by Calculated Risk on 3/26/2013 02:56:00 PM

When the new home sales report was released for January, showing a large increase in the annualized sales rate, I cautioned not to read too much into that number. It was just one month of data, and January is seasonally the weakest month of the year with the largest positive seasonal adjustment.

Now that we have two months of data for 2013, one way to look at the growth rate is to use not seasonally adjusted (NSA) year-to-date data.

According to the Census Bureau, there have been 63 thousand new homes sold in 2013, up about 19% from the 53 thousand sold in January and February of 2012. That is a solid increase in sales. Note: For 2013, estimates are sales will increase to around 450 to 460 thousand, or an increase of around 22% to 25% on an annual basis from the 368 thousand in 2012.

As I mentioned last month, although there has been a large increase in the sales rate, sales are still near the lows for previous recessions. This suggest significant upside over the next few years (based on estimates of household formation and demographics, I expect sales to increase to 750 to 800 thousand over the next several years). Also housing is historically the best leading indicator for the economy, and this is one of the reasons I think The future's so bright, I gotta wear shades.

And here is another update to the "distressing gap" graph that I first started posting over four years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to start to close over the next few years.

Click on graph for larger image.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through February 2013. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. The flood of distressed sales kept existing home sales elevated, and depressed new home sales since builders weren't able to compete with the low prices of all the foreclosed properties.

I don't expect much of an increase in existing home sales (distressed sales will slowly decline and be offset by more conventional sales). But I do expect this gap to close - mostly from an increase in new home sales.

Another way to look at this is a ratio of existing to new home sales.

This ratio was fairly stable from 1994 through 2006, and then the flood of distressed sales kept the number of existing home sales elevated and depressed new home sales. (Note: This ratio was fairly stable back to the early '70s, but I only have annual data for the earlier years).

In general the ratio has been trending down, and I expect this ratio to trend down over the next several years as the number of distressed sales declines and new home sales increase.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

by Calculated Risk on 3/26/2013 12:12:00 PM

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.

As an example, if a house price was $200,000 in January 2000, the price would be close to $275,000 today adjusted for inflation.  This is why economist also look at real house prices (inflation adjusted).

Nominal House Prices

The first graph shows the quarterly Case-Shiller National Index SA (through Q4 2012), and the monthly Case-Shiller Composite 20 SA and CoreLogic House Price Indexes (through January) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to Q2 2003 levels (and also back up to Q3 2010), and the Case-Shiller Composite 20 Index (SA) is back to November 2003 levels, and the CoreLogic index (NSA) is back to January 2004.

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 October 1999 levels, the Composite 20 index is back to December 2000, and the CoreLogic index back to February 2001.

In real terms, most of the appreciation in the last decade is 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 Q4 1999 levels, the Composite 20 index is back to December 2000 levels, and the CoreLogic index is back to February 2001.

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

Nominal Prices: Cities relative to Jan 2000


The last graph shows the bubble peak, the post bubble minimum, and current nominal prices relative to January 2000 prices for all the Case-Shiller cities in nominal terms.

As an example, at the peak, prices in Phoenix were 127% above the January 2000 level. Then prices in Phoenix fell slightly below the January 2000 level, and are now up 27% above January 2000 (I'll look at this in real terms later). Some cities - like Denver - are close to the peak level. Other cities, like Atlanta and Detroit, are below the January 2000 level.

by Calculated Risk on 3/26/2013 10:18:00 AM

The Census Bureau reports New Home Sales in February were at a seasonally adjusted annual rate (SAAR) of 411 thousand. This was down from a revised 431 thousand SAAR in January (revised down from 437 thousand). 

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

"Sales of new single-family houses in February 2013 were at a seasonally adjusted annual rate of 411,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.6 percent below the revised January rate of 431,000, but is 12.3 percent above the February 2012 estimate of 366,000.

Click on graph for larger image in graph gallery.

