Finally, after completing 22 of 24 broker’s licensing classes, I walked away from class tonight with some new knowledge.
Nothing earth-shattering mind you. Just a website. But it’s a cool website, jammed full of data — data that you can download into an Excel spreadsheet, churn a bit, and spit out some interesting charts.
For example, here is a chart showing the home appreciation rates for Arizona since 1976:
No surprise about the stratospheric run up in 2004 - 2005. Interesting to me was the three full years of negative appreciation from 1988 - 1990. What will be most interesting is seeing what happens over the next couple of quarters.
I tried to overlay the same data for the U.S., but it made both data series difficult to see. Here is the U.S. average appreciation for the same time period, on the same scale as the Arizona chart:
Note the U.S. average home appreciation rate has never dipped into the negative side (at least since 1976). The general “shape” of the trend is similar to Arizona’s, though obviously flattened and smoothed — as you’d expect from the shear volume of homes and locations when comparing U.S. based data to a single state.
The Office of Federal Housing Enterprise Oversight uses what they term as the Housing Price Index (HPI), which uses a weighted-repeat sales (WRS) methodology that, in a nutshell, looks at repeat transactions (including re-fi’s) of the same property over time, as opposed to simply gathering single sale numbers as many indexes do. This method should provide a more accurate assessment of true home appreciation. If you really want to know more about the WPS method, here is a 15 page PDF file that explains it in detail, including cool math like:
and stuff I haven’t heard since my second semester of college statistics (or was it Calc II?) like:
The standard assumption that the error variance of the (log) change in house value is proportional to the length of time between repeat transactions was modified to allow for a diminution of the rate of increase in volatility through the use of a quadratic function of time.
Whew. I never really enjoyed either of those classes. I do however enjoy seeing real math and statistics applied to real estate market analysis.
There’s a TON of data at this site, including MSA (Metropolitan Statistical Areas) details which may provide data for some more localized Phoenix real estate market analysis. The former semiconductor engineer in me is stoked. Stay tuned…
Technorati Tags: home appreciation, Office of Federal Housing Enterprise Oversight, HPI
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Shailesh 09.06.07 at 7:17 am
Great graphs Jay. I especially loved the equation you put up there. Brought back some warm memories from back in the day.
The OFHEO is a great website. I’ve always seen them referenced by various mortgage newsletter, I had visited a few times but never really dug around to get some really good information. Looks like is a gold mine of relevant information.
Kermit Johnson 09.06.07 at 10:50 am
In your market, what price brackets are showing the greatest depreciation? Are there any price brackets that are showing appreciation in 07?
John L. Wake - Realtor 09.06.07 at 6:35 pm
OFHEO is good.
I prefer the Case-Shiller index because it does not include refinances but it does include all sales regardless of price.
For refinances, OFHEO uses the appraised value and, as you know, appraisers can sometimes be way off.
Secondarily, OFHEO only includes sales with conforming loans which makes sense since OFHEO oversees Fannie Mae and Freddie Mac and that’s where they get their data.
http://www.arizonarealestateno.....#more-1245
Dave Smith 09.06.07 at 8:43 pm
Jay,
WOW I didn’t take the class but found this site a week ago when quoted in an article in the Arizona Daily Star. I’ve just spent three days tearing into the numbers on that report and posting all week on the numbers.
John and Jay, did you know there are also numbers available that do not include refinance appraisals on the site. Called the Home Price Index Purchase Only.
John is right about the main report with the refinance data included, not just included but making up a significant amount of the data the Purchase Only numbers are a better.
It really is a wealth of information, to bad the papers try to use these numbers to create a negative image of the real estate market.
John L. Wake - Realtor 09.06.07 at 10:24 pm
OFHEO has talked a lot about the Purchase Only index in recent reports. Perhaps it’s a reaction to the “competition” from Case-Shiller. The Purchase Only numbers are clearly more accurate in my opinion. Perhaps they’ll phase them in as the primary numbers.
The Purchase Only numbers in addition to being more accurate, also have a lot less variation. That means the graph line is amazingly “smoother” than the line that includes refinancings.
It still only covers conforming loans but for Arizona that’s fine.
Dave Smith 09.06.07 at 10:44 pm
John,
The one issue for Tucson is we have a lot of people coming to here to retire or buy a second home. Many of them pay cash for the home. Those cash sales are never included in the purchase only index.
I can see for much of the state this not being an issue, but for Tucson there are enough cash transactions to have an effect on the data.
John L. Wake - Realtor 09.07.07 at 12:46 am
I hadn’t put that together about cash sales not being included.
