by Calculated Risk on 10/25/2010 01:41:00 PM

Notes: CoreLogic reports the year-over-year change. The headline for this post is for the change from July 2010 to August 2010. The CoreLogic HPI is a three month weighted average of June, July and August, and is not seasonally adjusted (NSA).

From CoreLogic: August Home Prices Declined 1.5 Percent Year Over Year

CoreLogic ... today released its Home Price Index (HPI) which shows that home prices in the U.S. declined for the first time this year. According to the CoreLogic HPI, national home prices, including distressed sales, declined 1.5 percent in August 2010 compared to August 2009 and increased by 0.6 percent in July 2010 compared to July 2009. Excluding distressed sales, year-over-year prices declined 0.4 percent in August 2010. ...

“Price declines are geographically expanding as 78 out of the largest 100 metropolitan areas are experiencing declines, up from 58 just one month ago” said Mark Fleming, chief economist for CoreLogic.

Click on graph for larger image in new window.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index is down 1.5% over the last year, and off 28.2% from the peak.

The index is 5.4% above the low set in March 2009, and I expect to see a new post-bubble low for this index later this year or early in 2011. As Fleming noted, prices are falling in most areas now (unusually for the summer months).

Earlier posts on Existing Home sales:

September Existing Home Sales: 4.53 million SAAR, 10.7 months of supply

Existing Home Inventory increases 8.9% Year-over-Year

by Calculated Risk on 10/25/2010 11:22:00 AM

Earlier the NAR released the existing home sales data for September; here are a couple more graphs ...

The first graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Inventory is not seasonally adjusted, so it really helps to look at the YoY change.

Click on graph for larger image in new window.

Although inventory decreased slightly from August 2010 to September 2010, inventory increased 8.9% YoY in September. This is the largest YoY increase in inventory since early 2008.

Note: Usually July is the peak month for inventory.

The year-over-year increase in inventory is very bad news because the reported inventory is already historically very high (around 4 million), and the 10.7 months of supply in September is far above normal.

And double digit months-of-supply suggests house prices will continue to fall.

By request - the second graph shows existing home sales Not Seasonally Adjusted (NSA).

The red columns are for 2010. Sales for the last three months are significantly below the previous years, and sales will probably be well weak for the remainder of 2010.

The bottom line: Sales were weak in September - almost exactly at the levels I expected - and will continue to be weak for some time. Inventory is very high - and the significant year-over-year increase in inventory is very concerning. The high level of inventory and months-of-supply will put downward pressure on house prices.

by Calculated Risk on 10/25/2010 10:00:00 AM

The NAR reports: September Existing-Home Sales Show Another Strong Gain

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, jumped 10.0 percent to a seasonally adjusted annual rate of 4.53 million in September from a downwardly revised 4.12 million in August, but remain 19.1 percent below the 5.60 million-unit pace in September 2009 when first-time buyers were ramping up in advance of the initial deadline for the tax credit last November.
...
Total housing inventory at the end of September fell 1.9 percent to 4.04 million existing homes available for sale, which represents a 10.7-month supply at the current sales pace, down from a 12.0-month supply in August.

Click on graph for larger image in new window.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in September 2010 (4.53 million SAAR) were 10% higher than last month, and were 19.1% lower than September 2009 (5.6 million SAAR).

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory decreased slightly to 4.04 million in September from August from 4.12 million in August. The all time record high was 4.58 million homes for sale in July 2008.

Inventory is not seasonally adjusted and there is a clear seasonal pattern with inventory increasing in the spring and into the summer. I'll have more on inventory later ...

The last graph shows the 'months of supply' metric.

Months of supply decreased to 10.7 months in September from 12.0 months in August. This is extremely high and suggests prices, as measured by the repeat sales indexes like Case-Shiller and CoreLogic, will continue to decline.

Ignore the NAR spin and the median price! These fairly weak numbers are exactly what I expected.

The ongoing high level of supply - and double digit months-of-supply are the key stories. I'll have more ...

by Calculated Risk on 10/25/2010 08:30:00 AM

Note: This is a composite index based on a number of economic releases.

From the Chicago Fed: Index shows economic activity slowed further in September

Led by declines in production-related indicators, the Chicago Fed National Activity Index decreased to –0.58 in September from –0.49 in August.
...
The index’s three-month moving average, CFNAI-MA3, ticked down to –0.33 in September from –0.32 in August. September’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.

Click on graph for larger image in new window.

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967. According to the Chicago Fed:

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

by Calculated Risk on 10/24/2010 11:03:00 PM

Posted earlier:

Schedule for Week of Oct 24th

Summary for Week ending Oct 23rd

Michael Powell at the NY Times looks at short sales and foreclosures: Owners Seek to Sell at a Loss, but Bankers Push Foreclosure

The article offers two explanations for why lenders seem to prefer foreclosures: 1) short sale fraud, and 2) some incentives might favor foreclosure.

From Powell:

[F]inancial incentives can push toward a foreclosure rather than a short sale. Servicers can reap high fees from foreclosures. And lenders can try to collect on private mortgage insurance.

Some advocates and real estate agents also point to an April 2009 regulatory change in an obscure federal accounting law. The change, in effect, allowed banks to foreclose on a home without having to write down a loss until that home was sold. By contrast, if a bank agrees to a short sale, it must mark the loss immediately.

In a more normal environment, servicers can "reap high fees" from foreclosures, but in the current environment there is a less of an incentive (since investors are reviewing all expenses closely). And mortgage insurance is a definite stumbling block to some short sales. But there is little evidence of the banks sitting on REOs to avoid taking losses (there just aren't that many REOs on their balance sheets) - so I think that point is incorrect.

When I've spoken to lenders / servicers, short sale fraud is always the first thing they mention. There are all kinds of possible frauds - from non-arms length transactions (selling to friends or relatives), off the record kickbacks to the owner, and "flopping", where the agent presents an offer to the bank from a partner - even though the agents has received higher offers, and then the partner flips the house after the short sale splitting the profits with the agent.

Even with all these problems, and the long waits for buyers, short sales have increased significantly this year.

by Calculated Risk on 10/24/2010 08:19:00 PM

Posted earlier:

Schedule for Week of Oct 24th

Summary for Week ending Oct 23rd

Here is a preview (here is the link if the embed doesn't work).

Not on preview, but one 99er was asked ...
Q: "What comes next?"
A: "The abyss"