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Some Good News on Single Family Homes

David Blitzer
Chairman of the Index Committee
S&P Indices
January 20 - 10:52 am
Comments: 1

December existing home sales rose 5% and December starts of single family homes rose 4.4%. While all these rates remain below the pace seen before the financial crisis, the figures are headed in the right direction.   December 2011 also is up from December 2010 for both existing home sales and single family housing starts by 3.6% and 11.6% respectively.  For much of 2011, apartment construction was the driving force in housing starts. Although this was down by 4.1% in December it was up 69.1% compared to December 2010.  Driven by apartments, total housing starts were up 24.9% from December 2010 to December 2011.  These reports suggest that while prices remain soft, both realtors and home builders are seeing some hints of possible improvement.

Posted in Housing Data | Tagged , , , , , | 1 Comment

S&P/Experian data show increases in consumer credit default rates in December.

Maureen Maitland
Vice President
S&P Indices
January 17 - 12:29 pm
Comments: 0

On January 17, S&P Indices and Experian released December data for the S&P/Experian Consumer Credit Default Indices, which measure changes in consumer credit defaults. The data showed an increase in the composite index, led by an increase in first and second mortgage and auto default rates. Bank loans were the only loan type that saw a drop in its default rate.

As seen in the graph below, the weight of first mortgage default rates tends to drive the trend in the national. First mortgage default rates rose for the fourth consecutive month, leading the same pattern for the composite.

S&P/Experian Credit Default Indices. Sources: S&P Indices and Experian

In December, first mortgage default rates rose to 2.19%, from 2.17% in November. This is the fourth consecutive time we have seen an increase in first mortgage default rates. Prior to that, first mortgage default rates last rose in November 2010. Since August, first mortgage default rates have risen from 1.92% to 2.19%. The composite also rose those months, from 2.04% to 2.24%. Second mortgage default rates rose to 1.33% in December from 1.26% in November. Recent weaknesses we have seen in other housing statistics, including home prices, are evident in these data. Prior to the most recent months, mortgage default rates had seen two years of declining trends. The key concern is how long this recent trend reversal will continue.

Posted in Consumer Credit, Housing Data | Tagged , , , , , , , | Leave a comment

S&P/Experian Credit Default Indices Indicate National Default Rates Increased for the Fourth Consecutive Month in December

Dave Guarino
Director, Global Index Communications
S&P Indices
January 17 - 9:00 am
Comments: 0

S&P Indices released  today the latest results for the S&P/Experian Consumer Credit Default Indices. Data is through December 2011. To access click: S&P/Experian Consumer Credit Default Indices – January 2012

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Foreclosures in 2011: RealtyTrac Reports Full Year Data

David Blitzer
Chairman of the Index Committee
S&P Indices
January 12 - 11:16 am
Comments: 0

Nationally in 2011 1.9 million homes were in some stage of the foreclosure process representing 1.45% of the homes in the US — the lowest percentage in four years.  The good news is that this is down by about a third from 2010.  In 2010 2.23% of homes were in foreclosure compared to 2.21% in 2009 and 1.84% in 2008.  The full report from RealtyTrac is on the web. State by state data show a large range of results.  Ranked by the percentage of homes in foreclosure the top few states should be no surprise to followers of the S&P/Case-Shiller Home Price Indices — numbers one, two and three are Nevada,  Arizona and California;  Michigan is sixth and Florida is seventh.   The state with the smallest percentage of homes in foreclosure is North Dakota at 0.03% — a mere 92 homes.   Among states that include cities covered by S&P/Case-Shiller, the smallest percentage of homes in foreclosure is found in New York at 0.33%.

California, being the largest state by population also had the most homes in foreclosure with 428 thousand. Close behind were some less populous states where the housing bust is a major issue. These include Florida with 182 thousand homes, Arizona with 114 thousand and Georgia with 110 thousand homes in foreclosure. Foreclosure rates are declined nationally from 2010 to 2011, and only seven states showed increasing foreclosures.

Ten States Account for 68% of Homes In Foreclosure

Top 10 States With Foreclosures

Posted in Foreclosures, Shadow Inventory, Housing Data, Uncategorized | Tagged , | Leave a comment

“What’s Going on in Atlanta???”

David L. Stiff
Chief Economist & Vice President
Fiserv Case-Shiller
January 5 - 4:29 pm
Comments: 3

I have received a good number of inquiries into the large decline in home prices for Atlanta. According to the latest S&P/Case-Shiller Home Price Indices report, home values in Atlanta fell 5% from September to October and 11.7% from October 2010 to October 2011.

