Tuesday, September 04, 2012

The Year of the Housing Recovery: CoreLogic Home Price Index Up 3.8% in July, Largest Gain in 6 Years

CoreLogic Home Price Index, Percentage Change Year-Over-Year, January 2002 to June 2012
CoreLogic released its July Home Price Index (HPI) report today, here are some highlights:

1. Home prices nationwide, including distressed sales, increased on a year-over-year basis by 3.8% in July 2012. This was the biggest year-over-year increase since August 2006. 

2. On a month-over-month basis, including distressed sales, home prices increased by 1.3% in July 2012. The July 2012 figures mark the fifth consecutive increase in home prices nationally on both a year-over-year and month-over-month basis.
 
3. Excluding distressed sales, home prices nationwide increased on a year-over-year basis by 4.3% in July 2012. On a month-over-month basis excluding distressed sales, home prices increased 1.7% in July 2012, also the fifth consecutive month-over-month increase. Distressed sales include short sales and real estate owned (REO) transactions.

5. The CoreLogic Pending HPI indicates that August home prices, including distressed sales, will rise by 4.6%

6. Excluding distressed sales, August house prices are also poised to rise 6.0% year-over-year. The CoreLogic Pending HPI is a proprietary and exclusive metric that provides the most current indication of trends in home prices.

7. Mark Fleming, chief economist for CoreLogic: “The housing market continues its positive trajectory with significant price gains in July and our expectation of a further increase in August. While the pace of growth is moderating as we transition to the off-season for home buying, we expect a positive gain in price levels for the full year.”

8. Anand Nallathambi, president and CEO of CoreLogic: “It’s been six years since the housing market last experienced the gains that we saw in July, with indications the summer will finish up on a strong note. Although we expect some slowing in price gains over the balance of 2012, we are clearly seeing the light at the end of a very long tunnel.”

MP: The CoreLogic report today provides more evidence that 2012 will be known as the year of the U.S. housing recovery.  The 3.8% gain in July home prices was the highest annual increase in almost six years, and CoreLogic's pending home price index is predicting an even greater 4.6% gain in August.  

20 Comments:

At 9/04/2012 8:32 AM, Blogger VangelV said...

Some recovery. You have zero percent interest rates keeping borrowing costs artificially low. You have FHA guaranteeing low downpayment purchases up to $750K or so. You just had a huge collapse in house prices. Let us wait a few months to see if there is an actual recovery on the way because the blind optimism has not panned out very well for the past two years.

 
At 9/04/2012 9:48 AM, Blogger Ed R said...

Optimistic numbers from the real estate industry, which is very good at talking its own book.

But price levels are still 20% to 30% below 2006-07. And that is with record low mortgage rates.

 
At 9/04/2012 10:02 AM, Blogger Mark J. Perry said...

CoreLogic is a leading provider of information, analytics and business services, so it is not really "the real estate industry" reporting data, it's an independent company. The National Association of Realtors would be the "real estate industry," but not CoreLogic.

 
At 9/04/2012 10:13 AM, Blogger Jon Murphy said...

Besides, the low interest rates are nothing new. Why would buyers be entering the market now as opposed to last year or the year before? For that matter, since interest rates are expect to remain low going forward, why are they entering the market now as opposed to next year or the year after? There is more going on here.

 
At 9/04/2012 10:46 AM, Blogger VangelV said...

Besides, the low interest rates are nothing new. Why would buyers be entering the market now as opposed to last year or the year before? For that matter, since interest rates are expect to remain low going forward, why are they entering the market now as opposed to next year or the year after? There is more going on here.

A recovery implies that things will get better. But if the economy picks up interest rates will increase. If they don't increase it means that the Fed is the buyer of treasuries and monetizing the debt. Neither scenario seems to be favourable for the market. You are now in the last year of an election year and are the beneficiary of all the manipulation and liquidity that comes with it. What happens when the stimulus packages wind down? What happens when the Euro gives up the ghost and people start to look at the USD and the US debt?

 
At 9/04/2012 10:49 AM, Blogger Jon Murphy said...

Why do you think people are going for fixed, as opposed to ARMs?

You worry too much.

But you still haven't answered my question: why now?

 
At 9/04/2012 11:29 AM, Blogger Jon Murphy said...

Things will always get better. Always. We're in a several-century boom, with no possibility of any recession or downturn. Ever.

Right. Recessions are just collective hallucination :-P

Although, given the constant improvement in humanity, one could argue that growth is the natural state of being and that recessions are just temporary bumps along the road.

