Who to Believe? Case Shiller or Ken Rosen

Case Shiller may be talking about double dip but Ken Rosen sees a somewhat brighter future for San Francisco’s residential real estate market.

Here’s the doom and gloom at the national level from the recently released Case Shiller Report for January 2011:

These data confirm what we have seen with recent housing starts and sales reports. The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery. At most, we have seen all statistics bounce along their troughs; at worst, the feared double-dip recession may be materializing.

The index for the horribly-named “San Francisco MSA”  — horribly named because everybody seems to forget the MSA part, which includes five of the nine Bay Area counties — was down 1.9% from December 2010 and down 1.7% from a year previous.

Meanwhile, Ken Rosen, chair of the Fisher School of Real Estate and Urban Economics, and über-guru to the real estate industry, sees San Francisco’s prospects somewhat differently.  Here’s what his consulting group had to say in its most recent report published for the San Francisco Association of Realtors:

Moderate improvements to employment levels across Bay Area cities through year-end 2010 and into early-2011 have contributed to the stability of the San Francisco housing market in recent periods. Through February 2011, for-sale inventory levels contracted in comparison to February 2010, while the healthy rise in pending home sales points to a more robust rebound in home sales in the coming months.

Who to believe?  It’s probably fair to assume that Rosen is willing to “accentuate the positive”  since he’s being paid by the San Francisco Association of Realtors, whose members’ bread and butter is likely to be improved by a rosier outlook.  On the other hand, I can’t imagine that Rosen would be willing to risk his credibility by issuing outlandish reports.

I’d tend to put my money with Rosen.  First of all, he is focused on the real San Francisco — ie.  San Francisco County alone — whereas the Case Shiller Index includes a much much larger geographic and demographic area.  There are over 4 million people in the five Bay Area counties covered by the C-S San Francisco MSA, versus some 800,000 in San Francisco.  And the top third of all sales in the SF MSA are those priced at above $611,000.  By contrast, the median price in San Francisco county was $645,000 according to Ken Rosen.  Likewise, as Rosen points out in his report, San Francisco has been much less affected by short sales than parts of the Bay Area included in the C-S SF MSA.  Think Pittsburgh and Antioch in Contra Costa County, for example.

That’s not to say that Rosen’s report is all sweetness and light.  Median prices are down for both condos and homes compared to the previous month and previous year.  When I contacted the Rosen Consulting Group to ask whether the contraction in inventory could really be taken as that elusive leading indicator of housing prices we’re all in search of, they hedged their bets.  Here’s what they said:

We did not intend to imply that there is a direct correlation at this time beyond traditional supply/demand relationships that would lead to an impending price increase. Our intent was to highlight that the decrease in inventory was one of the positives of the recent month and could be considered an indication that the housing market was not heading into a double-dip as has been implied by other reports.

Hardly news to celebrate, but a tad more positive — at least for now — than Case Shiller’s dire report.

Here’s the Case Shiller Report for your reading pleasure. January 2011 Case Shiller Report

And here’s Rosen’s. Market_Focus_Report_March_2011


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