by Calculated Risk on 7/10/2015 11:31:00 AM

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

FNC released their May 2015 index data today.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 1.2% from April to May (Composite 100 index, not seasonally adjusted). 

The 10 city MSA increased 1.2% in May, the 20-MSA RPI increased 1.3%, and the 30-MSA RPI increased 1.2%. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).

Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data.

The year-over-year (YoY) change was lower in May than in April, with the 100-MSA composite up 5.4% compared to May 2014.

The index is still down 16.2% from the peak in 2006 (not inflation adjusted).

Click on graph for larger image.

This graph shows the year-over-year change based on the FNC index (four composites) through May 2015. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.

Most of the other indexes are also showing the year-over-year change mostly steady at around 5% for the last several months.

Note: The May Case-Shiller index will be released on Tuesday, July 28th.

by Calculated Risk on 7/10/2015 08:41:00 AM

From A Evans-Pritchard: "Just spoke to senior Greek banker. Delighted. Sees 90% chance of deal. France + US saved hour. Still worried Schauble might throw spanner"

From the WSJ: Creditors Assess Greece’s Bailout Plan as Optimism Rises

Greece’s creditor institutions will make an assessment on the country’s eligibility for new bailout on Friday, as some leaders from the currency bloc voiced optimism about the latest Greek economic proposals.

However, a fight still looms about the level of debt relief that will have to accompany any new rescue deal for Greece.

Debt relief - and some hope for the future - are key elements to a successful plan.

From the NY Times: Is Greece Worse Off Than the U.S. During the Great Depression?  Great graphs.  Short answer: Yes.

by Calculated Risk on 7/09/2015 05:52:00 PM

Headlines on Greece - and a voice of reason:

Headline only from the WSJ: New Greek economic-reform proposals appear to be closer to creditor demands

From the Financial Times: Tsipras submits new plan to bailout monitors

From the WSJ: Greece Submits Reform Proposals as Pressure Mounts to Reach Rescue Deal

“The realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors,” [said Donald Tusk, the European Council president]

No word from Wolfgang Schäuble yet, but I expect "Nein, nein, nein".

Friday:
• At 12:30 PM ET, Speech by Fed Chair Janet Yellen, U.S. Economic Outlook, at The City Club of Cleveland's Sally Gries Forum Honoring Women of Achievement, Cleveland, Ohio

by Calculated Risk on 7/09/2015 01:59:00 PM

From Freddie Mac today: Global Uncertainty Pushes U.S. Mortgage Rates Lower

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing an investor flight to safety for U.S. Treasuries is pushing average fixed mortgage rates lower and helping to keep buyer activity strong toward the close of the spring homebuying season. ...

30-year fixed-rate mortgage (FRM) averaged 4.04 percent with an average 0.6 point for the week ending July 9, 2015, down from last week when it averaged 4.08 percent. A year ago at this time, the 30-year FRM averaged 4.15 percent.

15-year FRM this week averaged 3.20 percent with an average 0.5 point, down from last week when it averaged 3.24 percent. A year ago at this time, the 15-year FRM averaged 3.24 percent.

Click on graph for larger image.

This graph shows the 30 year and 15 year fixed rate mortgage interest rates from the Freddie Mac Primary Mortgage Market Survey®.  

30 year mortgage rates are up from the all time low of 3.35% in late 2012, but down from 4.15% a year ago. 

The Freddie Mac survey started in 1971. Mortgage rates were below 5% back in the 1950s.

by Calculated Risk on 7/09/2015 10:57:00 AM

Here is a new paper from FHFA Senior Economist Saty Patrabansh: The Marginal Effect of First-Time Homebuyer Status on Mortgage Default and Prepayment

During the housing bubble, there an increase in first time buyers as shown in the first graph below (from paper).

Also first time homebuyers defaulted at a higher rate than repeat buyers.

Patrabansh shows that the higher default rate for first-time homebuyers is related to borrower differences, and, after adjusting for these differences, first-time hombuyers defaulted at the same rate as repeat homebuyers.

 From the conclusion:

First-time homebuyer mortgages acquired by the Enterprises generally performed worse than repeat homebuyer mortgages. But fi rst-time homebuyers are also inherently diff erent from repeat homebuyers. For example, they are younger, and have lower credit scores, lower home equity, and less income and therefore are less likely to withstand fi nancial stress or take advantage of financial innovations available in the market than repeat homebuyers. In other words, in terms of many borrower, loan, and property characteristics that can be determined at the time of loan origination, the distributional make-up of fi rst-time homebuyers is somewhat weaker than that of repeat homebuyers.

