Jan 7, 2014 | Housing Analysis
The Case-Shiller 10 and 20-City Home Price Indices for October were released on December 31. Although home prices in most cities continued to show year-over-year gains, the pace of home price appreciation is expected to slow in 2014.
Year-over-year increases have been in double digit territory since March 2013, but month-to-month readings suggest that the rate of increasing home prices is slowing.
According to David Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, “…the monthly numbers show that we are living on borrowed time and the boom is fading.”
The 10 and 20 city indices are showing that home prices some cities that were showing little or no growth in 2013 are posting higher rates of appreciation, while growth in cities that have shown very high increases in home prices are beginning to lose momentum.
Year-over-Year Growth In Double Digits
The 10-and 20-city indices each posted year-over year gains of 13.60 percent between October 2012and October 2013. These were the highest year-over-year gains since February of 2006.
Home prices recovered to mid-2004 levels in October, but remained 20 percent lower than peak home prices seen in June and July of 2006.
Here are figures for 10 cities showing the highest increases in home prices year-over-year in October 2013:
City Y-O-Y Growth Rate
Las Vegas, NV 27.10 %
San Francisco, CA 24.60%
Los Angeles, CA 22.10%
San Diego, CA 19.70%
Atlanta, GA 19.00%
Phoenix, AZ 18.10%
Detroit, MI 17.30%
Miami, FL 15.80%
Tampa, FL 15.20%
Seattle, WA 13.10 %
Home prices in the 10 and 20-city indices have gained 23.10 percent and 23.70 percent since home prices reached their lowest points in March 2012.
Month-To-Month Readings Indicate Slower Growth
Month-to-month readings show a slowing trend in home price growth. 18 of 20 cities included in the S&P Case-Shiller Home Price Indices showed slower growth in October as compared to September’s readings.
The Federal Reserve will begin tapering its asset purchases this month and will continue doing so unless economic conditions slow to a point where the Fed considers tapering counter-productive to economic growth.
Concerns over the tapering of “quantitative easing” and higher mortgage rates are seen as contributing to slower gains in home prices.
Although some analysts have identified indicators of economic growth, most seem to agree that home prices are likely to increase by single-digit percentages in 2014.
Dec 31, 2013 | Housing Analysis
The holiday season and winter weather slowed home sales in November. Last week, the NAR reported that sales of existing homes had slumped to their lowest level in nearly a year, but this was not unexpected.
Short supplies of available homes and rising mortgage rates have increased pent-up demand for homes have kept some buyers on the sidelines.
Improvement In The Labor Market
4.90 existing homes were sold in November; this was lower than the 5.13 million existing homes sold in October, as well as lower than expectations of 5.00 million existing home sales in November.
Existing home sales for November 2013 were also 1.20 percent lower than for November 2012; this is the first time in 29 months that existing home sales were lower year-over-year.
Lawrence Yun, chief economist for NAR, described the slow-down in sales as a “clear loss of momentum.” The outlook for 2014 is better, as analysts expect continued improvement in the labor market.
The pent-up demand for homes will ease as homeowners begin to list their homes for sale as home prices increase. Mr. Yun also noted that prices for existing homes are increasing at their highest rate in eight years.
The national median home price of existing homes rose to $196,000 in November, which represents a year-over-year increase of 9.40 percent. There was a 5.1 month supply of previously homes available at the current sales rate.
Housing Market Continues To Progress Over Long Term
The Census Bureau and HUD report that 464,000 new homes were sold in November. This was 2.10 percent lower than October’s rate of 474,000 new homes sold. This represents an increase of 16.60 percent as compared to the 398,000 new homes sold in November 2012.
The national median home price for new homes in November was $270,900; with an average new home price of $340,300. The seasonally-adjusted estimate of new homes for sale in November was 167,000; this reading represents a 4.30 month supply of new homes for sale.
While home builder confidence is up and recent labor reports indicate improving job markets, the Fed’s decision to taper its quantitative easing program in January is generating some uncertainty as mortgage rates will likely rise as the Fed winds down the QE program.
Dec 18, 2013 | Housing Analysis
According to the National Association of Homebuilders/Wells Fargo Homebuilders Market Index for December, builder confidence recovered in with a reading of 58. This surpassed both expectations of 56 and last month’s reading of 54.
