Widespread Gains in Home Prices for February According to the S&P/Case-Shiller Home Price Indices

Data through February 2015 show that home prices continued their rise across the country over the last 12 months. S&P/Case-Shiller Home Price Indices ─ February 2015

Share of Underwater Loans Ticks Up

RealtyTrac®  reported today that the percentage U.S. residential properties that are seriously underwater — where the combined loan amount secured by the property is at least 25% higher than the property’s estimated market value — ticked up to 13.2% percent of all properties with a mortgage in the 2015 first quarter from 12.7% in the 4th quarter of 2014. This was the first increase since RealtyTrac’s records began in 2012.


Markets with the highest percentage of seriously underwater properties in Q1 2015 were Lakeland, Florida, (28.7%), Las Vegas, Nevada (28.4%), Cleveland, Ohio (28.2%), Akron, Ohio (27.2%), Orlando, Florida (26.1%), Tampa, Florida (25.0%), Chicago, Illinois (24.7%), Palm Bay, Florida (24.5%) and Jacksonville, Florida (24.3%).

Markets where the share of distressed properties —  those in some stage of foreclosure —  that were  seriously underwater exceeded 50% in the first quarter of 2015 included Las Vegas, Nevada (57.6%), Lakeland, Florida (55.1%), Cleveland, Ohio (53.1%), Chicago (52.6%), Palm Bay, Florida (52%), Tampa, Florida (51%) and Jacksonville, Florida (49.4%).

The share of equity rich U.S. residential properties with at least 50% positive equity at the end of the first quarter was 19.8%. This is down slightly from Q4 2014 at 20.3%, but up 0.2 percentage points from the first quarter of 2014. Major metro areas with the highest percentage of equity rich properties were San Jose, California (43.7%), San Francisco, California (38.6%), Honolulu, Hawaii (36.2%), Los Angeles, California (32.2%), New York (31.0%), Pittsburgh, Pennsylvania (29.7%), Poughkeepsie, New York (28.3%), Oxnard, California (27.7%) and San Diego, California (27.0%).

As of the end of the first quarter, 35.1% of all distressed properties — those in some stage of foreclosure — were seriously underwater, up 0.5 percentage points from the 34.6% seriously underwater in the fourth quarter of 2014, but still down from 45.0% seriously underwater in the first quarter of 2014. The share of distressed properties with positive equity (42.1%) surpassed those that were seriously underwater (35.1%) in the first quarter, continuing the trend from previous quarter. Those states with the highest% of distressed properties with positive equity included Colorado (76.1%), Oklahoma (69.8%), Texas (68.1%) and Minnesota (67.9%) and Louisiana (63.8%).

National Credit Default Rates Flat Despite Jump in Bank Card Defaults in March 2015 According to the S&P/Experian Consumer Credit Default Indices

S&P Dow Jones Indices released the latest results for the S&P/Experian Consumer Credit Default Indices. Data is through March 2015.  S&P/Experian Consumer Credit Default Indices Press Release – April 2015

U.S. Weekly Economic Roundup: Speed Bump

The Bureau of Labor Statistics (BLS) reported that just 126,000 payroll jobs were added in March. With the downward revisions of past two months, job gains have now averaged 197,000 per month this quarter (compared with 324,000 the previous quarter). The unemployment rate remained 5.5%, and yearly wage growth continues to stay within 1.8%-2.2%. The sharp dip in March employment growth is a realignment with the true underlying pace of economic growth in the first quarter. Still, we expect a rebound in April. That said, odds of the first rate hike occurring in June have declined, especially if this weakness persists into spring.

The economic releases this week include:

  • The U.S. recorded a trade deficit of $35.4 billion in February, down from the revised January deficit of $42.7 billion (originally $41.8 billion).
  • According to the ADP Employment Report, the private-sector nonfarm businesses added 189,000 jobs in March, following an upwardly revised 214,000 gain (was 212,000) in February.
  • Personal income increased by 0.4% in February, matching the revised rise in January (was up 0.3%). Personal spending fell by 0.2% in February, following a revised fall of 0.4% (was down 0.5%) in January. Personal income rose 4.5% on a year-over-year basis. The core Personal Consumption Expenditure Price Index, the Fed’s favored measure of inflation, rose 1.4% over the year.
  • U.S. factory orders rose 0.2% in February from a revised 0.7% drop (was -0.2%) in January.
  • The Conference Board’s Consumer Confidence Index climbed to 101.3 in March from an upwardly revised 98.8 (was 96.4) in February.
  • The Institute for Supply Management (ISM) Manufacturing Index declined to 51.5 in March from 52.9 in February.
  • The Chicago Business Activity Barometer edged up to 46.3 in March from 45.8 in February.
  • Initial jobless claims fell to 268,000 in the week ended March 28 from the previous week’s revised level of 288,000 (was 282,000). Continuing claims fell to 2.325 million in the week ended March 21.


