by Calculated Risk on 10/25/2011 02:05:00 PM

An update: Case-Shiller, CoreLogic and others report nominal house prices. However it is also useful to look at house prices in real terms (adjusted for inflation), as a price-to-rent ratio, and also price-to-income (not shown here).

Below are three graphs showing nominal prices (as reported), real prices and a price-to-rent ratio. Real prices are back to 1999/2000 levels, and the price-to-rent ratio is also back to 2000 levels.

Nominal House Prices

Click on graph for larger image.

The first graph shows the quarterly Case-Shiller National Index SA (through Q2 2011), and the monthly Case-Shiller Composite 20 SA (through August) and CoreLogic House Price Indexes (through August) in nominal terms (as reported).

In nominal terms, the Case-Shiller National index is back to Q4 2002 levels, the Case-Shiller Composite 20 Index (SA) is back to June 2003 levels, and the CoreLogic index is back to July 2003.

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 Q3 1999 levels, the Composite 20 index is back to July 2000, and the CoreLogic index back to June 2000.

In real terms, all appreciation in the last decade is gone.

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 Composite 20 and CoreLogic House Price Index.

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

On a price-to-rent basis, the Composite 20 index is back to August 2000 levels, and the CoreLogic index is back to July 2000.

In real terms - and as a price-to-rent ratio - prices are mostly back to 2000 levels (nationally) and will probably be back to 1999 levels in the next few months.

Earlier:
• Case Shiller: Home Prices increased Seasonally in August

by Calculated Risk on 10/25/2011 11:59:00 AM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for September 2011. In the past month, the indexes increased in 30 states, decreased in 13, and remained unchanged in seven for a one-month diffusion index of 34. Over the past three months, the indexes increased in 30 states, decreased in 16, and remained unchanged in four (Kentucky, Maryland, Mississippi, and New Mexico) for a three-month diffusion index of 28.

Note: These are coincident indexes constructed from state employment data. From the Philly Fed:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Click on graph for larger image.

This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In September, 35 states had increasing activity, up from 28 in August. It is important to remember that August was an especially weak month due to the debt ceiling debate, and some rebound in September was expected.

Here is a map of the three month change in the Philly Fed state coincident indicators. Several states have turned red again. This map was all red during the worst of the recession, and all green not long ago - but this is an improvement from August.

Earlier:
• Case Shiller: Home Prices increased Seasonally in August

by Calculated Risk on 10/25/2011 10:17:00 AM

• Richmond Fed: Manufacturing Contraction Persists in October; Employment Turns Negative

In October, the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — was unchanged from September's reading of −6. Among the index's components, shipments lost four points to −6, while new orders gained twelve points to finish at −5 and the jobs index turned negative, moving down fourteen points to −7.
...
Labor market conditions weakened at District plants in October. The manufacturing employment index moved down 14 points to −7 — the first negative reading for employment since September 2010. The average workweek index, however, gained six points to −1, while wage growth was virtually unchanged, easing one point to finish at 5.

• From the Conference Board Consumer Confidence Index® Declines

The Conference Board Consumer Confidence Index®, which had slightly improved in September, declined in October. The Index now stands at 39.8 (1985=100), down from 46.4 in September.

This is the lowest reading since 26.9 in March 2009.

• From the FHFA: FHFA House Price Index Falls 0.1 Percent in August, First Monthly Decline Since March

U.S. house prices fell 0.1 percent on a seasonally adjusted basis from July to August, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 0.8 percent increase in July was revised to reflect no change. For the 12 months ending in August, U.S. prices fell 4.0 percent.

• Via Bloomberg, EU Finance minister meeting cancelled:

While 27 EU leaders convene before the 17 chiefs of the 17 euro nations tomorrow, a meeting of the 27 EU finance ministers scheduled to precede them was cancelled with no explanation.

Earlier:
• Case Shiller: Home Prices increased Seasonally in August

by Calculated Risk on 10/25/2011 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for August (actually a 3 month average of June, July and August).

This includes prices for 20 individual cities and and two composite indices (for 10 cities and 20 cities).

Note: Case-Shiller reports NSA, I use the SA data. The composite indexes were up about 0.2% in August (from July) Not Seasonally Adjusted (NSA), but declined Seasonally Adjusted (SA).

From S&P: Annual Rates of Change Continue to Improve According to the S&P/Case-Shiller Home Price Indices

Data through August 2011, released today by S&P Indices for its S&P/Case-Shiller Home Price Indices ... showed increases of +0.2% for the 10- and 20-City Composites in August versus July. Ten of the 20 cities covered by the indices also saw home prices increase over the month.d.

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 32.2% from the peak, and down 0.2% in August (SA). The Composite 10 is 1.0% above the June 2009 post-bubble bottom (Seasonally adjusted).

The Composite 20 index is off 32.0% from the peak, and down 0.1% in August (SA). The Composite 20 is slightly above the March 2011 post-bubble bottom seasonally adjusted.

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

The Composite 10 SA is down 3.6% compared to August 2010.

The Composite 20 SA is down 3.9% compared to August 2010. This is slightly smaller year-over-year decline than in July.

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

Prices increased (SA) in 6 of the 20 Case-Shiller cities in August seasonally adjusted. Prices in Las Vegas are off 59.8% from the peak, and prices in Dallas only off 9.0% from the peak.

As S&P noted, prices increased in 10 of 20 cities not seasonally adjusted (NSA). However seasonally adjusted, prices only increased in 6 cities.

The small increase reported by S&P was seasonal.

by Calculated Risk on 10/24/2011 11:12:00 PM

From the Financial Times: Hard line adopted on Greek debt loss

European negotiators have asked Greek debt holders to accept a 60 per cent cut in the face value of their bonds ...
excerpt with permission

The previous agreement was for a 21% cut in the net present value, not the face value. This is a 60% cut in the face value, and according to the Financial Times, this is about a 75% to 80% reduction in NPV.

The Greek 2 year yield is up to 78%. The Greek 1 year yield is at 183%.

The Portuguese 2 year yield is up to 18% and the Irish 2 year yield is up to 8.7%.

The Spanish 10 year yield is at 5.55% and the Italian 10 year yield is at 5.95%.

The Belgian 10 year yield is at 4.45% and the French 10 year yield is up to 3.3%.