by Calculated Risk on 12/18/2013 07:01:00 AM

From the MBA: Mortgage Applications Fall During Holiday-Shortened Week

Mortgage applications decreased 5.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 13, 2013. ...

The Refinance Index decreased 4 percent from the previous week. The seasonally adjusted Purchase Index decreased 6 percent from one week earlier to the lowest level since December 2012....
...
"Mortgage applications fell further last week, with the market index falling to its lowest level in more than a dozen years,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Both purchase and refinance applications fell as interest rates increased going into today's Federal Open Market Committee meeting."

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.62 percent, the highest level since September 2013, from 4.61 percent, with points increasing to 0.38 from 0.26 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index.

The refinance index is down sharply - and down 70% from the levels in early May.


The second graph shows the MBA mortgage purchase index.  

The 4-week average of the purchase index is now down about 11% from a year ago.

by Calculated Risk on 12/17/2013 08:21:00 PM

The long delayed housing starts report will be released tomorrow for September, October and November.

Starts are a key report, but the big story for the day will be the FOMC announcement, projections, and press briefing. The consensus is the FOMC will wait until early 2014 to start to reduce asset purchases, but it is possible that they will start the "taper" at this meeting.

Wednesday:
• 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, the Census Bureau will release Housing Starts for September, October and November. Total housing starts were at 891 thousand (SAAR) in August. Single family starts were at 628 thousand SAAR in August. The consensus is for total housing starts to increase to 952 thousand (SAAR) in November.

• During the day: The AIA's Architecture Billings Index for November (a leading indicator for commercial real estate).

• At 2:00 PM, the FOMC Meeting Announcement will be released. It is possible the FOMC will start to reduce QE purchases following this meeting.

• Also at 2:00 PM, the FOMC projections will be released. This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

• At 2:30 PM, Fed Chairman Ben Bernanke will hold a press briefing following the FOMC announcement.

by Calculated Risk on 12/17/2013 05:41:00 PM

Economist Tom Lawler sent me the updated table below of short sales, foreclosures and cash buyers for several selected cities in November.

From CR: This is just a few markets, but total "distressed" share is down significantly, foreclosure are down in most areas, and short sales are off sharply year-over-year.


The All Cash Share (last two columns) is mostly declining year-over-year.  As investors pull back in markets (like Vegas and Phoenix) the share of all cash buyers will probably decline.

Note: Existing home sales for November will be released on Thursday, and Tom Lawler is projecting the NAR will report sales of 4.98 million on a seasonally adjusted annual rate basis. The consensus is for sales to decline to a 5.05 million SAAR, down from 5.12 SAAR in October.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share		All Cash Share
	Nov-13	Nov-12	Nov-13	Nov-12	Nov-13	Nov-12	Nov-13	Nov-12
Las Vegas	21.0%	41.2%	7.0%	10.7%	28.0%	51.9%	43.7%	52.7%
Reno	17.0%	41.0%	6.0%	9.0%	23.0%	50.0%
Phoenix	7.8%	23.2%	8.0%	12.9%	15.8%	36.1%	34.0%	43.2%
Sacramento	11.0%	36.1%	4.6%	11.5%	15.6%	47.6%	25.0%	37.1%
Minneapolis	5.0%	11.1%	17.0%	24.5%	22.0%	35.6%
Mid-Atlantic	7.5%	11.9%	8.1%	8.7%	15.7%	20.6%	19.6%	20.0%
Orlando	13.5%	29.4%	20.3%	21.1%	33.8%	50.5%	46.5%	54.2%
California*	12.3%	26.2%	6.8%	16.9%	19.1%	43.1%
Bay Area CA*	9.1%	23.2%	3.7%	12.5%	12.8%	35.7%	22.0%	28.9%
So. California*	12.7%	26.6%	6.3%	15.4%	19.0%	42.0%	27.2%	34.0%
Hampton Roads					26.9%	28.3%
Northeast Florida					36.4%	41.8%
Chicago					35.0%	43.0%
Tucson							32.2%	0.338
Toledo							37.2%	0.409
Des Moines							19.9%	22.1%
Peoria							21.8%	21.2%
Omaha							21.6%	19.8%
Spokane			16.0%	9.1%
Houston			7.7%	15.0%
Memphis*			20.4%	24.4%
Birmingham AL			21.0%	26.5%
Springfield IL			17.0%	15.8%
*share of existing home sales, based on property records