Jay - The Phoenix Real Estate Guy 09.07.07 at 7:50 am
Thanks for the great discussion gentlemen!
For anyone reading this that isn’t aware, John is one of the “data gods” for Phoenix real estate and Dave is the Tucson wizard.
And Kermit, great question. I’m pulling some data because I don’t know the answer!
Sunny 09.07.07 at 8:55 am
Hi Jay,
I noticed you on the Saskatoon site and thought I’d come check out your blog.
Jay or John, my husband is from Tucson and we’ve been thinking about moving down to AZ since Saskatoon’s prices have went so crazy. What is happening in your market? I’m sorry but I don’t really have time to read up on weeks of blogs. Is there even any point on young couples moving to Tucson since it is mostly a retirement city? I know he’d like to move closer to his family but I’m just not sure if the wages compared to house prices make it worth it.
Thanks for any help.
Jay - The Phoenix Real Estate Guy 09.07.07 at 10:04 am
Hi Sunny -
Thanks for stopping by! I spent a few days in Saskatoon earlier this year. Lovely city, though WAY too cold for this Phoenix guy! (I was there in the winter)
Sounds like you’re considering a move to Tucson. So I’ll defer your question to Dave Smith — he’s in Tucson and knows it far better than I do.
If I misread and your’re thinking Phoenix, let me know!
Dave Smith 09.07.07 at 10:13 am
Hi Sunny,
If you drove around Tucson on any given morning you would be surrounded by school crossing zones and large yellow buses everywhere.
I’m sure these buses and school aren’t filled with the children of retired families. : )
Granted there are retired people in Tucson. I would say there are probably more retired people in Phoenix than Tucson, statistics : )
Tucson wages depend on your field. We have a lot of medical, engineering, and defense industry here in Tucson. If you are talking about service industry, manufacturing, construction wages are probably lower.
But if you Think Tucson is a town where they roll the streets up after 5PM. It isn’t. If you have any specific questions please feel free to contact me directly.
Dave In Tucson
Sam Chapman 09.08.07 at 9:12 am
That’s a scary, but not surprising graph at the top. What is the consensus about a bottoming out?
Sunny 09.09.07 at 8:10 am
Hi Jay and Dave,
LOL Jay I know what you mean about our winters. I’ve been in SK all my life and I still can’t get used to the winters, but your summers in AZ are no better. I hear from DH’s relatives how hot it is and think sunburn.
Oh don’t get me wrong. I think Tucson is a beautiful city. It’s got a different beauty than Saskatoon, but the mountains are gorgeous there. And I KNOW it’s not just retired people, LOL because DH’s sibling are living there. I was just wondering if the job market made it worth the while to move down a country.
So Dave what is housing doing in Tucson right now? Are you guys feeling the pressure like the rest of the US? We don’t know everything up here in Sask.
Dave Smith 09.09.07 at 11:13 am
Hi Sunny,
There is some pressure in Tucson but not as much as in other parts of the country. While Tucson is not all retirees there are enough people with second homes in Tucson and a predicted influx of 33,000 people per year for the next 10 years to keep things going.
Housing in Tucson depends a lot of what your want or need. New construction is still going on and some very reasonably priced, but you have to be careful buying NC making sure you won’t have to sell before the community is built out. Otherwise you will find yourself competing with the builder to sell your home and you will loose that one every time.
The high end market is steady as are certain areas of town Historic Neighborhoods, Catalina Foothills, the Northwest-Oro Valley area, homes around the U of A etc.
And it depends on your wants and needs 3 br, 4 br, etc.
The median sale price in July was $218,000 for a single family res.
Overall we have a 7 month inventory for all areas of Tucson. Plenty to choose from again depending on what you want or need.
Asking prices have been coming down over the last year, but sale prices have maintained a steady increase.
Can you find affordable housing in Tucson, it depends on what your “affordable” level is. If you want 3 br and 3 ba with a pool for $100,000 nope you won’t find it here. If you can afford anything between $200,000 and up there are lots of options.
Sunny 09.10.07 at 1:29 pm
Thanks Dave, you gave us some things to think about. LOL I don’t know who would expect to get a house for $100,000. In Saskatoon you can’t even get a condo for that right now. We were thinking in the $200,000 - $250,000 range.
Jennifer 09.14.07 at 6:44 am
Jay -
Were you able to answer Kermit’s question regarding which price brackets were showing the greatest depreciation? I am doing some research for my company and that would be some great information.
Thanks,
Jennifer
Jay - The Phoenix Real Estate Guy 09.14.07 at 10:00 am
Not yet Jennifer, sorry. Duty has been calling lately. (a good thing) I hope to have something done over the weekend…