by Calculated Risk on 2/22/2013 01:58:00 PM

The Case-Shiller house price indexes will be released next week. I like to check the Zillow forecasts; they have been pretty close.

Zillow Forecast: December Case-Shiller Composite-20 Expected to Show 6.7% Increase from One Year Ago

[W]e predict that next month’s Case-Shiller data (December 2012) will show that the 20-City Composite Home Price Index (non-seasonally adjusted [NSA]) increased 6.7 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) increased 5.7 percent on a year-over-year basis. The seasonally adjusted (SA) month-over-month change from November to December will be 0.7 percent for the 20-City Composite and 0.6 percent for the 10-City Composite Home Price Index (SA). All forecasts are shown in the table below. Officially, the Case-Shiller Composite Home Price Indices for December will not be released until Tuesday, February 26th, almost two months after the end of 2012.

The December Case-Shiller numbers are forecast to come in stronger than many economists expect. The last few months have hinted at a strong close to 2012, but part of this strength is due to the weak December 2011 numbers to which December’s numbers are compared. ... To forecast the Case-Shiller indices we use past data from Case-Shiller, as well as the Zillow Home Value Index (ZHVI), which is available more than a month in advance of Case-Shiller numbers, paired with foreclosure re-sale numbers, which we also have available more than a month prior to Case-Shiller numbers. Together, these data points enable us to reliably forecast the Case-Shiller 10-City and 20-City Composite indices.

Right now it looks like Case-Shiller will be up over 6% in 2012 (through the December / Q4 reports to be released in February).

Note: Zillow also released their January index yesterday: January Annual Home Value Increase Is Largest Since Summer 2006

Zillow’s January Real Estate Market Reports, released today, show that national home values rose 0.7% from December to January to $158,100. January 2013 marks the 15th consecutive month of home value appreciation. On a year-over-year basis, home values were up 6.2% from January 2012 – a rate of annual appreciation [for Zillow index] we haven’t seen since July 2006 (when the rate was 7.5%), before the peak of the housing bubble.

		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (year ago)	Dec 2011	149.59	149.77	136.60	136.84
Case-Shiller (last month)	Nov 2012	158.28	157.33	145.82	144.99
Zillow December Forecast	YoY	5.7%	5.7%	6.7%	6.7%
	MoM	-0.1%	0.6%	0.0%	0.7%
Zillow Forecasts1		158.1	158.3	145.8	146.0
Current Post Bubble Low		146.46	149.44	134.07	136.74
Date of Post Bubble Low		Mar-12	Jan-12	Mar-12	Jan-12
Above Post Bubble Low		8.0%	5.9%	8.7%	6.8%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts

by Calculated Risk on 2/22/2013 01:00:00 PM

Just thinking out loud ... one of my ten economic questions for 2013 was: Will Housing inventory bottom in 2013?. My guess was active inventory would bottom in 2013, "probably in January". At the least, I expected that the rate of year-over-year decline would "slow sharply".

This could still be correct. The NAR reported yesterday that listed inventory fell to 1.74 million units in January, the lowest level since December 1999. This was down 25.3 percent from January 2012.

Note: Inventory will increase seasonally over the next few months (this happens every year), and this is why I'm tracking the weekly inventory data.

Click on graph for larger image.

This graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Look at that year-over-year decline (blue line).  Inventory has been falling sharply on a year-over-year basis for some time.   With the low level of inventory, both in absolute numbers and as a month-of-supply, and the recent price increases in some areas, it would some likely more inventory would come on the market.

But what if this is incorrect?  Just imagine if inventory falls another 25% by January 2014. That would be the lowest level of inventory in decades.  At the current sales rate, the months-of-supply would fall to 3.2 months. I just don't see that happening. So, it seems likely that at least the rate of inventory decline will slow.

My view has been that if prices increase enough, then some of the potential sellers will come off the fence, and some underwater homeowners would be able to sell. Zillow just reported that 2 Million Homeowners Freed From Negative Equity in 2012; 1 Million More to Come in 2013

Almost 2 million American homeowners were freed from negative equity in 2012, and the overall percentage of all homeowners with a mortgage in negative equity fell to 27.5 percent at the end of the fourth quarter, according to Zillow’s fourth quarter Negative Equity Report.