by Calculated Risk on 12/17/2013 03:51:00 PM

Several years ago I started following the Sacramento market to look for changes in the mix of houses sold (conventional, REOs, and short sales).  For a long time, not much changed. But over the last 2 years we've seen some significant changes with a dramatic shift from foreclosures (REO: lender Real Estate Owned) to short sales, and the percentage of total distressed sales declining sharply.

This data suggests healing in the Sacramento market, although some of this is due to investor buying.  Other distressed markets are showing similar improvement.  Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In November 2013, 15.5% of all resales (single family homes) were distressed sales. This was down from 16.7% last month, and down from 47.6% in November 2012.

The percentage of REOs was at 4.4%, and the percentage of short sales decreased to 11.0%. (the lowest percentage of distressed sales since the Sacramento Realtors started tracking the data).

Here are the statistics.

Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been a sharp increase in conventional sales recently (blue). 

Active Listing Inventory for single family homes increased 56.8% year-over-year in November.  This is the seventh consecutive month with a year-over-year increase in inventory.

Cash buyers accounted for 25.0% of all sales, down from 37.1% a year ago (frequently investors).  This has been trending down, and it appears investors are becoming less of a factor in Sacramento.

Total sales were down 29% from November 2012, but conventional sales were up 14% compared to the same month last year. This is exactly what we expect to see in an improving distressed market - flat or even declining overall sales as distressed sales decline, and conventional sales increasing.

As I've noted before, we are seeing a similar pattern in other distressed areas.  This suggests what will happen in other areas: 1) Flat or declining overall existing home sales, 2) but increasing conventional sales,  3) Less investor buying, 4) more inventory, and 5) slower price increases.

by Calculated Risk on 12/17/2013 12:49:00 PM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.2% annualized rate) in November. The 16% trimmed-mean Consumer Price Index increased 0.1% (1.2% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers was unchanged (with annualized rate of 0.4%) in November. The CPI less food and energy increased 0.2% (1.9% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for November here.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.0%, the trimmed-mean CPI rose 1.6%, the CPI rose 1.2%, and the CPI less food and energy rose 1.7%. Core PCE is for October and increased just 1.1% year-over-year.

On a monthly basis, median CPI was at 2.2% annualized, trimmed-mean CPI was at 1.2% annualized, and core CPI increased 1.9% annualized.

These measures indicate inflation remains below the Fed's target.

by Calculated Risk on 12/17/2013 10:00:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 58 in December, up from 54 in November. Any number above 50 indicates that more builders view sales conditions as good than poor.

From the NAHB: Builder Confidence Rises Four Points in December

Builder confidence in the market for newly built, single-family homes improved four points to a 58 reading on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for December, released today. This gain reflected improvement in all three index components – current sales conditions, sales expectations and traffic of prospective buyers.
...
All three HMI components posted gains in December. The index gauging current sales conditions jumped six points to 64, while the index gauging expectations for future sales rose two points to 62. The index gauging traffic of prospective buyers gained three points to 44.

Looking at the three-month moving averages for regional HMI scores, the South edged one point higher to 57 while the Northeast, Midwest and West each fell a single point to 38, 59 and 59, respectively.
emphasis added

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

“This is definitely an encouraging sign as we move into 2014,” said National Association of Home Builders (NAHB) Chairman Rick Judson, a home builder from Charlotte, N.C. “The HMI is up 11 points since December of 2012 and has been above 50 for the past seven months. This indicates that an increasing number of builders have a positive view on where the industry is going.”

by Calculated Risk on 12/17/2013 08:57:00 AM

From CoreLogic: CoreLogic reports 791,000 More Residential Properties Return to Positive Equity in Second Quarter

CoreLogic ... today released new analysis showing approximately 791,000 more residential properties returned to a state of positive equity during the third quarter of 2013, and the total number of mortgaged residential properties with equity currently stands at 42.6 million. The analysis indicates that nearly 6.4 million homes, or 13 percent of all residential properties with a mortgage, were still in negative equity at the end of the third quarter of 2013. This figure is down from 7.2 million homes, or 14.7 percent of all residential properties with a mortgage, at the end of the second quarter of 2013.

