S&P/Case-Shiller national HPI shows 4% fall in home prices

U.S. home prices fell 4.0% during 2011:

Data through December 2011, released today by S&P Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed that all three headline composites ended 2011 at new index lows. The national composite fell by 3.8% during the fourth quarter of 2011 and was down 4.0% versus the fourth quarter of 2010. Both the 10- and 20-City Composites fell by 1.1% in December over November, and posted annual returns of -3.9% and -4.0% versus December 2010, respectively. These are worse than the -3.8% respective annual rates both reported for November. With these latest data, all three composites are at their lowest levels since the housing crisis began in mid-2006.

Note: Only the national composite index really matters when measuring the national housing market. Ignore the 10- and 20-city indexes.

In addition to both Composites, 18 of the 20 MSAs saw monthly declines in December over November. Miami and Phoenix were up 0.2% and 0.8%, respectively. At -12.8% Atlanta continued to post the lowest annual return. Detroit was the only city to post a positive annual return, +0.5% in December versus the same month in 2010. In addition to the three composites, Atlanta, Las Vegas, Seattle and Tampa each saw average home prices hit new lows. ...

Translation: Washington, DC metro area home prices fell, too.

As I pointed out yesterday, Phoenix, Detroit, and Miami are dirt cheap, so the prices should rise. Las Vegas and Tampa are also dirt cheap, but apparently prices are still falling there.

“In terms of prices, the housing market ended 2011 on a very disappointing note,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “With this month’s report we saw all three composite hit new record lows. While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended.

“After a prior three years of accelerated decline, the past two years has been a story of a housing market that is bottoming out but has not yet stabilized. Up until today’s report we had believed the crisis lows for the composites were behind us, with the 10-City Composite originally hitting a low in April 2009 and the 20-City Composite in March 2011. Now it looks like neither was the case, as both hit new record lows in December 2011. The National Composite fell by 3.8% in the fourth quarter alone, and is down 33.8% from its 2nd quarter 2006 peak. It also recorded a new record low.

“In general, most of the regions also posted weak data in December. Eighteen of the cities saw average home prices fall in December over November. Seventeen of the cities have seen monthly declines for at least three consecutive months. In addition to both monthly composites, 10 of the cities saw home prices fall by more than 1.0% during the month of December. The pick-up in the economy has simply not been strong enough to keep home prices stabilized. If anything it looks like we might have reentered a period of decline as we begin 2012.”

To paraphrase Annie: The bottom, the bottom, I love you, the bottom. You're always a year away.

Warren Buffett is a housing bull

Billionaire investor Warren Buffett believes housing is a better investment than stocks right now:

Warren Buffett says along with equities, single-family homes are a very attractive investment right now.

Appearing live on CNBC's Squawk Box, Buffett tells Becky Quick he'd buy up "millions" of single family homes if it were practical to do so.

If held for a long period of time and purchased at low rates, Buffett says houses are even better than stocks. He advises buyers to take out a 30-year mortgage and refinance if rates go down.

His housing recommendation is likely based on the fact that mortgage rates are incredibly low right now. Nationally, home prices are no cheaper than their pre-bubble norm, although it varies depending on where you live.

I believe that some housing markets are far better buys than others. Cities with very high unemployment rates have dirt-cheap home prices right now. Places like Las Vegas, Phoenix, Detroit, and most of Florida have prices below their historical norms.

Happy Valentine's Day, renters!

We get no respect, no respect at all:

In a survey of 1,000 single people, more than a third of women and 18% of men said they would much rather date a homeowner than a renter.

Ouch!

Only 2% of women said they preferred to date a man who rents, while only 3% of men said they would choose a woman who rents over one that owns her home, according to the survey, which was conducted by Harris Interactive for real estate site Trulia.

Both sexes also clearly prefer it when there's no roommate in the picture; 62% of survey respondents, men and women, prefer to date singles who live alone. ...

Trulia also asked which home features are the biggest turn-ons. Number one turned out to be a master bath. Men (64%) love that private sanctum almost as much as women (75%) do.

Walk-in closets were cited by 55% of men and 72% of women and gourmet kitchens got 51% of the male vote and 62% of the female. Hardwood floors, outdoor decks and home theaters also came in high on the list.

