House Prices Continue to Rebound

Nationally, house prices continued to rise in March, contributing to the overall recovery currently underway in U.S. house prices. According to the most recent release by the Federal Housing Finance Agency (FHFA), U.S. house prices rose by 1.3% on a month-over-month seasonally adjusted basis in March and 1.9% on quarter-over-quarter basis. This is the fourteenth consecutive monthly rise and the seventh consecutive quarterly increase for the House Price Index – Purchase Only (HPI). Over the past year house prices have risen by 6.7%.

The March increase in house prices was geographically widespread, increasing in every division of the country. The Census Bureau uses divisions to segment the four major regions of the country; Northeast, Midwest, South, and West. As Chart 1 illustrates, every division experienced a month-over-month increase in house prices, furthering the price recovery underway in each division.

Although house prices have extended their gains, they have not fully recovered their pre-bust peak. However, it’s clear from the chart that price appreciation accelerated during the boom compared to earlier years. In hindsight those gains were unsustainable and the declines represent a correction, purging the speculative bubble. The recent increases are based on a return to a fundamental balance between house prices and incomes. According to the HPI, house prices are now on par with those that prevailed in November 2004.

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

House Price Growth Is Accelerating

Standard and Poor’s reported that house prices rose in February. According to the most recent release, the S&P/Case-Shiller Home Price Index – 20 City Composite grew by 9.3% on a year-over-year not seasonally adjusted basis. Following 20 consecutive months of year-over-year declines, house prices registered their ninth consecutive year-over-year increase in February.

Year-over-year house price growth has been generally widespread. As Chart 1 illustrates, house prices have risen on a not seasonally adjusted twelve month basis in each city tracked by the 20-City Composite Index. House prices in Phoenix experienced the largest price increase. In February 2013, Phoenix house prices rose by 23.0%, the sixth consecutive month that house prices have experienced a year-over-year increase greater than 20.0%. Meanwhile, New York City, which rose by 1.9%, experienced the smallest year-over-year growth in not seasonally adjusted house prices among this group. However, as Chart 2 illustrates, while the upward trend in Phoenix and New York house prices during the boom years were roughly similar, house prices in Phoenix experienced a more severe downturn than house prices in New York. As a result, the higher growth rate recently seen in Phoenix house prices reflects their greater distance from normality.

According to the April press release, the not seasonally adjusted 10- and 20-City Composite Indexes are “the leading measure of U.S. home prices”. Between January 2013 and February 2013, the rate of growth in the 20-City Composite Index increased from 8.1% to 9.3%. This acceleration partially reflects an increase in house prices between these two months. However, it largely reflects the house price declines that were still taking place one year ago. Between January 2013 and February 2013, house prices rose by 0.3% on a not seasonally adjusted basis. Meanwhile, between January 2012 and February 2012, house prices fell by 0.8%. As Chart 3 illustrates, the recent rise in house prices is being compared to a period of house price declines. As a result, the acceleration in year-over-year house prices may be overstating the strength of the recovery. However, Chart 4 illustrates that the seasonally adjusted house price index more clearly demonstrates that house prices are accelerating.

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

House Prices Continue Their Ascent

Nationally, house prices continued to rise in February, contributing to the overall recovery in U.S. house prices. According to the most recent release by the Federal Housing Finance Agency, U.S. house prices rose by 0.7% on a month-over-month seasonally adjusted basis in February. This is the thirteenth consecutive monthly increase for the House Price Index – Purchase Only. Over this 13-month period, house prices have risen by 7.4%. Over the past year house prices have risen by 7.1%

The February increase in house prices was geographically widespread, increasing in nearly every division of the country. The Census Bureau uses divisions to segment the four major regions of the country; Northeast, Midwest, South, and West. As Chart 1 illustrates, February house prices increased in each division of the country except the Middle Atlantic region. Despite the February decline, house prices in the Middle Atlantic region are 1.9% higher than when they bottomed out one year ago.

