house collapse
bobolink / Flickr

Keith Jurow

Keith Jurow is a former senior economic writer for the Holt Investment Advisory, who researches and writes about the housing market.
Recent Posts
Housing analyst Keith Jurow has been a regular contributor to Business Insider for almost three years. His new real estate subscription service – Capital Preservation Real Estate Report – will launch in a few weeks.
At the end of March, it was announced that the 20-city Case-Shiller Index was up 8.1% year-over-year. Nearly all housing experts declared that this was further confirmation that the housing recovery was firmly in place.
A few weeks earlier, Zillow had released its latest survey of 118 economists, strategists and other experts on the expected direction of home prices over the next five years. Every one expected higher prices with the most pessimistic prediction showing an average annual increase of 3%.
Clearly, there is a very broad consensus that the housing market has bottomed. In the article below, I review much of their analysis. For those of you who have never read any article of mine, I have been consistently asserting that there is no convincing data to support the view that housing markets have turned the corner.
Because my view is so out-of-sync with the consensus, it is worth taking an in-depth look at what my latest research has uncovered.
My conclusion is that the much-vaunted housing recovery is actually a mirage and that a new delinquency crisis is coming.
Home Prices in the Northeast
We’ll get to the Case-Shiller Index shortly. Let me begin by showing you raw sale price numbers from the largest family-owned brokerage firm in the northeast – William Raveis & Co. This table shows the average price-per-square-foot for single-family homes in five northeast states. The figures are for the months November 2012 through January 2013.

Single-family home prices in the Northeast
Keith Jurow

The figures show the average price-per-square foot (ppsf) for all single-family homes sold in these towns and cities. As far as I know, Raveis & Co. is the only brokerage firm in the country which provides these statistics. Their website also provides median sale prices. I wiIl explain why I prefer the use of average price-per-square-foot.
Here is why. A median price is simply the point at which half of the prices of homes sold are above it and half are below it. It is greatly influenced by the mix of homes sold. Sharp reductions in the sale of foreclosed properties will great affect the median price.
I’ve emphasized repeatedly in previous articles that the banks have severely curtailed the number of foreclosed properties (REOs) which they have put on the active MLS market. For example, in the spring of 2009, 2/3 of all homes sold in the Greater Phoenix area were foreclosed properties. In December 2012, a mere 10% of the homes sold were foreclosures.
Since foreclosed properties are normally the lowest-priced homes on the market, the sharp reduction in sales of these inexpensive homes will almost always raise the median price of sold homes. Yet a higher median price does not necessarily indicate that homes prices would be rising without this market manipulation by banks.
The average ppsf is not skewed by the plunge in foreclosed property sales nearly as much as the median sale price. But since foreclosed homes will normally have the lowest ppsf in any market, the average ppsf will also tend to be pushed up by the scarcity of foreclosures for sale. Thus it is all the more remarkable that prices in my home state of Connecticut showed double-digit declines in average ppsf for numerous towns.
Now you may object to the use of average ppsf. I have found that the ppsf does not vary all that much throughout a given town for comparable homes and does not change much month-to-month. Three bedroom homes tend to command a slightly higher ppsf than four bedroom houses. Nonetheless, I believe that average ppsf is a far more reliable indicator of home prices in a town than the median sale price.
Home prices in Connecticut have been much weaker than in the other four northeast states. Some of you will object that the figures from raveis.com show that prices are up in other New England cities and towns. Granted. But you can see that, with one glaring exception, year-over-year price increases in the towns I’ve listed have been tepid at best.