by Calculated Risk on 8/28/2012 11:56:00 AM

Case-Shiller reported the first year-over-year (YoY) gain in their house price indexes since 2010 - and the increase back in 2010 was related to the housing tax credit. Excluding the tax credit, this is the first YoY increase since 2006. The YoY increase in June suggests that house prices probably bottomed earlier this year (the YoY change lags the turning point for prices).

Since there is a seasonal pattern for house prices, we should expect the month-over-month change to turn negative later this year (probably in the report for August or September). The key will be to watch the YoY change and also compare to the seasonal lows in March 2012. In June, the Case-Shiller Composite 20 index Not Seasonally Adjusted (NSA) was 6.0% above the March 2012 low.

No one should expect the strong price increases to continue. The Case-Shiller Composite 20 index NSA was up 2.3% in June from May. However a large portion of that increase was seasonal. On a Seasonally Adjusted (SA) basis, the Composite 20 index was up 0.9%. That is a 11% annualized rate - and that will not continue. I suspect much of the increase over the last few months was a "bounce off the bottom" and I don't expect prices to increase at this pace.

Here is another update to a few graphs: Case-Shiller, CoreLogic and others report nominal house prices, and it is also useful to look at house prices in real terms (adjusted for inflation) and as a price-to-rent ratio. Real prices, and the price-to-rent ratio, are back to late 1999 to 2000 levels depending on the index.

Nominal House Prices

Click on graph for larger image.

The first graph shows the quarterly Case-Shiller National Index SA (through Q2 2012), and the monthly Case-Shiller Composite 20 SA and CoreLogic House Price Indexes (through June) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to Q1 2003 levels (and also back up to Q4 2010), and the Case-Shiller Composite 20 Index (SA) is back to July 2003 levels, and the CoreLogic index (NSA) is back to November 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 mid-1999 levels, the Composite 20 index is back to June 2000, and the CoreLogic index back to October 2000.

As we've discussed before, in real terms, all of the appreciation early in the last decade is still 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 National, Composite 20 and CoreLogic House Price Indexes.

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

On a price-to-rent basis, the Case-Shiller National index is back to Q3 1999 levels, the Composite 20 index is back to June 2000 levels, and the CoreLogic index is back to August 2000.

In real terms - and as a price-to-rent ratio - prices are mostly back to late 1990s or early 2000 levels.

All Current House Price Graphs

by Calculated Risk on 8/28/2012 09:00:00 AM

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

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

Note: Case-Shiller reports NSA, I use the SA data.

From S&P: Home Prices Rose in the Second Quarter of 2012 According to the S&P/Case-Shiller Home Price Indices

Data through June 2012, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices ... showed that all three headline composites ended the second quarter of 2012 with positive annual growth rates for the first time since the summer of 2010. The national composite was up 1.2% in the second quarter of 2012 versus the second quarter of 2011, and was up 6.9% versus the first quarter of 2012. The 10- and 20-City Composites posted respective annual returns of +0.1% and +0.5% in June 2012. Month-over-month, average home prices in the 10-City Composite were up 2.2% and in the 20-City Composite were up 2.3% versus May. For the second consecutive month, all 20 cities and both Composites recorded positive monthly gains. Eighteen of the 20 MSAs and both Composites posted better annual returns in June as compared to May 2012 – only Charlotte and Dallas saw a deceleration in their annual rates.
...
“Home prices gained in the second quarter,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “In this month’s report all three composites and all 20 cities improved both in June and through the entire second quarter of 2012. All 20 cities and both monthly Composites rose for the second consecutive month. It would have been a third consecutive month had we not seen home prices fall in Detroit back in April."

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 32.0% from the peak, and up 1.0% in June (SA). The Composite 10 is up 3.5% from the post bubble low set in March (SA).

The Composite 20 index is off 31.6% from the peak, and up 0.9% (SA) in June. The Composite 20 is up 3.6% from the post-bubble low set in March (SA).

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

The Composite 10 SA is up 0.1% compared to June 2011.

