by Calculated Risk on 8/27/2013 04:25:00 PM

From housing economist Tom Lawler:

Below is a table showing the latest YOY % changes in various entities’ home price indexes for the metro areas covered in today’s Case Shiller home price report, as well as “national” HPIs. The YOY changes are for the period ended in June, with Case-Shiller, FHFA expanded, and Zillow effectively being quarterly averages; CoreLogic a weighted 3-month moving average; and LPS and FNC being “June.” Zillow does not include foreclosure resales in constructing its HVI, while LPS’ HPI “reflects” non-distressed sales, as it “takes into account” price discounts for REO and short sales. FNC’s RPI is a “hedonic” price index, as is (pretty much) Zillow’s HVI. CoreLogic produces HPIs for all of the metro areas below, but only releases to the public the ones shown below. Note that in some cases (e.g., NY), Case-Shiller’s “metro area” definition differs from the other entities (it is broader).

The biggest “outliers” are the “hedonic” home price indexes, which attempt to take into account the characteristics of homes sold. FNC’s RPI for many metro areas seem “most strange” – the RPIs for DC and Portland showed virtually no change from a year ago, which just doesn’t seem right. And FNC’s “national” (100 metro area) RPI gain of 3.7% over the last year seems way too low.

Even if all of the metro/regional/state HPIs from these entities “matched up,” the various entities’ “national” HPIs would show different growth rates. Case-Shiller constructs a “national” HPI from Census division HPIs with weights based on each division’s share of the market value of the housing stock from Census 2000. FHFA constructs a “national” HPI using weights based on state shares of the housing stock in units using the latest available ACS data. CoreLogic does not “build up” a national HPI from regional HPIs, but instead aggregates all transactions across the county. Zillow’s HVI is a “median” home-value measure, I believe using all homes for which it has a “Zestimate.” I’m not rightly sure how LPS or FNC construct their “national” HPIs.

The method used to construct a “national” HPI from state/regional HPIs can have a material impact. As I noted last week, if CoreLogic used Census 2000 market value weight applied to its state HPIs, its “national” HPI for June would have been up 9.4% YOY, compared to the reported 11.9%. And if the FHFA had applied Census 2000 market value weights to its state HPIs, its “national” HPI for June would have bee up 8.1%, instead of the reported 7.6%. The Case Shiller “national” HPI for “June” (Q2) was up 10.1% YOY. Case-Shiller doesn’t produce state HPIs and doesn’t release its Census division HPIs to the public.

YOY % Change, Various Home Price Indexes ("June"/Q2 2013)
	Case-Shiller	FHFA Expanded	CoreLogic	LPS	FNC	Zillow
AZ-Phoenix	19.8%	21.2%	17.1%	16.6%	27.5%	22.0%
CA-Los Angeles	19.9%	18.3%	20.7%	18.8%	7.8%	19.7%
CA-San Diego	19.3%	17.5%	19.9%	18.0%	9.1%	21.8%
CA-San Francisco	24.5%	19.7%		23.9%	10.2%	26.3%
CO-Denver	9.4%	10.3%	10.5%	9.8%	8.8%	12.7%
DC-Washington	5.7%	9.9%	9.4%	7.7%	0.8%	7.0%
FL-Miami	14.8%	13.4%	13.4%	14.3%	5.8%	12.5%
FL-Tampa	11.1%	11.7%	9.4%	11.0%	5.9%	10.6%
GA-Atlanta	19.0%	18.6%	16.1%	13.0%	2.7%	6.5%
IL-Chicago	7.3%	6.7%	4.6%	6.8%	-1.0%	1.1%
MA-Boston	6.7%	7.5%		6.4%	3.0%	6.7%
MI-Detroit	16.4%	15.2%		11.3%	6.3%	15.1%
MN-Minneapolis	11.5%	10.2%	9.1%	8.4%	4.4%	11.7%
NC-Charlotte	7.8%	8.5%		6.3%	5.3%	1.9%
NV-Las Vegas	24.9%	24.5%		27.0%	18.6%	29.5%
NY-New York	3.3%	2.6%	7.2%	4.2%	0.2%	1.8%
OH-Cleveland	3.5%	3.1%		3.5%	0.9%	3.2%
OR-Portland	11.8%	13.8%	14.6%	10.3%	0.9%	13.3%
TX-Dallas	8.0%	9.0%	9.9%	6.5%	7.4%	6.0%
WA-Seattle	11.8%	14.9%	15.1%	11.9%	2.9%	13.0%
“National”	10.1%	7.6%	11.9%	8.4%	3.7%	5.6%

by Calculated Risk on 8/27/2013 01:44:00 PM

From the Richmond Fed: Manufacturing Sector Strengthened, Hiring Remained Modest

The composite index of manufacturing activity rebounded in August, climbing twenty-five points above the July reading to 14. The components of that index all rose this month, with the index for shipments jumping to 17 from the previous reading of −15 and the index for new orders moving to 16 from −15. ...

