by Calculated Risk on 7/27/2021 12:05:00 PM

Here is the post earlier on Case-Shiller: Case-Shiller: National House Price Index increased 16.6% year-over-year in May

It has been over fifteen years since the bubble peak. In the Case-Shiller release today, the seasonally adjusted National Index (SA), was reported as being 38% above the previous bubble peak. However, in real terms, the National index (SA) is about 6% above the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is still 2% below the bubble peak.

The year-over-year growth in prices increased to 16.6% nationally.

Usually people graph nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be over $303,000 today adjusted for inflation (51.5%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

Nominal House Prices

The first graph shows the monthly Case-Shiller National Index SA, and the monthly Case-Shiller Composite 20 SA (through April) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) and the Case-Shiller Composite 20 Index (SA) are both at new all times highs (above the bubble peak).



Real House Prices

The second graph shows the same two 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 6% above the bubble peak, and the Composite 20 index is back to late-2005.

In real terms, house prices are close to previous peak  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 and Composite 20 House Price Indexes.

This graph shows the price to rent ratio (January 2000 = 1.0). The price-to-rent ratio had been moving more sideways, but picked up significantly recently.

On a price-to-rent basis, the Case-Shiller National index is back to June 2005 levels, and the Composite 20 index is back to November 2004 levels.

In real terms, prices are close to 2005 peak levels, and the price-to-rent ratio is back to late 2004, early 2005.

by Calculated Risk on 7/27/2021 10:48:00 AM

The Census Bureau released the Residential Vacancies and Homeownership report for Q2 2021.

It is likely the results of this survey were significantly distorted by the pandemic.  

This report is frequently mentioned by analysts and the media to track household formation, the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.

This survey might show the trend, but I wouldn't rely on the absolute numbers. Analysts probably shouldn't use the HVS to estimate the excess vacant supply or household formation, or rely on the homeownership rate, except as a guide to the trend.

"National vacancy rates in the second quarter 2021 were 6.2 percent for rental housing and 0.9 percent for homeowner housing. The rental vacancy rate was 0.5 percentage points higher than the rate in the second quarter 2020 (5.7 percent) and 0.6 percentage points lower than the rate in the first quarter 2021 (6.8 percent). The homeowner vacancy rate of 0.9 percent was virtually the same as the rate in the second quarter 2020 (0.9 percent) and virtually the same as the rate in the first quarter 2021 (0.9 percent).

The homeownership rate of 65.4 percent was 2.5 percentage points lower than the rate in the second quarter 2020 (67.9 percent) and not statistically different from the rate in the first quarter 2021 (65.6 percent)."

Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010.  The Census Bureau will released data for 2020 soon.

The HVS homeownership rate decreased to 65.4% in Q2, from 65.6% in Q1.

The results starting in Q2 2020 were distorted by the pandemic.

The HVS homeowner vacancy was unchanged at 0.9% in Q2.

Once again - this probably shows the general trend, but I wouldn't rely on the absolute numbers.

The rental vacancy rate decreased to 6.2% in Q2 from 6.8% in Q1.

The quarterly HVS is the most timely survey on households, but there are many questions about the accuracy of this survey.

by Calculated Risk on 7/27/2021 09:12:00 AM

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

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

From S&P: S&P Corelogic Case-Shiller Index Reports Record High Annual Home Price Gain Of 16.6% In May

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 16.6% annual gain in May, up from 14.8% in the previous month. The 10-City Composite annual increase came in at 16.4%, up from 14.5% in the previous month. The 20-City Composite posted a 17.0% year-over-year gain, up from 15.0% in the previous month.

Phoenix, San Diego, and Seattle reported the highest year-over-year gains among the 20 cities in May. Phoenix led the way with a 25.9% year-over-year price increase, followed by San Diego with a 24.7% increase and Seattle with a 23.4% increase. All 20 cities reported higher price increases in the year ending May 2021 versus the year ending April 2021.
...
Before seasonal adjustment, the U.S. National Index posted a 2.1% month-over-month increase in May, while the 10-City and 20-City Composites both posted increases of 1.9% and 2.1%, respectively

After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 1.7%, and the 10-City and 20-City Composites both posted increases of 1.7% and 1.8%, respectively. In May, all 20 cities reported increases before and after seasonal adjustments.

“Housing price growth set a record for the second consecutive month in May 2021,” says Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI. “The National Composite Index marked its twelfth consecutive month of accelerating prices with a 16.6% gain from year-ago levels, up from 14.8% in April. This acceleration is also reflected in the 10- and 20-City Composites (up 16.4% and 17.0%, respectively). The market’s strength continues to be broadly-based: all 20 cities rose, and all 20 gained more in the 12 months ended in May than they had gained in the 12 months ended in April. Prices in 18 of our 20 cities now stand at all-time highs, as do the National Composite and both the 10- and 20-City indices.

