Catch Me If You Can

June 24, 2014

House prices grew by 10.8% between April 2013 and 2014, according to the S&P/Case-Shiller 20-City Composite Home Price Index, which was less than the 12-month growth rate of 12.4% seen in March. Similarly, the Federal Housing Finance Agency’s Purchase-Only Index rose 6.0% compared to 6.4% in March. On a seasonally-adjusted monthly basis the 20-City Composite index increased by 0.2%, while the Purchase-Only index was virtually unchanged. Both indices show that annual house appreciation has slowed over the past five consecutive months ending in April and suggest the housing market may be returning to its long-run trend of growth.

Among the 20 metro areas, Las Vegas experienced the largest annual gains (18.8%), followed by San Francisco (18.2%) and San Diego (15.3%). Meanwhile, cities experiencing the smallest increases include Cleveland (2.7%), Charlotte (4.4%) and New York City (5.4%). In addition, some areas are exhibiting large price gains for lower-priced homes as the chart below demonstrates. In April, Atlanta saw a 35.8% annual increase in homes under $153,000 and San Francisco saw homes under $496,200 rise 30.6%. In contrast, New York City saw an increase of 4.8% and Boston a 9.7% gain.

Prices1

The growth rates may be inflated, however, due to previously distressed homes being resold. For instance, CoreLogic provides a comparable house price index to the S&P/Case Shiller series and also has an additional one that excludes distressed homes. Foreclosed properties generally sell for a discount, currently at around 18 percent in April, according the National Association of Realtors, which suggests they would weigh down the overall market index. Yet since 2012, it appears distressed sales have added to the market’s growth, as seen the figure below.

Prices2

What’s occurring is during the housing crisis, many homes were foreclosed upon. In fact, the number of homes in foreclosure eventually peaked in the first quarter of 2010 at over two million, based on data from the Mortgage Bankers Association. These foreclosed homes were bought at deep discounts, ranging up to 40 percent and even higher in certain areas by 2009, as the chart above indicates when distressed sales are included. However, once the homes were repaired and later sold again either in the near-term for profit or when the new homeowners decided to move, the sales price was dramatically higher than the original price, owing to those heavy discounts. And as house prices recovered in general, those who waited longer to sell saw even larger increases in their sales price relative to the original purchase price. For instance, over the 12-months ending in April of this year, the inclusion of distressed properties added over two percentage points to overall growth in the price index, but the actual sales price for those troubled homes was likely at or below those of comparable non-distressed homes. So, this is more of a catch up to the race than a grand spree in house prices.

For full histories of the FHFA US and 9 Census divisions, click here.

For full histories of the composites and 20 markets included in the Case-Shiller composites, click here


House Prices Continue to Climb, Led by the West

April 30, 2014

Data released by Standard & Poor’s and Case-Shiller indicates that house prices continued to rise in February 2014. According to the release, the seasonally adjusted S&P/Case-Shiller 10-City Index rose by 0.9% over the month, while the seasonally adjusted S&P/Case-Shiller 20-City Index rose by 0.8% over the month. For the past twelve months these two house price indexes, the 10-City and the 20-City, rose by a not seasonally adjusted rate of 13.1% and 12.9% respectively.

The monthly increase in the seasonally adjusted 20-City HPI that took place in February was led by cities in the western portion of the country. According to the figure below, the six cities recording the largest month-over-month increase are located in the either the Pacific or Mountain Census Divisions. These six cities, San Francisco, San Diego, Portland, Denver, Los Angeles, and Seattle all recorded month-over-month house price growth that equaled or exceeded 1.0%. Combined with Chicago and Minneapolis, these six cities also recorded growth rates above the average for all 20 cities. Meanwhile, house prices in Cleveland fell over the month by 0.5%.

Presentation1

For full histories of the composites and 20 markets included in the Case-Shiller composites, click here cs.


House Prices Continue Their Ascent

April 22, 2014

Data released by the Federal Housing Finance Agency (FHFA) indicates that house prices rose by 0.6% on a seasonally adjusted basis over the month of February 2014. In addition, previous estimates of house price gains in January, 0.5%, and in December, 0.7%, were marked down slightly; to 0.4% and 0.6% respectively. February marks the 3rd consecutive monthly increase and the 24th increase in the past 25 months for FHFA’s House Price Index – Purchase Only. Over this 25-month period, the House Price Index – Purchase Only has risen by 15.0% and is now at roughly the same level as in June 2005.