... Of the 42.6 million residential properties with positive equity, 10 million have less than 20 percent equity. Borrowers with less than 20 percent equity, referred to as “under-equitied,” may have a more difficult time obtaining new financing for their homes due to underwriting constraints. Under-equitied mortgages accounted for 20.4 percent of all residential properties with a mortgage nationwide in the third quarter of 2013, with more than 1.5 million residential properties at less than 5 percent equity, referred to as near-negative equity. Properties that are near negative equity are considered at risk should home prices fall. ...

“Rising home prices continued to help homeowners regain their lost equity in the third quarter of 2013,” said Mark Fleming, chief economist for CoreLogic. “Fewer than 7 million homeowners are underwater, with a total mortgage debt of $1.6 trillion. Negative equity will decline even further in the coming quarters as the housing market continues to improve.”
emphasis added

Click on graph for larger image.

This graph shows the break down of negative equity by state. Note: Data not available for some states. From CoreLogic:

"Nevada had the highest percentage of mortgaged properties in negative equity at 32.2 percent, followed by Florida (28.8 percent), Arizona (22.5 percent), Ohio (18.0 percent) and Georgia (17.8 percent). These top five states combined accounted for 36.4 percent of negative equity in the U.S."

The second graph shows the distribution of home equity in Q3 compared to Q2. Close to 5% of residential properties have 25% or more negative equity, down from around 6% in Q2 and 8% in Q1.

In Q3 2012, there were 10.5 million properties with negative equity - now there are 6.4 million.  A significant change.

by Calculated Risk on 12/17/2013 08:36:00 AM

From the Bureau of Labor Statistics (BLS): Consumer Price Index - November 2013

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.2 percent before seasonal adjustment.
...
The index for all items less food and energy rose 0.2 percent in November. ... The 12-month increase in the index for all items less food and energy remained at 1.7 percent for the third month in a row.
emphasis added

On a year-over-year basis, CPI is up 1.2 percent, and core CPI is up also up 1.7 percent.  Both are below the Fed's target. This was close to the consensus forecast of no change for CPI, and above the consensus for a 0.1% increase in core CPI.

I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.   This is the last inflation data before the FOMC decision tomorrow.

by Calculated Risk on 12/16/2013 08:10:00 PM

Tuesday:
• 8:30 AM ET, Consumer Price Index for November. The consensus is for no change in CPI in November and for core CPI to increase 0.1%.

• 10:00 AM, the December NAHB homebuilder survey. The consensus is for a reading of 55, up from 54.0 in November. Any number above 50 indicates that more builders view sales conditions as good than poor.

In addition to Case-Shiller, CoreLogic, FHFA and LPS, I'm also watching the FNC, Zillow and several other house price indexes.

From FNC: FNC Index: October Home Prices Up; Pace Slows

The latest FNC Residential Price Index™ (RPI) shows October home prices are up, albeit at a slower pace than previous months. The index, constructed to gauge underlying property value based on non-distressed home sales, showed a 0.3% month-over-month increase from September to October—its weakest acceleration in eight months.

The deceleration in the pace of price increase is expected as the housing market heads into the winter low season after strong growth in the spring and summer. Sustained by moderate economic growth and job creation, housing market fundamentals are expected to improve continually as indicators of distressed mortgages and home foreclosures continue to point to new lows. As of October, completed foreclosure sales nationwide contributed 13.9% to total home sales, up slightly from September’s 13.4% but down from 17.0% a year ago. The uptick in completed foreclosure sales is primarily a seasonal trend as banks tend to dispose of distressed properties more quickly in winter months. In another sign of slower housing activity and weakening price growth, the average asking-price discount has been trending higher in recent months....