“A month ago, I described April’s performance as “truly extraordinary,” and this month I find myself running out of superlatives. The 16.6% gain is the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data. As was the case last month, five cities – Charlotte, Cleveland, Dallas, Denver, and Seattle – joined the National Composite in recording their all-time highest 12-month gains. Price gains in all 20 cities were in the top quartile of historical performance; in 17 cities, price gains were in top decile.

“We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. May’s data continue to be consistent with this hypothesis. This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years. Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing. More time and data will be required to analyze this question.
emphasis added

Click on graph for larger image.

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

The Composite 10 index is up 1.7 in May (SA).

The Composite 20 index is up 1.8% (SA) in May.

The National index is 38% above the bubble peak (SA), and up 1.7% (SA) in May.  The National index is up 86% from the post-bubble low set in February 2012 (SA).

The second graph shows the year-over-year change in all three indices.

The Composite 10 SA is up 16.4% compared to May 2020.  The Composite 20 SA is up 17.0% year-over-year.

The National index SA is up 164.6% year-over-year.

Price increases were slightly above expectations.  I'll have more later.

by Calculated Risk on 7/26/2021 09:00:00 PM

From Matthew Graham at Mortgage News Daily: MBS RECAP: Slow Monday, But Late Warning Shots

It was a slow trading day for the most part until the last 90 minutes. ...  As the day wound down, yields bumped up to the highs--right in line with the 1.295% technical level--and MBS coughed up a quick eighth of a point. That was enough for several lenders to reprice for the worse even though the weakness doesn't speak to any bigger picture issues. ... [30 year fixed 2.86%]
emphasis added

Tuesday:
• At 9:00 AM ET, S&P/Case-Shiller House Price Index for May. The consensus is for a 16.3% year-over-year increase in the Comp 20 index for May.

• Also at 9:00 AM, FHFA House Price Index for May. This was originally a GSE only repeat sales, however there is also an expanded index.

• At 10:00 AM: Richmond Fed Survey of Manufacturing Activity for July. This is the last of the regional surveys for July.

• Also at 10:00 AM, The Q2 Housing Vacancies and Homeownership report from the Census Bureau.

by Calculated Risk on 7/26/2021 04:38:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in June was 1.86%, down from 2.01% in May. Freddie's rate is down year-over-year from 2.48% in June 2020.

Freddie's serious delinquency rate peaked in February 2010 at 4.20% following the housing bubble, and peaked at 3.17% in August 2020 during the pandemic.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

Mortgages in forbearance are being counted as delinquent in this monthly report, but they will not be reported to the credit bureaus.

This is very different from the increase in delinquencies following the housing bubble.   Lending standards have been fairly solid over the last decade, and most of these homeowners have equity in their homes - and they will be able to restructure their loans once (if) they are employed.

Also - for multifamily - delinquencies were at 0.15%, down from 0.19% in May, and down from the peak of 0.20% in April 2021.

by Calculated Risk on 7/26/2021 04:23:00 PM

Note: Data reported on Monday is always low, and is revised up as data is received.

This data is from the CDC.

According to the CDC, on Vaccinations.

Total doses administered: 342,212,051, as of a week ago 338,247,434. Average doses last week: 0.57 million per day.

COVID Metrics
	Today	Yesterday	Week Ago	Goal
Percent over 18, One Dose	69.0%	69.0%	68.3%	≥70.0%1,2
Fully Vaccinated✅ (millions)	163.2	163.0	161.5	≥1601
New Cases per Day3🚩	42,226	45,332	34,465	≤5,0002
Hospitalized3🚩	24,257	24,368	20,958	≤3,0002
Deaths per Day3🚩	239	245	214	≤502
1 America's Short Term Goals, 2my goals to stop daily posts, 37 day average for Cases, Hospitalized, and Deaths 🚩 Increasing 7 day average week-over-week for Cases, Hospitalized, and Deaths ✅ Goal met (even if late).

KUDOS to the residents of the 20 states and D.C. that have achieved the 70% goal (percent over 18 with at least one dose): Vermont, Hawaii, Massachusetts and Connecticut are at 80%+, and Maine, New Mexico, New Jersey,  Rhode Island, Pennsylvania, California, Maryland, Washington, New Hampshire, New York, Illinois, Virginia, Delaware, Minnesota, Oregon, Colorado and D.C. are all over 70%.

Next up are Florida at 67.6%, Utah at 67.1%, Wisconsin at 66.9%, Nebraska at 66.7%, South Dakota at 65.7%, Kansas at 65.9%, Iowa at 65.1%, Nevada at 64.8% and Arizona at 64.1%.

Click on graph for larger image.

This graph shows the daily (columns) and 7 day average (line) of positive tests reported.

