Wednesday, August 31, 2011

Updated housing chart

I have updated my national housing graph to reflect the new S&P/Case-Shiller numbers.

Tuesday, August 30, 2011

S&P/Case-Shiller national index down 5.9% YoY; up 3.6% QoQ

In the second quarter (Q2) of 2011, the S&P/Case-Shiller National Home Price Index was down 5.9% since Q2 2010, but up 3.6% since Q1 2011:
Data through June 2011, released today by S&P Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index increased by 3.6% in the second quarter of 2011, after having fallen 4.1% in the first quarter of 2011. With the second quarter’s data, the National Index recovered from its first quarter low, but still posted an annual decline of 5.9% versus the second quarter of 2010. Nationally, home prices are back to their early 2003 levels.

As of June 2011, 19 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were up versus May – Portland was flat. However, they were all down compared to June 2010. Twelve of the 20 MSAs and both Composites have now increased for three consecutive months, a sign of the seasonal strength in the housing market. None of the markets posted new lows with June’s report. Minneapolis posted a double-digit 10.8% annual decline; Portland is not far behind at -9.6%. Thirteen of the cities and both composites saw improvements in their annual rates; however; they all are in negative territory and have been so for three consecutive months. ...

The chart [above] depicts the annual returns of the U.S. National, the 10-City Composite and the 20-City Composite Home Price Indices. ...

S&P Indices has introduced a new blog called This interactive blog delivers realtime commentary and analysis from across the Standard & Poor’s organization on a wide-range of topics impacting residential home prices, homebuilding and mortgage financing in the United States. Readers and viewers can visit the blog at, where feedback and commentary is certainly welcomed and encouraged.
Keep in mind that Q2 is the traditional spring buying season, when home prices typically rise. The seasonally adjusted numbers from Q1 to Q2 were basically flat (up 0.08%).

Pending home sales up 14.4% YoY

From the National Association of Realtors:
Pending home sales declined in July but remain well above year-ago levels, according to the National Association of Realtors®. All regions show monthly declines except for the West, which continues to show the highest level of sales contract activity.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, slipped 1.3 percent to 89.7 in July from 90.9 in June but is 14.4 percent above the 78.4 index in July 2010. The data reflects contracts but not closings.

Lawrence Yun, NAR chief economist, said sales activity is underperforming.

Monday, August 29, 2011

Thank the government, in part, for the high unemployment rate

Sometimes when politicians try to help people, they hurt people:
The painfully slow rate of job growth can be blamed at least in part on home mortgage modifications that reduce house payments for struggling homeowners, because such policies incentivize people to stay where they are instead of moving to better job markets, according to a new paper by researchers Kyle F. Herkenhoff and Lee E. Ohanian, both at UCLA.

The paper is one among a growing number papers that explore why mobility has decreased so drastically through the recession, and what the effects have been. Most economists would agree that reduced mobility increases unemployment: When people don’t move, they deny themselves the chance to find work in a city or state where jobs are more plentiful.

Saturday, August 27, 2011

The week in summary

On Monday, the Mortgage Bankers Association reported that mortgage delinquencies are rising again:
In another hit to the beleaguered housing market, a report out Monday found that the number of delinquent mortgage borrowers -- those who have missed at least one payment -- rose during the second quarter.

The delinquency rate grew only slightly, up 0.12 percentage points to 8.44%, but that reverses the steady improvement of the past two years.

The increase, as reported by the Mortgage Bankers Association (MBA), may not sound like much, but it could mean that the recovery in the housing market will take even longer than thought.

On Tuesday, the Commerce Department reported declining new home sales for the third month in a row:
U.S. sales of new homes declined in July for the third straight month, a sign of continued woes in the housing market.

Sales fell 0.7% in July to a seasonally adjusted annual rate of 298,000, the slowest pace since February, the Commerce Department reported Tuesday. Sales had reached 316,000 in April before slipping.
New home sales were still up 6.8% year-over-year.

