Wednesday, April 28, 2021

House Prices and Inventory

by Calculated Risk on 4/28/2021 09:30:00 AM

Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.

And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.

And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases.  

In 2020, with the pandemic, inventory dropped to record lows, and prices really increased (record low mortgage rates and demographics were factors too).

I don't have a crystal ball, but watching inventory helps understand the housing market.

Existing Home SalesClick on graph for larger image.

This graph below shows existing home months-of-supply (from the NAR) vs. the seasonally adjusted month-to-month price change in the Case-Shiller National Index (both since January 1999 through February 2021).

There is a clear relationship, and this is no surprise (but interesting to graph).  If months-of-supply is high, prices decline. If months-of-supply is low, prices rise.

In February, months-of-supply was at 2.0 months, and the Case-Shiller National Index increased 1.1% month-over-month.  The arrow points to the February dot.

In the existing home sales report released last week, the NAR reported months-of-supply at 2.1 months in March. There is a seasonal pattern to inventory, but this is just above the record low of 1.9 months for December 2020 and January 2021 - and prices are increasing sharply.

MBA: Mortgage Applications Decrease in Latest Weekly Survey

by Calculated Risk on 4/28/2021 07:00:00 AM

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

Mortgage applications decreased 2.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 23, 2021.

... The Refinance Index decreased 1 percent from the previous week and was 18 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 34 percent higher than the same week one year ago.

“Mortgage applications decreased last week, even as mortgage rates dropped for the third week in a row. The 30-year fixed rate was down 3 basis points to 3.17 percent, which is still 32 basis points higher than the low reported in December 2020. Even with a few weeks of lower rates, most borrowers have likely already refinanced, which is why activity has decreased in seven of the last eight weeks,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The purchase market’s recent slide comes despite a strengthening economy and labor market. Activity is still above year-ago levels, but accelerating home-price growth and low inventory has led to a decline in purchase applications in four of the last five weeks.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.17 percent from 3.20 percent, with points decreasing to 0.30 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Refinance IndexClick on graph for larger image.

The first graph shows the refinance index since 1990.

With low rates, the index remains elevated, but below recent levels since mortgage rates have moved up from the record lows.

The second graph shows the MBA mortgage purchase index

Mortgage Purchase Index According to the MBA, purchase activity is up 34% year-over-year unadjusted.

Note: Until the 2nd half of May, the MBA index will be up sharply year-over-year since purchase activity collapsed in late March 2020 in the early weeks of the pandemic.

Note: Red is a four-week average (blue is weekly).

Tuesday, April 27, 2021

Wednesday: FOMC Announcement

by Calculated Risk on 4/27/2021 09:00:00 PM

From Matthew Graham at MortgageNewsDaily: Mortgage Rates Continue Edging Slightly Higher From Recent Lows

Mortgage rates have fallen almost every single day in April. By the end of last week, that meant the average lender was offering the lowest conventional 30yr fixed rates in more than a month. The first two days of the current week have taken rates in the other direction, albeit at a very modest pace.
To be fair, sub-3% rates are currently available--especially for purchases--but they're the exception. The average lender is closer to 3.125% on refi transactions, and 3.25% for cash-out refis. Well-qualified borrowers who are willing to pay points (aka, higher closing costs in exchange for a lower rate) can easily get under 3%. [30 Year Fixed Average 3.14%]
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 2:00 PM, FOMC Meeting Announcement. No change to policy is expected at this meeting.

• At 2:30 PM, Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

Zillow Case-Shiller House Price Forecast: "Red Hot", 12.8% YoY in March

by Calculated Risk on 4/27/2021 05:00:00 PM

The Case-Shiller house price indexes for February were released today. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Matthew Speakman at Zillow: February 2021 Case-Shiller Results & Forecast: Red Hot

Already rising at a blistering pace, home price appreciation pressed higher in February as competition for housing remained red hot.
As more signs emerge that the economy’s recovery is gathering steam, a wave of eager buyers – many of them seeking their first home purchase – remain determined to find their next home. But with relatively few for-sale homes on the market, bidding wars have become increasingly common, pushing sale prices higher and leading homes to sell at a record pace. In the near-term, it appears unlikely that these upward price pressures will relent meaningfully, particularly as recent retreats in mortgage rates offer many home shoppers increased buying power. However, after pausing in February, home listing activity has shown a meaningful improvement in recent weeks and some recent signs suggest that the historically tight inventory pressures may finally be starting to ease. Should those signs materialize, the meteoric rise in home prices may finally have a reason to come back down to earth. For now, red hot home price appreciation shows few signs of cooling.

Monthly growth in March as reported by Case-Shiller is expected to slow slightly from February in both of the smaller 10- and 20-city composite indices, and accelerate slightly in the national index. Annual growth is expected to accelerate across the board. S&P Dow Jones Indices is expected to release data for the March S&P CoreLogic Case-Shiller Indices on Tuesday, May 25.
emphasis added
Zillow forecast for Case-ShillerThe Zillow forecast is for the year-over-year change for the Case-Shiller National index to be at 12.8% in March, up from 12.0% in February.