 
At 9/04/2012 11:30 AM, Blogger morganovich said...

jon-

to a certain extent, recoveries in markets are somehting of a self fulfilling prophesy.

the old adage is "don't catch a falling knife".

people are scared to buy when prices are falling for fear of further declines. this tends to make markets overshoot on the downside.

but at some point, for whatever reason (and honestly, it's often only clear what the reason was in retrospect and even then, not always) the market starts to go up.

this tends to gather momentum. suddenly, it's not a better deal to wait, but it costs you money to do so. this brings everyone into the fray looking to buy before prices rise further, which, of course, drives price up further.

so "why now" is not always a really good question. if there is one thing i have learned in a career of watching currency and equity markets, it's that sometimes, the answer is just "because".

i'll tell you one thing, i was looking at some miaimi real estate over the weekend, and southbeach has sure recovered.

it's $1000/ft2 if you want to be south of 10th st.

i think that there are some good reasons to be concerned about foundations of the current real estate market though. money is very cheap and loans are heavily subsidized by the GSE's and FHA which are something like 90% pf the market.

on the other hand, some gains in price might get a bunch of folks above water/give them enough equity for downpayments if they move and start making the market more liquid again.

real estate is not my forte.

 
At 9/04/2012 11:36 AM, Blogger bart said...

Jon Murphy said...
Although, given the constant improvement in humanity, one could argue that growth is the natural state of being and that recessions are just temporary bumps along the road.


Probably surprisingly to some, I agree.

 
At 9/04/2012 11:47 AM, Blogger morganovich said...

"Although, given the constant improvement in humanity, one could argue that growth is the natural state of being and that recessions are just temporary bumps along the road. "

like bart, i generally think this is true as well.

however, we must also realize that such a "natural state" can easily be derailed by a determined government.

ask russia, china, or venezeula about that.

ask an american that lived through he 30's.

humanity is ingenious and tend to self correct from the overshots and busts inevitable in a business cycle SO LONG AS THEY ARE ALLOWED TO. that, to my mind, is the key caveat.

alas, so often the very interference that disrupts such behavior is implemented as "help". the great society programs did more damage to black america than jim crow. fdr's new deal created a depression from what could have been merely a nasty bust.

i fear we are doing it again.

"i'm from the government and i'm here to help you"....

 
At 9/04/2012 11:56 AM, Blogger bart said...

morganovich said...

i fear we are doing it again.

"i'm from the government and i'm here to help you"....


Same here, and the related sadness is palpable.

The only truly major good thing about these times and what's ahead is looking forward to the point that the pendulum reverses. It literally always does.

 
At 9/04/2012 12:02 PM, Blogger morganovich said...

v-

oh man. when barrons has super bull covers, that is always a terrible sign for the market.

only the economist has a worse contrary indicator factor.

 
At 9/04/2012 12:16 PM, Blogger rjs said...

the same analysts who panned the homebuyer tax credits as temporary market distortions are ignoring the temporary distortion in home prices caused by operation twist induced record low interest rates, which effectively reduces the amount a buyer pays for a home even as the list price rises..

the average interest rate on fixed rate 30 year mortgages in July was 3.55%, a full percentage point lower than Freddie Mac's had the 30 year mortgage rate at a year ago...a simple mortgage calculation shows that the monthly cost per $100,000 on a 30 year mortgage in july of 2012 was $451.84, compared to the $509.66 per $100K one would have paid monthly on a 30 year mortgage last July; that means to buy the same house a year ago would have cost a potential homeowner 12.8% more in payments monthly than it would cost under current interest rate regimes...so that July's home price index showed a 3.8% year over year gain in the principal price of the house still means that potential home buyers are still commiting 9% less to homeownership than they were a year ago...the so-called housing recovery is merely a fiction of low interest rates, which will not stay this low forever...

 
At 9/04/2012 1:19 PM, Blogger Moe said...

From Morgan Stanley:
The authors report that between 2006 and 2011, the average credit score for a person getting an FHA mortgage jumped to 760 from 720; similarly, the average for those getting GSE-sponsored mortgages
rose to 715 from 650. The latest data show very few mortgages are going to borrowers with a score of less than 600. Given that nearly two-thirds of US households have scores below 750, a good portion of would-be buyers are likely shut out of the mortgage market at this time.

Their conclusion: Today’s system of mortgage finance is “broken and unsustainable” and, since the US
government accounts for most of the market, it will take major changes in federal housing-finance policy to fix it

 
At 9/04/2012 4:38 PM, Blogger VangelV said...

Why do you think people are going for fixed, as opposed to ARMs?

Because rates will go up. But future prices will be dictated by how much future buyers will be able to afford for their monthly payments.

You worry too much.

I think that I am too complacent. FHA is bankrupt and needs an injection of cash. Fannie and Freddie are bankrupt but most of the mortgages are purchased by them on the secondary markets. The US deficits and debt have exploded and total unfunded liabilities stand at more than $100 trillion. There is no way for the government to pay off its debts and other obligations so it will resort to inflating them away.

But you still haven't answered my question: why now?

