some metros are much more unequal than others, and the most unequal metros tend to have higher housing costs and slower economic growth. Despite these differences, income inequality has increased in nearly all metros over the past two decades and has accelerated in recent years.

Income Gap Widest in Fairfield County, San Francisco, and New York
The most unequal metro in America isn’t a well-known big city; it isn’t even bankrupt or overrun with rich tech workers. It’s Fairfield County, CT, home to the tony towns of Darien and Weston but also to the city of Bridgeport, where one third of children are below the official poverty level today and which tried to go bankrupt back in 1991. There, the 90th percentile of income is 18.5 times the 10th percentile. San Francisco, New York, Boston, and Detroit – which did successfully go bankrupt last year – round out the top five. Among the top 10 most unequal metros, four are in New England.

Where Income Inequality Is Highest

# U.S. Metro 90/10 ratio, 2012
1 Fairfield County, CT

18.5

2 San Francisco, CA

17.9

3 New York, NY-NJ

17.7

4 Boston, MA

16.2

5 Detroit, MI

15.2

6 Miami, FL

15.1

7 Philadelphia, PA

14.7

8 Springfield, MA

14.2

9 Peabody, MA

14.0

10 Toledo, OH

13.9

Note: the 90/10 ratio is the ratio of income at the 90th percentile to income at the 10th percentile, for a given metro. A higher ratio means greater income inequality. For the 90/10 ratio for the 100 largest metros, click here.

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