This data is from the CDC.

by Calculated Risk on 7/26/2021 04:00:00 PM

Note: This is as of July 18th.

From the MBA: Share of Mortgage Loans in Forbearance Slightly Decreases to 3.48%

The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance decreased by 2 basis points from 3.50% of servicers’ portfolio volume in the prior week to 3.48% as of July 18, 2021. According to MBA’s estimate, 1.74 million homeowners are in forbearance plans.

The share of Fannie Mae and Freddie Mac loans in forbearance decreased 2 basis points to 1.81%. Ginnie Mae loans in forbearance decreased 1 basis point to 4.35%, while the forbearance share for portfolio loans and private-label securities (PLS) increased 5 basis points to 7.38%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers remained the same relative to the prior week at 3.68%, and the percentage of loans in forbearance for depository servicers decreased 1 basis point to 3.61%.

“As is typical for mid-month reporting, forbearance exits slowed, and there was a slight increase in new requests. The net result was a small drop in the share of loans in forbearance – the 21 st consecutive week of declines,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “The forbearance share decreased for GSE and Ginnie Mae loans, but increased for portfolio and PLS loans, as new forbearance requests increased for this category.”
emphasis added

Click on graph for larger image.

This graph shows the percent of portfolio in forbearance by investor type over time.  Most of the increase was in late March and early April 2020, and has trended down since then.

The MBA notes: "Total weekly forbearance requests as a percent of servicing portfolio volume (#) increased relative to the prior week: from 0.03% to 0.04%"

by Calculated Risk on 7/26/2021 12:23:00 PM

Tracking existing home inventory will be very important this year.

Click on graph for larger image in graph gallery.

This inventory graph is courtesy of Altos Research.

As of July 23rd, inventory was at 403 thousand (7 day average), compared to 640 thousand the same week a year ago.  That is a decline of 37.1%.

A week ago, inventory was at 391 thousand, and was down 39.6% YoY.  

Seasonally, inventory has bottomed.   Inventory was about 31.4% above the record low in early April.

Mike Simonsen discusses this data regularly on Youtube.  

Altos Research has also seen a significant pickup in price decreases - almost back to the level of a year ago - although still well below a normal rate for July.

by Calculated Risk on 7/26/2021 10:34:00 AM

New home sales for June were reported at 676,000 on a seasonally adjusted annual rate basis (SAAR). Sales for the previous three months were revised down significantly.

This was well below consensus expectations for June, and probably the start of a number of months with year-over-year declines.

However, sales were in line with home builder comments about "limiting sales", closing communities and limited finished inventory.

Earlier: New Home Sales Decrease to 676,000 Annual Rate in June.

Click on graph for larger image.

This graph shows new home sales for 2020 and 2021 by month (Seasonally Adjusted Annual Rate).

The year-over-year comparisons were easy in the first half of 2021 - especially in March and April.

However, sales will likely be down year-over-year in the 2nd half of 2021 - since the selling season was delayed in 2020.

And on inventory: note that completed inventory (3rd graph in previous post) is near record lows, but inventory under construction is closer to normal.

This graph shows the months of supply by stage of construction.

The inventory of completed homes for sale was at 36 thousand in June, just above the record low of 33 thousand in March and April 2021. That is about 0.6 months of completed supply (just above the record low).

The inventory of new homes under construction, and not started, is at 5.6 months - slightly above the normal level.  However, a record 105 thousand homes have not been started - about double the normal level.

by Calculated Risk on 7/26/2021 10:15:00 AM

The Census Bureau reports New Home Sales in June were at a seasonally adjusted annual rate (SAAR) of 676 thousand.

The previous three months were revised down sharply.

Sales of new single‐family houses in June 2021 were at a seasonally adjusted annual rate of 676,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 6.6 percent below the revised May rate of 724,000 and is 19.4 percent below the June 2020 estimate of 839,000.
emphasis added

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

This is the start of likely year-over-year declines since sales soared following the first few months of the pandemic.

The second graph shows New Home Months of Supply.

The months of supply increased in June to 6.3 months from 5.5 months in May.

The all time record high was 12.1 months of supply in January 2009. The all time record low was 3.5 months, most recently in October 2020.

This is above the normal range (about 4 to 6 months supply is normal).

"The seasonally‐adjusted estimate of new houses for sale at the end of June was 353,000. This represents a supply of 6.3 months at the current sales rate."

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is just above the record low, but the combined total of completed and under construction is close to normal.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In June 2021 (red column), 60 thousand new homes were sold (NSA). Last year, 79 thousand homes were sold in June.

The all time high for June was 115 thousand in 2005, and the all time low for June was 28 thousand in 2010 and in 2011.

This was well below expectations of 800 thousand sales SAAR, and sales in the three previous months were revised down significantly. I'll have more later today.