Tuesday, May 31, 2011

Case-Shiller national index down 5.1% YoY

This housing chart shows the year-over-year percentage change in the 20-city index, which is down 3.6% since March 2010:

The S&P/Case-Shiller national index is down 5.1% year-over-year:
U.S. home prices fell 4.2% in the first quarter, hitting their lowest levels since mid-2002 after falling 3.6% in the fourth quarter, according to the S&P Case-Shiller home-price indexes.

"This month's report is marked by the confirmation of a double-dip in home prices across much of the nation," said David Blitzer, chairman of S&P's index committee. "The National Index fell 4.2% over the first quarter alone, and is down 5.1% compared to its year-ago level. Home prices continue on their downward spiral with no relief in sight," he added. ...

Once federal home-buyer tax credits expired last year, the indexes — based on the three-month averages of home prices — started to fall again in August, increasing fears of a double dip in the home-buying market.

While other parts of the economy have started to show improvement, the housing market continues to sputter as U.S. unemployment remains high and a steady supply of foreclosures weigh on home sales and prices.
And The Wall Street Journal gives us this little reminder:
The National Association of Realtors said earlier this month that existing home sales eased 0.8% in April from March, while prices dropped 5%.
Yep, that's right, "eased," which means journalists are parroting the Realtors' spin verbatim.

And this is for you, Partisan:
Only the Washington, D.C., and Seattle markets saw month-to-month growth of 1.1% and 0.1%, respectively.
Finally, here's how the Case-Shiller results compare to other indexes:
What are other price indexes showing?

The CoreLogic index, which is used by the Federal Reserve, shows that prices in March were down 7.5% in March from one year earlier. When excluding distressed sales, prices were down by 1%. A separate repeat-sales index that excludes foreclosure sales from FNC Inc. shows that prices nationally were down 6.3% in March from one year ago.

Zillow’s national home value index, which excludes foreclosures but not short sales, was down 8.2% in March from one year ago and has declined for 57 consecutive months.
Personally, I think this would all be behind us if Congress hadn't artificially propped up the market from 2009-2010.

Monday, May 30, 2011

April pending home sales decline from month earlier and year earlier

April 2011 pending home sales fell 11.6% since March 2011, and 26.5% since April 2010:
The number of people who signed contracts to buy previously occupied homes in the U.S. tumbled last month, the latest sign that the battered sector is struggling to rebound.

The National Association of Realtors’ seasonally adjusted index for pending sales of existing homes decreased 11.6% on a monthly basis to 81.9, the industry group said Friday.

March’s reading was revised down to 92.6 from an original reading of 94.1. ...

The pending sales index was 26.5% below its level in April 2010, which is when a tax subsidy for first-time home buyers expired. ...

A sale is considered pending when the contract has been signed but the transaction hasn’t closed. Pending sales typically close within one or two months of signing.

Lawrence Yun, the NAR’s chief economist, said the drop may reflect an economic soft patch in April driven by higher oil prices, severe weather and a bump in unemployment claims.

Wednesday, May 25, 2011

FHFA reports declining Q1 2011 home prices

I think I've said this a few times in the recent past, but just to reiterate: Home prices are still falling!
Here’s some more bad news for the housing market: U.S. home prices posted the sharpest quarterly decline in more than two years in the first three months of this year, according to a government index.

On a quarterly basis, home prices adjusted for seasonal factors were down 2.5% in the first quarter from the fourth quarter of 2010 and were down 5.5% from the same quarter a year ago, according to the Federal Housing Finance Agency’s home price index released Wednesday. It was the steepest quarterly decline since the end of 2008. ...

The FHFA’s index is calculated by using the prices of houses purchased with mortgages backed by government-controlled mortgage companies Fannie Mae and Freddie Mac.

Tuesday, May 24, 2011

New single-family home sales up 7.3% MoM; down 23.1% YoY

New single-family home sales are up 7.3% in April from a month earlier, but down 23.1% from April 2010:
New U.S. single-family home sales rose unexpectedly in April to notch their second straight month of gains and prices increased, according to a government report on Tuesday that offered some hope for the stagnant housing market.

The Commerce Department said sales increased 7.3 percent to a seasonally adjusted 323,000 unit annual rate, the highest level since December, from a slightly upwardly revised 301,000-unit pace in March. ...

However, compared to April last year sales were down 23.1 percent. ...

While the report cast a positive light on the housing market, it did little to change perceptions the economy remained mired in a soft patch.

Data ranging so far ranging from retail sales to industrial production have painted a picture of an economy struggling to regain momentum as the second quarter started, with employment only the bright spot.

