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Tag Archives: Case-Shiller

Inventory boost lifts home sales

Michael J. Berens

Wednesday, November 28, 2018

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Inventory boost lifts home sales

More buyers looked favorably on the housing market in October, encouraged by a greater number of homes for sale, continued slowing in home prices, and a temporary decline in mortgage rates.

Existing home sales posted their first month-over-month positive growth in six months. New home sales, on the other hand, plummeted to their lowest point in over three-and-a-half years, even as inventories increased and prices dropped. Riding the same downward trajectory, construction of new homes also declined for the second month in a row.

Although the number of existing homes for sale decreased slightly from the end of September to the end of October, available inventory was up from the same period a year ago, according to the National Association of Realtors (NAR).

Real estate website Zillow reports that total available inventory in the metro areas it tracks rose 3 percent year-over-year in October, the first time in four years it has exceeded 1 percent growth. Availability was not widespread, however, with metro areas in California, for example, reporting big gains.

Home prices remain high, but the pace at which prices have been increasing has been slowing over the past six months due to weak sales. According to the latest S&P CoreLogic Case-Shiller home price index, prices in October were 5.1 percent higher than a year ago, down from 5.5 percent in September. The NAR stated the median price of an existing home was 3.8 percent higher than in October 2017, down from 4.2 percent year-over-year in September.

Along with increased inventory and easing prices, some buyers in late October would have been able to take advantage of a temporary dip in mortgage rates that occurred in response to turbulence in the stock and bond markets. That may have provided an added incentive to commit to a purchase while conditions were more favorable.

These trends helped push sales of existing homes up 1.4 percent for the month, compared with September’s drop of 3.4 percent, said the NAR. It was the first time since March that month-over-month sales enjoyed positive growth.

Activity was strongest in the Northeast, South and West. Most of the gains came from sales of condos and co-ops, which were up 5.3 percent over the previous month. Sales of single-family homes remained nearly flat, and are now 5.3 percent lower than the same time last year.

Higher than average prices (for existing homes) and rising interest rates are taking their toll on new home sales, which plunged 8.9 percent in October, following a 5.5 percent drop in September, to their lowest point since March 2016. The median price of a new home dipped to $309,700 (3.1 percent lower than the same time last year), but the average price was $395,000 – both far higher than the $255,400 median price (up 3.8 percent) for an existing home sold last month.

The softening market for new homes pushed inventories up to 7.4 months, the highest level of supply in seven and half years, reports MarketWatch. Not surprisingly, new single-family starts declined 1.8 percent from September, and permit requests were down 0.6 percent.

While October’s numbers were a welcome relief for real estate agents after a disappointing third quarter, market indicators suggest the growth in sales is not likely to continue for the remainder of the fourth quarter. Fannie Mae stated that its Home Purchase Sentiment Index (HPSI) fell for the second month in a row, by 2 points, in October.

Concerns about home prices, mortgage rates, and personal financial security combined to bring down the portion of participants saying “now is a good time to buy a home” by 5 points and those saying “now is a good time to sell a home” by 3 points.

Builders, too, are less optimistic about business activity in the coming months. In announcing that the Housing Market Index (HMI) for November had decreased by 8 points, to 60 (its lowest point in over three years), Randy Noe, chairman of the National Association of Home Builders, stated builders are reporting “that customers are taking a pause due to concerns over rising interest rates and home prices.” Current sales activity was down 7 points, customer traffic down 8 points, and expected future activity down 10 points.

Activity is expected to remain flat or worse going into next year. At the NAR’s annual conference earlier this month, chief economist Lawrence Yun told the audience his current forecast projects existing-home sales this year will finish at a pace of 5.345 million — a decrease from 2017 (5.51 million). In 2019, sales are forecasted to increase to 5.4 million, a 1 percent increase, provided the market begins to stabilize.

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About the Author

Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at mjberensresearch@gmail.com.

Continue reading Inventory boost lifts home sales

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HOME PRICE GAINS SLOW IN JULY

Case-Shiller 10-City Index down to 4.2% from 4.3% in June; 20-City down to 5% gain from 5.1%.

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.1% annual gain in July, up from 5.0% last month. The 10-City Composite posted a 4.2% annual increase, down from 4.3% the previous month. The 20-City Composite reported a year-over-year gain of 5.0%, down from 5.1% in June.

Portland, Seattle, and Denver reported the highest year-over-year gains among the 20 cities over each of the last six months. In July, Portland led the way with a 12.4% year-over-year price increase, followed by Seattle at 11.2%, and Denver with a 9.4% increase. Nine cities reported greater price increases in the year ending July 2016 versus the year ending June 2016.

The chart below depicts the annual returns of the U.S. National, the 10 -City Composite, and the 20- City Composite Home Price Indices. The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. census divisions, recorded a 5.1% annual gain in July 2016. The 10- City and 20-City Composites reported year-over-year increases of 4.2% and 5.0%.