The Composite 20 SA is up 0.5% compared to June 2011. This was the first year-over-year since 2010 (when the tax credit boosted prices temporarily).

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

Prices increased (SA) in 18 of the 20 Case-Shiller cities in June seasonally adjusted (all 20 cities increased NSA). Prices in Las Vegas are off 60.0% from the peak, and prices in Dallas only off 6.0% from the peak. Note that the red column (cumulative decline through June 2012) is above previous declines for all cities.

This was better than the consensus forecast and the change to a year-over-year increase is significant. I'll have more on prices later.

by Calculated Risk on 8/28/2012 08:42:00 AM

From Reuters: Draghi Skips Jackson Hole Ahead of Pivotal ECB Meeting

European Central Bank President Mario Draghi will not attend the annual Jackson Hole meeting of central bankers at the end of this week due to a heavy workload, the ECB said on Tuesday as its policymakers gear up for a critical meeting on Sept. 6.

Draghi had been expected to speak at the Jackson Hole gathering, but the retreat in the U.S. state of Wyoming falls just as ECB policymakers are hammering out the details of a new bond-buying plan aimed at tackling the euro zone debt crisis.

When asked whether Draghi was no longer planning to attend the Jackson Hole meeting, an ECB spokesman said: "That's correct ... He has a very heavy workload in the coming days."

No speech on Saturday (Bernanke speaks on Friday at the Jackson Hole Economic Symposium).

by Calculated Risk on 8/27/2012 09:11:00 PM

First, tropical storm Isaac is forecast to reach hurricane strength soon, and is expected to make landfall near New Orleans on Tuesday night. Here is the NHC website with the forecast track and satellite images. It appears Isaac will be slow down as it makes landfall and will be over New Orleans for an extended period.

The big news tomorrow will be the release of the Case-Shiller house price index for June that I expect will to show a year-over-year increase for the first time since the housing bust started (except a brief increase in 2010 related to the housing tax credit).

On Tuesday:
• At 9:30 AM ET, the S&P/Case-Shiller House Price Index for June (and the national index for Q2) will be released. The consensus is for a no change year-over-year in the Composite 20 prices (NSA) for June. The Zillow forecast is for the Composite 20 to increase 0.3% year-over-year, and for prices to increase 0.9% month-to-month seasonally adjusted.

• At 10:00 AM, the Conference Board's consumer confidence index for August is scheduled for release. The consensus is for a decrease to 65.0 from 65.9 last month.

• Also at 10:00 AM, the Richmond Fed Survey of Manufacturing Activity for August will be released. The consensus is for an increase to -10 for this survey from -17 in July (above zero is expansion).


A question for the August economic prediction contest (Note: You can now use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 8/27/2012 04:49:00 PM

The Department of Transportation (DOT) reported today:

Travel on all roads and streets changed by 0.4% (1.1 billion vehicle miles) for June 2012 as compared with June 2011. Travel for the month is estimated to be 257.6 billion vehicle miles.

Cumulative Travel for 2012 changed by 1.1% (15.6 billion vehicle miles).

The following graph shows the rolling 12 month total vehicle miles driven.

The rolling 12 month total is still mostly moving sideways.

Click on graph for larger image.

In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Currently miles driven has been below the previous peak for 55 months - and still counting.

The second graph shows the year-over-year change from the same month in the previous year.

Gasoline prices peaked in April at close to $4.00 per gallon, and then started falling.

Gasoline prices were down in June to an average of $3.60 per gallon according to the EIA. Last year, prices in June averaged $3.74 per gallon, so it makes sense that miles driven are up year-over-year in June.

Just looking at gasoline prices suggest miles driven will be up in July too, but then decline year-over-year in August with the recent increase in prices.

However, as I've mentioned before, gasoline prices are just part of the story. The lack of growth in miles driven over the last 4+ years is probably also due to the lingering effects of the great recession (high unemployment rate and lack of wage growth), the aging of the overall population (over 50 drivers drive fewer miles) and changing driving habits of young drivers. With all these factors, it may be years before we see a new peak in miles driven.