The falling negative equity rate is good news for struggling homeowners and is largely attributable to a 5.9 percent bump in home values nationwide last year to a median Zillow Home Value Index of $157,400 (when home values rise, negative equity falls). At the end of 2011, 31.1 percent of homeowners with a mortgage were underwater, or more than 15.7 million people.

So some of these people can sell now.

I need to think about this, but if inventory keeps falling sharply, we might see stronger house price gains in 2013 than originally expected - and maybe more new homes on the market (although some builders are lot constrained this year). This will be an interesting issue all year.

by Calculated Risk on 2/22/2013 09:16:00 AM

Joseph Cotterill at the FT Alphaville blog linked to a post on lumber prices last night: Listen to Lumber. The post included a graph on lumber prices over the last few months, and showed a fairly sharp decline in future prices recently. The author wrote:

Over the past few years, the strength in lumber proved to be a leading indicator for the bullish action we had seen in the homebuilders and, frankly, all housing related stocks.

This week, though, lumber has sold “limit down” ...

I have no comment on housing stocks, but I suspect this decline is either just "noise" following a large price increase, or more supply coming back on the market (remember many mills closed during the housing bust, and I suspect some are coming back online). Back in 2010, after the end of the housing tax credit, I noted that lumber prices collapsed. But the dynamics were different (that was obviously tax credit related and not a real recovery).

Click on graph for larger image in graph gallery.

This graph puts the recent decline in context. This graph shows two measures of lumber prices: 1) from Random Lengths through last week (via NAHB), and 2) CME futures (through today).

The recent decline in CME futures hardly shows up.

by Calculated Risk on 2/21/2013 06:41:00 PM

This morning I posted a graph of mortgage delinquencies by "bucket". The graph I posted did not include Q4 2012 (I've updated the previous post). Here is the correct graph showing the improvement in Q4:

Click on graph for larger image in graph gallery.

This graph shows the percent of loans delinquent by days past due.

Loans 30 days delinquent decreased to 3.04% from 3.25% in Q3. This is just below 2007 levels and around the long term average.

Delinquent loans in the 60 day bucket decreased to 1.16% in Q4, from 1.19% in Q3.

The 90 day bucket decreased to 2.89% from 2.96%. This is still way above normal (around 0.8% would be normal according to the MBA).

The percent of loans in the foreclosure process decreased to 3.74% from 4.07% and is now at the lowest level since 2008.

Here was the MBA press release: Mortgage Delinquency and Foreclosure Rates Finished 2012 Down Sharply

And an earlier post on the conference call: Q4 MBA National Delinquency Survey Comments

by Calculated Risk on 2/21/2013 04:15:00 PM

The NAR reported total sales were up 9.1% from January 2012, but conventional sales are probably up closer to 20% (or more) from January 2012, and distressed sales down.  The NAR reported (from a survey):

Distressed homes - foreclosures and short sales - accounted for 23 percent of January sales, down from 24 percent in December and 35 percent in January 2012.

Although this survey isn't perfect, if total sales were up 9.1% from January 2012, and distressed sales declined from 35% of total sales to 23%, this suggests conventional sales were up sharply year-over-year - a good sign.

And what matters the most in the NAR's existing home sales report is inventory. It is active inventory that impacts prices (although the "shadow" inventory could come on the market and keep prices from rising). For existing home sales, look at inventory first and then at the percent of conventional sales.

The NAR reported inventory decreased to 1.74 million units in January, down from 1.83 million in December. This is down 25.3% from January 2012, and down 19% from the inventory level in January 2005 (mid-2005 was when inventory started increasing sharply). This is the lowest level of inventory since December 1999. 

Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, most "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.

Click on graph for larger image.

This graph shows inventory for January since 2001. In 2005 inventory kept rising all year - and that was a clear sign that the housing bubble was ending.  Inventory was very high from 2006 through 2011, and started declining in 2012.

The months-of-supply has fallen to 4.2 months.  Since months-of-supply uses Not Seasonally Adjusted (NSA) inventory, and Seasonally Adjusted (SA) sales, I expect months-of-supply to stop declining in February.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Sales NSA in January (black column) are  above the sales for for 2009 through 2012, but below the bubble years of 2005 and 2006. 

Note that January is usually the weakest month of the year and sales typically increase in March and peak in the summer.

Earlier:
• Existing Home Sales in January: 4.92 million SAAR, 4.2 months of supply