S&P/Case-Shiller HPI down in November

The November numbers for the S&P/Case-Shiller Home Price Index are out. The 20-city index is down 3.7% year-over-year and down 1.3% month-over-month:

Home prices posted a steep, month-over-month drop in November, falling 1.3%, according to the latest S&P/Case-Shiller 20-city report. Prices fell in 19 of the 20 cities the index covers.

Prices are down 3.7% from a year ago, and off 32.8% since they peaked in the summer of 2006. The index is currently only 0.6% above its March, 2011 low.

"Despite continued low interest rates and better real GDP growth in the fourth quarter, home prices continue to fall," said David Blitzer, spokesman for S&P.

December housing starts down 4.1% month-over-month; up 8% year-over-year

Housing starts fell in December compared with November. (FYI, housing starts numbers are usually seasonally adjusted.) However, they are up about 8% year-over-year. Keep in mind that we've had abnormally good weather this winter, which is great for home building.

It wasn’t exactly a banner December for the home-building industry.

The nation’s builders started construction on 4.1% fewer homes compared with a month earlier. Construction decreased to a seasonally adjusted annual rate of 657,000 in December, the Commerce Department said Thursday.

But the news wasn’t all gloomy. The main reason for the monthly decline was a more than 20% drop in construction of multifamily homes with at least two units, a part of the market that tends to swing around a lot.

Other data were more positive. Analysts often pay more attention to the single-family sector, which made up more than 70% of housing starts in December. Single-family construction was actually up 4.4% from a month earlier and reached the highest level since April 2010 – a time when builders were ramping up construction in response to a government tax credit for first-time home buyers.

The housing sector is gradually, tentatively, slowly healing after a collapse in prices that started 5 1/2 years ago. There have been some encouraging signs of late, and builders have been growing more optimistic.

But it’s clear that there’s a long way to go. Since 1959, there have been about 1.5 million new homes started per year, on average. Last year, construction was started on only 607,000 homes – the best year since 2008, but still the third-worst year since the government began keeping records.

The clueless Fed

The release of Federal Open Market Committee (FOMC) meeting transcripts from 2006 show how little America's top economic minds understand how leveraged asset bubbles harm the economy:

As the housing bubble entered its waning hours in 2006, top Federal Reserve officials marveled at the desperate antics of home builders seeking to lure buyers.

The officials laughed about the cars that builders were offering as signing bonuses, and about efforts to make empty homes look occupied. They joked about one builder who said that inventory was “rising through the roof.”

But the officials, meeting every six weeks to discuss the health of the nation’s economy, gave little credence to the possibility that the faltering housing market would weigh on the broader economy, according to transcripts that the Fed released Thursday. Instead they continued to tell one another throughout 2006 that the greatest danger was inflation — the possibility that the economy would grow too fast.

“We think the fundamentals of the expansion going forward still look good,” Timothy F. Geithner, then president of the Federal Reserve Bank of New York, told his colleagues when they gathered in Washington in December 2006. ...

The transcripts of the 2006 meetings, released after a standard five-year delay, clearly show some of the nation’s pre-eminent economic minds did not fully understand the basic mechanics of the economy that they were charged with shepherding. The problem was not a lack of information; it was a lack of comprehension, born in part of their deep confidence in economic forecasting models that turned out to be broken.

“It’s embarrassing for the Fed,” said Justin Wolfers, an economics professor at the University of Pennsylvania. “You see an awareness that the housing market is starting to crumble, and you see a lack of awareness of the connection between the housing market and financial markets.”

“It’s also embarrassing for economics,” he continued. “My strong guess is that if we had a transcript of any other economist, there would be at least as much fodder.” ...

The committee consists of the governors of the Federal Reserve and the presidents of the 12 regional banks.

“The speed of the falloff in housing activity and the deceleration in house prices continue to surprise us,” Janet Yellen, then president of the Federal Reserve Bank of San Francisco, said in September.

One builder she spoke with, she said, “toured some new subdivisions on the outskirts of Boise and discovered that the houses, most of which are unoccupied, are now being dressed up to look occupied — with curtains, things in the driveway, and so forth — so as not to discourage potential buyers.” ...

But the Fed’s chairman, Ben S. Bernanke, appears as the most consistent voice of warning that problems in the housing market could have broader consequences.

The general consensus on the board, summarized by Mr. Geithner, was that problems in the housing market had few broader ramifications. “We just don’t see troubling signs yet of collateral damage, and we are not expecting much,” he said at the September meeting.

Mr. Bernanke initially agreed, telling colleagues at his first meeting as chairman, in March, “I think we are unlikely to see growth being derailed by the housing market.”