Click on graph for larger image.

This graph from the paper shows the surge in first-time homebuying during the housing bubble.

Note: As I've noted before, this is one of the tragedies of the housing bubble - many people were lured into buying before they were really ready, and have soured on the homebuying experience.

Patrabansh presents several charts on the differences between first-time homebuyers and repeat buyers (see paper Appendix A). First time homebuyers are younger than repeat buyers, have lower monthly income, lower FICO scores, have a higher percentage of one borrower mortgages, took out higher LTV loans, and had a higher payment-to-income and debt-to-income ratios.

From the paper:

Once these distributional di fferences are accounted for in an econometric model, however, there appears to be virtually no di fference between the "average" first-time and repeat home- buyers in their probabilities of default. Therefore the di fference in the first-time and repeat homebuyer loan performance is due to the diff erence in distributional make-up of the two groups in terms of borrower, loan, and property characteristics and not because fi rst-time homebuyers are an inherently riskier group. As long as the borrower, property, and loan characteristics known at the time of origination are able to determine a borrower's ability to repay well and risk is priced accordingly, there should not be a concern that the average first-time homebuyer mortgages are inherently any riskier than the average repeat home- buyer mortgages once those characteristics are taken into account. Both types of mortgages can be expected to default at a similar rate if borrowers, loans, and properties are similar in all other regards.

by Calculated Risk on 7/09/2015 08:33:00 AM

The DOL reported:

In the week ending July 4, the advance figure for seasonally adjusted initial claims was 297,000, an increase of 15,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 281,000 to 282,000. The 4-week moving average was 279,500, an increase of 4,500 from the previous week's revised average. The previous week's average was revised up by 250 from 274,750 to 275,000.

There were no special factors impacting this week's initial claims.

The previous week was revised up by 1,000.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 279,500.

This was above the consensus forecast of 275,000, however the low level of the 4-week average suggests few layoffs.

by Calculated Risk on 7/08/2015 08:04:00 PM

From the Financial Times: Lew and Lagarde raise pressure on EU to avoid Grexit.  Both the US and the IMF are pushing for debt relief, but it doesn't seem like anyone is listening.

From the WSJ: Greece Requests Three-Year Bailout in First Step Toward Meeting Creditors’ Demand

The government in Athens formally asked for a three-year bailout from the eurozone’s rescue fund on Wednesday and pledged to start implementing some economic-policy overhauls by early next week, according to a copy of the request seen by The Wall Street Journal.

But whether European leaders accept the application for more emergency loans at a crisis summit on Sunday still depends on Prime Minister Alexis Tsipras making a drastic turnaround on pension cuts, tax increases and other austerity measures after five months of often-acrimonious negotiations.

From the NY Times: Greek Debt Dispute Highlights Prospect of a Euro Exit

“We have a Grexit scenario prepared in detail,” Jean-Claude Juncker, the president of the European Commission, said on Tuesday, using the term for a Greek exit from the euro. On the other side, Greece’s leaders have decried similar comments as “blackmail.”

A grim situation - and Greece is already in a Great Depression size slump.

by Calculated Risk on 7/08/2015 04:30:00 PM

Click on graph for larger image.

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the June 2015 seasonally adjusted annual sales rate (SAAR).

Heavy truck sales really collapsed during the recession, falling to a low of 181 thousand in April 2009 on a seasonally adjusted annual rate basis (SAAR). Since then sales have more than doubled and hit 450 thousand SAAR in June 2015 - even with weakness in the oil sector.

The level in June 2015 was the highest level since February 2007 (over 7 years ago).  Sales have been above 400 thousand SAAR for 12 consecutive months, are now above the average (and median) of the last 20 years.

by Calculated Risk on 7/08/2015 02:06:00 PM

From the Fed: Minutes of the Federal Open Market Committee, June 16-17, 2015 . Excerpts:

