by Calculated Risk on 2/05/2013 11:55:00 AM

Press Release: Asking Prices Up 5.9 Percent Nationally Year-Over-Year, Rents Rose 4.1 Percent

Indicating the strength of the home price recovery, asking prices rose 0.3 percent quarter-over-quarter (Q-o-Q) in January without seasonal adjustment—despite the fact that prices typically fall during the wintertime. Seasonally adjusted, prices rose 2.2 percent Q-o-Q. Moreover, prices rose 0.9 percent month-over-month (M-o-M), the highest monthly gain since the price recovery began. Year-over-year (Y-o-Y), prices rose 5.9 percent; excluding foreclosures, prices rose 6.5 percent.

With more newly-constructed multi-unit buildings coming to completion, rent gains fell behind asking price increases at the national level for the first time since the price recovery began last spring. In January, rents rose 4.1 percent Y-o-Y nationally, slowing down from 4.7 percent in July 2012. Regionally, rent gains cooled the most in San Francisco, where rents rose 2.4 percent versus 11.5 percent in July 2012.

“Rent gains are slowing down because of more supply, not less demand,” explains Jed Kolko, Trulia’s Chief Economist. “Many of the multi-unit buildings that have been under construction over the past two years are now coming onto the market. Renters in San Francisco, Seattle, and Denver are starting to get a touch of relief, even though rising prices might put homeownership out of their reach.”

More from Jed Kolko, Trulia Chief Economist: Asking Home Prices Set New Records While Rents Ease as Supply Expands

These asking prices are SA (Seasonally Adjusted) - and adjusted for the mix of homes - and this suggests further house price increases over the next few months on a seasonally adjusted basis.

by Calculated Risk on 2/05/2013 10:00:00 AM

The January ISM Non-manufacturing index was at 55.2%, down from 55.7% in December. The employment index increased in January to 57.5%, up from 55.3% in December. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: January 2013 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in January for the 37th consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee. "The NMI™ registered 55.2 percent in January, 0.5 percentage point lower than the seasonally adjusted 55.7 percent registered in December. This indicates continued growth at a slightly slower rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 56.4 percent, which is 4.4 percentage points lower than the seasonally adjusted 60.8 percent reported in December, reflecting growth for the 42nd consecutive month. The New Orders Index decreased by 3.9 percentage points to 54.4 percent, and the Employment Index increased 2.2 percentage points to 57.5 percent, indicating growth in employment for the sixth consecutive month. The Prices Index increased 1.9 percentage points to 58 percent, indicating prices increased at a faster rate in January when compared to December. According to the NMI™, eight non-manufacturing industries reported growth in January. Respondents' comments are mixed about the economy and business conditions; however, the majority of respondents are optimistic about the overall direction."
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was slightly above the consensus forecast of 55.0% and indicates slightly slower expansion in January than in December. 

by Calculated Risk on 2/05/2013 08:59:00 AM

Notes: This CoreLogic House Price Index report is for December. The recent Case-Shiller index release was for November. Case-Shiller is currently the most followed house price index, however CoreLogic is used by the Federal Reserve and is followed by many analysts. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Home Price Index Rises for the 10th Consecutive Month in December; Biggest Year-Over-Year Increase Since May 2006

Home prices nationwide, including distressed sales, increased on a year-over-year basis by 8.3 percent in December 2012 compared to December 2011. This change represents the biggest increase since May 2006 and the 10th consecutive monthly increase in home prices nationally. On a month-over-month basis, including distressed sales, home prices increased by 0.4 percent in December 2012 compared to November 2012. The HPI analysis shows that all but four states are experiencing year-over-year price gains.

Excluding distressed sales, home prices increased on a year-over-year basis by 7.5 percent in December 2012 compared to December 2011. On a month-over-month basis, excluding distressed sales, home prices increased 0.9 percent in December 2012 compared to November 2012. Distressed sales include short sales and real estate owned (REO) transactions.

The CoreLogic Pending HPI indicates that January 2013 home prices, including distressed sales, are expected to rise by 7.9 percent on a year-over-year basis from January 2012 and fall by 1 percent on a month-over-month basis from December 2012, reflecting a seasonal winter slowdown.
...
“December marked 10 consecutive months of year-over-year home price improvements, and the strongest growth since the height of the last housing boom more than six years ago,” said Mark Fleming, chief economist for CoreLogic. “We expect price growth to continue in January as our Pending HPI shows strong year-over-year appreciation.”