Monday, May 23, 2011

What caused (and didn't cause) the housing bubble: A look at the evidence

About a month-and-a-half ago, I gave a presentation on the housing bubble in an economics of money and banking class I was taking. I have been meaning to explore some of the parts of the presentation on this blog, but I haven't gotten around to it. Anyway, I thought I'd share the outline of the presentation with you, although it lacks my commentary. I can summarize my commentary as follows: All of the hypotheses about what caused the bubble have problems, although Ben Bernanke's "global saving glut" idea is the best so far.

You can read the outline of my housing bubble presentation here.

Friday, May 20, 2011

Realtors: Existing home sales "eased" in April

Note that when the Realtors say "eased", they really mean "declined". From their press release:
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, eased 0.8 percent to a seasonally adjusted annual rate of 5.05 million in April from a downwardly revised 5.09 million in March, and are 12.9 percent below a 5.80 million pace in April 2010; sales surged in April and May of 2010 in response to the home buyer tax credit. ...

A parallel NAR practitioner survey shows 11 percent of Realtors® report a contract was cancelled in April from an appraisal coming in below the price negotiated between a buyer and seller, 10 percent had a contract delayed, and 14 percent said a contract was renegotiated to a lower sales price as a result of a low appraisal. ...

The national median existing-home price for all housing types was $163,700 in April, which is 5.0 percent below April 2010. Distressed homes – typically sold at a discount of about 20 percent – accounted for 37 percent of sales in April, down from 40 percent in March; they were 33 percent in April 2010. ...

Total housing inventory at the end of April increased 9.9 percent to 3.87 million existing homes available for sale, which represents a 9.2-month supply at the current sales pace, up from an 8.3-month supply in March. ...

[NAR President] Phipps added that proposals and regulations are being considered in Washington that could further constrain the housing market. “One of the most damaging proposals would effectively raise downpayment requirements to 20 percent, which would slam the brakes on the housing market,” he said. “What we need to do is simply return to the sound standards that were in place before the introduction of risky mortgage products.”
I strongly believe mandatory 20% down payments would have prevented the housing bubble, and thus the financial crisis and recession, because home buyers would have paid more attention to the price of the house rather than just the interest rate (which quite often was just a teaser rate).
Single-family home sales slipped 0.5 percent to a seasonally adjusted annual rate of 4.42 million in April from 4.44 million in March, and are 12.6 percent below the 5.06 million pace in April 2010. The median existing single-family home price was $163,200 in April, which is 5.4 percent below a year ago.

Existing condominium and co-op sales fell 3.1 percent to a seasonally adjusted annual rate of 630,000 in April from 650,000 in March, and are 15.0 percent below the 741,000-unit level one year ago. The median existing condo price5 was $167,300 in April, down 2.3 percent from April 2010.
Not a lot of good news for those hoping for an end to the real estate decline—and this is from a NAR press release!

Thursday, May 19, 2011

How buyers lost money with the home buyer tax credit

SmartMoney explains how free money from the government became a money loser for home buyers:
The government's recent $8,000 cash incentive for first-time home buyers has proved even more costly for recipients than for taxpayers. ... Typical buyers have lost twice as much to price declines as they received from the program.

The median home value fell to about $170,000 in March from $185,000 a year earlier, according to Zillow.com. That means a buyer who closed on a house just before the tax-credit program expired in April 2010 collected $8,000 but has since lost $15,000 in value. Those who bought earlier in the program have done worse; the median price is down $20,000 from March 2009. ...

The credit wasn't great for taxpayers, either. IRS says it paid $26 billion in home buyer credits in 2009 and 2010, enough to cover the maximum $8,000 credit for more than 3 million buyers. (It says at least $513 million went for fraudulent claims. Some claimants hadn't bought houses. Some filed twice. Some were under age 18 or incarcerated.)

Tuesday, May 17, 2011

Spin vs. reality

The Wall Street Journal reports:
U.S. home builders’ confidence remained stuck at an extremely low level in May as the battered housing market continues limping toward recovery.

The National Association of Home Builders trade group said Monday its closely watched housing-market index was unchanged at 16 this month as expectations for single-family sales over the next six months fell, while traffic from potential buyers and current sales inched up. The index has been at that level for six of the last seven months. Readings at 50 and above indicate a positive view of the market. (The most recent time the home builders’ confidence gauge hit positive territory—that is, 50 or better—was April 2006. The latest 16 reading must mean that builders are pretty down.)

Builders continue fretting about bargain-priced competition from foreclosures and other distressed properties, as well as proposals to scale back government support for housing. Many consumers remain on the sidelines, afraid that home prices have further to fall. Meanwhile, many would-be buyers can’t qualify for a loan.
Regarding the California housing market, they write:
Sales of single-family homes and condominiums were down last month by 3.3% from March and by 6.1% from one year ago, when sales were artificially boosted by federal tax credits, according to a report Monday from DataQuick, a real-estate research firm. Southern California had its worst April in three years.
And CNN Money reports:
New home construction tumbled in April, the government said Tuesday, as the nation's housing market remains weak.

