by Calculated Risk on 11/29/2011 03:14:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for October 2011. In the past month, the indexes increased in 43 states, decreased in five, and remained unchanged in two (Georgia and New Mexico) for a one-month diffusion index of 76. Over the past three months, the indexes increased in 42 states, decreased in seven, and remained unchanged in one (Delaware) for a three-month diffusion index of 70.

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 October, 45 states had increasing activity, up from 39 in September. This is the highest level since April.

Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and all green earlier this year - but this is an improvement from September.

Earlier:
• CoreLogic: 10.7 Million U.S. Properties with Negative Equity in Q3
• Case Shiller: Home Prices decline in September
• Real House Prices and House Price-to-Rent

by Calculated Risk on 11/29/2011 12:46:00 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 Q3 2011), and the monthly Case-Shiller Composite 20 SA and CoreLogic House Price Indexes (through September) in nominal terms (as reported).

In nominal terms, the Case-Shiller National index (SA) is back to Q4 2002 levels, the Case-Shiller Composite 20 Index (SA) is back to April 2003 levels, and the CoreLogic index is back to June 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 Q1 1999 levels, the Composite 20 index is back to May 2000, and the CoreLogic index back to April 2000.

In real terms, all appreciation in the '00s 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 June 2000 levels, and the CoreLogic index is back to May 2000.

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

All current house price graphs
Earlier:
• CoreLogic: 10.7 Million U.S. Properties with Negative Equity in Q3
• Case Shiller: Home Prices decline in September

by Calculated Risk on 11/29/2011 10:55:00 AM

CoreLogic released the Q3 2011 negative equity report today.

CoreLogic ... today released negative equity data showing that 10.7 million, or 22.1 percent, of all residential properties with a mortgage were in negative equity at the end of the third quarter of 2011. This is down slightly from 10.9 million properties, or 22.5 percent, in the second quarter. An additional 2.4 million borrowers had less than 5 percent equity, referred to as near-negative equity, in the third quarter.

Here are a couple of graphs from the report:

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 has the highest negative equity percentage with 58 percent of all of its mortgaged properties underwater, followed by Arizona (47 percent), Florida (44 percent), Michigan (35 percent) and Georgia (30 percent). This is the first quarter that Georgia entered the top five, surpassing California which had been in the top five since tracking began in 2009.

The top five states combined have an average negative equity ratio of 41.4 percent, while the remaining states have a combined average negative equity ratio of 17.6 percent."

The second graph shows the distribution of equity by state- black is Loan-to-value (LTV) of less than 80%, blue is 80% to 100%, red is a LTV of greater than 100% (or negative equity). Note: This only includes homeowners with a mortgage - about 31% of homeowners nationwide do not have a mortgage.

Some states - like New York - have a large percentage of borrowers with more than 20% equity, and Nevada, Arizona and Florida have the fewest borrowers with more than 20% equity.

Some interesting data on borrowers with and without home equity loans from CoreLogic: "Of the 10.7 million borrowers in negative equity, there are 6.3 million first liens without home equity loans that have an average mortgage balance of $222,000. They are underwater by an average of $52,000 which equates to an average LTV ratio of 131 percent. The negative equity share for the first lien-only borrowers was 18 percent, and 40 percent had an LTV of 80 percent or higher.

The remaining 4.4 million negative equity borrowers hold first liens and home equity loans with an average mortgage balance of $309,000. These borrowers are underwater by an average of $84,000 and have an average LTV of 137 percent."

by Calculated Risk on 11/29/2011 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for September (a 3 month average of July, August and September). This release includes prices for 20 individual cities and and two composite indices (for 10 cities and 20 cities) and the national quarterly index for Q3.

Note: Case-Shiller reports NSA, I use the SA data. Here is a table of the year-over-year and monthly changes for both SA and NSA.

Case Shiller September 2011	Seasonally Adjusted		Not Seasonally Adjusted
	YoY Change	One Month Change	YoY Change	One Month Change
Composite 10	-3.3%	-0.4%	-3.3%	-0.4%
Composite 20	-3.6%	-0.6%	-3.6%	-0.6%

From S&P: Home Prices Weaken as the Third Quarter of 2011 Ends

The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 3.9% decline in the third quarter of 2011 over the third quarter of 2010. In September, the 10- and 20-City Composites posted annual rates of decline of 3.3% and 3.6%, respectively. Eighteen of the 20 MSAs and both monthly Composites had negative annual rates in September 2011, the only exceptions being Detroit and Washington DC.

“Home prices drifted lower in September and the third quarter,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “The National Index was down 3.9% versus the third quarter of 2010 and up only 0.1% from the previous quarter. Three cities posted new index lows in September 2011 - Atlanta, Las Vegas and Phoenix. Seventeen of the 20 cities and both Composites were down for the
month.

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 32.5% from the peak, and down 0.4% in September (SA). The Composite 10 is 0.5% above the June 2009 post-bubble bottom (Seasonally adjusted).

The Composite 20 index is off 32.5% from the peak, and down 0.6% in September (SA). The Composite 20 is at a new post-bubble low.

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

The Composite 10 SA is down 3.3% compared to September 2010.

The Composite 20 SA is down 3.6% compared to September 2010. This is slightly smaller year-over-year decline than in August.

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

Prices increased (SA) in 5 of the 20 Case-Shiller cities in September seasonally adjusted. Prices in Las Vegas are off 60.6% from the peak, and prices in Dallas only off 8.6% from the peak.

Prices are now falling again, and the Case-Shiller Composite 20 (SA) hit a new post-bubble low.

by Calculated Risk on 11/28/2011 11:04:00 PM

From the NY Times: Crisis in Europe Tightens Credit Across the Globe

Europe’s worsening sovereign debt crisis has spread beyond its banks and the spillover now threatens businesses on the Continent and around the world.

From global airlines and shipping giants to small manufacturers, all kinds of companies are feeling the strain as European banks pull back on lending in an effort to hoard capital and shore up their balance sheets.

The result is a credit squeeze for companies from Berlin to Beijing ...

I've been watching some of the credit indicators we tracked several years ago - like the TED spread and the two year U.S. dollar swap spread - both are rising, but are well below the levels during the financial crisis. Probably the most significant channel of contagion from the European financial crisis would be tightening of U.S. credit conditions - and so far the tightening in the U.S. appears to be minimal. However, as the NY Times story points out, tighter credit could be impacting U.S. trading partners "from Berlin to Beijing".

Earlier on New Homes:
• New Home Sales in October: 307,000 SAAR
• New Home Prices: Average Lowest since 2003
• All current New Home Graphs