The second graph shows New Home Months of Supply.

The months of supply increased in February to 4.4 months from 4.2 months in January.

The all time record was 12.1 months of supply in January 2009.

This is now in the normal range (less than 6 months supply is normal).

"The seasonally adjusted estimate of new houses for sale at the end of February was 152,000. This represents a supply of 4.4 months at the current sales rate."

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is just above the record low. The combined total of completed and under construction is also just above the record low.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In February 2013 (red column), 33 thousand new homes were sold (NSA). Last year 30 thousand homes were sold in February. This was the eight weakest February since this data has been tracked. The high for February was 109 thousand in 2005, and the low for February was 22 thousand in 2011.



This was below expectations of 425,000 sales in February, but still a fairly solid report.  I'll have more soon ...

by Calculated Risk on 3/26/2013 09:18:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for January ("January" is a 3 month average of November, December and January).

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

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Home Prices Accelerate in January 2013 According to the S&P/Case-Shiller Home Price Indices

Data through January 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices ... showed average home prices increased 7.3% for the 10-City Composite and 8.1% for the 20-City Composite in the 12 months ending in January 2013.

“The two headline composites posted their highest year-over-year increases since summer 2006,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “This marks the highest increase since the housing bubble burst."
...
In January 2013, nine cities -- Atlanta, Charlotte, Las Vegas, Los Angeles, Miami, New York, Phoenix, San Francisco and Tampa -- and both Composites posted positive monthly returns. Dallas was the only MSAwhere the level remained flat.

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 29.3% from the peak, and up 1.0% in January (SA). The Composite 10 is up 7.3% from the post bubble low set in Feb 2012 (SA).

The Composite 20 index is off 28.4% from the peak, and up 1.0% (SA) in January. The Composite 20 is up 8.1% from the post-bubble low set in Jan 2012 (SA).

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

The Composite 10 SA is up 7.3% compared to January 2012.

The Composite 20 SA is up 8.1% compared to January 2012. This was the eight consecutive month with a year-over-year gain since 2010 (when the tax credit boosted prices temporarily).  This was the largest year-over-year gain for the Composite 20 index since 2006.

Prices increased (SA) in 20 of the 20 Case-Shiller cities in January seasonally adjusted (prices increased in 9 of 20 cities NSA). Prices in Las Vegas are off 55.9% from the peak, and prices in Denver only off 2.0% from the peak.

This was close to the consensus forecast for a 8.2% YoY increase. I'll have more on prices later.

by Calculated Risk on 3/26/2013 08:15:00 AM

According to the First Look report for February to be released today by Lender Processing Services (LPS), the percent of loans delinquent decreased in February compared to January, and declined about 6.5% year-over-year. Also the percent of loans in the foreclosure process declined further in February and were down significantly over the last year.

LPS reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) decreased to 6.80% from 7.03% in January. Note: the normal rate for delinquencies is around 4.5% to 5%.

 The percent of loans in the foreclosure process declined to 3.38% in February from 3.41% in January. 

The number of delinquent properties, but not in foreclosure, is down about 8% year-over-year (301,000 fewer properties delinquent), and the number of properties in the foreclosure process is down 21% or 449,000 properties year-over-year.

The percent (and number) of loans 90+ days delinquent and in the foreclosure process is still very high, but the number of loans in the foreclosure process is now steadily declining.

LPS will release the complete mortgage monitor for February in early April.

LPS: Percent Loans Delinquent and in Foreclosure Process
	Feb 2013	Jan 2013	Feb 2012
Delinquent	6.80%	7.03%	7.28%
In Foreclosure	3.38%	3.41%	4.20%
Number of properties:
Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure:	1,927,000	1,974,000	2,002,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:	1,483,000	1,531,000	1,709,000
Number of properties in foreclosure pre-sale inventory:	1,694,000	1,703,000	2,143,000
Total Properties	5,104,000	5,208,000	5,854,000