Taking a closer look at Fiserv’s real estate transaction data for Atlanta, I determined that there was a significant increase in the sales volume of bank-owned properties in August, September and October in the Atlanta metro area. (Note: I looked at individual transaction counts, not repeat sale pair counts; however, I expect that the number of pairs with bank-owned sales as the 2nd transaction increased proportionally with the increase in individual bank-owned sales transactions.)

Changes in the volume of bank-owned sales can cause changes in average prices that will be reflected in the S&P/Case-Shiller Home Price Indexes. And, if bank-owned sales are concentrated within one price segment (e.g., low-priced homes), shifts in bank-owned sales volumes can cause the S&P/Case-Shiller indexes to shift relative to the aggregate indexes. During the housing bubble collapse, in many metro area markets, the proportions of bank-owned sales vs. all sales have fluctuated substantially over time (but not consistently across different metro areas). Bank-owned sales volumes also tend to drop less in winter months (than regular sales volumes), so their proportion of total sales often increases from October through March, leading to larger seasonal swings in the S&P/Case-Shiller Home Price Indices in markets with large numbers of foreclosed properties.

Atlanta non-REO sales volumes also increased in August and September, but on a smaller percentage basis than REO sales. Consequently, the proportion of REO sales increased. Changes in the REO proportion of sales have been causing fluctuations in average prices in many markets, especially those with large foreclosure inventories.

I remain uncertain as to why REO and non-REO sales volumes spiked in August and September. This is not the typical seasonal pattern in Atlanta – in previous years, sales volumes tended to peak in July. It is certainly not out of the realm of possibilities that potential homebuyers (including investors) are jumping into the market to try to catch prices near a bottom.

Posted in Economic Data, Housing Data, S&P/Case-Shiller Indices | Tagged , , , , , , , | 3 Comments

Fed Puts Push for Housing

David Blitzer
Chairman of the Index Committee
S&P Indices
January 5 - 11:00 am
Comments: 2

Ben Bernanke, chairman of the Federal Reserve, sent an open letter and report to the chairs of the House and Senate Banking, Housing and Urban Affairs Committees urging them to consider additional steps to support housing.  The report argues that housing in the US continues to suffer from excess supply, high rates of foreclosure, limited access to mortgages and weak prices and that these conditions retard economic growth.  Three general policy areas are focused on: limiting increases in new supplies of unsold homes, removing obstacles that prevent credit-worthy borrowers from getting mortgages and reducing the number of homeowners pushed into foreclosure.   One major focus is the large number of REO houses — real estate owned by banks, other lenders, mortgage servicers or Fannie Mae and Freddie Mac.  The Fed argues that the demand for rental housing is rising in many cities while the supply of rental homes is not increasing fast enough so rents are being pushed higher.  The report proposes policies to move REO homes into the rental market — the policies vary depending on whether the houses are owned by banks, other lenders, Fannie Mae or Freddie Mac so the issues aren’t simple or direct.

The report also highlights the tightening of mortgage lending standards during 2007-2009, after the damage from overly lax lending became all too clear, and points out that the Fed’s own surveys of bank lending terms reveals little or no relaxation of tighter standards since 2009.  One segment of the market that is particularly hard hit by tight lending standards is first time home buyers who tend to be younger and have fewer financial resources than other home buyers. The problem for the housing market is that first time home buyers are normally an important source of demand for housing.  Finally, the report recognizes that programs to assist home owners at risk of default and foreclosure — HARP and HAMP — have been less successful than hoped.  Yet finding ways to help this group of home owners is essential to helping housing.

The two key aspects of the report are the Fed’s push coming from the top and the focus on moving houses into the rental market.  What happens next is probably a question for politics, not economics or housing.

Posted in Housing Data | Tagged , , , | 2 Comments

House Prices and the Unemployment Rate

David Blitzer
Chairman of the Index Committee
S&P Indices
January 4 - 5:15 pm
Comments: 2

On Friday the Bureau of Labor Statistics will release the unemployment rate for December.   Whatever the numbers look like we are sure to hear a debate about housing and unemployment — are they related, which causes which and does one hold the key to solving the other.  A quick look at the way home prices in the 20 S&P/Case-Shiller cities have moved in the year ended in October and unemployment rates reported for those same cities in November suggests that the two are related.  The chart shows a scatter diagram of the unemployment rate on the vertical axis and the change (mostly decline) in home prices on the horizontal axis.  The higher the unemployment rate, the more home prices dropped.

Home Prices and the Unemployment Rate

Scatter Diagram of Unemployment and Change in Home Prices

There doesn’t tell whether falling home prices raise unemployment or high unemployment depresses home prices. In fact, it is quite possible that some other factor is driving both house prices and unemployment.  However, since unemployment is an important measure of a local economy, it should be no surprise that one of the better performing cities for home prices, Washington DC, has one of the lowest unemployment rates.   The table shows the data used in the chart.

