by Calculated Risk on 12/29/2009 11:46:00 AM

This following graph compares the Case-Shiller Composite 10 SA index with the Stress Test scenarios from the Treasury (stress test data is estimated from quarterly forecasts).

Click on graph for larger image in new window.

The Stress Test scenarios use the Composite 10 index and start in December. Here are the numbers:

Case-Shiller Composite 10 Index (SA), October: 157.56

Stress Test Baseline Scenario, October: 142.3

Stress Test More Adverse Scenario, October: 130.6

House prices are 10.7% higher than the baseline scenario, and 20.6% higher than the more adverse scenario.

There were three key economic stress test parameters: house prices, GDP and unemployment. Both house prices and GDP are performing better than the baseline scenario, and unemployment is performing worse than both stress test scenarios.

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 through October 2009 using the Case-Shiller Composite Indices (SA):

This graph shows the price to rent ratio (January 2000 = 1.0) for the Case-Shiller composite indices. For rents, the national Owners' Equivalent Rent from the BLS is used.

At the peak of the housing bubble it was obvious that prices were out of line with fundamentals such as price-to-rent, price-to-income and real prices. Now most of the adjustment in the price-to-rent ratio is behind us.

It appears the ratio is still a little high, and the recent increase was a combination of falling rents and rising house prices (probably due to the massive government intervention). I expect some further decline in prices, although it isn't as obvious as in 2005.

Comparison to LoanPerformance

And finally, here is a graph of the LoanPerformance index (with and without foreclosures) and the Case-Shiller Composite 20 index. Earlier LoanPerformance announced that house prices fell 0.7% in October.

This graph shows the three indices with January 2000 = 100.

The indices mostly move together over time. Notice how the total LoanPerformance index fell further than the index excluding foreclosures - and also rebounded more.

The seasonally adjusted Case-Shiller index increased slightly in October and the LoanPerformance index showed a decline. However Case-Shiller is an average of three months, so there might be a decline next month.

by Calculated Risk on 12/29/2009 09:30:00 AM

S&P/Case-Shiller released their monthly Home Price Indices for October this morning.

This monthly data includes prices for 20 individual cities, and two composite indices (10 cities and 20 cities). This is the Seasonally Adjusted data - some sites report the NSA data.

Click on graph for larger image in new window.

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 30.5% from the peak, and up about 0.4% in October.

The Composite 20 index is off 29.5% from the peak, and up 0.4% in October.

NOTE: S&P reported this as "flat", but they were using the NSA data.

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

The Composite 10 is off 6.4% from October 2008.

The Composite 20 is off 7.3% from October 2008.

This is still a significant YoY decline in prices.

The third graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

Prices decreased (SA) in 9 of the 20 Case-Shiller cities in October.

In Las Vegas, house prices have declined 56.3% from the peak. At the other end of the spectrum, prices in Dallas are only off about 5.4% from the peak - and up slightly in 2009. Prices have declined by double digits from the peak in 18 of the 20 Case-Shiller cities.

The impact of the massive government effort to support house prices led to small increases in prices over the Summer, and the question is what happens to prices as these programs end over the next 6 months. I expect further price declines in many cities. I'll have more ...

by Calculated Risk on 12/29/2009 09:05:00 AM

Still waiting for the data ...

From S&P:

“The turn-around in home prices seen in the Spring and Summer has faded with only seven of the 20 cities seeing month-to-month gains, although all 20 continue to show improvements on a year-over-year basis. All in all, this report should be described as flat.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.
...
As of October 2009, average home prices across the United States are at similar levels to where they were in the autumn of 2003. From the peak in the second quarter of 2006 through the trough in April 2009, the 10-City Composite is down 33.5% and the 20-City Composite is down 32.6%. With the relative improvement of the past few months, the peak-to-date figures through October 2009 are -29.8% and -29.0%, respectively.

Prices declined in 12 of the 20 Case-Shiller cities, and were flat in New York.

by Calculated Risk on 12/28/2009 11:54:00 PM

From Eric Pryne at the Seattle Times: Commercial real-estate market suffered in 2009; more of the same forecast for 2010

In 2007, developers excavated a deep hole in downtown Seattle at Second Avenue and Pine Street for the foundation of a 23-story luxury hotel and condo tower.

They filled the hole in 2009.

That pretty much captures the kind of year it's been for commercial real estate in the Seattle area.

Lots of good information in the article about commercial real estate in the Seattle area. After discussing rising vacancy rates and falling rents, the article finishes with this great quote:

"About a year and a half ago, we thought we were different," [Jim DeLisle, a University of Washington professor of real-estate studies] told one recent forum. "Nobody is really different."

How times did we hear "it is different here" during the housing bust?

by Calculated Risk on 12/28/2009 08:01:00 PM

Here is the monthly Fannie Mae hockey stick graph ...

Click on graph for larger image in new window.

Fannie Mae reported today that the rate of serious delinquencies - at least 90 days behind - for conventional loans in its single-family guarantee business increased to 4.98% in October, up from 4.72% in September - and up from 1.89% in October 2008.

"Includes seriously delinquent conventional single-family loans as a percent of the total number of conventional single-family loans. These rates are based on conventional single-family mortgage loans and exclude reverse mortgages and non-Fannie Mae mortgage securities held in our portfolio.
...
A measure of credit performance and indicator of future defaults for the single-family ... credit books. We include single-family loans that are three months or more past due or in the foreclosure process ... We include conventional single-family loans that we own and that back Fannie Mae MBS in our single-family delinquency rate, including those with substantial credit enhancement."

Just more evidence of the growing delinquency problem, although it is important to note these stats do include Home Affordable Modification Program (HAMP) loans in trial modifications (and the trial modification periods have been extended again).