On Wednesday, the FHFA reported that home prices fell 5.9% year-over-year:
Home prices in the U.S. fell 5.9 percent in the second quarter from a year earlier, the biggest decline since 2009, as foreclosures added to the inventory of properties for sale.

Prices dropped 0.6 percent from the prior three months, the Federal Housing Finance Agency said today in a report from Washington.

Also on Wednesday came news that Australia's housing bubble may be popping:
One of the few bright spots in real estate amid a three-year global slump, Australia now faces falling home prices and fears of overbuilding.

A downturn in Australia's real estate market will add to concerns of a two-speed economy in the resource-rich nation. Mining profits are surging due to heavy demand from China and other fast-growing Asian countries, but consumer businesses and manufacturing have faltered under the weight of the swollen Australian dollar, which is trading near 30-year highs to the U.S. currency.

On Thursday, RealtyTrac reported that 31% of homes sold were in some stage of foreclosure:
Nearly one-third of all U.S. homes sold in the second quarter of 2011 were in some stage of the foreclosure process or had been repossessed by a lender, according to numbers released today by RealtyTrac, an Irvine, Calif.-based real estate data provider.

Also on Thursday, the National Association of Realtors says it's really a landlord's market:
NAR expects vacancy rates in multifamily housing will drop from 5.5% to 4.6% in the third quarter of 2012. Vacancies below 5% generally are considered a landlord’s market, the trade group noted.

On Friday, another reason not to be a homeowner: Hurricanes
As Hurricane Irene bears down on the East Coast, many Americans are preparing for the worst. But whether they are covered for the ensuing damage is another matter entirely.

Between Wilmington N.C. and Boston, there are nearly 1.9 million residences and businesses that are at risk of storm surge flooding, according to CoreLogic, the financial analytics company. And nearly half of those properties lie outside of a designated flood zone and are likely to lack flood insurance.

Mortgage lenders require homes that lie within designated flood zones to be covered by flood insurance. This low-cost coverage — which runs as low as $129 a year — is provided by the federal government and purchased through insurers like Allstate Insurance and Farmers Insurance Group.

But homes outside of flood zones often go uncovered, mainly because homeowners don't realize that their existing policies don't cover floods or because they don't feel their home are at risk.
If you rent and your place gets flooded, you may lose your belongings, but the landlord takes the expensive structural damage losses.

Friday, August 26, 2011

Was it worth it?

Via Paul Krugman, here is the Congressional Budget Office's forecast of the output gap—the difference between potential real GDP and actual real GDP:

That looks to me like seven years of subpar economic performance in exchange for about five or six years of rising housing bubble. But Krugman thinks the seven years may be optimistic:
No, I don’t know where that recovery in 2015 is supposed to come from; my guess is that it’s basically the CBO unwilling to project a depressed economy more or less forever.
He adds:
The CBO also projects unemployment staying above 8 percent until late 2014 — again, with no clear explanation of why it should fall sharply in 2015. This translates into a human catastrophe for the long-term unemployed.
Bubble Meter was created to try to warn people of the housing bubble, but many didn't want to listen.

So here's the question: Was the party really worth the hangover?

I'm back from vacation

Funny thing: I just checked the web stats and Bubble Meter's readership hasn't declined at all in the past two weeks.

As compensation for the lack of blogging while I've been gone, I have temporarily disabled the requirement that people must log in to post comments.

Thursday, August 11, 2011

Bits bucket

I'm on summer vacation for the next two weeks. Consider the comments section of this post an open discussion forum.

Wednesday, August 10, 2011

Prospects for a housing recovery are declining

According to CNN/Money, the prospects for a housing recovery have slipped "out of sight":
Any glimmer of hope that the housing market will stage a recovery in the upcoming months has vanished, thanks to the recent spate of bad economic news that has been making headlines over the past several weeks.

According to the latest analysis of home price trends in 384 markets based on the Fiserv/Case-Shiller Indexes, it will be well into the first quarter of 2013 before median home prices across the nation will even be on par with prices from the first quarter of this year.

