by Calculated Risk on 6/11/2012 05:33:00 PM

I've been following the Sacramento market to look for changes in the mix of house sales in a distressed area over time (conventional, REOs, and short sales). The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

So far there has been a shift from REO to short sales, and the percentage of distressed sales has been declining year-over-year. This data would suggest improvement, however we do not know the impact of the mortgage settlement yet (the court signed off on the agreement in early April).

In May 2012, 58.3% of all resales (single family homes and condos) were distressed sales. This was down from 60.7% last month, and down from 65.6% in May 2011. This is lowest level since the Sacramento Realtors started tracking distressed sales, but 58% distressed is still extremely high!

Here are the statistics.

Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales. There is a seasonal pattern for conventional sales (stronger in the spring and summer), and distressed sales happen all year - so the percentage of distressed sales decreases every summer and the increases in the fall and winter.

There has been a sharp increase in conventional sales, and there were more short sales than REO sales in May for the second consecutive month.

Total sales were up 9.0% compared to May 2011, and conventional sales were up 32% year-over-year. Active Listing Inventory for single family homes declined 65.6% from last May, and total inventory, including "short sale contingent", was off 36% year-over-year.

Cash buyers accounted for 31.5% of all sales (frequently investors), and median prices were down 1.8% from last May.

This appears to be a little progress, although the market is still in distress - and the impact of the mortgage settlement is still unknown.

We are seeing similar patterns in other distressed areas.

by Calculated Risk on 6/11/2012 02:36:00 PM

From the Federal Reserve: Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances (ht MS)

The Federal Reserve Board’s Survey of Consumer Finances (SCF) for 2010 provides insights into changes in family income and net worth since the 2007 survey. The survey shows that, over the 2007–10 period, the median value of real (inflation-adjusted) family income before taxes fell 7.7 percent; median income had also fallen slightly in the preceding three-year period. The decline in median income was widespread across demographic groups, with only a few groups experiencing stable or rising incomes. Most noticeably, median incomes moved higher for retirees and other nonworking families. The decline in median income was most pronounced among more highly educated families, families headed by persons aged less than 55, and families living in the South and West regions.
...
The decreases in family income over the 2007−10 period were substantially smaller than the declines in both median and mean net worth; overall, median net worth fell 38.8 percent, and the mean fell 14.7 percent (figure 2).Median net worth fell for most groups between 2007 and 2010, and the decline in the median was almost always larger than the decline in the mean. The exceptions to this pattern in the medians and means are seen in the highest 10 percent of the distributions of income and net worth, where changes in the median were relatively muted. Although declines in the values of financial assets or business were important factors for some families, the decreases in median net worth appear to have been driven most strongly by a broad collapse in house prices.

Click on table for larger image.

This is a portion of table 4 from the Fed Bulletin, and shows the median and mean net worth by income and head of household age for four periods (2001, 2004, 2007 and 2010).

The only group (by income) with an increase in the median net worth was the top 10%. There is much more in the survey.

by Calculated Risk on 6/11/2012 12:23:00 PM

There is plenty of confusion regarding the Spanish bank aid. See the Financial Times Alphaville: Just buying time? , An ESM subordination ... save? and on rumors of capital controls.

From Bloomberg: U.S. Gasoline Fell to $3.6243 a Gallon, Lundberg Survey

The average price of regular gasoline at U.S. filling stations declined 15.9 cents in the past three weeks to $3.6243 a gallon, according to Lundberg Survey Inc.

... The price is down 11.62 cents from a year earlier. The highest average this year was $3.9671 during the two weeks ended April 6.

“Europeans’ misfortunes are American fuel consumers gain,” Trilby Lundberg, president of Lundberg Survey, said today in a telephone interview. “Our dollar looks strong against the weaker euro, which has reduced the price of crude.”

The euro has declined further today with the confusion around the Spanish bank aid.

Oil prices are down again today. Brent is down to $98.56 per barrel, and WTI is down to $83.36. The lower oil prices will not only lead to lower gasoline prices, but also a lower trade deficit and lower headline inflation (CPI).

The following graph shows the decline in gasoline prices. Gasoline prices are down significantly from the peak in early April. Gasoline prices in the west had been impacted by refinery issues, but prices are now falling there too.

Note: The graph shows oil prices for WTI; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 6/11/2012 08:59:00 AM

CoreLogic released their June MarketPulse Report today.

Here is a brief excerpt from a piece by Sam Khater, CoreLogic senior economist, on the impact of negative equity on housing supply:

While the rapid decline in months’ supply is typically good news because it indicates a better balance between demand and supply, this decline is occurring less because of an increase in sales and more because of a drop in unsold inventory as a result of negative equity. Negative equity is typically a demand-side obstacle to sales and refinances, but currently is also restricting the supply of homes for sale. Analysis of the 50 largest markets reveals the metropolitan areas with the lowest levels of months’ supply also have the higher shares of negative equity. Markets with negative equity share of 50 percent or more have an average months’ supply of 4.7 months, compared to 8.3 months’ supply for markets with less than a 10 percent negative equity share. The presence of negative equity not only drives foreclosures, reduces the availability of purchase down payments and impedes refinances, but also restricts the ability of owners to list their homes for sale as the demand side of the market improves.

Paradoxically, as the flow of REOs has slowed over the last 18 months, negative equity has become a positive force in real estate markets by restricting supply in the face of increasing demand.

Although negative equity is probably contributing to the decline in inventory - especially in certain markets with high levels of negative equity - I think price expectations are a bigger factor in the recent decline in inventory.

by Calculated Risk on 6/10/2012 09:24:00 PM

There are no US economic releases scheduled for Monday. The big story will be the aid for Spanish Banks. The next key event in Europe is the Greek election on Sunday June 17th.

The Asian markets are up tonight. The Nikkei is up about 2.3%, and the Hang Seng is up 2.6%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P 500 futures are up about 16, and Dow futures are up 150.

Oil: WTI futures are up to $86.48 (this is down from $109.77 in February) and Brent is back over $100 at $102.14 per barrel.

Saturday:
• Summary for Week Ending June 8th
• Schedule for Week of June 10th

For the monthly economic question contest (three more questions for June later this week):