Analysts noted that builder confidence has steadied after the government shutdown. December’s reading was the highest in four months. Dave Crowe, NAHB chief economist, said that his organization was expecting a “gradual improvement in the housing recovery” in 2014.
Any reading above 50 indicates that more builders are confident about overall housing market conditions than not.
Builder Confidence – Highest Reading Since 2005
Pent-up demand for housing is driving housing markets in spite of higher mortgage rates. Three components of builder confidence used to calculate the overall reading also rose in December. Builder confidence in current home sales rose to 64 from a reading of 58 in November; this is the highest reading since 2005.
Confidence levels in housing markets over the next six months rose to 62 from last month’s reading of 60. Builder confidence also grew in the area of buyer foot traffic in new developments and gained three points to a reading of 44.
All of this is good news, but the NAHB said that a gap remains between higher home builder confidence and the rate of new home construction. A seasonal lull in home construction is not unusual especially in areas experiencing harsh weather.
More Jobs, Low Refinance Numbers Could Mean More Mortgages Available
MarketWatch analysts suggest that if the economy continues to add jobs “at a brisk pace” and mortgage lenders ease lending requirements next year, the demand for homes could further strengthen the U.S. housing market next year.
Low numbers of refinance mortgages in 2013 may cause some lenders to loosen mortgage credit requirements, which were tightened after the housing bubble burst.
Economic News scheduled for today may provide a broader picture of economic health and likely trends for 2015. The Federal Reserve’s Federal Open Market Committee will provide its expected statement after its meeting, and Fed Chairman Ben Bernanke will give his last press conference as Fed chair as well.
Any indication of plans to reduce the Fed’s current quantitative easing program could upset financial and mortgage markets, but most economic analysts don’t expect an announcement of tapering the Fed’s asset purchases before next year.
Data on November Housing Starts and Building Permits will also offer clues as to how housing markets and the general economy are doing.
Dec 3, 2013 | Housing Analysis
According to the S&P Case-Shiller 10-and 20-City Housing Market Indices for September, home prices grew at an average of 13.30 percent year-over-year and achieved the highest growth rate for home prices since February 2006.
On a month-to month basis, home prices are slowing in most areas with 19 cities included in the S&P 20-City Housing Market Index showing lower rates of growth in home prices. September’s average month-to-month growth rate was 1.0 percent for the 20-City HMI as compared to 0.90 percent in August, and 1.90 percent posted earlier in 2013.
Home prices increased by 0.70 percent in September for the combined 20-City and 10-City Housing Market Indices tracked by Case-Shiller.
Rapidly Rising Home Prices In The West: Another Housing Bubble On Tap?
Home prices continued rising in the West, with Las Vegas leading the pack with a 29.10 percent gain year-over-year although average home price in Las Vegas, Nevada remains 46 percent than its peak in February of 2006.
California also showed double-digit year-over-year growth for home prices with San Francisco at 25.70 percent, Los Angeles at 21.80 percent and San Diego posting 20.90 percent growth in home prices year-over-year.
Rapidly increasing home prices in the West are largely due to demand exceeding supply, but buyers may be sitting on the sidelines due to concerns over another housing bubble in the making.
Buyers in this scenario are aware of increasing home prices, but aren’t buying now to avoid higher prices later. Instead they are waiting to see what happens with current home prices and housing market conditions in the longer term.
Chicago, Illinois posted its highest year-over-year growth rate since 2005 while Cleveland, Ohio posted a growth rate of 5.00 percent for September as compared to a month-to-month growth rate of 3.70 percent.
This was the second lowest month-to-month growth rate for home prices, with New York City posting a month-to-month home price growth rate of 4.00 percent from August to September.
FHFA Reports Slight Gain In Home Prices
The Federal Housing Finance Agency reported stronger gains in home prices for properties financed with mortgages owned or guaranteed by Fannie Mae or Freddie Mac. In September, home prices reported by FHFA rose by 0.30 percent as compared to August’s growth rate of 0.40 percent.
On a year-over-year basis, FHFA reported a gain of 8.40 percent between the third quarter of 2012 and the third quarter of 2013. Adjusted for inflation, home prices as reported by FHFA have risen approximately 7.20 percent. FHFA noted that home prices are growing at a rate far above the rate of 1.20 percent reported for other “goods and services.”
