House Prices

[gsgs]

I'd be interested, whether prices for lodgements in USA are already
reacting. Are lodgements in cities becoming cheaper compared
to country-lodgements in remote agricultural areas ?

Or are there other ideas how to watch the impact of the
bird-flu threat on the economy ?

[LMonty]

Re: house-prices

gs, i think th ehousing market here is already starting to slow- but I doubt it has anything to do yet with bird flu.

[gsgs]

Re: house-prices

if the threat is as big, as estimated by the experts , then shouldn't
there be some effect ?
Or are the traders somehow not realising the expert opinions ?
Then the experts and we would have some "insider" information,
which could be used to beat the market.

Or is the market better in estimating the threat than the experts ?

I mean, I don't understand all this. Virologists,professors,CDC,ECDC,HHS,
NIAID,NIH,WHO, Asian Developement Bank,etc. are telling
telling us that the threat is big but the markets are not reacting.
OK gold and oil is going up, but it's not directly related to panflu-news.

When Webster gave his ABC-interview, why didn't gold or house-prices
react directly, momentary ? Apparantly noone believed him
or noone noticed or what ?

I'd really like to see some high-volume panflu asset where we could
watch the change of panflu-predictions as estimated by the market.
We have these birdflu claims at intrade, but they have few
volume and they ask nonsignificant questions.

Instead we have more interest in sport-bets, but what could be better
suited to betting than this pandemic event which is so controversial
between the average people and the experts ?

More opportunities to watch the panflu impact on some financial
markets would also increase awareness of the problem.

[LMonty]

Re: house-prices

heres an interesting article, gs. guess we're not the only ones thinking of it

Ten Signs of a Real Estate Apocalypse
Sara Clemence
Signs of the Apocalypse
Which events could drive the U.S. housing market over a proverbial cliff? Take a look at this photo gallery.
Reason No.1: Bird Flu








Gallery: Ten Signs of a Real Estate Apocalypse


New York -- If California slid into the sea, would it take the U.S. housing market with it?


After a few years of real estate boom, which spread dramatically higher prices to many (though not all) parts of the U.S., the market has recently seemed to change course. On Thursday, the U.S. Census Bureau reported that housing starts were down 7.9% from January to February and had declined 4.8% from February 2005, indicating less demand for new construction. That came three days after the National Association of Realtors predicted that this year would bring "a more level playing field for buyers and sellers on the heels of a five-year sellers market."


This won't be a crash, but a soft landing for the real estate market, it appears. But that made us wonder: What would it take to make things really go off the rails? Click here to see events that could send the real estate market reeling.


War, pestilence and natural disaster have always been bad news for human civilization; that would seem to suggest that they are bad for home sales as well. While conflagrations like World War II and economic declines like the Depression are rare, they do happen--as do lesser versions of conflict and crisis.

More from Forbes.com
Top Real Estate Tax TipsHome of the Week: Cabo CoolCelebrity Homes 2006Best & Worst Neighborhoods to BuyHome of Forbes' BillionairesBest Home Improvement ROIsMore from Forbes.com
We talked to a number of experts about hypothetical events that could send the U.S. real estate market into a skid, from highly unlikely scenarios such as a military confrontation with China, to the types of predicaments we have faced in recent years, like natural disasters and terrorist attacks.


Turns out, there are lots of ways to hit the housing market.


"Prices will certainly plummet if we have significant loss of house buying power," says James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.


Higher interest rates that make mortgages more expensive, an employment decline that results in loss of income, or an increase in the costs of other goods (think oil) can all divert money from real estate.


"Anything that throws the economy into recession will throw the real estate market into recession," says Susan M. Wachter, professor of real estate, finance and city and regional planning at the Wharton School of the University of Pennsylvania.


A truly dramatic plunge in the real estate market could be precipitated by a crisis, whether economic, natural or, as in the case of war, man-made, that lasted.


"It's the long-term impact stuff we have to worry about," says Delores Conway, director of the Casden Real Estate Economics Forecast at the University of Southern California Lusk Center for Real Estate. An earthquake may be devastating, but if it only lasts a day the market can recover. A prolonged economic crisis can have a far more profound effect.


What about wars abroad, or concerns like bird flu, nuclear ambitions in Iran or conflict in Israel? In some cases, such as with Hurricane Katrina, what can be devastating to one region will have no impact--if not even a positive effect--on other areas.


"SARS in Asia is very negative for the Asian market and real estate in the markets where it occurs," she points out. "But it has no negative impact on the U.S. A beneficial impact is that it might, if anything, draw capital to the U.S. and lower interest rates." An increase in the threat of war could have the same result, as investors seek a safe harbor for their money.