Housing starts, the number of new homes being built, fell 10.6% in April to an annual rate of 523,000 units, down from a revised 585,000 in March, the Commerce Department said.
How did the National Association of Realtors spin the current state of the housing market?
Housing and Economic Forecast Points to Rising Activity
Realtors® Urged to "Seize the Day"
Over the past five years, I have repeatedly noticed that we don't get positive spin from the home builders, just from the Realtors.

Monday, May 16, 2011

Is housing hurting the economic recovery?

At macroblog, Dave Altig asks whether housing is hurting the economic recovery. He answers with a quote from Atlanta Fed President Dennis Lockhart:
...can we have high-quality growth while the residential real estate and commercial real estate sectors continue to be so weak? Not completely, in my opinion. The recovery will progress, but it will not be robust until we work through the economy's serious imbalances, including those in the real estate sector.

As I look ahead, I think the most reasonable assumption is that improvement of the real estate sector will lag an otherwise improving economy. But I am encouraged by the fact that the economy is increasingly on firmer footing.
Here are more thoughts from Dennis Lockhart on the housing market:
The residential real estate market remains depressed. In my baseline forecast, the housing sector will contribute only modestly at best to economic growth this year and next.

The housing sector impacts economic growth in two basic ways—one direct and one indirect. The direct effect primarily comes through the construction of new homes and production of building materials and household products. Indirectly, the housing sector contributes to growth through its effect on household balance sheets, which can influence consumer spending. Another indirect effect relates to banks' balance sheets and the health of the financial system.

To assess how direct and indirect effects will play out, let me provide some perspective on the state of the residential sector.

Home sales have not shown any clear trend of improvement since the end of the recession, except for a short pick-up during the period of the federal tax credit last year. From the peak five years ago, sales of existing homes are down nearly 50 percent and are close to the 1998 level. New home sales have fallen almost 80 percent from the peak and are at levels not seen since these data were first collected in the early 1960s.

Why such weak sales? There are several explanations. Tougher underwriting standards have shrunk the pool of potential homebuyers. Entry-level homebuyers, who typically have the weakest credit histories, continue to experience the most difficulty in obtaining mortgage financing. And anecdotal information suggests this could be a longer-term issue. At the same time, many potential move-up buyers are blocked because they're either underwater in their current mortgage or don't have enough equity to meet the down payment requirements for a new mortgage. The real estate analytics firm CoreLogic estimates that about 23 percent of residential mortgages are underwater.

On the supply side, existing home inventory levels remain elevated, in part due to the great number of distressed properties on the market. These include bank-owned properties and properties where the loan is in default or the property is in the process of foreclosure. ...

Because of the factors I've discussed, I do not expect significant new residential construction nationally. Thus, it's unlikely that residential real estate will directly contribute much to GDP growth this year or next.

Thursday, May 12, 2011

My housing graph in Chinese

Apparently, word gets around:

Click on the screen shots to see the actual web pages.

A link to my housing graph labeled "CLICK HERE" can also be found at the very bottom of a recent NBC Los Angeles news story.

Wednesday, May 11, 2011

Conforming loan limit to come down in high-cost areas

As The New York Times reports, the conforming loan limit in high-cost areas will come down soon:
By summer’s end, buyers and sellers in some of the country’s most upscale housing markets are slated to lose one their biggest benefactors: the deep pockets of the federal government. ...
By summer's end? Really? Autumn begins on September 23. The change occurs on October 1after summer's end.
For the last three years, federal agencies have backed new mortgages as large as $729,750 in desirable neighborhoods in high-cost states like California, New York, New Jersey, Connecticut and Massachusetts. Without the government covering the risk of default, many lenders would have refused to make the loans. With the economy in free fall, Congress broadened its traditionally generous support of housing to a substantial degree.

But now Democrats and Republicans agree that the taxpayer should no longer be responsible for homes valued well above the national average, and are about to turn a top slice of the housing market into a testing ground for whether the private mortgage market can once again go it alone. The result, analysts say, will be higher-cost loans and fewer potential buyers for more expensive homes.

Michael S. Barr, a former assistant Treasury secretary, said the federal government’s retrenchment would be painful for many communities. “There’s always going to be a line, and for the person just over it it’s always going to be an arbitrary line,” said Mr. Barr, who teaches at the University of Michigan Law School. “But there is no entitlement to living in a home that costs $750,000.” ...

The federal government last year backed nine out of 10 new mortgages nationwide, and losses from soured loans are still mounting. Fannie Mae, which buys mortgages from lenders and packages them for investors, said last week it needed an additional $6.2 billion in aid, bringing the cost of its rescue to nearly $100 billion.
The fact that Fannie Mae and Freddie Mac are losing billions of dollars on recent loans means that they have been giving people loans for less than the cost of the loans. It's funny how politicians scolded banks for engaging in "reckless lending," then proceeded to engage in the same activity themselves.

