by Calculated Risk on 5/14/2014 04:29:00 PM

From housing economist Tom Lawler:

In a report that got a huge amount of media coverage, RealtyTrac alleged that the all-cash share of home purchases hit a record 42.7% last quarter, up from 19.1% in the first quarter of 2013. This increase was “shockingly” large, and occurred despite a decline in the institutional investor share of home purchases. If correct, it is not surprising that this would be “big news.” In reality, however, they are not ...

Click on graph for larger image.

Here is a chart from RealtyTrac. The blue line is the All-Cash Share.

According to RealtyTrac’s tabulations, the all-cash share of home purchases surged in the third quarter of 2013, and has continued to increase, and last quarter it was more than double the year-earlier share.

Data from other sources, in contrast, strongly indicate that the all-cash share of home purchases has been declining over the last year – not just MLS-based reports (such as the one’s I track, but from another entity (CoreLogic) that uses property and mortgage records.

The RealtyTrac data from 2011 through the second quarter of 2013 show a MASSIVELY lower all-cash share of home purchases than does CoreLogic, or that local MLS data would suggest. CoreLogic, e.g., estimated that the all-cash share of home purchases in the first quarter of 2013 was a tad over 40%, compared to RealtyTrac’s estimate of 19.1%. While I don’t have CoreLogic’s estimates for Q1 2014 yet, I’m pretty sure it will show a drop from the first quarter of 2013 of at least five percentage points. (I’m hoping CoreLogic will send me their Q1/2014 estimates soon.)

Below are some all-cash shares of home purchases for various areas – most based on MLS data, but some based on property records tabulated by Dataquick – for March of this year vs. March 2013.

In looking at both these data and the CoreLogic estimates, how can it POSSIBLY be true that the all-cash share of home sales in the first quarter of 2013 was just 19.1%, or that the all-cash share of home sales in the first quarter of 2014 was more than double that of 2013?

The simple answer is ...it can’t.

	All-Cash Share
	Mar-14	Mar-13
Las Vegas	43.1%	57.5%
Seattle*	22.8%	23.9%
Phoenix	33.1%	41.5%
Sacramento	22.5%	36.5%
Miami*	62.5%	66.6%
Mid-Atlantic	19.9%	20.6%
Orlando	44.6%	55.6%
Bay Area CA*	25.0%	31.0%
So. California*	29.1%	35.1%
Toledo	40.7%	38.9%
Wichita	32.0%	27.9%
Des Moines	20.8%	19.1%
Peoria	21.3%	21.7%
Florida SF	45.5%	48.3%
Florida C/TH	70.9%	74.9%
Tucson	33.5%	35.0%
Omaha	20.3%	22.1%
Georgia***	33.8%	NA
*share of existing home sales, based on property records **Single Family Only ***GAMLS

by Calculated Risk on 5/14/2014 02:58:00 PM

From DataQuick: Bay Area Home Prices Continue to Rise; Sales Up from March, Flat Yr/Yr

A total of 7,555 new and resale houses and condos were sold in the nine-county Bay Area last month. That was up 19.8 percent from 6,308 in March and down 0.9 percent from 7,621 in April a year ago, according to San Diego-based DataQuick.

Bay Area sales generally increase from March to April, but the 19.8 percent increase this year was high. The average increase is 4.8 percent. ...

Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 3.6 percent of resales in April, down from a revised 4.3 percent the month before, and down from 8.4 percent a year ago. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 17 years is 9.9 percent.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 3.8 percent of Bay Area resales last month. That was down from an estimated 4.6 percent in March and down from 11.8 percent a year earlier.

Last month absentee buyers – mostly investors – purchased 20.2 percent of all Bay Area homes. That was down from March’s 20.7 percent and down from 24.2 percent for April a year ago.
emphasis added

Sales declined 0.9% year-over-year in April compared to a 12.9% year-over-year decline in March.