Presentation1

National house price appreciation is taking place because most areas of the country are experiencing house price increases. However, many regions of the country recorded monthly house price changes, up or down, that deviated significantly from the 0.6% national average. As the figure below illustrates, house prices in February rose in 6 of the nine Census Divisions, with 4 of these divisions, the South Atlantic, Pacific, Mountain, and West South Central divisions, posting monthly gains greater than 1.0%. However, these gains were partly offset by declines in other areas of the country. House prices in New England fell by 2.5% over the month while prices in the Middle Atlantic division declined by 1.6%. Meanwhile, house prices in the West North Central were unchanged over the month.

Presentation2

For full histories of the FHFA US and 9 Census divisions, click here.


House Prices Rise

March 26, 2014

Data released by Standard & Poor’s indicates that house prices rose over the month of January 2014. According to the release, both the S&P/Case-Shiller 10-City Index and the S&P/Case-Shiller 20-City Index rose by 0.8% on a seasonally adjusted basis over the month of January 2014. This marks the 23rd consecutive month-over-month increase in both the seasonally adjusted 10-City Index and the seasonally adjusted 20-City Index. Over this 23-month period, the 10-City Index has grown by 22.0% and the 20-City Index has risen by 22.6%.

Data from the Federal Housing Finance Agency (FHFA) confirms the monthly rise in national house prices. Over the month of January 2014, the FHFA House Price Index – Purchase Only rose by a seasonally adjusted rate of 0.5%. According to the release, this is the 23rd monthly increase in the past 24 months. Over this two-year period house prices have increased by 14.1%.

According to the figure below, 8 of the 9 Census Divisions recorded month-over-month house price increases. Only the West South Central part of the country, which includes states such as Oklahoma and Louisiana, experienced a decline. Meanwhile, monthly house price growth was led by the Middle Atlantic, New England, and West North Central areas of the country. The figure below also illustrates that despite the above average monthly gains, these 3 regions of country registered below average year-over-year increases; with the Middle Atlantic and New England regions of the country experiencing the smallest year-over-year price increases amongst the 9 Census Divisions.

Presentation1

For full histories of the composites and 20 markets included in the Case-Shiller composites, click here.

For full histories of the FHFA US and 9 Census divisions, click here.


House Prices End the Year Higher

February 25, 2014

Data from Standard and Poor’s indicates that house prices rose in December 2013. According to the release, the seasonally adjusted S&P/Case-Shiller HPI – 20 City Composite rose by 0.8% in December 2013. This is the 23rd consecutive month-over-month increase for the Index. Over this time period, the Index has risen by 21.7%. For the entire year of 2013, the 20 City Composite Index grew by 13.4%.

The Federal Housing Finance Agency (FHFA) also released data on house prices. According to its seasonally adjusted House Price Index – Purchase-Only, house prices rose by 0.8% in December 2013. The FHFA House Price Index – Purchase-Only has now increased for for 24 of the past 26 months, rising by 14.8% during this period. Over the year, the FHFA House Price Index – Purchase-Only has climbed by 7.7%. As Figure 1 shows, following the 15.3% increase in the FHFA House Price Index – Purchase-Only that took place between April 2011 and December 2013, house prices are roughly the same as the level recorded in May 2005 and are now at 92% of the peak level reached in March 2007.

Presentation1

A previous post demonstrated that the recovery in house prices is a key contributor to the renewed expansion in housing equity. In a related fashion, rising house prices should also help expand the amount of homeowners with positive housing equity, shrinking the amount with negative housing equity. Figure 2 juxtaposes the FHFA House Price Index – Purchase-Only data displayed in Figure 1 onto a chart depicting the share of homes with negative housing equity. According to this chart, house prices in December 2011 were at 81% of their March 2007 peak. By September 2013, house prices reached 91% of this peak level. At the same time, the share of homes with negative equity reached 25.2% by the end of the fourth quarter of 2011. However, by the end of the third quarter of 2013, the share of homes with negative equity had fallen to 13.0%. Given that the FHFA House Price Index – Purchase Only ended the fourth quarter of 2013 at 92% of its peak, the share of homes with negative housing equity is expected to end the year even lower.

Presentation2

For full histories of the composites and 20 markets included in the Case-Shiller composites, click here cs.

For full histories of the FHFA US and 9 Census divisions, click here.