On the other hand, a meaningful outbreak of avian flu in the U.S. would probably have a strongly adverse impact on the housing market, especially if it struck a major population center. Robert J. Shiller, an economist at Yale University and author of the book Irrational Exuberance, which predicted the 2001 stock market bust and was recently updated to include real estate bubbles, notes that housing prices in the U.S. were on the decline in 1916. But a serious drop took place at the same time as the 1918 flu epidemic. "World War I and the flu were kind of coincided," he says. "It looks like that had a huge hit on housing prices--they were down 40% in real terms from 1912 to 1920."


But Shiller believes that the biggest potential market shifter is far less tangible than a tsunami, interest rate spike or other newsworthy event. "I think that most likely what would cause a big drop in real estate would be a change in public thinking," he says.


In October 1987, when the Dow Jones Industrial Index fell more than 22% in one day, nothing in particular seemed to be happening, he says. But investors had been adopting a new strategy called portfolio insurance, which meant there were large and sudden sell-offs when the market dipped. "It got everyone really primed to sell," he says.


The real estate boom in Florida in the 1920s collapsed partly because of the 1926 hurricane, which killed scores of people--but also because newspapers around the country started describing people who were buying land they had never seen, or that was under water.


Despite potential nightmare scenarios, though, for the most part, the economists and experts we spoke with seemed convinced of the overall resiliency of the U.S. housing market. As Wharton's Wachter points out: "Natural disasters are bad news, but not necessarily for real estate." Gallery: Ten Signs of a Real Estate Apocalypse

http://realestate.aol.com/article?id=20060414114909990001

[sharon sanders]

Re: House Prices

Yes - In most places in the U.S., housing prices reached a peak last Summer. This week mortgage rates hit a 4 year high. This alone will slow the appreciation rate of house prices in most areas.

Bird flu could decimate the housing market.




Mortgage Rates at Highest in Nearly 4 Yrs.

By JEANNINE AVERSA AP Economics Writer
© 2006 The Associated Press

WASHINGTON — Rates on 30-year mortgages climbed this week to their highest point in nearly four years, a development that could put a further crimp in housing activity. Freddie Mac, the mortgage company, reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.49 percent for the week ending April 13. That was up from 6.43 percent last week and was the highest since mid-July of 2002. Mortgage rates rose as Wall Street investors fretted that an improving jobs climate could drive up wages and thus inflation, analysts said. Those fears were fanned by a government report last week showing the unemployment rate dropped to 4.7 percent in March. "The threat of higher inflation, as we all know, invariably leads to higher mortgage rates," said Frank Nothaft, Freddie Mac's chief economist.
Some economists believe rates on 30-year mortgages could reach 7 percent by the end of this year.
There are signs that rising mortgage rates are slowing the housing market, which registered record-high sales for five years in a row.
"If the past is any guide, the effect of rising interest rates is likely to be felt most visibly in housing markets," Federal Reserve Governor Donald Kohn said in a speech Thursday.
Sales of existing homes are expected to fall by 6 percent this year compared with last year, while new-home sales are expected to drop by 10.9 percent, according to the National Association of Realtors.
Home prices, which have posted double-digit gains in past years, aren't expected to go up nearly as much this year.
The association predicts the nationwide median price for an existing home will increase 6.4 percent this year, while the median new-home price will rise 2.3 percent. The median is where half sell for more and half for less.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing a home mortgage, averaged 6.14 percent this week, up from 6.10 percent last week.
One-year adjustable rate mortgages increased to 5.61 percent this week, compared with last week's 5.57 percent. Rates on five-year, hybrid adjustable-rate mortgages averaged 6.13 percent this week, up from 6.11 percent last week.
The mortgage rates do not include add-on fees known as points. Thirty-year mortgages carried an average nationwide fee of 0.6 point. Fifteen-year mortgages had a fee of 0.5 point, one-year ARMs carried a fee of 0.8 point and five-year ARMs had a fee of 0.7 point.
A year ago, 30-year mortgages averaged 5.91 percent, 15-year mortgages stood at 5.46 percent, one-year ARMs were at 4.30 percent and five-year ARMs averaged 5.31 percent.

http://www.chron.com/cs/CDA/printsto...siness/3792234
___

[gsgs]

Re: House Prices

yes, there are many other factors which can drive house-prices.

So, maybe let's look at prices for small rural homes as compared
to lodgements in cities ?

Assuming that rural homes are safer in a pandemic.

