Sand-State Real Estate

http://www.nytimes.com/2010/04/03/business/economy/03charts.html?emc=eta1

As Floyd Norris points out in his 4/2 NY Times OP-ED, "During the housing boom early in the last decade, the strongest markets were in the states that could offer sand and sun to lure prospective purchasers ... But when the boom turned to bust, buyers found that what went up the most came down the fastest."

Now there are signs of life in the real estate markets of two of the sand states: California and Arizona. Alas, Florida and Nevada continue to suffer. The chart that Norris attaches (the Case/Shiller indexes thru January, 2010) looks at the "sand markets" versus other markets in a two pronged way which is very interesting. First, the chart shows the growth by market from the "low" to right now. Second, it looks at the "gain" needed to get that market to return to its former peak.

So, Las Vegas is "up" 1.2% from its low (that is, at least, better than "down"), but it would take a further appreciation of 126.2% for that market to get back to its prior peak. This would be contrasted with San Francisco, for example, that is "up" 14.7% from its "low" and is within 59% of its former peak.

We choose to see this as a positive sign and one that blends well with the announcement on Friday that employers added 162,000 jobs last month. It makes no difference that over 40,000 of those jobs were for the 2010 "Census". The overall point is that the number was "up" and not down.

Back to the sand states: while "Dallas" is not listed as a sand state city, it is interesting to note where it sits on the comparison chart - Dallas is 4.4% up from its low and would need a gain of only 5.5% to reach its "peak".

The lagging indicator in any recovery from a recession is "jobs" but the "overhang" of housing inventory has been a concern for the past two years. Appearing today on the ABC TV network, Alan Greenspan (who has tracked the housing market for the past 30 years as a "hobby") opined that he sees less risk of a "double dip" recession than even as recently as two months ago. Yes, we realize that this is the same person who told us that the "financial markets" were "self-regulating". However; we would suggest that Greenspan's career body of work still gives weight to his opinions.

If we can put together jobs and housing as two "glimmers of hope", then other data should began to follow. The manufacturing indexes are up and that was not expected so soon. There are probably other signs as well.

As we have said in prior posts, a "jobs" number up in the area of 300,000 per month is a goal to shoot for because numbers between 100 and 150,000 barely cover new entrants into the workforce. So, we hope the trend continues.

An editor's note: we have tried and failed twice (on two different computers) to attach the Floyd Norris article and charts. So, if you don't see that data attached, go to the NY Times and the Floyd Norris Finance Blog. The data will be there.