While participants generally saw the risks to their projections of economic activity and the labor market as balanced, they gave a number of reasons to be cautious in assessing the outlook. Some pointed to the risk that the weaker-than-anticipated rise in economic activity over the first half of the year could reflect factors that might continue to restrain sales and production, and that economic activity might not have sufficient momentum to sustain progress toward the Committee's objectives. In particular, they were concerned that consumers could remain cautious or that the drag on sectors affected by lower energy prices and the higher dollar could persist. Others, however, viewed the strength in the labor market in recent months as potentially signaling a stronger-than-expected bounceback in economic activity. Several mentioned their uncertainty about whether Greece and its official creditors would reach an agreement and about the likely pace of economic growth abroad, particularly in China and other emerging market economies. Other concerns were related to whether the apparent weakness in productivity growth recently would be reversed or continue. On the one hand, a rebound in productivity growth in coming quarters might restrain hiring and slow the improvement in labor market conditions. On the other hand, if productivity growth remained weak, the labor market might tighten more quickly and inflation might rise more rapidly than anticipated.
...
During their discussion of economic conditions and monetary policy, participants commented on a number of considerations associated with the timing and pace of policy normalization. Most participants judged that the conditions for policy firming had not yet been achieved; a number of them cautioned against a premature decision. Many participants emphasized that, in order to determine that the criteria for beginning policy normalization had been met, they would need additional information indicating that economic growth was strengthening, that labor market conditions were continuing to improve, and that inflation was moving back toward the Committee's objective. Other concerns that were mentioned were the potential erosion of the Committee's credibility if inflation were to persist below 2 percent and the limited ability of monetary policy to offset downside shocks to inflation and economic activity when the federal funds rate was at its effective lower bound. Some participants viewed the economic conditions for increasing the target range for the federal funds rate as having been met or were confident that they would be met shortly.
emphasis added

by Calculated Risk on 7/08/2015 09:40:00 AM

This is a key distressed market to follow since Las Vegas has seen the largest price decline of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported GLVAR reports home sales, prices post double-digit increases from one year ago

According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in June was 3,693, up from 3,274 one year ago. Compared to June 2014, 14.2 percent more homes and 6.3 percent more condos and townhomes sold this June.
...
Since 2013, GLVAR has been reporting fewer distressed sales and more traditional home sales, where lenders are not controlling the transaction. In June, 6.7 percent of all local sales were short sales – which occur when lenders allow borrowers to sell a home for less than what they owe on the mortgage. That’s down from 10.8 percent one year ago. Another 7.6 percent of June sales were bank-owned, down from 10.1 percent one year ago.
...
The total number of single-family homes listed for sale on GLVAR’s Multiple Listing Service in June was 13,740, down 0.7 percent from one year ago. GLVAR tracked a total of 3,474 condos, high-rise condos and townhomes listed for sale on its MLS in June, down 6.5 percent from one year ago.

By the end of June, GLVAR reported 7,432 single-family homes listed without any sort of offer. That’s up 4.3 percent from one year ago. For condos and townhomes, the 2,329 properties listed without offers in June represented a 0.2 percent decrease from one year ago.
emphasis added

There are several key trends that we've been following:

1) Overall sales were up 12.8% year-over-year.

2) Conventional (equity, not distressed) sales were up 22% year-over-year.  In June 2014, 79.1% of all sales were conventional equity.  In June 2015, 85.7% were standard equity sales.

3) The percent of cash sales has declined year-over-year from 34.7% in June 2014 to 28.4% in June 2015. (investor buying appears to be declining).

4) Non-contingent inventory is up 4.3% year-over-year. The table below shows the year-over-year change for non-contingent inventory in Las Vegas. Inventory declined sharply through early 2013, and then inventory started increasing sharply year-over-year. It appears the inventory build is slowing  - but still ongoing.

Las Vegas: Year-over-year Change in Non-contingent Inventory
Month	YoY
Jan-13	-58.3%
Feb-13	-53.4%
Mar-13	-42.1%
Apr-13	-24.1%
May-13	-13.2%
Jun-13	3.7%
Jul-13	9.0%
Aug-13	41.1%
Sep-13	60.5%
Oct-13	73.4%
Nov-13	77.4%
Dec-13	78.6%
Jan-14	96.2%
Feb-14	107.3%
Mar-14	127.9%
Apr-14	103.1%
May-14	100.6%
Jun-14	86.2%
Jul-14	55.2%
Aug-14	38.8%
Sep-14	29.5%
Oct-14	25.6%
Nov-14	20.0%
Dec-14	18.0%
Jan-15	12.9%
Feb-15	15.8%
Mar-15	12.2%
Apr-15	7.6%
May-15	7.8%
Jun-15	4.3%