Tamiflu-prices or share prices for anticiral-producers or
vaccine-companies are other indicators.
Also, maybe gold or interest rates, I'm not sure.
Maybe also mask-sales statistics, or food spendings.
Intrade birdflu contracts.
Opinion polls.Expert opinion polls.
Other ideas ?

I'd like to see some cumulative birdflu-index with
all these signs appropriately weighted

[LMonty]

Re: House Prices

I think you'd see rural house prices rise,if pandemic flu was being taken seriously by large numbers; or should i say, the chance of social disruption of long term being taken seriously? there was a transitory spike in rural properties before Y2k IIRC. But, because of rising interest rates, we might not see it- disposable income is shrinking right now.

I just dont think the threat of long term social disruption is being viewed as possible by very many. Theres probably just a few on the flu boards and others like it that recognize the risk. JMHO, i could be wrong-but i dont see that concern being expressed by too many. Its a really hard concept for people to grasp.

[GaudiaRay]

Re: House Prices

As DB said about 2 months ago, bird flu will manifest itself as an abrupt change. Plotting market movements with an eye to detecting a trend is imo highly improbable. I look forward to your work, but won't participate myself due to my view that the markets will not discount low probability, high consequence.

[LMonty]

Re: House Prices

what, exactly; are you trying to measure, gs?

the impact of the threat, or the impact of various levels of pandemic itself?

or something else?

those different methods you mentioned really do measure different things. i think your choice of indicator depends on your goal. gotta pick the right canary!

[Laidback Al]

Re: House Prices

I'd be interested, whether prices for lodgements in USA are already reacting. Are lodgements in cities becoming cheaper compared
to country-lodgements in remote agricultural areas ?

Or are there other ideas how to watch the impact of the
bird-flu threat on the economy ?

gsgs, price fluctuations in real estate are always local, dependent on local economic conditions, and thus are not a good measure or index of the economic impacts of bird flu on a large scale. Also, real estate prices react after the fact, not prior, to changes in the local economic conditions. Finally, as GR alluded to, a bird flu pandemic will occur very rapidly. Real estate prices just do not fluctuation that quickly over such a short time frame.

And to your question about rural homes:

. . . So, maybe let's look at prices for small rural homes as compared to lodgements in cities? Assuming that rural homes are safer in a pandemic.

LMonty reponded:

I think you'd see rural house prices rise, if pandemic flu was being taken seriously by large numbers; or should i say, the chance of social disruption of long term being taken seriously? there was a transitory spike in rural properties before Y2k IIRC. But, because of rising interest rates, we might not see it- disposable income is shrinking right now.

I just dont think the threat of long term social disruption is being viewed as possible by very many. Theres probably just a few on the flu boards and others like it that recognize the risk. JMHO, i could be wrong-but i dont see that concern being expressed by too many. Its a really hard concept for people to grasp.

Here is my observation. Rural houses and associated farmland are probably the most underpriced real estate in the U.S. If we do suffer a doomsday senario with pandemic flu, the only viable survival option will be to have a plot of fertile land on which you can grow your own crops.

The problem for me, and presumably many others, is that I have no farming skills or knowledge. Having farmland is useless if you don't know how to make it productive. LMonty may underestimate the number of flu board members that recognize the risk of social disruption and may desire to prepare for bird flu within a rural or farmstead lifestyle. Unfortunately, those of us who don't have the rural skills would probably have a better chance of survival by prepping carefully and and sheltering in place.

Certainly, many rural families survived quite well during the 1918 epidemic. Now, almost 90 years later, most of the US population has no knowledge or skills that would help them survive in a rural setting in the event of a bird flu pandemic.

[LMonty]

Re: House Prices

LMonty may underestimate the number of flu board members that recognize the risk of social disruption and may desire to prepare for bird flu within a rural or farmstead lifestyle

.

Actually, LMonty didnt phrase her reply very well! I meant to say that theres few people in general- with the exception of those on the flu boards and others like them, such as the survivial boards; that really consider the possibility of social collapse and thus would value rurual property for its survival potential. I really dont think the population as a whole even considers social collapse from flu or other similar disaster a potential. Probalby less than one percent of the population would think of it, IMHO. Thanks for the chance to better explain myself.

I believe you're right- that us flu watchers are probably more likely to consider the possibility of social collapse and to prepare for it by buying rural property. I unfortunatly have only a 1/2 acre myself.:With pandemic brewing, I wish I had much more! Five at a minimum. But my next door neighbor has 47- and the whole block is mostly farms and the farmers that work them. Its not ideal, and I hope to get more property some day soon-but for now, its going to have to do.