What do you mean now? The decline began not long after I was born and shortly after I turned 10 Nixon ended all hope of going back to the type of country you used to have. Since then there have been one bubble after another and more and more destruction of the currency. We are now into the late stages of the collapse. The USD is not much better than the Euro and once the shorts have done their damage to the EU the US will follow.

 
At 9/04/2012 4:39 PM, Blogger VangelV said...

But things will never get better. Ever. We're in a several-century depression, with no hope of a recovery. Ever.

They will get better. After the liquidation is permitted to happen as government gets out of the way.

 
At 9/04/2012 9:35 PM, Blogger VangelV said...

but at some point, for whatever reason (and honestly, it's often only clear what the reason was in retrospect and even then, not always) the market starts to go up.

I was bar hopping with my boss in Hong Kong in the mid 1990s. I was high on caffeine and my boss was buzzed on beer. At one of our last stops we sat next to a rowdy group of people who were even more drunk than my boss. The argument is the same one we are having today.

Well, one of the guys was a bit loud and made a point. He had asked when was the last time any of them had been to Memphis or Changan. Both were the greatest cities in their day and both had gone thorough a real estate boom that had burst. The question was a simple one; when was the peak in real terms for those cities? It happened that I had been to Memphis a few months previously. The place was a rathole that was several thousand years past its peak. I also happened to live in Changan, which had its best days during the Tang Dynasty.

The point being made was that sometimes prices don't recover. I expect that will be the case with some of the American and European cities that saw a massive decline in economic activity and are going to be buried by high taxes and depreciating capital assets. The question is at what point of development is the US. It is very possible that we can see a default and that unless liquidation is permitted to take place any recovery will be very long. It is also possible that house prices could go up sharply as the currency loses its purchasing power. In either case you are looking at lower real prices well into the future.

We cannot afford to be too pessimistic but being too optimistic is also a danger. The trick is to see reality as it is before it is filtered by the media or government agencies that collect and massage the data. What I find ironic is that many of the same people who claim that government is inefficient and corrupt seem to accept reports as gospel whenever they support a narrative that they want advanced. Prudence dictates a different path.

 
At 9/05/2012 12:42 PM, Blogger morganovich said...

trulia weighs in:

Trulia today released the latest findings from the Trulia Price Monitor and the Trulia Rent Monitor, the earliest leading indicators available of trends in home prices and rents. Based on the for-sale homes and rentals listed on Trulia, these monitors take into account changes in the mix of listed homes and reflect trends in prices and rents for similar homes in similar neighborhoods through August 31, 2012.

Asking prices on for-sale homes–which lead sales prices by approximately two or more months – increased 2.3 percent in August year over year (Y-o-Y) and rose in 68 of the 100 largest metros. Excluding foreclosures, prices rose 3.8 percent Y-o-Y. These are the largest Y-o-Y gains since the recession. Meanwhile, asking prices rose nationally 1.8 percent quarter over quarter (Q-o-Q), seasonally adjusted. Month-over-month (M-o-M) asking prices rose by 0.8 percent, the seventh consecutive month of increases.
...
Nationally, rents rose 4.7 percent Y-o-Y in August, compared to 5.8 percent Y-o-Y in May – making it the slowest rise since March. At the regional level, rents jumped more than 10 percent Y-o-Y in Houston and Seattle, but slowed in Denver, San Francisco, Miami, Oakland and Boston.

 
At 9/05/2012 3:20 PM, Blogger VangelV said...

Asking prices on for-sale homes–which lead sales prices by approximately two or more months – increased 2.3 percent in August year over year (Y-o-Y) and rose in 68 of the 100 largest metros. Excluding foreclosures, prices rose 3.8 percent Y-o-Y. These are the largest Y-o-Y gains since the recession. Meanwhile, asking prices rose nationally 1.8 percent quarter over quarter (Q-o-Q), seasonally adjusted. Month-over-month (M-o-M) asking prices rose by 0.8 percent, the seventh consecutive month of increases.
...
Nationally, rents rose 4.7 percent Y-o-Y in August, compared to 5.8 percent Y-o-Y in May – making it the slowest rise since March. At the regional level, rents jumped more than 10 percent Y-o-Y in Houston and Seattle, but slowed in Denver, San Francisco, Miami, Oakland and Boston.


Of course, there is no inflation to be seen in the 'rising' housing and rental markets.

 
At 9/05/2012 3:48 PM, Blogger bart said...

VangelV said...

Of course, there is no inflation to be seen in the 'rising' housing and rental markets.



Thank goodness someone else understands... /sarcasm

Funny thing about the BLS rent category, it's only going up about 2%/yr... while other folk like Trulia (and even the Census Bureau!) shows rent going up at about 5%/yr. Same thing with utilities (water/sewer/trash is up 5.5%/yr. per the BLS), and even electricity rates are up.

OER continues to be a bad joke, only being up about 2%.

 

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