The besieged housing market has even further to fall before home prices really hit rock bottom.
According to Fiserv (FISV), a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006 and marking a triple dip in prices.
Several factors will be working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment, explained David Stiff, Fiserv's chief economist.
Should home values meet Fiserv's expectations, it would make it the third (and lowest) trough for home prices since the housing bubble burst.
The first post-bubble bottom was hit in 2009, when prices fell to 31% below peak. The First-Time Homebuyer Credit helped perk prices up by mid-2010, but by the time the credit expired, prices fell again.
In the second dip, which was reached last winter, prices were down 33%before staging a mild rally that was artificially spurred as banks slowed the processing of foreclosures following the robo-signing scandal, which found that loan servicers were rapidly signing foreclosures without properly vetting them.
Now that the scandal is mostly resolved, lenders are speeding more cases through the foreclosure pipeline and back onto the market, weighing on home prices even further.
Monday, October 31, 2011
Fiserv: Housing market to fall another 3.6% by June 2012
Fiserv is forecasting that home prices will experience a "triple dip" and fall to 35% below their 2006 peak by next June:
Saturday, October 29, 2011
Rents rising in the U.S.
As the home ownership rate in the U.S. continues to decline, it is pushing up rents:
Strong growth of rents and occupancy levels of rental apartments have pushed some building values to record levels as Americans shift away from home ownership.My own rent got jacked up more than usual this year. Perhaps it's time to do the contrarian thing and become a homeowner. Nah!
While concerns about the economy are cooling the market for most other types of commercial real estate, apartment rents and occupancies continue to be boosted by demand from millions of people who are victims of foreclosure or are unwilling or unable to buy their own homes.
At the end of the third quarter, 5.6% of the nation's apartments were vacant, down from 5.9% in the second quarter, and the lowest level since 2006, according to Reis Inc., a real-estate data service.
Friday, October 28, 2011
New home sales flat year-over-year
New home sales for September were up a decent amount month-over-month, but down very slightly year-over-year:
Sales of new homes, a benchmark indicator both for the housing market and the overall economy, rose slightly but remained slow in September.
Sales reached a 313,000 annual rate in September, 5.7% more sales than the revised estimate for August, according to a monthly report from the Census Bureau released Wednesday. But sales were off 0.9% compared with 12 months earlier.
New-home sales have been hovering around the 300,000 mark for many months, a shadow of the activity of the boom years, when monthly sales peaked at an annual rate of 1.4 million units.
Thursday, October 27, 2011
August Case-Shiller numbers up slightly month-over-month
...but down year-over-year:
S&P/Case-Shiller home-price data showed sideways movement in August, as prices were boosted from a month earlier thanks to seasonal factors but remained below year-ago levels.
The composite 20-city home price index, a key gauge of U.S. home prices, posted a 0.2% increase from July but fell 3.8% from a year earlier. Ten cities posted monthly declines, while the other 10 showed gains. Las Vegas was the only city that posted a new index level low and is 59.5% below its August 2006 peak.
Eighteen of the 20 cities posted annual declines in August, with just Detroit and Washington D.C. notching gains. On a seasonally adjusted basis, which aims to take into account the stronger spring-summer selling season, just six cities — Boston, Charlotte, Chicago, Dallas, Minneapolis and Washington, D.C. — posted monthly increases. The overall 20-city index was flat on a seasonally adjusted basis.
Monday, October 24, 2011
Regulators seize PMI Group!
I was wondering how private mortgage insurers were remaining in business. Now I guess I know. They're not!
Arizona regulators have taken over a big mortgage insurer and put restrictions on its claims payments, the latest indication that the housing bust is not finished taking casualties—and that lenders and investors are likely to suffer more losses.That's what you get for insuring people who put nothing down.
PMI Group Inc.'s mortgage-insurance unit had been paying about $1.5 billion a year in claims to reimburse lenders and mortgage investors such as Fannie Mae, Freddie Mac and Wells Fargo & Co. for some of their losses when homeowners default.
Now, the insurer will pay just 50% of claims in cash, and the remainder will be deferred, the company said in a posting on its website. ...
PMI was the third-biggest private-sector mortgage insurer as measured by insurance in force at the end of June, according to Inside Mortgage Finance, a trade publication. PMI joins Triad Guaranty Inc., a much smaller rival, in facing regulatory restrictions on payments since the mortgage meltdown began.
The Arizona Department of Insurance, which regulates the insurer because it initially was licensed in the state, now has "full and exclusive power of management and control of PMI," according to an Oct. 20 order posted on PMI's website.
Friday, October 21, 2011
Existing home sales up 11.3% year-over-year; prices down 3.5%
Existing home sales for September were down slightly month-over-month, but up big year-over-year. One reason for the big year-over-year rise in existing home sales may be that prices are lower than they were a year ago. As I often say, "drop prices, sell houses."
Existing-home sales were down in September on the heels of a strong gain in August, but remain well above a year ago, according to the National Association of Realtors®.I have long believed that the best way to get the housing market thriving again is to drop prices to the point where supply equals demand. Home sellers might not like it, but it's good for buyers and it's great for Realtors. For Realtors, the best way to make more money is to sell houses quickly. The best way to sell houses quickly is to convince the seller to drop the price.
Total existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, declined 3.0 percent to a seasonally adjusted annual rate of 4.91 million in September from an upwardly revised 5.06 million in August, but are 11.3 percent above the 4.41 million unit pace in September 2010. ...