Data out so far for the first quarter show weak industrial production, residential construction, retail sales, and nonresidential investments (for various reasons that include weather, a stronger dollar, a sharp pull-back in the energy sector, and the now-resolved West Coast port dispute). Among all economic data, payroll jobs had been an anomaly as its growth momentum was faster than what the economic growth rate would imply. All of that changed with the BLS’s March employment report.

The BLS reported that only 126,000 jobs were created in March (according to the establishment survey), far below consensus forecast of 250,000 and breaking a 12-month string of 200,000-plus job gains. Prior payrolls were revised down for February (264,000 from 295,000) and January (201,000 from 239,000). That meant a net 69,000 fewer jobs were added in the first quarter of 2015, making the first-quarter average jobs growth per month only 197,000–much slower than the 324,000 in the previous quarter.

Given that employment numbers are lagging indicators of the products activity market, we view the first quarter’s slowdown in payroll jobs growth as a realignment of the labor market with the weak underlying pace of economic growth for the quarter.

Still, this is a sharp slowdown that we had not expected heading into this year. We had instead forecasted a gradual slowdown to a 200,000 jobs gain per month by the middle of the year as the economy approaches its natural rate of unemployment (also referred to as NAIRU). We expect a rebound in April, given the uptick in consumer confidence lately, the 15-year low in initial claims of unemployment insurance, the now open West Coast ports, and dissipating weather-led setbacks.

The weaker-than-expected economic data of late, combined with the lower estimates of the natural rate of unemployment, would naturally push back and down the policy normalization path. That said, the April jobs report has now become even more important. The Fed’s policy action is data-dependent, and if the labor market slowdown is not just a one-month blip and weakness persists, this would mean that the timing of the Fed’s interest rate hike would be later than June–the month pegged as the absolute earliest for the first rate hike.

Employment continued to rise in professional and business services, health care, and retail trade (see chart). One sector that had a sharp pullback is the leisure and hospitality sector. This sector had a huge correction, adding only 13,000 jobs, from a strong February, when it had added 70,000 jobs. In March, jobs were lost in the mining and logging industry (-11,000), government (-3,000), construction (-1,000), and manufacturing (-1,000) sectors. The fall in the oil prices has had a notable impact on the mining industry. The industry has now lost jobs for a third consecutive month. Almost all of the mining jobs lost in March were in the support activities areas. This brings the total loss of jobs to 23,700 in this area in 2015. We expect to see more job losses in this sector in the near future, although the precipitous drop in the rig count seems to be stabilizing now.

Rise in Home Prices Paced by Denver, Miami, and Dallas According to the S&P/Case-Shiller Home Price Indices

Data through January 2015 show home prices continued their rise across the country over the last 12 months. However, monthly data reveal slowing increases and seasonal weakness.  S&P/Case-Shiller Home Price Indices ─ January 2015

National Credit Default Rates Report Mixed Results in February 2015 According to the S&P/Experian Consumer Credit Default Indices

S&P Dow Jones Indices released the latest results for the S&P/Experian Consumer Credit Default Indices.  Data is through February 2015.  S&P/Experian Consumer Credit Default Indices Press Release – February 2015

U.S. Weekly Economic Roundup: Getting Better Slowly But Surely

The Federal Reserve’s Financial Accounts of the U.S. (previously known as the Flow of Funds report) showed that in fourth-quarter 2014 U.S. households saw the largest increase in their net worth since fourth-quarter 2013. While far from being equally distributed, household net worth is now 26% higher than its 2007 pre-recession peak, mainly due to the strong stock market rally in recent years. Meanwhile, the U.S. household debt-to-income ratio fell to its lowest level since 2002 as consumers continued to deleverage as their disposable income increased. We believe that household balance sheets will improve further in the coming quarter as stock prices continue to rise and labor market conditions improve. We expect the improvements in the financial condition of U.S. households to drive solid consumer spending growth in 2015.