The index for the number of employees moved up to 6 in August following a flat reading a month ago. The indicator for the average manufacturing workweek also gained, picking up six points to post a reading of 8. In addition, average wage growth intensified, pushing the index to 13 from July's reading of 8.

Manufacturers were decidedly upbeat about business prospects for the next six months. The index for expected shipments rose to 36 from July's reading of 24, and the indicator for the volume of new orders added nine points to last month's index to finish the month at a reading of 33. ...
...
Manufacturers planned to increase hiring in the six months ahead; the marker for the number of employees picked up four points to settle at 9, while the index for the average workweek moved up to 10 from last month's reading of 8. Employers also anticipated robust wage growth, pushing that index to 28 in August from 21.
emphasis added

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (dashed green, through August), and five Fed surveys are averaged (blue, through August) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through July (right axis).

All of the regional surveys showed expansion in August, and overall at about the same pace as in July.  The ISM index for July will be released next Tuesday, Sept 3rd.

by Calculated Risk on 8/27/2013 11:04:00 AM

Two key points:

• The Case-Shiller index released this morning was for June, and it is actually a 3 month of average prices in April, May and June. I think price increases have slowed recently based on agent reports (a combination of a little more inventory and higher mortgage rates), but this slowdown in price increases will not show up for several months in the Case-Shiller index because of the reporting lag and because of the three month average. I expect to see smaller year-over-year price increases going forward and some significant deceleration towards the end of the year. 

• It appears the Case-Shiller index is currently overstating price increases for most homeowners, both because of the handling of distressed sales and the weighting of some coastal areas.

I also think it is important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $275,000 today adjusted for inflation. 

Earlier: Case-Shiller: Case-Shiller: Comp 20 House Prices increased 12.1% year-over-year in June

Nominal House Prices

The first graph shows the quarterly Case-Shiller National Index SA (through Q2 2013), and the monthly Case-Shiller Composite 20 SA and CoreLogic House Price Indexes (through June) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to Q4 2003 levels (and also back up to Q4 2008), and the Case-Shiller Composite 20 Index (SA) is back to April 2004 levels, and the CoreLogic index (NSA) is back to August 2004.

Real House Prices

The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to Q4 2000 levels, the Composite 20 index is back to November 2001, and the CoreLogic index back to March 2002.

In real terms, house prices are back to early '00s levels.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to Q4 2000 levels, the Composite 20 index is back to April 2002 levels, and the CoreLogic index is back to December 2002.

In real terms - and as a price-to-rent ratio - prices are mostly back to early 2000 levels.

Nominal Prices: Cities relative to Jan 2000


The last graph shows the bubble peak, the post bubble minimum, and current nominal prices relative to January 2000 prices for all the Case-Shiller cities in nominal terms.

As an example, at the peak, prices in Phoenix were 127% above the January 2000 level. Then prices in Phoenix fell slightly below the January 2000 level, and are now up 36% above January 2000.  Two cities - Denver and Dallas - are at new highs (no other Case-Shiller Comp 20 city is close).  Detroit prices are still below the January 2000 level.

by Calculated Risk on 8/27/2013 09:05:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for June ("June" is a 3 month average of April, May and June prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the Q2 National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Home Prices Continue Climbing in June 2013 According to the S&P/Case-Shiller Home Price Indices

Data through June 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1Home Price Indices ... showed that prices continue to increase. The National Index grew 7.1% in the second quarter and 10.1% over the last four quarters. The 10-City and 20-City Composites posted returns of 2.2% for June and 11.9% and 12.1% over 12 months. ...

All 20 cities posted gains on a monthly and annual basis. However, in only six cities were prices rising faster this month than last, compared to ten in May. Dallas and Denver reached new all-time highs as they did last month, with returns of +1.7% each in June. ...

