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The housing market is going through a "catfish recovery," finding the bottom and then coming up for air before going down again, market analyst Scott Sambucci of San Francisco-based Altos Research said Thursday.
It's different from the "double dip" reported by the national media and shows nothing more than the historical volatility of housing prices, Sambucci said during a 40-minute webcast.
The analyst said he "respectfully disagrees" with statements made by David Blitzer, chairman of the Standard & Poor Case-Shiller Index widely used as a measuring stick for home prices. Blitzer said home prices "continued their downward spiral with no relief in sight."
Most of the data used in the Case-Shiller index is three to six months in the "rearview mirror," Sambucci said. He's seeing a seasonal uptick in real-time prices that probably won't show up in Case-Shiller's index until late summer or early fall, he said.
The "catfish recovery" is a much better description of the market, Sambucci said.
Catfish spend their time moving slowly along the bottom of lakes and rivers, bobbing up and down from place to place without a clear direction, he said. They'll swim to the surface to eat and then return to the bottom.
"Plan for prices over the long term to hit a bottom, rise a bit, sink back down, rise again -- a pattern we expect with the housing market for several years," Sambucci said. "The housing recovery will take a long time and it is going to happen slowly."
May numbers are showing signs of strength in the market, as did March and April numbers. Prices are rising in all 20 cities tracked by Altos Research except New York and Las Vegas, which experienced only moderate declines.
The firm showed Las Vegas with an average home price of $140,598 in May, a decrease of 0.76 percent from the previous month and down 1.92 percent over the last three months.
The new Altos Mid-Cities Composite is also showing signs of strength in markets across the country. This composite examines an alternate set of smaller metropolitan statistical areas across the country to counter the volatility seen in larger, mostly coastal cities in the Case-Shiller index.
"Volatility is what we're talking about in the catfish recovery," Sambucci said. "Watch housing just like other assets. You're not going to get one, two, three, five, 10 or 15 years of growth. You're going to get volatility and finding that inflection point is the opportunity to make money."
Those who say strong job gains are needed to bolster housing are thinking backward, said Quinn Eddins, director of research for New York-based RadarLogic.
The bulk of jobs created during the housing boom disappeared when the market collapsed and builders stopped building new homes. Competition from distressed property sales are keeping housing starts near historic lows.
The problem is the huge supply of homes already in foreclosure or on their way, Eddins said.
"It could take years for the inventory of distressed homes to be absorbed and for prices to stabilize to the point where new construction is deemed to be a worthwhile endeavor," he said. "As such, sustained and robust job creation will not occur in the construction sector until the excess supply of homes is absorbed and homebuilding resumes in a sustained and robust manner. And even then, not all of the construction jobs lost in the great recession will return."
Rather than watch for job growth, watch the banks for a real measure of when the housing market hits bottom, Eddins said. They know the depth of inventory overhang because they own most of it.
Banks recognize that current dynamics suggest further declines in value and are requiring larger down payments. When banks start lending 85 percent loan-to-value as opposed to 70 percent or 75 percent, that will be a good sign that they either feel comfortable with the market or they will have figured out a new way to manage the risk.
Sambucci said he's seeing more higher-end homes move through the real estate-owned inventory, which is a good sign.
Pricing of new listings has been accelerating rapidly since spring and the price of listings being absorbed also moved higher, another good sign for the market, he said.
"Typically you assume prices will move up in the spring and this is the first time in four years we've seen that trend," he said. "This data is not captured in lagging data indices out there."
Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.
Altos Research Price Composite
SOURCE: Altos Research
It's different from the "double dip" reported by the national media and shows nothing more than the historical volatility of housing prices, Sambucci said during a 40-minute webcast.
The analyst said he "respectfully disagrees" with statements made by David Blitzer, chairman of the Standard & Poor Case-Shiller Index widely used as a measuring stick for home prices. Blitzer said home prices "continued their downward spiral with no relief in sight."
Most of the data used in the Case-Shiller index is three to six months in the "rearview mirror," Sambucci said. He's seeing a seasonal uptick in real-time prices that probably won't show up in Case-Shiller's index until late summer or early fall, he said.
The "catfish recovery" is a much better description of the market, Sambucci said.
Catfish spend their time moving slowly along the bottom of lakes and rivers, bobbing up and down from place to place without a clear direction, he said. They'll swim to the surface to eat and then return to the bottom.
"Plan for prices over the long term to hit a bottom, rise a bit, sink back down, rise again -- a pattern we expect with the housing market for several years," Sambucci said. "The housing recovery will take a long time and it is going to happen slowly."
May numbers are showing signs of strength in the market, as did March and April numbers. Prices are rising in all 20 cities tracked by Altos Research except New York and Las Vegas, which experienced only moderate declines.
The firm showed Las Vegas with an average home price of $140,598 in May, a decrease of 0.76 percent from the previous month and down 1.92 percent over the last three months.
The new Altos Mid-Cities Composite is also showing signs of strength in markets across the country. This composite examines an alternate set of smaller metropolitan statistical areas across the country to counter the volatility seen in larger, mostly coastal cities in the Case-Shiller index.
"Volatility is what we're talking about in the catfish recovery," Sambucci said. "Watch housing just like other assets. You're not going to get one, two, three, five, 10 or 15 years of growth. You're going to get volatility and finding that inflection point is the opportunity to make money."
Those who say strong job gains are needed to bolster housing are thinking backward, said Quinn Eddins, director of research for New York-based RadarLogic.
The bulk of jobs created during the housing boom disappeared when the market collapsed and builders stopped building new homes. Competition from distressed property sales are keeping housing starts near historic lows.
The problem is the huge supply of homes already in foreclosure or on their way, Eddins said.
"It could take years for the inventory of distressed homes to be absorbed and for prices to stabilize to the point where new construction is deemed to be a worthwhile endeavor," he said. "As such, sustained and robust job creation will not occur in the construction sector until the excess supply of homes is absorbed and homebuilding resumes in a sustained and robust manner. And even then, not all of the construction jobs lost in the great recession will return."
Rather than watch for job growth, watch the banks for a real measure of when the housing market hits bottom, Eddins said. They know the depth of inventory overhang because they own most of it.
Banks recognize that current dynamics suggest further declines in value and are requiring larger down payments. When banks start lending 85 percent loan-to-value as opposed to 70 percent or 75 percent, that will be a good sign that they either feel comfortable with the market or they will have figured out a new way to manage the risk.
Sambucci said he's seeing more higher-end homes move through the real estate-owned inventory, which is a good sign.
Pricing of new listings has been accelerating rapidly since spring and the price of listings being absorbed also moved higher, another good sign for the market, he said.
"Typically you assume prices will move up in the spring and this is the first time in four years we've seen that trend," he said. "This data is not captured in lagging data indices out there."
Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.
Altos Research Price Composite
| MSA | May Price | 1-month change | 3-month change |
| Denver | $321,820 | 1.95% | 5.24% |
| Las Vegas | $140,598 | -0.76% | -1.92% |
| Los Angeles | $596,001 | 1.56% | 2.94% |
| Phoenix | $230,028 | 2.26% | 5.63% |
| Portland | $285,332 | 0.86% | 1.37% |
| Salt Lake City | $293,426 | 0.85% | 1.54% |
| San Diego | $595,105 | 1.19% | 3.04% |
| San Francisco | $648,018 | 3.33% | 8.36% |
| San Jose | $706,051 | 3.14% | 7.59% |
| Seattle | $335,425 | 0.69% | 1.08% |
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