And that's not saying much. During the first quarter of 2011, prices fell in 302 of the 384 housing markets tracked by the Fiserv/Case-Shiller index, dropping by an average of 5.1% year-over-year.

As a result of continued weakness on the jobs front and the debt ceiling fiasco, Fiserv pushed back its projections of a housing market turnaround by three months. Now, it doesn't expect home prices to start gaining any ground until the second quarter of 2012.

Instead, Fiserv expects median home prices to continue to fall by an average of 3.1% between March 31 of this year and March 31, 2012. After that, it expects to see prices increase by 2.7% until the first quarter of 2013.
So, Fiserv expects the 5-year-old housing bust to continue for another year.

Tuesday, August 09, 2011

Mortgage giants downgraded

This was briefly mentioned in yesterday's post, but I'm giving it its own post for emphasis. The credit ratings of Fannie Mae, Freddie Mac, and other federal entities were downgraded by S&P yesterday:
Standard & Poor's on Monday downgraded the credit ratings of Fannie Mae, Freddie Mac and several other U.S. government entities, reflecting their dependence on federal support.

Included in S&P's latest downgrade were the senior issue ratings on debt issued by Fannie and Freddie, the giant mortgage-finance firms. Ten of the 12 Federal Home Loan Banks, which also provide funding for home loans, also received downgrades.

Monday, August 08, 2011

WSJ: S&P downgrade could discourage home buyers

Do the recent downgrades of Treasuries and the fall in the stock market discourage home buyers? The Wall Street Journal seems to think so:
When all is said and done, borrower psychology—and not mortgage rates—could face the bulk of any housing-market damage that stems from the Standard & Poor’s rating downgrades.

S&P downgraded the credit ratings of Fannie Mae and Freddie Mac on Monday morning to AA+ from AAA. That, of course, followed Friday’s rating cut for the United States. ...

At this point, it seems the downgrades are likely doing far more damage to consumer psychology than to mortgage rates, which have fallen to around 4.37% for a 30-year fixed rate loan, near historic lows.

The rout in the stock market, new worries about layoffs, and the euro-zone crisis will not help consumer confidence. “Who wants to get out of bed today, let alone buy a house?” says Lou Barnes, a mortgage banker in Boulder, Colo.

Thursday, August 04, 2011

Bin Laden Group to construct world's tallest building

Oh, the irony:
Saudi Arabia's Prince Alwaleed bin Talal announced plans to build the world's tallest building in Jeddah less than two years after the Burj Khalifa opened in Dubai at a height that many thought wouldn't be surpassed for years.

The planned tower will soar to 3,281 feet (1,000 meters) and will include a hotel, luxury condominiums and offices. It would dwarf the Burj Khalifa, which is 2,717 feet (828 meters), and would also be the world's tallest man-made structure.

Prince Alwaleed at a news conference Tuesday said his company, Kingdom Holding Co., had signed a 4.6 billion Saudi riyal ($1.23 billion) deal with Bin Laden Group to build the tower, which is expected to take more than five years to complete. Bin Laden Group is the largest construction firm in Saudi Arabia and is owned by the bin Laden family, which in the 1990s distanced itself from Osama bin Laden.
Since a member of the Bin Laden family destroyed our 2nd and 3rd tallest buildings, should we... hmm... no... well... perhaps... no... payback would be a bitch, though.

Wednesday, August 03, 2011

Housing inventories declined in the second quarter

From The Wall Street Journal:
The number of homes listed for sale declined sharply in a number of U.S. cities during the second quarter, offering glimmers of hope that some housing markets are starting to recover.

At the end of June, nearly 2.34 million homes were listed for sale on multiple-listing services in more than 900 metro areas, the lowest level for that time of year since at least 2007, according to In some cases, inventory levels are at their lowest levels since the housing downturn began five years ago.

Shrinking inventory often is seen as a positive sign for housing because it usually means demand is rising, which often leads to higher prices. But in the current environment, the decline in inventory may instead reflect how the market remains anything but healthy. While sales are picking up in some cities, analysts say the sharp decline in inventory also reflects the slow pace at which banks are processing foreclosures.

