by Calculated Risk on 2/06/2013 03:52:00 PM

From DataQuick: Record Number of California Homes Bought with Cash

The number of California homes purchased with cash reached an all-time high last year ... A total of 145,797 condos and houses were bought without mortgage financing in 2012, a record. That was up from 125,812 in 2011, the previous high. In 2007, as the housing market deflated, cash sales totaled 39,731, according to San Diego-based DataQuick.

"It's clear that a lot of today's housing market recovery is being fueled by people putting their own money into homes. Some cash buying is part of a normal housing market, but we're at twice that normal rate. There are always some rich people, also buyers from abroad, but in a normal market the biggest single category would be retirees and empty-nesters who are down-sizing. Today, a lot of buyers are chasing what they view as the deal of a lifetime," said John Walsh, DataQuick president.

Cash purchases accounted for a record 32.4 percent of California's overall home sales last year, up from 30.4 percent in 2011 and more than double the annual average of 15.6 percent since 1991, when DataQuick's cash statistics begin.
...
Last year more all-cash deals occurred above the $500,000 threshold, and fewer below $100,000. Cash-only purchases of $500,000 or more rose 35.0 percent compared with 2011. That compares with an 11.2 percent decline in the number of homes cash buyers purchased below $100,000.

Investors and vacation-home buyers bought roughly 55 percent of all homes purchased with cash last year. Multi-home buyers, meaning those purchasing two or more properties, accounted for about 28 percent of last year's cash sales, up from around 24 percent in 2011, according to an analysis of buyer names in the public record.

Last year more than 11,700 cash-paying, multi-home buyers collectively purchased about 41,450 homes.
emphasis added

Cash buying at the low end is mostly investors, but there are a large number of cash buyers for higher priced homes.

DataQuick reports that a total of "447,573 homes were sold in California to all buyers".  If we assume that last sentence is institutional investors - then institutional investors are buying close to 10% of all homes in California.

by Calculated Risk on 2/06/2013 12:38:00 PM

This fits with the MBA purchase index released this morning ...

From Redfin: Homebuyer Demand Takes Off in January with Home Offers up 70%, Tours up 58%

• Customers signing offers increased 70.4 percent in January, compared with an increase of 58.5 percent a year earlier.

• Customers requesting home tours were up 57.9 percent in January, compared with an increase of 52.0 percent in 2012.

The increase in homebuyer demand seen in January paired with a nation-wide inventory shortage has created an extreme seller’s market as we head into the spring home-buying and selling season. Particularly in Redfin’s Southern California markets, bidding wars involving thirty or more offers have become increasingly common. With no signs that homebuyer demand will let up any time soon, all eyes are on the nation's homeowners, builders and banks to list their homes for sale, providing some relief from this chaotic market.

Note that demand always picks up in January and Redfin provides a comparison to the increase last year in their markets.

I expect more inventory to come on the market over the next few months (Several potential sellers have told me they plan to list their homes soon since the market has "improved").

by Calculated Risk on 2/06/2013 08:43:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

The Refinance Index increased 4 percent from the previous week. The seasonally adjusted Purchase Index increased 2 percent from one week earlier was at its highest level since the week ending May 7, 2010. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.73 percent from 3.67 percent, with points increasing to 0.43 from 0.42 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The contract interest rate for 30-year fixed mortgages has increased for seven of the last eight weeks.

Click on graph for larger image.

This graph shows the MBA mortgage purchase index.

The purchase index has increased in all but one week this year, and is now at the highest level since May 7, 2010 - and that was a spike related to the housing tax credit. The 4-week average of the purchase index is also at the highest level since May 2010.

by Calculated Risk on 2/05/2013 08:23:00 PM

There is a clear seasonal pattern for house prices. Even in normal times house prices tend to be stronger in the spring and early summer, than in the fall and winter. Recently there has been a stronger than normal seasonal pattern because conventional sales are following the normal pattern (more sales in the spring and summer), but distressed sales (foreclosures and short sales) happen all year. So distressed sales have had a larger negative impact on prices in the fall and winter.

However, house prices - not seasonally adjusted (NSA) - have been pretty strong over the last few months - at the start of the normally weak months.

Click on graph for larger image.

This graph shows the month-to-month change in the CoreLogic and NSA Case-Shiller Composite 20 index over the last several years (Case-Shiller through November, CoreLogic through December).

The CoreLogic index has been positive in both the November and December reports (CoreLogic is a 3 month weighted average, with the most recent month weighted the most).

Case-Shiller NSA turned negative month-to-month in the October report (also a three month average, but not weighted), but was only slightly negative in November.   I expect more inventory to come on the market over the next few months than during the spring of 2011 and 2012, and that might slow the price increases - but it looks like the "off-season" for prices will be pretty strong.

by Calculated Risk on 2/05/2013 03:36:00 PM

The Congressional Budget Office (CBO) released their new The Budget and Economic Outlook: Fiscal Years 2013 to 2023.

From the WSJ: CBO Sees Rising U.S. Debt, Economic Rebound in 2014

Economic growth and recent legislation have cut the federal budget deficit in half in the past four years ... the Congressional Budget Office said Tuesday in the annual update of its budget and economic forecast.

The CBO said it expected economic growth to be sluggish in 2013, in part because of a sharp drop in government spending, but it sees a better economy in 2014 as the recovery takes hold.

The federal deficit for the fiscal year ending Sept. 30, 2013, is projected to fall to $845 billion, or 5.3% of gross domestic product, said the CBO, which produces nonpartisan reports on the budget and economy for Congress. That is down sharply from the past four years, which each had deficits exceeding $1 trillion. The 2012 deficit amounted to 7% of GDP.

The CBO projects the deficit will decline to 3.7% of GDP in fiscal 2014, and 2.4% of GDP in fiscal 2015.

Click on graph for larger image.

This graph shows the actual (purple) budget deficit each year as a percent of GDP, and an estimate for the next ten years based on estimates from the CBO.

The CBO deficit estimates are even lower than my projections.

After 2015, the deficit will start to increase again according to the CBO, but as I've noted before, we really don't want to reduce the deficit much faster than this path over the next few years, because that will be too much of a drag on the economy.