The Zillow forecast is for the 20-City index to be up 12.7% YoY in March from 11.9% in February, and for the 10-City index to increase to be up 12.3% YoY compared to 11.7% YoY in February.

April 27th COVID-19 Vaccinations, New Cases, Hospitalizations; Vaccinations have Slowed

by Calculated Risk on 4/27/2021 04:30:00 PM

Note: I'm looking forward to not posting this daily! I've been posting this data daily for over a year, and I'll stop once all three of these criteria are met:
1) 70% of the population over 18 has had at least one dose of vaccine,
2) new cases are under 5,000 per day, and
3) hospitalizations are below 3,000.

According to the CDC, 232.4 million doses have been administered. 37.3% of the population over 18 is fully vaccinated, and 54.2% of the population over 18 has had at least one dose (139.9 million people over 18 have had at least one dose).

And check out COVID Act Now to see how each state is doing. 

Almost 17,500 US deaths were reported so far in April due to COVID.

COVID-19 Positive Tests per DayClick on graph for larger image.

This graph shows the daily (columns) 7 day average (line) of positive tests reported.

Note: The ups and downs during the Winter surge were related to reporting delays due to the Thanksgiving and Christmas holidays.

This data is from the CDC.

The 7-day average is 55,186, down from 56,013 yesterday, and down from the recent peak of 69,878 on April 13, 2021. This is also below the summer surge peak of 67,337 on July 23, 2020.

The second graph shows the number of people hospitalized.

COVID-19 HospitalizedThis data is also from the CDC.

The CDC cautions that due to reporting delays, the area in grey will probably increase.

The current 7-day average is 37,092, up from 36,654 reported yesterday, and well above the post-summer surge low of 23,000.

Las Vegas Visitor Authority for March: No Convention Attendance, Visitor Traffic Down 40% Compared to 2019

by Calculated Risk on 4/27/2021 02:42:00 PM

From the Las Vegas Visitor Authority: March 2021 Las Vegas Visitor Statistics

March 2021 saw the highest visitation since Feb of last year as the destination welcomed more than 2.2M visitors, up nearly 45% MoM. With travel reduced last March due to the initial shutdown, year‐over‐year (YoY) comparisons show a 45.7% increase while a comparison to pre‐COVID 2019 monthly metrics shows visitation down roughly ‐40% from March 2019.

Hotel occupancy ramped up to 55.5%, up 13.5 pts MoM, as Weekend occupancy reached 77.7% (up 14.9 pts MoM) and Midweek occupancy reached 47.8% (up 15.7% MoM).
Las Vegas Visitor Traffic Click on graph for larger image.

The first graph shows visitor traffic for 2019 (blue), 2020 (orange) and 2021 (red).

Visitor traffic was down 39.7% compared to the same month in 2019.

Convention traffic was non-existent again in March, and was down 100% compared to March 2019.

There has been no convention traffic since March 2020.  

I'll add a graph of convention traffic once conventions start to reopen.

Note: A convention is scheduled for early June (HT MS): "Informa Markets, organizers of the World of Concrete, has received approval from the Nevada Department of Business and Industry to move forward with its 2021 in-person edition. The event is scheduled to be held June 8-10, 2021 at the Las Vegas Convention Center."

Real House Prices and Price-to-Rent Ratio in February

by Calculated Risk on 4/27/2021 11:14:00 AM

Here is the post earlier on Case-Shiller: Case-Shiller: National House Price Index increased 12.0% year-over-year in February

It has been fifteen years since the bubble peak. In the Case-Shiller release today, the seasonally adjusted National Index (SA), was reported as being 31% above the previous bubble peak. However, in real terms, the National index (SA) is about 4% above the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is still 5% below the bubble peak.

The year-over-year growth in prices increased to 12.0% nationally.

Usually people graph nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be over $295,000 today adjusted for inflation (48%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

Nominal House Prices

Nominal House PricesThe first graph shows the monthly Case-Shiller National Index SA, and the monthly Case-Shiller Composite 20 SA (through February) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) and the Case-Shiller Composite 20 Index (SA) are both at new all times highs (above the bubble peak).

Real House Prices

Real House PricesThe second graph shows the same two 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 4% above the bubble peak, and the Composite 20 index is back to mid-2005.

In real terms, house prices are at 2005 levels.

Note that inflation was negative for a few months last year, and that also boosted real prices.


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.

Price-to-Rent RatioHere is a similar graph using the Case-Shiller National and Composite 20 House Price Indexes.

This graph shows the price to rent ratio (January 2000 = 1.0). The price-to-rent ratio had been moving mostly sideways, but picked up recently.

On a price-to-rent basis, the Case-Shiller National index is back to January 2005 levels, and the Composite 20 index is back to June 2004 levels.

In real terms, prices are back to 2005 levels, and the price-to-rent ratio is back to late 2004.

HVS: Q1 2021 Homeownership and Vacancy Rates

by Calculated Risk on 4/27/2021 10:36:00 AM

The Census Bureau released the Residential Vacancies and Homeownership report for Q1 2021.