And even though total sales were still down slightly year-over-year, the percent of non-distressed sales is up almost 15%.  There were 7,555 total sales this year in April, and 7.4% were distressed.  In April 2013, there were 7,621 total sales, and 20.1% were distressed.  A big positive change. 

by Calculated Risk on 5/14/2014 12:13:00 PM

For fun: This morning Barry Ritholtz reminded me of an article by Charlie Gasparino from March 2009: Is the Worst Yet to Come?

[T]hey can’t believe what they are witnessing: an economic agenda that is contradictory at best, and possibly reckless in its extreme. Policies that will certainly make a very bad situation even worse ...

Gasparino basically called the market bottom! (Ritholtz wrote yesterday: The Parasites of Finance)

Not to pick on Gasparino - we all make bad calls - but here is what I wrote at the same time: What is a depression?

It seems like the "D" word is everywhere. And that raises a question: what is a depression? Although there is no formal definition, most economists agree it is a prolonged slump with a 10% or more decline in real GDP.
...
I still think a depression is very unlikely. More likely the economy will bottom later this year or at least the rate of economic decline will slow sharply. I also still believe that the eventual recovery will be very sluggish, and it will take some time to return to normal growth.
...
It is possible - see Looking for the Sun - that new home sales and housing starts will bottom in 2009, but any recovery in housing will probably be sluggish.

That leaves Personal Consumption Expenditures (PCE) - and as households increase their savings rate to repair their balance sheets, it seems unlikely that PCE will increase significantly any time soon. So even if the economy bottoms in the 2nd half of 2009, any recovery will probably be very sluggish.

This was one of a series of my more positive posts in 2009 (after being very negative for several years).  Not perfect, but clearly my outlook was changing.

Note:
1) The recession ended in June 2009 according to NBER.

2) Housing starts bottomed in 2009, but new home sales didn't bottom until 2010-2011. Note: I predicted house prices would continue to decline, and finally called the bottom for house prices in Feb 2012.

3) The recovery has been sluggish - for housing, PCE, and the overall economy.

Sometimes it is fun to look back. I remember watching CNBC at that time, and it seemed every talking head was bearish - and many were predicting a depression. Gasparino wasn't alone, and those of us looking for the economy to bottom were definitely in the minority.

by Calculated Risk on 5/14/2014 09:25:00 AM

From Melanie Mason at the LA Times: Howard Jarvis group won't oppose bill to close Prop. 13 loophole

The legislation would eliminate the ability of businesses to elude higher property taxes by carving up ownership in commercial property purchases so no one has a majority stake. The tactic averts a reassessment of the property that can increase its taxes.

The 2006 sale of Santa Monica's Fairmont Miramar Hotel to computer magnate Michael Dell cast one of the brightest lights on that loophole. Dell divided ownership shares among his wife and two business partners, with no one taking on more than 49% of the property.

The move saved him about $1 million a year in property taxes.

This has been going on for years, and there lower properties taxes on existing commercial properties tends to discourage some new construction (hard to compete). This is a positive step and is supported by just about everyone.

by Calculated Risk on 5/14/2014 07:00:00 AM

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

Mortgage applications increased 3.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 9, 2014. ...

The Refinance Index increased 7 percent from the previous week to its highest level since the week ending April 11, 2014. The seasonally adjusted Purchase Index decreased less than 1 percent from one week earlier. The unadjusted Purchase Index increased less than 1 percent compared with the previous week and was 12 percent lower than the same week one year ago. ...
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.39 percent, the lowest rate since November 2013, from 4.43 percent, with points increasing to 0.22 from 0.21 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index.

The refinance index is down 74% from the levels in May 2013 (one year ago).

As expected, with the mortgage rate increases, refinance activity is very low this year.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is down about 12% from a year ago.

Note: I've wondered if the purchase index was understating purchase activity because small lenders tend to focus on purchases, and those small lenders might be underrepresented in the purchase index. The Mortgage Bankers Association (MBA) told me the mortgage purchase index includes many smaller "purchase focused" lenders, and the MBA doesn't believe their purchase index is "skewed" by large lenders who were focused on refinance applications.