Based on recorded sales of non-distressed properties (existing and new homes) in the 100 largest metropolitan areas, the FNC 100-MSA composite index shows that October home prices increased from the previous month at a seasonally unadjusted rate of 0.3%. The two narrower RPI indices (30- and 10-MSA composites) also rose at a slower pace than previous months. On a year-over-year basis (YOY), home prices continue to accelerate moderately, up 6.5% from the same period a year ago, the fastest growth in more than seven years. (August 2006 was the last time the YOY growth measured similar magnitude.) The 30-MSA and 10-MSA composites recorded slightly faster YOY price appreciation.
emphasis added

The 100-MSA composite was up 6.5% compared to October 2012. The FNC index turned positive on a year-over-year basis in July, 2012.

Click on graph for larger image.

This graph shows the year-over-year change for the FNC Composite 10, 20, 30 and 100 indexes. 

Even with the recent increase, the FNC composite 100 index is still off 25.2% from the peak.

I expect all of the housing price indexes to show lower year-over-year price gains soon.

by Calculated Risk on 12/16/2013 05:03:00 PM

From housing economist Tom Lawler:

Based on realtor/MLS reports I’ve seen across the country, I estimate that US existing home sales as measured by the National Association of Realtors ran at a seasonally adjusted annual rate of 4.98 million in November, down 3.7% from October’s SA pace, and up just 0.4% from last November’s SA pace. I estimate that unadjusted existing home sales last month were down about 2.9% from last November’s pace – the first YOY decline since June 2011. This November, however, had one fewer business day than last November, and as such this November’s will be lower than last November’s (meaning that the YOY change in seasonally adjusted sales will exceed that of unadjusted sales).

While difficult to quantify, the 16-day government shutdown in October appears to have negatively impacted November home closings, through three channels: (1) delays in various loan-application verifications associated with the IRS/SSA being closed for the first half of October; (2) adverse impacts on “confidence” related to the government shutdown; and (3) temporary direct adverse impacts on potential buyers (e.g., furloughed government workers). It is worth noting that sales in the DC metro area, which in October showed a YOY increase of 19.1%, were down 13.7% YOY in November.

There also appears to have been a significantly slowdown in investor buying in many parts of the country in November, in large part reflecting lower inventories of homes priced “attractively enough” for rental/investment purchases (as opposed to overall inventories). E.g., in Phoenix and Orlando overall home listings were up both on the month and from year-ago levels, home sales were down sharply YOY. Here is how the Orlando Regional Realtor Association “explained” the significant decline in Orlando home sales last month.

"We’re seeing fewer investor and institutional buyers in the Orlando market due to the dramatic gains in median prices we’ve experienced,” Merchant says. "In addition, we’re experiencing another effect of the governmental shutdown, which understandably dampened buyers’ willingness to commit to a home purchase in October. Since it takes about four weeks to move from contract to closing, the expected result is a drop in completed sales in November.”

The rapid increase in home prices over the last year in several markets, combined with increases in mortgage rates from earlier this year, has also dampened “traditional” home buying, according to several realtor sources.

To be sure, not all areas showed weakness in home sales this November vs. last November. Charlotte and the Triangle area of North Carolina, e.g., both showed double-digit YOY sales gains, and MLS sales in Long Island were up 25.5% from a year ago (though sales last November were adversely impacted by Hurricane Sandy). By the same token, however, there were double-digit YOY declines in sales in several areas of the country, including but not limited to the DC metro area, Phoenix, Vegas, quite a few California areas, and several key Florida area.

On the inventory front, home listings typically drop seasonally by a significant amount in November in most (though not all) parts of the country, and most realtor/MLS reported sizable monthly declines in inventories (exceptions include Phoenix, Arizona, and several Florida markets.) Based on realtor/MLS reports as well as reports from entities that track regional listings, my “best guess” is that the NAR’s estimate of the number of existing homes for sale at the end of November will be down 4.7% from October, and up 2.0% from last November.

Finally, I estimate that the NAR’s estimate of the median existing SF home sales price in November will be about 9.0% higher than last November.

CR Note: The NAR is scheduled to report November existing home sales on Thursday, Dec 19th.