Tuesday, May 10, 2011

U.S. housing price decline accelerating

According to Zillow.com, in Q1 2011 housing prices experienced their biggest quarterly decline since 2008:
Home values posted the largest decline in the first quarter since late 2008, prompting many economists to push back their estimates of when the housing market will hit a bottom.

Home values fell 3% in the first quarter from the previous quarter and 1.1% in March from the previous month, pushed down by an abundance of foreclosed homes on the market, according to data to be released Monday by real-estate website Zillow.com. Prices have now fallen for 57 consecutive months, according to Zillow.

Last year, the housing market showed signs of improving as price depreciation slowed in some markets and stabilized in others. In response, a number of economists began forecasting that housing would hit a bottom in late 2011, then begin to recover. But the improvements, spurred by federal programs that gave buyers up to $8,000 in tax credits, proved fleeting. Sales collapsed when the credits expired last summer, and prices in many markets have been falling ever since.

While most economists expected sales to decline after tax credits expired, the drag on the market has been greater than many anticipated. "We expected December and January to be bad" as the market reeled from the after-effects of the tax credit, said Stan Humphries, Zillow's chief economist. But monthly declines for February and March were "really staggering," he said. They indicate "a reflection of the true underlying demand, which is now apparent because most of the tax credit is out of the system, and it's being completely overwhelmed by supply." ...

Prices are decelerating in large part because the many foreclosed properties that often sell at a discount force other sellers to lower their prices.
Personally, I think that if the federal government hadn't tried to artificially prop up housing prices in 2009-2010, the market would already have hit bottom and we'd be seeing recovering housing prices now. The desire to avoid housing pain in 2009 simply delayed the pain until 2011.

Monday, May 09, 2011

Foreclosures continue to rise even as mortgage delinquency rates fall

Mortgage delinquency rates have been falling for a while now—down 12% in March alone—yet foreclosure rates continue to creep upward.

In the longer term I expect that declining delinquency rates will eventually lead to declining foreclosure rates, but apparently we're not there yet.

Friday, May 06, 2011

U.S. home-ownership rate continues to decline

After rising to an all-time high during the upside of the bubble, America's home-ownership rate is now back down to where it was in 1998:
In the first quarter, 66.5% of Americans owned homes, down from 67.2% a year earlier, the Census Bureau reported. The rate last hit this level in 1998.

During the boom, when easy credit made mortgages available with less regard for income or ability to pay, the ownership rate surged to a record 69.2% in 2004′s second and fourth quarters and stayed near that level until the recession deepened.

Now, some industry watchers expect the rate to slip below 65%. Housing experts say each 1% decline in the home ownership rate represents the movement of one million households to rentals. Some people can’t buy homes, while others just don’t want to.

Tuesday, May 03, 2011

Pending home sales up

Pending home sales, a leading indicator, are up even as prices are expected to continue falling:
Here’s a bit of good news for the existing-home market: The National Association of Realtors’ monthly index for pending sales climbed 5.1% to 94.1 in March. That is (drumroll) the highest reading since November.

It was the second-straight monthly increase for the index, which tracks ahttp://www.blogger.com/img/blank.gifgreements to purchase homes. The results beat expectations: Economists were looking for a 1.5% increase.

But, before you break out the bubbly, know that the reading is 26% below its April 2005 peak. Plus, prices, already down 30% from the peak, continue their downward spiral. The median sales price for an existing home is forecast to fall to $169,800 this year, down from $172,900 in 2010.
Here's the spin from the National Association of Realtors:

U.S. housing prices still falling

Sorry about the lack of blogging over the past two weeks. Here's some of what I missed. The S&P/Case-Shiller 20-city index shows U.S. home prices are still falling.
Home prices in February sank 3.3% to just above the post-crisis lows reached in April 2009. It was the seventh straight month of declines.

Home values are down 32% from their peak set in May of 2006, according to the S&P/Case-Shiller index of home prices in 20 cities.

"There is very little, if any, good news about housing," said David Blitzer, spokesman for S&P. "Prices continue to weaken, trends in sales and construction are disappointing."

The drop has come in two stages. First, the index recorded 36 months of nearly uninterrupted declines after reaching the spring 2006 peak. Then came a 13-month upswing during which the index recorded a 5% gain. That rebound ended last June.

Since then, the index has recorded losses every month and it has now edged closer to a new low — the dreaded double-dip. ...

Economists say the initial rebound after the financial crisis was artificially inflated by government initiatives.

Lawmakers implemented a tax credit for homebuyers. And the Federal Reserve helped keep mortgage rates low.

Also artificially supporting prices at the time was a decrease in the supply of foreclosed properties. That was the result of government loan modification programs, but many foreclosed properties have again come back to market.