As the year rolled along, however, Mr. Bernanke increasingly took the view that his colleagues were too sanguine.

”I don’t have quite as much confidence as some people around the table that there will be no spillover effect,” he said. ...

One fundamental reason for this blindness was that Fed officials did not understand how deeply intertwined the housing sector and financial markets had become. They also were convinced that financial innovations, by distributing the risk of losses more broadly, had increased the strength and resilience of the system as a whole.

So, for all the criticism you might give Ben Bernanke, apparently he's the least incompetent of the bunch.

I'll admit I didn't know that the housing bubble would cause a financial crisis. The best I can say for myself is that I expected a failure of Fannie Mae and Freddie Mac, but also expected more diversified financial institutions to be OK.

However, I expect people with Ph.D.s in economics to know a lot more about this stuff than I do. (After all, I'm a software developer, not an economist.) I especially expect it of economists who are supposedly so good at what they do that they get appointed to a post at the U.S. Federal Reserve.

DC-area homes of the 2012 presidential candidates

A bunch of websites are posting photos of the 2012 presidential candidates' homes, probably sparked by this Zillow Blog post. Here are the homes the candidates have in the DC area:

Newt Gingrich
7410 Windy Hill Ct, McLean, VA 22102
Value: $1,284,400

Rick Santorum
10607 Creamcup Ln, Great Falls, VA 22066
Value: $1,305,100

Jon Huntsman
2121 Leroy Pl NW, Washington, DC 20008
Value: $3,303,100

Immediately prior to his purchase of the home, it was used as the residence for contenders on the Bravo reality TV show "Top Chef: Season 7".

Barack Obama
1600 Pennsylvania Ave. NW, Washington, DC 20500
Value: $261,632,300

The deadbeat hasn't paid rent in three years! Zillow.com gets the zip code wrong. It's 20500, not 20006.

Ron Paul
I don't know were Ron Paul lives in the DC area, but he's trying to sell his Texas home over the internet for $63,500 more than Zillow thinks it's worth.

Zillow CEO on housing market

S&P/Case-Shiller Index falls yet again

I was on Christmas vacation last week. Here's some housing news that was released while I was gone:

Home prices fell for the sixth straight month in October, down 1.2% compared with September and 3.4% a year ago, according to the latest S&P/Case-Shiller 20-city index.

The decline was disappointing in light of several other recent reports, which painted a more positive picture of the housing market. ...

tight lending standards and a glut of foreclosures continue to weigh on the housing market, said Pat Newport, a housing market analyst for IHS Global Insight.

With so many homes for sale at distressed prices, the home price numbers come as no surprise, he said.

"The numbers are pretty bad and will get even worse over the next two years," he said.

The 20-city index has dropped every month since April. Since the housing bust began in mid-2006, homes have lost nearly 33% of their value.

CNN Money isn't clear about this, but they are referring specifically to the S&P/Case-Shiller 20-city seasonally-adjusted index.

The Wall Street Journal has a nice little graphic showing the year-over-year home price change measured by different sources:

National Association of Realtors overstated existing home sales by 16.7%

Last week I blogged about the National Association of Realtors overstating existing homes sales over the past five years. At the time we didn't know how much the Realtors overstated the numbers. Now we know they overstated them by 16.7%:

Existing home sales during the housing bust were actually 14.3% worse than previously reported, a revision to Realtors' group numbers shows.

On Wednesday, the National Association of Realtors (NAR) revised home sale counts back to 2007 due to flaws in their original data analysis.

In 2007, there were actually just 5.04 million existing home sales, 11% less than the 5.65 million originally reported. Even worse were 2008 and 2009, when there were 16% fewer sales than originally reported. Sales in 2010 were 15% lower.

"The errors started in 2007 and continued to accumulate over time," said Lawrence Yun, NAR's chief economist. ...

The data is "key to the economic outlook," said Mark Zandi of Moody's Analytics, "and the revisions help to explain the severity of the housing crash." ...

Some industry sources had been critical of the organization's data. In February, CoreLogic charged that NAR data was overestimating sales by 15% to 20%.

When NAR investigated, it found a "notable upward drift" in the numbers compared to other measurements such as courthouse deeds records, said Yun.

For anyone confused about where the 16.7% in the title comes from, the first sentence of the quoted article says sales were 14.3% worse than previously reported, and 100 / (100-14.3) = 16.7.