Young Adults Living with Parents Up Sharply

February 4, 2014

New NAHB Economics research shows that the share of young adults ages 18 to 34 living with parents or parents-in-law increased sharply in the late 2000s. According to the most recent American Community Survey (ACS), one in three young adults ages 18 to 34, or more than 24 million, lived in homes of their parents or parents-in-law in 2012. By comparison, the 1990 and 2000 Censuses reported that only one in four young adults ages 18 to 34 lived with parents at that time.

The NAHB analysis shows that the biggest shift in the preferences of young adults to live with parents happened after 2005. This is particularly true for older young adults, ages 25 to 34, whose share living with parents was fluctuating around 12 percent from 1990 through 2005 and then quickly rose to exceed 19 percent in 2012 (see figure below). The younger cohort, ages 18 to 24, was more likely to live with parents in 1990, when more than half of these adults lived with parents, than in the early 2000s. However, by 2006 this share exceeded 50 percent again and grew to more than 57 percent in 2012.

YA_wp

Rising college enrollment among younger adults ages 18 to 24 helps explain their increased preferences for not leaving parental homes. The majority of adults in this age group, 52 percent, attended school or college in 2012, compared to 45 percent in 2000 and 43 percent in 1990. College attendance plays a less important role in the decision of older adults, ages 25 to 34, to stay at parents’ home. Less than 14 percent of adults in this older cohort were still in college or school in 2012, the comparable share in 1990 and 2000 was just slightly below, close to 12 percent.

For older, more experienced and better educated adults ages 25 to 34, the ability to find stable, higher-paying jobs plays an increasing role. As unemployment rates kept increasing in the late 2000s so did the shares of young adults living with parents. In 2000, the shares of unemployed in this age group were 7 percent among young adults living with parents and 4 percent among those living independently. By 2012, these shares reached 14 percent among adults living with parents and 6 percent among same age adults living independently.

The NAHB report also analyzes state unemployment rates and finds that, on average, states with larger increases in unemployment rates among young adults registered larger gains in percent of young adults living with parents. Even though unemployment rates started to decline in most states in 2011, shares of young adults living with parents remain stubbornly high and even increased in some states, suggesting that it takes longer for young adults to overcome the overall sense of economic instability, gain confidence and financial independence before leaving parents’ homes. This is particularly true for states hardest hit by the housing boom and bust, such as California and Florida, where percent of young adults living with parents continued to rise through 2012 despite improving job markets.

Young_adults

As of 2012, three Northeast states – New Jersey, Connecticut, and New York – register the nation’s highest shares of young adults ages 18 to 34 living with parents or parents-in-law – 45, 42 and 41 percent, respectively (see the map above). California and Florida – two of the states hardest hit by the housing boom and bust – follow with their shares just slightly under 40 percent. At the opposite end of the spectrum are the District of Columbia known for its relatively stable job market and North Dakota known for its oil booming economy – both registering shares under 20 percent.

Young adults ages 25 to 34 traditionally represent about half of all first-time home buyers. Their delayed willingness and ability to leave parental homes and strike out on their own undoubtedly contributed to suppressing housing demand further during the Great Recession. Declining shares of young adults living with parents in some states – Rhode Island, Montana, Wyoming, Maine, Delaware and New Mexico among others – could be one of the early signs that pent-up housing demand may finally start turning into realized housing demand.


House Prices Continue to Rise

January 30, 2014

Data released by Standard & Poor’s and Case-Shiller indicates that house prices continued to rise in November 2013. According to the release, both the seasonally adjusted S&P/Case-Shiller 10-City Index and the seasonally adjusted S&P/Case-Shiller 20-City Index rose by 0.9% over the month. For the past twelve months these two house price indexes, the 10-City and the 20-City, rose by 13.8% and 13.7% respectively.

The month-over-month increase in house prices nationally, according to the 20-City Index, reflected gains in each city. As Figure 1 illustrates, 9 of the 20 cities in the index saw monthly house price appreciation equal to or exceeding 1.0%. Four cities, Chicago, Los Angeles, Minneapolis, and New York experienced house price growth of 0.8%, just below the national average. Meanwhile, Phoenix house prices, which have experienced rapid growth in the immediate past, and Seattle house prices rose by 0.4%.

Presentation1

For full histories of the composites and 20 markets included in the Case-Shiller composites, click here cs.


Follow

Get every new post delivered to your Inbox.

Join 6,540 other followers