Catch Me If You Can

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.

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.

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

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%.

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

House Prices Continue Their Ascent

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 3^rd consecutive monthly increase and the 24^th 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.

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.

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

House Prices Rise

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 23^rd 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.

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

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 23^rd 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.

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.

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

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.

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.

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

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%.

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

House Prices Rise, But At A More Moderate Pace

According to the Federal Housing Finance Agency (FHFA), house prices rose by 0.1% on a seasonally adjusted basis over the month of November 2013. This is the 22^nd consecutive month that house prices have increased. Over this 22-month period, house prices have risen by 13% and the November 2013 FHFA House Price Index is now roughly the same as the April 2005 index level.

As Figure 1 shows, despite the increase nationally, house price changes varied across regions of the country. According to the chart, house prices rose in five of the nine Census divisions; the Mountain division (0.5%), the West North Central division (0.5%), West South Central division (0.1%), East North Central division (0.5%), and the South Atlantic division (0.2%). However, these gains were partially offset by house price declines in the East South Central (-1.4%), New England (-0.4%), and Middle Atlantic (-0.4%) divisions. House prices in the Pacific division were unchanged during the month. Over the past year, however, house prices have risen in all nine Census divisions.

House price changes are a key determinant of the amount of housing equity held by homeowners. Relative to the amount of housing-related debt taken on by homeowners, increasing house prices will raise the available amount of housing equity while falling house prices will lower the amount of housing equity. As Figure 2 below illustrates, between January 2012 and October 2013, house prices rose by 13%. Over roughly the same period, the first quarter of 2012 and the third quarter of 2013, the amount of housing equity expanded by 55%.

Since housing equity is often used by households to finance remodeling activity, the recent growth in house prices may be contributing to the current recovery in remodeling spending. NAHB’s Remodeling Market Index (RMI) further illustrates the recovery in remodeling activity. The Index has eclipsed 50 in 5 of the past 6 quarters dating back to the third quarter of 2012 and is currently at its historical high of 57. An RMI above 50 indicates that more remodelers report market activity is higher compared to the prior quarter than report that it is lower. As house prices continue to recover, NAHB expects remodeling activity to improve, growing by 0.7% in 2014 and by 2.1% in 2015.

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

House Prices Continue to Climb

Data released by the Federal Housing Finance Agency (FHFA) indicates that house prices rose nationally in October 2013 by 0.5% on a seasonally adjusted basis from the previous month.

However, house price changes varied across regions of the country. According to the release, four of the nine Census divisions, the Mountain Division, the Pacific Division, the Middle Atlantic Division, and the South Atlantic Division experienced a monthly gain of 0.9% or more. Monthly growth was more subdued in the West South Central region, the New England Division, and the East North Central. House prices in the West North Central were unchanged while house prices East South Central region of the country fell over the month by 1%.

Over the year, house prices have risen in every region of the country. House prices in the Pacific and in the Mountain regions, which include California and Nevada respectively, have experienced year-over-year gains greater than 10%.

Data from the S&P/Case-Shiller House Price Index – 20 City confirms the house price appreciation that is taking place in the Pacific and Mountain Census Divisions. In addition, the data indicates that while some cities located in either the Pacific or Mountain Divisions have recorded extraordinary house price appreciation over the year, house price growth is generally strong across these two regions of the country. According to the release, the 20 City HPI rose by 14% over the past twelve months ending in October 2013. Nine cities experienced year-over-year house price appreciation greater than the national rate. Five of these nine cities are located in the either the Mountain or Pacific Census Division, including the four cities experiencing the largest year-over-year growth. The three cities located in the Pacific or Mountain Census Division that experienced year-over-year changes that lagged the national average, Seattle, Portland and Denver, still experienced year-over-year house price gains of 10% or more.

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 Price Growth Highest in 7 Years

Standard & Poor’s and Case-Shiller reported that house prices continued to rise in August. According to the release, both the S&P/Case-Shiller House Price Index 20-City Composite and the 10-City Composite rose by 12.8% on a year-over-year not seasonally adjusted basis, the largest increase in house prices since February 2006. House price gains were largest in Las Vegas, 29.2% and San Francisco, 25.4%. Meanwhile, house prices in New York saw the slowest growth, 3.6%, over the previous 12 months.

Standard & Poor’s calculates tiered house price indexes for 16 of the 20 MSAs included in the House Price Index – 20 City Composite. Tiered indexes measure changes in the value of existing single-family houses in three price tiers – low, middle, and high. Each tier represents approximately one-third of the sales transactions in each respective market. A previous post illustrated that house prices in the lowest tier tend to be more volatile than house prices in the middle and upper tiers; house prices fell further during the housing bust and have grown faster during the housing recovery.

However, this spread between growth rates among house price tiers stands in marked contrast to the historical performance of house prices. It is also a distinguishing factor between cities where house prices have recovered and areas where house prices are still recovering. As Chart 1 illustrates, while house prices across all three tiers declined following the housing bust, house prices in the bottom third of the Phoenix house price distribution fell the most and subsequently rose the most.

At the bottom of the housing bust in April 2009, the annual rate of decline in low tier house prices was 58.4%, while the annual rate of decline for house prices in the middle and upper tier was 34.9% and 27.6%, respectively. In April 2010, the annual pace of growth in the low tier was 26.3% while it was only 2.9% and 1.9% in the middle and high tiers. After leading the decline in April 2011, the annual rate of increase in the low tier has exceeded the growth rate in the middle and high tiers. As of August 2013, the spread has narrowed somewhat as the annual rate of increase in the low tier was 30.7% the annual increase in the middle and high tiers was 23.1% and 15.2% respectively.

In contrast, house prices across all three tiers in Denver have changed at more similar rates. According to Standard and Poor’s/Case-Shiller, Denver house prices set a new record high in August 2013. As Chart 2 illustrates, although house prices in the low tier fell more than house prices in the middle and high tiers over the housing bust, the difference in the year-over-year rate of decline was not as wide as the spread in Phoenix.

At its depth in March 2008, the annual rate of decline in the low tier was 10.8%, while the annual pace of decline in the middle and high tiers was 5.2% and 3.5% respectively. At their post-boom peak, the annual rate of increase in the low tier reached 17.6% while the annual increase for the middle and high tier was 10.5% and 7.8% respectively. In August 2013, the annual rate of growth in the low tier was 12.9%, while it was 10.9% and 8.7% in the middle and high tiers.

Chart 3 shows the spread in the growth rate between the high tier and the low tier for 3 cities where the house price decline and recent house price growth have been most pronounced, and for Denver, where house prices recently set a record high. According to this chart, the relative parity of house price growth across tiers before the housing boom and the disparity during the bust (widening of the spread) suggests that one indicator of normalization of house prices in a market would be a return to parity in growth rates across the tiers and a narrowing of the high-low spread. As Chart 3 illustrates, the 2012-2013 inter-tier price movements significantly widened the spread, especially in Phoenix, Las Vegas, and San Francisco, indicating that the high and low tier growth rates were diverging. The recent 2013 narrowing of the spread (except for San Francisco) indicates the high and low tier growth rates are converging.

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