Before seasonal adjustment, the National Index posted a month-over-month gain of 0.7% in July. The 10-City Composite recorded a 0.5% month-over-month increase while the 20-City Composite posted a 0.6% increase in July. After seasonal adjustment, the National Index recorded a 0.4% month-over- month increase, the 10-City Composite posted a 0.1% decrease, and the 20-City Composite remains unchanged. After seasonal adjustment, 12 cities saw prices rise, two cities were unchanged, and six cities experienced negative monthly prices changes.

“Both the housing sector and the economy continue to expand with home prices continuing to rise at about a 5% annual rate,” says David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “The statement issued last week by the Fed after its policy meeting confirms the central bank’s view that the economy will see further gains. Most analysts now expect the Fed to raise interest rates in December. After such Fed action, mortgage rates would still be at historically low levels and would not be a major negative for house prices,

“The S&P CoreLogic Case-Shiller National Index is within 0.6% of the record high set in July 2006. Seven of the 20 cities have already set new record highs. The 10-year, 20-year, and National indices have been rising at about 5% per year over the last 24 months. Eight of the cities are seeing prices up 6% or more in the last year. Given that the overall inflation is a bit below 2%, the pace is probably not sustainable over the long term. The run-up to the financial crisis was marked with both rising home prices and rapid growth in mortgage debt. Currently, outstanding mortgage debt on one-to-four family homes is 12.6% below the peak seen in the first quarter of 2008 and up less than 2% in the last four quarters. There is no reason to fear that another massive collapse is around the corner.”

Continue reading HOME PRICE GAINS SLOW IN JULY

Home Prices Still Increasing Despite Fall In New Homes Sales

The report last week of a 13% fall in the number of new homes sold in September (compared to the previous September) was another bit of bad news behind the 10% fall in the S&P 500 so far in October. Homebuilder stocks are down nearly 40% from last January.

Looking at the graph below of Federal Reserve Economic Data (FRED), you can see new home sales have a strong tendency to fall a year or two before recessions begin, which helps explain why so many people are interested in following new home sales.

 

New One Family Home SalesSOURCE OF DATA: U.S. BUREAU OF THE CENSUS AND U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, RETRIEVED FROM FEDERAL RESERVE BANK OF ST. LOUIS. ANNOTATIONS BY JOHN WAKE.

The number of new homes sold began to fall a year or two before six out of the last seven recessions. (Home sales did not fall before the 2001 recession.) Looking at the graph again, you can see that new home sales did fall a few times without being followed by recessions—once in the 1960s, once in the 1980s and twice in the 1990s.

Case-Shiller Home Price Index

Now let’s switch from the new home market to the much larger existing home market and existing home price trends.

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One of the most closely followed statistics on the strength of the existing home market is the Case-Shiller Home Price Index, which released numbers today for August. The Case-Shiller numbers are not the most current, running about two months behind. But despite being slow, their “repeat sale” index is considered by many to be a better measure of home prices than median or average home prices. Average and median home prices, for example, are affected by the composition of the homes sold. If more luxury homes sell because the stock market is hot, that would increase the median and average home prices in a city even if home prices haven’t actually changed at all.

The latest Case-Shiller numbers show that home prices were still increasing in all 20 cities covered by the index and in the U.S. as a whole, but price increases were getting smaller.

Hot: Las Vegas home prices (up 13.9% in August compared to the previous August), San Francisco (up 10.6%) and Seattle (9.6%) had the highest annual home price appreciation in the 20 cities covered by Case-Shiller.

Cold: New York (up 2.8%) tied Washington D.C. (up 2.8%) for the least home price appreciation in the 20 cities. New York knocked Chicago (up 2.9%) out of the second worst spot.

Top and Bottom Two Case-Shiller Cities For Home Price AppreciationSOURCE OF DATA: S&P DOW JONES INDICES AND CORELOGIC. GRAPHIC BY JOHN WAKE.

Home Price Momentum

Las Vegas and San Francisco had by far the largest increases in home price momentum comparing their price increases the last 12 month to the previous 12 months.

Seattle’s price momentum slowed the most, down 3.6%, but Seattle still had a very high 9.6% appreciation rate over the last 12 months. Seattle led the country in home price appreciation from July 2016 through May 2018.

San Diego and Dallas were losing some upward momentum on prices but their home prices were still increasing at over 4% a year.

Overall, the U.S. home price momentum is essentially flat. U.S. home prices increased 5.8% in the last 12 months and 5.9% the previous 12 months. Half the 20 cities covered by Case-Shiller saw increasing price momentum and half saw decreasing home price momentum.

Case-Shiller Home Price Momentum For 20 CitiesSOURCE OF DATA: S&P DOW JONES INDICES AND CORELOGIC

The Case-Shiller existing home price index doesn’t show any red flags (yet) but, on the other hand, they say price is the last thing to change.

For more, here’s my discussion from last month on price deceleration and plateauing.

Continue reading Home Prices Still Increasing Despite Fall In New Homes Sales

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