All-cash sales accounted for 30 percent of purchase activity in September, up from 29 percent in August and 29 percent also in September 2010; investors make up the bulk of cash purchases.
Investors purchased 19 percent of homes in September, down from 22 percent in August; they were 18 percent in September 2010. First-time buyers accounted for 32 percent of transactions in September, unchanged from August; they were also 32 percent in September 2010.
The national median existing-home price for all housing types was $165,400 in September, down 3.5 percent from September 2010. Distressed homes – foreclosures and short sales typically sold at deep discounts – accounted for 30 percent of sales in September (18 percent were foreclosures and 12 percent were short sales), down from 31 percent in August and 35 percent in September 2010.
Total housing inventory at the end of September declined 2.0 percent to 3.48 million existing homes available for sale, which represents an 8.5-month supply at the current sales pace, compared with an 8.4-month supply in August.
Single-family home sales fell 3.6 percent to a seasonally adjusted annual rate of 4.33 million in September from 4.49 million in August, but are 12.2 percent above the 3.86 million-unit level in September 2010. The median existing single-family home price was $165,600 in September, down 3.9 percent from a year ago.
Existing condominium and co-op sales rose 1.8 percent a seasonally adjusted annual rate of 580,000 in September from 570,000 in August, and are 5.6 percent above the 549,000-unit pace one year ago. The median existing condo price was $163,800 in September, which is 1.0 percent below September 2010.
Wednesday, October 19, 2011
Housing starts up big; permits fall
U.S. housing starts were up 15% from August to September:
Housing starts rose 15 percent, or a seasonally adjusted rate of 658,000. That blew away analysts' forecasts of an increase to a 590,000-unit rate.Economists look to both housing starts and building permits as leading indicators, but building permits forecast further ahead than housing starts do.
Starts surged in September at their fastest annual pace in 17 months on a big increase in groundbreaking for multi-family units, while permits for future construction fell.
Building permits dropped 5 percent to 594,000.
Housing starts for buildings with two or more units rose 51.3 percent to a 233,000-unit rate. Single-family home construction — which accounts for a larger share of the market — increased 1.7 percent to a 425,000-unit pace.
Tuesday, October 18, 2011
Home ownership rate declined over the past decade
Despite a home ownership boom in the first half of the last decade, the overall trend for the decade was down:
This last bit is for Partisan:
The percentage of Americans who owned their homes has seen its biggest decline since the Great Depression, according to the U.S. Census Bureau.
The rate of home ownership fell to 65.1% in April 2010, 1.1 percentage points lower than it was in 2000. The decline was the biggest drop since the 1930s, when home ownership plunged 4.2%.
The most recent decade-over-decade drop, however, only tells half the story.
Home ownership during the 2000s "was really high in the middle of the decade, up to almost 70% at one point around 2004," said Ellen Wilson, a survey statistician with the bureau.
The crash from that peak was more than 4 percentage points in just about five years -- a far more dramatic decline than the 1.1% drop over the 10-year period.
This last bit is for Partisan:
Among the states, New York had the lowest home ownership rate of 53.3%, but the District of Columbia's home ownership rate was below that at 42%.
Saturday, October 15, 2011
Consumers pessimistic about home prices
U.S. consumers expect home prices to fall slightly over the next year:
Consumer expectations for U.S. home prices worsened significantly in September to register their weakest outlook in more than a year, according to a monthly survey from mortgage market enterprise Fannie Mae.
For its September reading, Fannie Mae said respondents now expect home prices to decline 1.1% over the next year, a steeper drop than the 0.5% decrease predicted in the August survey and the biggest decline expected to date.
Friday, October 14, 2011
Monday, October 03, 2011
Warren Buffett: New recession unlikely
Billionaire investor Warren Buffett thinks the likelihood of a new recession is low:
Positive
Negative
Borderline
The two borderline indicators have a history of producing lots of false positives. As the saying goes, "The stock market has predicted nine of the past five recessions." The financial stress indices are probably negative because of what's happening in Europe, rather than because of what's happening here.
This graph shows the Leading Index for the United States through August. Notice that while it normally dips during or prior to recessions, there is no dip this time.
Warren Buffett says Berkshire Hathaway has been buying stocks at bargain prices, including shares of his own company. ...I agree with him. I track eight specific leading indicators on the St. Louis Federal Reserve website. Of the eight, five are in positive territory, one is negative, and two are borderline. (For most of these indicators, I find the year-over-year percentage change to be a better leading indicator than the current level.)
The Omaha billionaire isn't worried his new purchases will be caught up in a 'double-dip' for the U.S. economy. He thinks "it's very, very unlikely we'll go back into a recession... We're coming out of a recession."
Positive
- Initial jobless claims (YoY)
- Interest rate spread between 3-month and 10-year Treasuries
- Manufacturer's new orders of capital and durable goods (YoY)
- Money supply growth (YoY)
- New housing permits (YoY)
Negative
- St. Louis & Kansas City financial stress indices
Borderline
- ISM Manufacturing Index
- S&P 500 (YoY)
The two borderline indicators have a history of producing lots of false positives. As the saying goes, "The stock market has predicted nine of the past five recessions." The financial stress indices are probably negative because of what's happening in Europe, rather than because of what's happening here.
This graph shows the Leading Index for the United States through August. Notice that while it normally dips during or prior to recessions, there is no dip this time.
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