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 0.4% in December, and is up 8.3% over the last year.

The index is off 26.9% from the peak - and is up 9.4% from the post-bubble low set in February 2012 (the index is NSA, so some of the increase is seasonal).

The second graph is from CoreLogic. The year-over-year comparison has been positive for ten consecutive months suggesting house prices bottomed early in 2012 on a national basis (the bump in 2010 was related to the tax credit).

This is the largest year-over-year increase since 2006.

Since this index is not seasonally adjusted, it was expected to decline on a month-to-month basis in December - instead the index increased, and, considering seasonal factors, this month-to-month increase was very strong.

by Calculated Risk on 2/04/2013 08:20:00 PM

A different view from Stephen Foley at the Financial Times: House price rebound cruising for a fall

The new flippers of US housing are not the individual speculators of the boom years ... These investors, who have poured into the US housing market since its nadir, are hedge funds and private equity vehicles, and recently (belatedly) individual entrepreneurs. They may be planning to hold the property for a while and harvest rental income in the interim, but decent returns are predicated on a sale, and usually a quick one.

That makes them flippers – and it means that the recent run of strong housing market data may be more chimeric than real.
excerpt with permission

Maybe. But these investors initially bought for the cash-flow, and they would only sell now if they could make a solid profit - and that means a higher price. This isn't logic for a "fall" in house prices, rather this is an argument for less future appreciation.

Also - the author argues "individual entrepreneurs" were late to the party and that is incorrect. Many individuals and small groups were ahead of the hedge funds and private equity groups. I've noted my discussions with some of these groups over the last few years, and they are very happy with their properties (I called one group after reading this article, and I was told they have no intention of selling any properties).

Tuesday economic releases:
• At 10:00 AM ET, the ISM non-Manufacturing Index for January. The consensus is for a decrease to 55.0 from 55.7 in December. Note: Above 50 indicates expansion, below 50 contraction.

• Also at 10:00 AM, the Trulia Price Rent Monitors for January will be released. This is the index from Trulia that uses asking prices adjusted both for the mix of homes listed for sale and for seasonal factors.

by Calculated Risk on 2/04/2013 02:00:00 PM

From the Federal Reserve: The January 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices

In the January survey, generally modest fractions of domestic banks reported having eased their standards across major loan categories over the past three months on net. Domestic respondents indicated that demand for business loans, prime residential mortgages, and auto loans had strengthened, on balance, while demand for other types of loans was about unchanged. U.S. branches and agencies of foreign banks, which mainly lend to businesses, reported little change in their lending standards, while demand for their loans was reportedly stronger on net.
...
Within consumer lending, a moderate fraction of domestic banks reported an easing of standards on auto loans, on net, while standards on other types of consumer loans were about unchanged. On balance, banks indicated having eased selected terms on consumer loans over the survey period. A moderate fraction of respondents continued to experience stronger demand for auto loans, on net, while demand for credit card loans was reportedly unchanged.
...
The January survey also included three sets of special questions: The first set asked banks about lending to and competition from banks headquartered in Europe; the second set asked banks about changes in their lending policies on CRE loans over the past year; and the third set asked banks about their outlook for asset quality in major loan categories during 2013. In response to the first set, only a small fraction of domestic banks indicated that lending standards to European banks and their affiliates had been tightened, on net, while foreign respondents' standards were reportedly little changed for such institutions. In response to the second set, respondents indicated that they had eased selected CRE loan terms over the past 12 months on net, with the rest of the surveyed terms having been about unchanged. Finally, respondents' answers for the outlook for asset quality revealed that moderate to large fractions of banks expect improvements in credit quality in most major loan categories on balance.
emphasis added

Click on graph for larger image.

Here are some charts from the Fed.

These two graphs shows the change in lending standards and demand for CRE (commercial real estate) loans.

Increasing demand and some easing in standards suggests some increase in CRE activity going forward.

In general this survey indicates lending standards are still tight, but some banks are loosening a little - and there is also increasing demand for certain loans.