Chart 2 compares national house prices, which began a sustained recovery in 2011, with mortgage applications for purchase, a measure of mortgage demand. According to the FHFA, the House Price Index – Purchase Only is composed of the purchase prices of houses with mortgages owned or guaranteed by Fannie Mae or Freddie Mac. As the chart below illustrates, the trend in house prices has generally mirrored the trend in mortgage applications for purchase. Prices are moving higher as demand increases from buyers coming back to the market and pushing application volumes up from housing bust lows, levels last seen in the late 1990s. Between January 2011 and February 2013, the HPI – Purchase Only has risen by 6.4%. Meanwhile, the Mortgage Bankers Association’s Mortgage Applications for Purchase Index has risen by 5.8% over this same period.

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

House Price Increases Widespread

January was the second consecutive month-over-month increase in house prices and the eighth consecutive year-over-year increase. According to the most recent release by Standard and Poor’s, the S&P/Case-Shiller 20-City Composite House Price Index rose by 0.1% on a not seasonally adjusted monthly basis and the 10-City Index rose by 0.2% on a not seasonally adjusted monthly basis. In the 12 months ending in January 2013, house prices rose by 8.1% according to the 20-City Composite Index and 7.3% according to the 10-City Composite Index.

Year-over-year house price growth has been generally widespread. As Chart 1 illustrates, house prices have risen on a not seasonally adjusted 12 month basis in each city tracked by the 20-City Composite Index. House prices in Phoenix experienced the largest price increase. In January 2013, Phoenix house prices rose by 23.2%, the fifth consecutive month that house prices have experienced a year-over-year increase greater than 20.0%. As Chart 2 illustrates, although house prices in Phoenix have experienced rapid increases in recent months, they remain 44.3% below their June 2006 peak.

In a previous post it was noted that despite recent growth, house prices in the West have not reached the peak level experienced during the housing boom. However, comparing current house prices to this level may not be the best indicator of whether house prices in Phoenix have normalized. According to Chart 3, Phoenix house prices began to climb rapidly during the boom, before falling sharply. In the three years prior to this January 2004-June 2006 period, growth of Phoenix house prices mirrored the house price trends of Denver and Dallas, cities which experienced much smaller house price appreciation during the boom period and are closest to regaining their peak levels. Denver is 4.4% from its peak and Dallas is 4.7% below its high. After a steep decline, the trend of house prices in Phoenix has returned to a pace that is nearly similar to the trend of house prices in Denver and Dallas. Moreover, although house prices in Phoenix have experienced strong growth in recent months, its trend continues to remain at a level roughly on par with these two cities.

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

U.S. House Prices Climb, But Remain Below Their Pre-Recession Peak

Nationally, house prices continued to rise in the first month of 2013, contributing to the overall recovery in U.S. house prices. According to the most recent release by the Federal Housing Finance Agency, U.S. house prices rose by 0.6% on a month-over-month seasonally adjusted basis in January. This is the twelfth consecutive monthly increase for the index. Over this twelve month period, house prices have risen by 6.5%

The Census Bureau uses divisions to segment the four major regions of the country; Northeast, Midwest, South, and West. As Chart 1 illustrates, the recovery in house prices is occurring in every division of the country. However, the contribution of January house prices to the recovery in each division varied. January house prices in divisions such as West South Central, West North Central, South Atlantic, Pacific, and Mountain, and East North Central added to the overall recovery already occurring in those divisions. Conversely, house prices in New England, Middle Atlantic, and East South Central subtracted from the general recovery already underway in those regions. However, these monthly declines were comparatively small.

While a recovery is taking place across the U.S., house prices in most divisions remain below their pre-recession peak. Only house prices in the West South Central area of the country, which includes Texas, Arkansas, Oklahoma, and Louisiana, have surpassed their pre-recession high. Previous research showed that there is a tendency for the areas where house prices declined the most to have strong rebounds. However, despite the stronger recovery experienced by these divisions, their house prices remain significantly below their peak. As Chart 2 illustrates, house prices in the Pacific, the South Atlantic, and the Mountain divisions, regions of the country that have experienced the greatest price increases, are furthest from their pre-recession high. These three divisions include the states where the house price bubbles and subsequent declines were the largest: California, Arizona, Nevada and Florida.