Lower numbers of foreclosed homes are seen as a boost for home prices in general; as mortgage lenders tend to offer foreclosed homes for sale at low prices in order to reduce inventories of real estate owned.
Nov 26, 2013 | Housing Analysis
The National Association of REALTORS reported Monday that pending home sales dropped by -0.60 percent in October after falling at a revised rate of -4.60 percent in September. According to Lawrence Yun, chief economist for NAR, 17 percent of real estate agents reported delays in loan closings due to the government shutdown in early October.
Lenders were unable to verify borrower income through the IRS, which was closed during the shutdown. October was the fifth consecutive month with fewer pending home sales reported.
Homeowners who owe more on their mortgages than their homes are waiting to sell, and recent spikes in mortgage rates were cited as factors contributing to fewer pending sales.
Pending home sales are defined as homes for which signed purchase offers have been received and are considered an indicator of future home sales. The NAR notes that most pending sales close within 30 to 60 days of an offer being signed.
High Demand And Low Supply Of Homes Thwarts Buyers
Would-be homebuyers may be including their dream homes on their wish lists for the holidays as many areas continue to experience a short supply of homes against high demand. In desirable areas this can lead to bidding wars and homes being sold before they are listed for sale.
Cash buyers are benefitting from these situations, while first-time and moderate income buyers may be sidelined due to affordability issues and the inability to compete with cash buyers.
Mortgage rates fell last week and the previous week. While a recovering housing market has been causing home prices to rise, economists described current readings for pending sales as a “pause” in the housing market recovery and said that a significant decline in home sales could adversely impact overall economic recovery.
Regional Pending Sales Mixed
Pending sales for the Northeast and Midwestern regions increased slightly and declined in the South and West. This suggested to some economists and analysts that the formerly hot housing market is cooling off along with the weather. Some decline in home sales is expected during fall and winter months.
Sales Of Existing Homes Better Than Expected
October sales of existing homes surpassed expectations of 5.10 million sales with a reading of 5.12 million existing homes sold. Again, the government shutdown and related concerns of consumers and home builders were cited as reasons for sales falling shy of September’s reading of 5.29 million existing homes sold.
Nov 19, 2013 | Housing Analysis
The National Association of Home Builders released its Housing Market Index for November on Monday. This month’s HMI reading was 54 against expectations of a reading of 55. October’s reading was also 54 after being downwardly revised.
Readings over 50 generally indicate that a majority of builders surveyed are confident in current housing market conditions, but the current pause came after two months of decline in home builder confidence. While the short term index readings are lower than in past months, the HMI is currently 20 percent higher than last year.
David Crowe, chief economist for NAHB said that “the fact that builder confidence remains above 50 is an encouraging sign.” Mr. Crowe also cited federal debt and budget issues as factors that keep builders and consumers from building and buying homes.
Fluctuating Mortgage Rates Of Concern To Builders, Home Buyers
Home builders are also subject to the impact of volatile mortgage rates, which can create affordability issues for first time and moderate income home buyers. There is some good news concerning mortgage rates as the Federal Reserve announced its plant to keep its quantitative easing program in effect in the coming months.
QE was implemented in 2012 and consists of the Fed purchasing $85 billion per month is treasury and mortgage-backed securities with the goal of keeping long-term interest rates and mortgage rates low.
Home builder confidence readings are not in synch with construction rates, as builder confidence was rapidly driven by excessive demand for homes against minimal inventories of available homes in many areas.
Components of November’s HMI provide more precise indications of builder confidence. November’s reading for confidence in sales of single family homes within the next six months fell from 61 in October to 60 in November.
Builder sentiment for current home sales was unchanged at 58 and the November reading for builder confidence in buyer foot traffic fell by one point from 43 in October to 42.
Regional Home Builder Confidence Readings Mixed
Regional builder confidence readings for November were as follows:
Northeast: This region gained 14 points with a reading of 44 for November.
South: Builder confidence rose by one point to a reading of 55.
Midwest: November’s reading declined by eight points to 54.
West: The reading for November was one point lower at 58.
Home sales are typically slower during the holiday season and winter months.