Tuesday, August 02, 2011

Home vacancies cause long-term damage. Luckily, they are declining.

CNBC's Diana Olick four days ago:
A new study by an economist at the Cleveland Federal Reserve finds today's foreclosures stay vacant far longer than the historical norm. Studying one Ohio county, Stephan Whitaker found, "foreclosed homes go through more than a year of very high vacancy rates following the auction and are substantially more likely to be vacant up to 60 months after the foreclosure." The higher the poverty rate in the area, the longer the property stays vacant.

Foreclosed homes obviously lower the value of surrounding homes, but Whitaker says the damage can go on much longer than we might think. "The data suggest that foreclosure may permanently scar some homes," he writes in his research.
The Wall Street Journal yesterday:
Fewer homes in the U.S. are sitting empty than earlier in the year. Residential vacancy rates ticked down during the second quarter from the first quarter as well as the year-ago period, to 9.2% for rental properties and 2.5% for privately owned homes. Both are below their recession-era levels but reflect continued weakness in the housing market.

Ten cities virtually untouched by the housing bust

Here's an interesting slideshow on

Monday, August 01, 2011

A summary of last week's housing data

I've been distracted by the real world recently, so I haven't been blogging much. Here are a few items I missed from last week.

According to S&P/Case-Shiller, year-over-year home prices fell 4.5% in May while seasonally-adjusted month-over-month home prices were flat:
May home prices in 20 major cities dipped 4.5% from one year ago, marking a continued decline in the already battered housing market.

The S&P/Case-Shiller report posted declines in both its 20-city composite and its 10-city index, which declined 3.6% year-over-year.

But housing did show some signs of life in May. Home prices ticked higher for the second consecutive month following an eight-month slide.

In May the 20-city index gained 1% compared with a month earlier, while the 10-city index rose 1.1% month-over-month.

David Blitzer, a spokesman for S&P, was cautious in detailing the index gains. ...

Blitzer attributed much of the home price increase for May to seasonal effects. Spring is the hottest time of year for home buying and the added demand usually drives prices higher.

Taking those seasonal factors into account, the 20-city index was flat and the 10-city showed a gain of just 0.1%.
Meanwhile, new home sales in June rose 1.6% year-over-year, but fell 1% month-over-month:
Sales of new homes slipped for a second straight month in June, unexpectedly falling 1%, as homebuilders remained reluctant to boost production.

The Census Bureau reported an annual sales rate of 312,000 new homes last month, down slightly from a revised rate of 315,000 homes in May. Compared to new home sales a year ago, June sales were up 1.6%.

Despite the year-over year uptick, the results disappointed. Economists had forecast a sales rate of 320,000 new homes, according to consensus estimates from

After falling to an all-time low of 278,000 in February, new home sales have been one of the weakest sectors of the economy.
The number of foreclosures fell 84% in the first half of 2011:
Foreclosures declined in more than 84% of U.S. metro areas during the first half of the year, according to the latest report from RealtyTrac, an online marketer of foreclosed properties. But that doesn't mean these markets are staging a turnaround.

"These dramatic decreases indicate the foreclosure pipeline continues to be clogged in many local markets across the country," said RealtyTrac CEO, James Saccacio, whose firm reported earlier this month that the national foreclosure rate fell 29% over the past 12 months.

Much of that backlog, he explained, is due to a glut of already-foreclosed properties that the banks are having a hard time selling and to the slowdown in the processing of foreclosures following the "robo-signing scandal" of 2010.

As a result of the scandal, in which the banks were accused of mishandling paperwork and failing to follow proper protocols, banks are being much more careful and many filings have been delayed.

The biggest decline in the number of foreclosures have come in judicial foreclosure states where defaults go through the courts and paperwork is scrutinized by judges.
And, finally, pending home sales—a leading indicator—rose in June:
Pending home sales increased in June following a wide swing down in April and then up in May, according to the National Association of Realtors®. Activity increased in the West and South but declined in the Midwest and Northeast; all regions show strong double-digit gains from a year ago.