Data for the Chart

Home Prices and Unemployment Rate Table

Posted in Employment and Unemployment, Other Housing Data, S&P/Case-Shiller Indices | Tagged , , , , | 2 Comments

Condo prices largely weaken in October

Maureen Maitland
Vice President
S&P Indices
January 4 - 10:59 am
Comments: 1

October 2011 data for the S&P/Case-Shiller Home Price Indices were released on Tuesday December 27th, revealing monthly declines in condo prices in four of the metro areas – Boston, Chicago, Los Angeles and San Francisco. The San Francisco index reported the largest decline, down 2.6%; in October versus September, but Chicago was close behind, down 2.5%.  The LA condo index fell by 1.7% and the Boston index by 1.6%. Condo prices in New York rose marginally, by 0.1%, in October, their fifth consecutive monthly increase, and are showing positive annual rates of change, up 0.5%.

With October’s report, Los Angeles condo prices have fallen 15 consecutive months. The index was down 8.2% in October 2011 versus October 2010, which is worst annual rate of the five markets covered by our indices, and hit a new crisis low in October 2011. San Francisco’s condo market is now down six consecutive months and also posted a new crisis low in October. Average condo prices in San Francisco are down 8.0% versus October 2010. Chicago prices are down 7.7%.

The chart below compares the index levels for the five condo markets covered by the indices, rebased to 1995 = 100. The blue and red lines represent Los Angeles and San Francisco, respectively, where you can see the 15 month declining trend continued for these two markets in October. On average Los Angeles condo market prices are back to their mid-2003 levels; while San Francisco prices are back to mid-2002 levels.

S&P/Case-Shiller Condo Price Indices. Sources: S&P Indices and Fiserv.

 

On a relative basis the New York condo market is the most stable, as the table below highlights. New York condo prices were the only ones up on both a monthly and an annual basis in October.

S&P/Case-Shiller Home and Condo Price Indices, comparative statistics.

 

The chart below illustrates the differences between New York, Los Angeles and Sand Francisco over almost 12 years. The green line clearly shows the New York condo market is the best relative performer coming out of the recent crisis.  Condo prices are still up over 102% versus January 2000.  By comparing the green, grey and orange lines, you can see that the New York condo market has been fairly stable over the past three years and has been on an upward trend since January 2011; whereas the California markets continue to weaken. The LA condo market has fallen by 40.8% since its July 2006 peak; the San Francisco market has fallen by 35.6% since its October 2005 peak; but the New York market has only fallen by 12.8% from its February 2006 peak.

S&P/Case-Shiller Home and Condo Price Indices. Sources: S&P Indices and Fiserv

 

Posted in Economic Data, Housing Data, S&P/Case-Shiller Indices | Tagged , , , , , , , , , , , , | 1 Comment

Video: economic momentum to weather the storms

Beth Ann Bovino
Senior Economist
Standard & Poor’s Ratings Services
January 4 - 9:53 am
Comments: 0

In this weeks Economic Update on Credit Matters TV,  I note that  recent economic data continues to show improvement. Although the weak S&P/Case-Shiller price data threw some cold water on the party, the overall trend appears to be moving in the right direction. While the recovery still faces headwinds going into the new year, the buildup in economic momentum will help the economy weather the storm.

To view the entire CMTV video, click here.

 

Posted in Economic Data, Housing Data | Tagged , | Leave a comment

Home Prices Corrected for Inflation at 2001 Levels

David Blitzer
Chairman of the Index Committee
S&P Indices
December 31 - 3:13 pm
Comments: 5

Take inflation out of home prices and we’re back to 2001 — ten years ago.  The chart shows the S&P/Case-Shiller 10-City Composite Index in nominal (or current dollar) terms along with the index deflated  by the Consumer Price Index.  Looking at the dashed orange lines near the lower right hand corner, one sees that prices haven’t gotten much beyond where they were in early 2001.   In fact, allowing for a dip in home prices in the 1990s when inflation rose faster than houses, we’re almost back to 1989.

Home Prices and the CPI

Back to 2001

This shouldn’t suggest that home prices never rise faster than inflation any more than the arguments for investing in your home — they’re not making any more land or everyone has to live somewhere — should be ignored. Rather, the run-up and the run-down in prices in the 2000s didn’t do much for average home values while they wreaked havoc on the economy.  Is buying a home a good idea?  There isn’t a general answer to the question because it depends on the economy,  the real estate market and most of all on the needs, desires and finances of the potential buyer.

Posted in Economic Data, Housing Data, Inflation | Tagged , , , | 5 Comments

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