The economic releases this week include:

  • Retail sales declined by 0.6% in February following a 0.8% drop in January. Retail sales excluding auto sales fell by 0.1% after declining by 0.9% the previous month.
  • The Producer Price Index (PPI) declined by 0.5% month-over-month in February after dropping by 0.8% in January. Excluding food and energy prices, the core PPI fell by 0.5% in February, which follows a 0.1% drop the previous month.
  • Business inventories were unchanged for the second consecutive month in January.
  • Wholesale inventories increased by 0.3% in January after they were unchanged in December (was 0.1%).
  • The Treasury announced a $192.3 billion budget deficit for February, which was slightly smaller than last February’s deficit of $193.5 billion.
  • The Export Price Index declined by 0.1% month-over-month in February after falling by a revised 1.9% (was 2%) in January while the Import Price Index rose by 0.4% month-over-month after dropping by a revised 3.1% (was 2.8%).
  • The University of Michigan Consumer Sentiment Index fell to 91.2 in March from 95.4 in February.
  • Initial jobless claims dropped to 289,000 in the week ended March 7 from a revised 325,000 (was 320,000) the previous week. Continuing claims fell to 2.418 million in the week ended Feb. 28.

A Bit Off

The brutal weather that pummeled the eastern U.S. in January and February of this year certainly dampened the will of many Americans to go out and spend money at their local stores, and the persistently sluggish wage growth we’ve seen so far this year hasn’t helped either.

Advance estimates of U.S. retail and food services sales (not adjusted for prices) show a decline of 0.6% in February, which follows the 0.8% decline we saw in January. Year over year, retail sales were still up by 1.7% in February, but this was much weaker than the 3.6% rise we saw in January. Total sales from December 2014 through February 2015 were up 2.9% compared with the same period a year ago.

And this time, gas stations can’t be blamed for the dip in sales. In fact, excluding gas station sales, retail sales still fell by 0.8% month over month, while sales of building materials and gardening equipment also contracted by 2.3%. So what is behind this weakness?

One explanation is that many Americans were dealing with the excessive snowfall that blanketed the eastern U.S. and were not in the mood to head out to auto dealerships or to patronize their local malls or restaurants. All of these categories are usually influenced by weather, so it seems that the brutal conditions definitely take some of the blame for the weaker-than-expected retail sales.

That said, grocery stores and online retailers weathered the storm rather nicely. Gas station sales also improved as prices at the pump began to creep up–a reversal of the declining trend we saw the previous month.

A measure we like to keep an eye on is core retail sales (excludes autos, gasoline and building material sales)–the “control” that guides the real consumption component of GDP–which were flat in February after declining by 0.1% (was up 0.1%) in January and climbing 0.2% in December. To be sure, the recent growth numbers have been weaker than the gains we saw during the preceding 12 months when there was a string of monthly gains between 0.3% and 1.1%.

For a better sense of the reduced volatility of the control series, Chart 1–which is a year-over-year overlay with headline retail sales–also shows a decline in February. That said, one month doesn’t make a trend.

S&P Ratings Shares 2015 Overview Of Australia’s Housing Market And RMBS

Standard & Poor’s Ratings Services has just published its annual overview of Australia’s housing market and residential mortgage backed securities (RMBS). The report, “An Overview Of Australia’s Housing Market And Residential Mortgage-Backed Securities,” considers the key drivers that underpin the performance trends of housing loans in Australia, and examines the key characteristics of the Australian housing market.

The report covers:

Australia’s economy and demographic trends, and how these affect the broader housing loan market;
The Australian residential mortgage loan market;
The role of lenders’ mortgage insurance in Australian RMBS;
Australian housing loan product types;
The Australian legal and regulatory systems applicable to RMBS;
The key structural issues of offshore RMBS issuance; and
The performance of Australian RMBS.


A related video on the topic can be viewed here: http://www.spratings.com.au/?video=294944651

Home Prices Grew at Twice the Rate of Inflation in 2014 According to the S&P/Case-Shiller Home Price Indices

Data through December 2014 shows a slight uptick in home prices across the country. Nine cities reported monthly increases in prices. S&P/Case-Shiller Home Price Indices ─ December 2014

National Credit Default Rate Acceleration Continues in January 2015 According to the S&P/Experian Consumer Credit Default Indices

S&P Dow Jones Indices released the latest results for the S&P/Experian Consumer Credit Default Indices. Data is through January 2015. S&P/Experian Consumer Credit Default Indices Press Release – February 2015

  • Categories

  • Recent Comments

  • Tags