“Overall, the report shows that housing prices are rising but the pace may be slowing. Thirteen out of twenty cities saw their returns weaken from May to June. As we are in the middle of a seasonal buying period, we should expect to see the most gains. With interest rates rising to almost 4.6%, home buyers may be discouraged and sharp increases may be dampened." [says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices]

All 20 cities showed positive monthly returns for at least the third consecutive month. Six cities – Charlotte, Cleveland, Las Vegas, Minneapolis, New York and Tampa – showed acceleration. Atlanta took the lead with a return of 3.4% as San Francisco dropped to +2.7% in June from +4.3% in May. New York posted a gain of 2.1%, its highest since July 2002.

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 24.1% from the peak, and up 1.1% in June (SA). The Composite 10 is up 15.1% from the post bubble low set in Jan 2012 (SA).

The Composite 20 index is off 23.4% from the peak, and up 0.9% (SA) in June. The Composite 20 is up 15.7% from the post-bubble low set in Jan 2012 (SA).

The second graph shows the Year over year change in both indices.

The Composite 10 SA is up 11.9% compared to June 2012.

The Composite 20 SA is up 12.1% compared to June 2012. This was the thirteen consecutive month with a year-over-year gain and it appears the YoY change might be starting to slow.

Prices increased (SA) in 15 of the 20 Case-Shiller cities in June seasonally adjusted. Prices in Las Vegas are off 50.2% from the peak, and prices in Denver and Dallas are at new highs.

This was close to the consensus forecast for a 12.2% YoY increase. I'll have more on prices later.

by Calculated Risk on 8/26/2013 09:31:00 PM

A very disappointing report from CNBC tonight: Obama source predicts Summers will be named Fed chief soon

A source from Team Obama told CNBC that Larry Summers will likely be named chairman of the Federal Reserve in a few weeks though he is "still being vetted" so it might take a little longer.

I don't think Summers is a good choice for Fed Chair.  Also I doubt any delay is because he is still being vetted, more likely they are still trying to find the confirmation votes in the Senate.

Tuesday:
• 9:00 AM ET, S&P/Case-Shiller House Price Index for June. Although this is the June report, it is really a 3 month average of April, May, and June. The consensus is for a 12.2% year-over-year increase in the Composite 20 index (NSA) for June. The Zillow forecast is for the Composite 20 to increase 12.1% year-over-year, and for prices to increase 1.1% month-to-month seasonally adjusted.

• At 10:00 AM, Conference Board's consumer confidence index for August. The consensus is for the index to decrease to 78.0 from 80.3.

• Also at 10:00 AM, Richmond Fed Survey of Manufacturing Activity for August. The consensus is for a reading of 0 for this survey, up from minus 11 in July (Above zero is expansion).

by Calculated Risk on 8/26/2013 06:00:00 PM

Here is another weekly update on housing inventory: One of key questions for 2013 is Will Housing inventory bottom this year?. Since this is a very important question, I'm tracking inventory weekly in 2013. 

There is a clear seasonal pattern for inventory, with the low point for inventory in late December or early January, and then peaking in mid-to-late summer.

The Realtor (NAR) data is monthly and released with a lag (the most recent data was for July).  However Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data for the last several years. This is displayed on the graph below as a percentage change from the first week of the year (to normalize the data).

In 2010 (blue), inventory increased more than the normal seasonal pattern, and finished the year up 7%. However in 2011 and 2012, there was only a small increase in inventory early in the year, followed by a sharp decline for the rest of the year.

Click on graph for larger image.

Note: the data is a little weird for early 2011 (spikes down briefly).

So far in 2013, inventory is up 21.4%, and there might be some further increases over the next few weeks.  It is important to remember that inventory is still very low, and is down 5.7% from the same week last year according to Housing Tracker.

This strongly suggests inventory bottomed early this year.   I expect inventory to be up year-over-year very soon (maybe in September), and I also expect the seasonal decline to be less than usual at the end of the year.  This increase in inventory also means price increases will slow.

by Calculated Risk on 8/26/2013 04:56:00 PM

A sad story from Michael Winerip at the NY Times: For Laid-Off Older Workers, Age Bias Is Pervasive

[A] substantial number of older workers who lost jobs — even those lucky enough to be re-employed — are still suffering. Two-thirds in that age group who found work again are making less than they did in their previous job; their median salary loss is 18 percent compared with a 6.7 percent drop for 20- to 24-year-olds.

The re-employment rate for 55- to 64-year-olds is 47 percent and 24 percent for those over 65, compared with 62 percent for 20- to 54-year-olds. And finding another job takes far longer: 46 weeks for boomers, compared with 20 weeks for 16- to 24-year-olds.