It is likely the results of this survey were significantly distorted by the pandemic.  

This report is frequently mentioned by analysts and the media to track household formation, the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.

This survey might show the trend, but I wouldn't rely on the absolute numbers. Analysts probably shouldn't use the HVS to estimate the excess vacant supply or household formation, or rely on the homeownership rate, except as a guide to the trend.
"National vacancy rates in the first quarter 2021 were 6.8 percent for rental housing and 0.9 percent for homeowner housing. The rental vacancy rate of 6.8 percent was not statistically different from the rate in the first quarter 2020 (6.6 percent) and 0.3 percentage points higher than the rate in the fourth quarter 2020 (6.5 percent). The homeowner vacancy rate of 0.9 percent was 0.2 percentage points lower than the rate in the first quarter 2020 (1.1 percent) and 0.1 percentage points lower than the rate in the fourth quarter 2020 (1.0 percent)

The homeownership rate of 65.6 percent was not statistically different from the rate in the first quarter 2020 (65.3 percent) and not statistically different from the rate in the fourth quarter 2020 (65.8 percent). "
Homeownership Rate Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010.  The Census Bureau will released data for 2020 soon.

The HVS homeownership rate decreased to 65.6% in Q1, from 65.8% in Q4.

The results in Q2 through Q4 of 2020 were distorted by the pandemic.

Homeowner Vacancy RateThe HVS homeowner vacancy increased to 0.9% from 1.0% in Q4.

Once again - this probably shows the general trend, but I wouldn't rely on the absolute numbers.

Rental Vacancy RateThe rental vacancy rate increased to 6.8% in Q1 from 6.5% in Q4.

The quarterly HVS is the most timely survey on households, but there are many questions about the accuracy of this survey.

Case-Shiller: National House Price Index increased 12.0% year-over-year in February

by Calculated Risk on 4/27/2021 09:11:00 AM

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

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

From S&P: S&P Corelogic Case-Shiller Index Reports 12.0% Annual Home Price Gain in February 2021

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 12.0% annual gain in February, up from 11.2% in the previous month. The 10-City Composite annual increase came in at 11.7%, up from 10.9% in the previous month. The 20-City Composite posted an 11.9% year-over-year gain, up from 11.1% in the previous month.

Phoenix, San Diego, and Seattle reported the highest year-over-year gains among the 20 cities in February. Phoenix led the way with a 17.4% year-over-year price increase, followed by San Diego with a 17.0% increase and Seattle with a 15.4% increase. Nineteen of the 20 cities reported higher price increases in the year ending February 2021 versus the year ending January 2021.
Before seasonal adjustment, the U.S. National Index posted an 1.1% month-over-month increase, while the 10-City and 20-City Composites both posted increases of 1.1% and 1.2% respectively in February. After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 1.1%, and the 10-City and 20-City Composites both posted increases of 1.1% and 1.2% respectively as well. In February, all 20 cities reported increases before and after seasonal adjustments.

“Strong home price gains continued in February 2021,” says Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI. The National Composite Index marked its ninth month of accelerating prices with a 12.0% gain from year-ago levels, up from 11.2% in January. This acceleration is also reflected in the 10- and 20-City Composites (up 11.7% and 11.9%, respectively). The market’s strength continues to be broadly-based: all 20 cities rose, and 19 cities gained more in the 12 months ended in February than they had gained in the 12 months ended in January.

“More than 30 years of S&P CoreLogic Case-Shiller data help us to put February’s results into historical context. The National Composite’s 12.0% gain is the highest recorded since February 2006, exactly 15 years ago, and lies comfortably in the top decile of historical performance. Housing’s strength is reflected across all 20 cities; February’s price gains in every city are above that city’s median level, and rank in the top quartile of all reports in 18 cities.
emphasis added
Case-Shiller House Prices Indices Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is up 1.1% in February (SA) from January.

The Composite 20 index is up 1.2% (SA) in February.

The National index is 31% above the bubble peak (SA), and up 1.1% (SA) in February.  The National index is up 77% from the post-bubble low set in December 2011 (SA).

Case-Shiller House Prices Indices The second graph shows the year-over-year change in all three indices.

The Composite 10 SA is up 11.7% compared to February 2020.  The Composite 20 SA is up 11.9% year-over-year.

The National index SA is up 12.0% year-over-year.

Price increases were at expectations.  I'll have more later.

Monday, April 26, 2021

Tuesday: Case-Shiller House Prices, Richmond Fed Mfg, Q1 2021 Housing Vacancies and Homeownership

by Calculated Risk on 4/26/2021 09:00:00 PM

• At 9:00 AM ET, S&P/Case-Shiller House Price Index for February. The consensus is for a 11.6% year-over-year increase in the Comp 20 index for February.

• Also at 9:00 AM, FHFA House Price Index for February. This was originally a GSE only repeat sales, however there is also an expanded index.

• At 10:00 AM, Richmond Fed Survey of Manufacturing Activity for April. This is the last of regional manufacturing surveys for April.

• Also at 10:00 AM, the Q1 2021 Housing Vacancies and Homeownership from the Census Bureau.