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

Case-Shiller and FHFA House Price Indexes – 2012 Closes With Solid Gains

The Federal Housing Finance Agency (FHFA) and S&P/Case-Shiller (CS) released home price indexes for the end of 2012 today. The monthly FHFA national indexes were up 0.6% for the month (December over November, seasonally adjusted), 1.4% for the quarter (average fourth quarter months over average third quarter months, seasonally adjusted) and 5.9% for the year (December 2012 over December 2011, non-seasonally adjusted). The quarterly CS national indexes were up 2.0% for the quarter (fourth quarter over third quarter, seasonally adjusted) and 7.3% for the year (fourth quarter 2012 over fourth quarter 2011, non-seasonally adjusted).

These gains were broadly distributed around the US. The FHFA indexes for all 9 Census divisions were up on a year over year basis and 7 of 9 were ahead for the month. The CS indexes showed all 20 cities in the composite index up for the month and only New York down slightly on a year over year basis. Both FHFA and CS show all regional markets safely above their cyclical troughs.

After a long challenging period this is an impressive end to 2012 for house prices. We expect 2013 to be a continuation of the gains made in 2012 with further improvement in the overall housing sector.

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

For full histories of the FHFA US and 9 Census regions, click here fhfa9.

For full histories of the FHFA 50 state level house price indexes, click here fhfa50.

 

Existing Home Sales Dip in December

Existing home sales declined 1% in December, sliding to a seasonally adjusted annualized rate of more than 4.9 million total units.  Nonetheless, data from The National Association of Realtors (NAR) indicate sales remain on an upward trend. The average monthly pace recorded during November and December was at its highest level in three years, while sales increased nearly 13% on a year-over-year basis in December. In addition, sales have risen at a double-digit pace in each of the last three months. For the year as a whole, the preliminary estimate increased 9.2% to 4.65 million, marking the highest annual sales volume since 2007.

Sales of existing single-family homes fell 1.4% compared to November 2012, dropping to a seasonally adjusted annual rate of 4.35 million units. Despite the slight decline last month, single-family existing home sales are up nearly 12% on a year-over-year basis and for the calendar year as a whole sales averaged roughly 4.13 million units—the largest annual total in 5 years. Condominium and co-op sales increased for the 6th consecutive month in December, rising 1.7% to a pace of 590,000 units, which is the highest monthly reading since late 2009. In addition, sales increased 10.7% during 2012 to a calendar year average of 527,000 units.

Existing home inventories shrank further to close out 2012, sliding to 1.82 million units available for sale in December. At the current sales rate, the estimated inventory for December represents 4.4 months of supply, approximately 2 months smaller than December 2011 and the lowest since May 2005. Distressed sales accounted for 24% of the overall sales volume in December 2012 as foreclosures and short sales both represented an identical 12% share of total sales.

The median sales price for existing homes of all types increased on a year-over-year basis for the 10th consecutive month during December 2012, rising 11.5% to $180,800. This represents the longest sustained period of growth in median prices since August 2005 to May 2006 and is also the largest percentage increase in more than 7 years. Foreclosure sales sold at an average discount of 17% and short sales fetched a discount of 16%. First-time homebuyers accounted for 30% of existing sales while investors purchased 21% of existing homes sold in December. Approximately 29% of sales went to all-cash buyers in December 2012, a 2 percentage-point decline compared to December 2011.

Case-Shiller Monthly House Price Indexes – It’s Time To Talk About Seasonal Adjustment

The S&P/Case-Shiller (CS) monthly home price indexes covering the 10 city and 20 city composites, and the component cities were released today for October. Both the 10 and 20 city composites posted small declines for October over September (both -0.1% on a non-seasonally adjusted basis – S&P’s headline measure), after decelerating from peak growth rates in June. The monthly growth rates for the 10 and 20 city composites in June were 2.1% and 2.3%, respectively. The number of component cities with positive monthly price growth dropped from all 20 cities to 8 between June and October.

No alarm bells, please. This is not a reversal of recent improvements or renewed deterioration in housing market conditions. It is the well-recognized seasonal pattern in housing markets. And we should expect to see similar softening in non-seasonally adjusted (NSA) housing data as we move through the winter months.

A more informative way to evaluate NSA data is to consider the current level compared to the same time last year, thus removing seasonal effects. On this basis the 10 and 20 city composites are up 3.4% and 4.3%, respectively, from last October. Eighteen of the 20 cities are above last October’s level, representing a much better performance than the monthly numbers suggest.

