Radar Logic Inc. last week released its housing-price index for August 2007, painting a similar picture of housing market weakness as the previously released S&P Case Shiller Index for August 2007. Of the 25 markets tracked by Radar Logic’s RPX index, only seven continue to be in positive territory for the past year.
Seattle, the strongest market, showed a price increase of 6.2 percent, with Charlotte, N.C., up 5.4 percent, Milwaukee up 5.3 percent, New York up 4.7 percent, Philadelphia up 2.8 percent, Atlanta up 1.4 percent and San Jose, Calif., up 1.2 percent. However, both Seattle and Charlotte showed sequential monthly declines in price, with Seattle dropping from $234.73 per square foot in July to $229.96 in August and Charlotte falling from $100.86 per square foot in July to $99.42 in August.
While the RPX and S&P Case Shiller indices paint broadly similar pictures of major metropolitan markets, there is substantial variation at the market level due to differences in their methodologies. For example, the RPX index includes condos, new homes and other transaction types, but the S&P Case Shiller index includes only resale transactions.
As a result, the S&P Case Shiller index for New York in August 2007 shows an annual price decline of 3.8 percent, whereas the RPX index for August 2007 shows an increase of 4.7 percent. Condos are a significant component of the New York metropolitan area housing market, and the demand for condos has remained strong. The Manhattan condo market alone accounts for almost three quarters of the New York condo market by value and as the dollar has fallen, international buyers continue to find value in Manhattan relative to other leading international cities like London.
Because Radar Logic’s index is based on price per square foot, it also dramatically illustrates differences in housing prices between markets. The Charlotte market increased in price by 5.4 percent over the last year to $99.42, according to the RPX index, which equates to a gain of a little over five bucks per square foot. Compare this to the San Diego market, which fell by 12.3 percent to $301.22 per square foot — a drop of more than $40 per square foot.
The ratio between the highest- and lowest-priced markets, San Jose at $471.69 per square foot and Cleveland at $95.21 per square foot, respectively, actually increased from 4.8 to 4.95.
Let’s put that in an affordability perspective: The personal income per capita in the Cleveland metropolitan area was $37,070 versus $53,533 in San Jose for 2006. That means folks in San Jose make about 45 percent more income than the average resident of Cleveland, but they have to pay almost five times as much to buy a house.
So if your company wants to relocate you to San Jose, tell your boss you’re going to need a raise, a really, really big raise.
Stephen Bedikian is a partner at Real IQ, which provides consulting and housing market analysis. He can be reached by phone at: (310) 871-3737 or by e-mail: sbedikian@realiq.com. Or contact him via his blog at http://realiq.wordpress.com/.