I think the age groups that are hit the hardest by a recession are those just entering the workforce, and those nearing retirement.   For those entering the workforce, it is tough to find that first job - and they face a long period of lower wages.  For those who are laid-off nearing retirement, it is very difficult to find a new job and learn new skills ... and the pay is usually substantially less.   

by Calculated Risk on 8/26/2013 01:41:00 PM

Notes: I follow several house price indexes (Case-Shiller, CoreLogic, LPS, Zillow, FHFA, FNC and more). The timing of different house prices indexes can be a little confusing. LPS uses June closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.

From LPS: LPS Home Price Index Report: U.S. Home Prices Up 1.2 Percent for the Month; Up 8.4 Percent Year-Over-Year

Lender Processing Services ... today released its latest LPS Home Price Index (HPI) report, based on June 2013 residential real estate transactions. The LPS HPI combines the company’s extensive property and loan-level databases to produce a repeat sales analysis of home prices as of their transaction dates every month for each of more than 18,500 U.S. ZIP codes. The LPS HPI represents the price of non-distressed sales by taking into account price discounts for REO and short sales.

The LPS HPI is off 15.2% from the peak in June 2006. Note: The press release has data for the 20 largest states, and 40 MSAs. LPS shows prices off 46.6% from the peak in Las Vegas, 37.6% off from the peak in Riverside-San Bernardino, CA (Inland Empire), and at new peaks in Austin, Dallas, Denver and Houston!

Note: Case-Shiller for June will be released tomorrow.

by Calculated Risk on 8/26/2013 10:34:00 AM

From the Dallas Fed: Texas Manufacturing Posts Slower Growth

Texas factory activity increased but at a slower pace in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, remained positive but fell from 11.4 to 7.3.

Other measures of current manufacturing activity also indicated slower growth in August. The new orders index was positive for the fourth month in a row, although it moved down from 10.8 to 5.4. The shipments index also posted a fourth consecutive positive reading but slipped 6 points to 11.4. The capacity utilization index fell from 12.2 to 4.6.

Perceptions of broader business conditions improved again in August, with the general business activity and company outlook indexes posting their third consecutive positive readings. The general business activity index edged up from 4.4 to 5.0, and the company outlook index rose from 4.5 to 7.3.

Labor market indicators reflected an increase in hiring but sharply reduced workweeks. The employment index rose 2 points to 11.2, its highest reading in a year. Twenty percent of firms reported hiring new workers compared with 8 percent reporting layoffs. The hours worked index fell 11 points to -9.9, its lowest reading in nearly four years.

Prices and wages rose in August. The raw materials price index came in at 10, down from its previous reading of 15.9 but still indicative of higher input costs than in July. The finished goods price index was positive for the first time since March, rising 5 points to a reading of 4, suggesting selling prices were up from July as well. The wages and benefits index was positive but edged down to 14.5, although the great majority of manufacturers continued to note no change in compensation costs. Looking ahead, 34 percent of respondents anticipate further increases in raw materials prices over the next six months, while 25 percent expect higher finished goods prices.

Expectations regarding future business conditions remained optimistic in August. The indexes of future general business activity and future company outlook showed mixed movements but remained in strongly positive territory. Indexes for future manufacturing activity also remained solidly positive. emphasis added

by Calculated Risk on 8/26/2013 08:31:00 AM

According to the First Look report for July to be released today by Lender Processing Services (LPS), the percent of loans delinquent decreased in July compared to June, and declined about 9% year-over-year. Also the percent of loans in the foreclosure process declined further in July and were down 31% over the last year.

LPS reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) decreased to 6.41% from 6.68% in June. Note: Some of the decrease in short term delinquencies in July is seasonal.   The normal rate for delinquencies is around 4.5% to 5%.

The percent of loans in the foreclosure process declined to 2.82% in July from 2.93% in June. 

The number of delinquent properties, but not in foreclosure, is down 327,000 properties, and the number of properties in the foreclosure process is down 636,000 properties year-over-year.

LPS will release the complete mortgage monitor for July in early September.

LPS: Percent Loans Delinquent and in Foreclosure Process
	July 2013	June 2013	July 2012
Delinquent	6.41%	6.68%	7.03%
In Foreclosure	2.82%	2.93%	4.08%
Number of properties:
Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure:	1,846,000	1,983,000	1,960,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:	1,347,000	1,345,000	1,560,000
Number of properties in foreclosure pre-sale inventory:	1,406,000	1,458,000	2,042,000
Total Properties	4,599,000	4,785,000	5,562,000