By Russell Ruggiero
The recent $88,000,000 sale of 15 Central Park West in Manhattan was not a good indicator regarding the overall health of the national housing market. For a better barometer, well respected reports such as the Case – Schiller Index should be looked at as a reliable source concerning market trends. My summary is meant to portray matters in a “Rubber Meets the Road” mindset, and is far more local in nature than the benchmark studies. I travel quite a bit and visited each and every city mentioned in this piece in the last 24 months. In addition, I have friends and family in each location, so they are able to keep me up-to-date on any changes pertaining to each local market. These people range from interns to partners in multi-billion dollar corporations. As a result, I am exposed to various housing markets catering to different income levels, which adds depth to the findings.
Again, this report depicts local trends and is not national in nature. For example, I have visited only three of the four most populous states (California, Florida, and New York), and Texas did not make it on to the list. As much as love this big state, I have not been to Austin, Dallas, San Antonio, and Wichita Falls in over ten years, so any housing market information would not be current and therefore inaccurate regarding the current landscape. Again, the content is local in nature and does not represent the national housing market.
The East Coast
Since I live in New York City, I have fairly good handle on matters. Vacancy is less than 1% and the one and two bedroom marker seems to be firm. No real escalation in prices except for the high-end of the market. It seem like the financial sector will be shedding jobs, which will keep a lid on prices over the short-term. Washington D.C. is frenetic and has a very healthy job market and housing market. However, Federal pay-freezes and job cuts could be drag on the housing market over the medium-term. I was in Charlotte over Memorial Day and the place was hopping. Many new houses up for sale and hiring is strong. As a result, prices in Charlotte are stable and trending up. As for Miami, the residential housing market is in better shape than two years ago and seems to be getting stronger. However, not all is well on the East Coast. The New Jersey market is in a funk and treading water, which is a direct result of large deficits and high taxes. All in all, things are better than the depths of the Great Recession, but it will take many years for the owners of two bedroom condos on Collins Avenue and large home in the Garden State to reach pre-recession levels.
Unfortunately, the wonderful city of Chicago did not make it on to the list because I have not been there in quite some time. However, I have been to Pittsburgh and Cleveland on many occasions because of a close family member. The former has done well by latching on to the “Green Theme” and by the presence of well-respected establishments for higher learning that includes The University of Pittsburgh and Carnegie Mellon. As a result, housing prices seem to be stable and trending up. As for the latter, the health of the auto industry has no doubt contributed to firm housing prices, which also seem to be on an upward trend. Please Note: There are both world class museums in both Pittsburgh and Cleveland, while new wineries around Lake Erie make for a pleasant surprise
The West Coast
What can I say, I dig the West Coast. From Seattle down to San Diego, it is just a fantastic drive. From the cozy little coffee houses in Seattle for breakfast to the little Italian outdoor restaurants in Pacific Heights for lunch to Santa Barbara for walk and snack, then on to dinner in the Gaslight District in San Diego, I am a very big fan of the West Coast. In the Bay-Area things are better than two years ago and prices in places like Cow Hollow and North Beach seem to be stable to trending-up. In the southern part of the state, things in Ocean County and places like Downtown Los Angeles seem to be holding steady. However, a 16 billion dollar current state budget deficit, and an unemployment rate at around 11% will put a cap on things for the near-term regarding housing prices.
Has the U.S. housing market finally turned the corner? While it may not as of yet turned the corner, it may have finally stabilized. We must look at the U.S. housing market as a patient who sustained severe injuries in an awful car or boat accident. The patient has been in a wheelchair for the last five to seven years and is only now able to take small steps forward. While the press may hype matters up, the patient will not be running the 4×100 anytime soon. We need to manage our expectations properly, which means that prices could start to rise on national level in the next 12 to 24 months. This scenario could come about with slow and steady job growth and the avoidance of euro-zone implosion. These are big “If’s”, and there is also the specter of higher interest rates. As someone involved with fixed-income during the Volcker rein, the Federal Reserve can change things pretty quickly by dialing-up the Fed Funds rate. As they say, do not count your chickens before they hatch.
(Photo credit: Matt Harang)