And given both the seasonal patterns and the varying degrees of housing boom and bust cycle experienced across markets it is worth considering where prices are now compared to where they hit bottom in any market. By this measure all 20 composite cities have hit bottom and turned around with increases ranging from 5% to 24% and averaging 12%.

But any of these simple statistics can present misleading signals. The healthiest markets are not necessarily the markets showing the most improvement. The Denver and Dallas markets post modest gains because they were the most immune to the boom and bust cycle. At the other extreme Phoenix and Detroit have among the strongest gains but with very different underlying historical experiences. The best analysis is to consider the full and most recent history of the price indexes in any given market.

For full histories of the 10 and 20 city composites and the component cities click here cs.

 

FHFA House Price Indexes – Progress In 2012

The Federal Housing Finance Agency (FHFA) released monthly home price indexes for October today. The national house price index increased 0.5% from the September level on a seasonally adjusted basis. The index is now 5.6% higher than its low point in March 2011. Most of the gain occurred in 2012.

Among the nine Census divisions, seven posted gains for the month ranging from 0.4% to 2.0%. The Middle Atlantic and New England divisions had modest declines of 1.3% and 0.3%, respectively. All nine divisions remain above earlier troughs established mostly in the first half of 2011. The Pacific and Middle Atlantic divisions hit bottom in February 2012. The East South Central division was the earliest to turn the corner in December 2010. Current gains since the troughs ranged from 0.8% in the Middle Atlantic division to 13.4% in the Mountain division.

Most parts of the country have seen steady gains in house prices so far in 2012. The Middle Atlantic and New England divisions are the exceptions having remained essentially flat since early 2011. But some of the current slow growth in these divisions can be interpreted as the absence of a strong rebound following the steep declines seen in some other areas. There is a tendency for the areas where house prices declined the most to have strong rebounds. Three of the four divisions with the largest gains in house prices include the states where the house price bubbles and subsequent declines were the largest: California, Arizona, Nevada and Florida.

For full histories of the FHFA price indexes for the US and 9 Census divisions, click here fhfa9.

 

Case-Shiller House Price Indexes – Phoenix? Really?

The S&P/Case-Shiller (CS) monthly home price indexes for the 10 city and 20 city composites, and the component cities were released last week for August. The usual coverage of this release includes how far up or down the composites are compared to last month and last year, and how many of the component cities are up or down and how much. The numbers this month are encouraging. Both composite indexes are up 0.9% in August from July (not seasonally adjusted), the 10 city composite is up 1.3% and the 20 city composite is up 2.0% from August last year. Among the component cities, all but Seattle are up from last month, and 17 of 20 cities are up from last year. It is true that house prices in markets around the country are improving, but this narrow focus is not the best way to understand the level of improvement.

First of all, Seattle is fine. House prices are down 0.1% from July but up 3.4% from last year and after taking seasonal patterns into account it looks like prices have turned the corner after having trended downward until as recently as early this year.

A second point is that these indexes are not seasonally adjusted so it’s not surprising that they are all posting solid gains over the last several releases which average the spring and summer months, the height of the selling season. And it shouldn’t be a surprise going forward when the indexes weaken as the releases cover prices from the fall and winter months. It will be reflecting the highly seasonal nature of home prices, not widespread deterioration in housing market conditions.

And the 3 cities not showing annual growth, Atlanta, Chicago and New York, they are all posting bigger gains in year to date price growth than at this point last year.

The focus on these narrow metrics, monthly and annual changes in not seasonally adjusted house prices, led to the S&P Dow Jones press release announcing that Phoenix, with 18.8% annual growth, is the best performing city among the 20 cities followed. I would have picked Washington, DC. The annual growth was only 4.3%, but house prices in that market rose more, fell less, and have been recovering for 41 months compared to 11 months in Phoenix.

So it’s worth stepping back and thinking about what these indexes are supposed to be telling us. In the short term the monthly and annual comparisons may be telling us less than we think. Over the medium term the indexes are indicating which markets are putting together a sustainable recovery in house prices and by extension broader economic and housing market recoveries. Over the longer term these indexes show how prices have adjusted to balance the supply of and demand for housing given the underlying long term fundamentals of population and job growth in 20 local economies.

When interpreting these price indexes it’s important to have the right perspective.

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