Having rural property where one can practice the necessary skillset doesnt have to mean "farm". An acre, wisely used, can support a lot of the needs of a small family. Several acres of the right kind of ground can support livestock, greatly improving quality of life. the skillset isnt impossible to obtain- theres great books out there for self reliance. Learning to milk a goat takes a little time, but its not rocket science!

A suggestion I'd make to any "city folk" wanting to learn rural skills-peruse "The Encylopedia of Country Living" for a start if youre considering the rural lifestyle. IMHO that book is probably the one book I'd consider the essential bible of Homesteading. Well worth having on the shelf if times get tough, we'll certainly refer to it often. Even city folks might find it interesting, and of value for the many simple skills it so clearly explains. I grew up on Long Island, the suburbs didnt teach me self raliance- but many a book has been helpful in leanring how to do a lot for myself. Practice is imperitive too, IMHO- mistakes teach well. I should know, I've made a lot of them!

[gsgs]

Re: House Prices

LMonty,I'm trying to measure the expectation value of the damage
due to panflu..
The magnitude of the panflu-threat. Probability multiplied by damage if it
happens summed over the possible scenarios.
What a panflu insurance would cost.

The house-prices, are they so much sensitive to the thinkings and feelings of the average citizens or more to the big fond-managers
and banks ? These should have access to panflu-studies and probably
made their own ones. Can we already observe them changing
their investments towards panflu-safety ?

[LMonty]

Re: House Prices

ok, gs, i think i understand now.

my guess is that mask prices/availability might be one of the more sensitive or earliest indicators of preparation- which I think is directly related to how seriously the threat is being taken. I think house prices would be less senstitive, since so many other factors apply.

Besides, people will IMHO tend to make small preps first- things that are easier and less expensive. They ramp up preparations as their threat of risk excalates- so the more expensive and difficult preps- like moving if necessary- are going to take place only when someone is very convinced its a safety issue. Even then, only a small percentage of those who percieve that will be able to make that move quickly, so I dont think rural property prices will show an uptick until very late in the game, if at all. Whatever small uptick that is caused by flu-preppers might be obscured by people selling second homes due to the economy tightening. Higher fuel prices tend to do that, and so will increased food prices which I expect to see happen if H5N1 is confirmed here. Just my rather uneducated guess, I'll definitely bow to the opinions of those more educated.

One other "canary" to watch may be the storage food suppliers- as people prepare thats one area where we may see shortages. They keep up with the demands of their niche market pretty well- but if theres a sudden spike in demand, they show it pretty quickly.

Mask manufacturers are already feeling the pinch- but its also because of large orders by countries and municipalities and large organizations. Ive heard rumors that some storage food companies are noticing an uptick in business, but its not causing shortages yet. Hosuing prices are definitely getting softer here, houses are remaining on the market longer than last year, and not bringing the prices they were. But they were so overinflated,its not terribly surprising, theres been articles for quite awhile that the bubble was going to burst soon. As soon as interest rates went up-housing sales started down.

I think market watchers more eduated to that than I am will have to help you with ideas on how investments may move to reflect preparation by the big boys, I'm guessing many will take a larger stand in PM's, but thats just a guess. I'm truly ignorant of high finance. But theres some players here who seem to know what they are talking about when it comes to observing the markets, maybe they can chime in and help.

Its kinda early in the morning here for me- what other items can someone think of that might become short in a pandemic preparation mode? What disappeared off the shelves before Y2k? Lamp oil? generators? Those might be the things that gsgs can watch for a sign of general preparation activity.

[LMonty]

Re: House Prices

OK, another thought to guage public perception of risk-what about travel patterns? Might tourism be affected enough to give you some indication of how the public is guaging risk? It might show some "irrational fear" and not reflect real risk, but it is likely to show what and where people are avoiding...and if you are trying to guage public attitude, that might help.

I'm guessing, the more I think about it, that there may be some multiple factors you'd want to monitor- like an across the board indicator. One or two may show reaction to other influences (such as economic contraction), but if the majority rise, or change rapidly, then it may be safer to call it as reacton to AF.

[gsgs]

Re: House Prices

yes, but even more interesting than public perception would
be , what the big investment companies , banks,
insurance companies are doing. They are doing their
own analysis, but keep it secret.
Are they rearranging their portfolios because of panflu ?
Is there already some fear of hyperinflation,crime,civil war and such ?
Also shares of traveling companies etc. but again, this is hard
to estimate since other factors play a role.


here is a link to the daily updated bird-flu-shares-index by Don Luskin:
http://weforum.newsfutures.com/marke...bol=FLUCOUNT06

17 pharma-shares which ~might~ benefit from bird flu