Thursday, August 23, 2012

2012: The Year of the Housing Recovery, Part II; "This Is What a Housing Recovery Looks Like"

There's more positive housing data coming out this week to support the growing consensus that we've passed the bottom and now have a solid, sustainable real estate recovery underway (see related CD post on Tuesday).  Here are some of those new data:

1.  The Federal Housing Finance Agency (FHFA) released its quarterly report today with U.S. home prices for the month of June and quarterly home prices for the second quarter, based on its House Price Indexes (HPIs) for houses financed or guaranteed by Fannie Mae or Freddie Mac. According to today's report, seasonally-adjusted home prices increased in June by 0.7% from May to an index level of 189.76, which was the highest monthly home price index since August 2010 (see red line in chart above).  The May-June increase in the HPI was the fifth back-to-back monthly price increase starting in February, and the first time since early 2006 of five consecutive monthly increases.   On an annual basis, the HPI in June was 3.6% above a year ago, and was the largest annual increase in almost six years, going back to September 2006.  Without seasonal adjustment, home prices increased by 1.2% from May-June and by 3.7% compared to a year ago (blue line in chart). 

2. On a quarterly basis, U.S. home prices increased during the second quarter by 1.8% from the previous quarter, and by 3.03% from a year ago.  The 1.8% increase in home prices was the largest quarterly gain since a 2.17% increase in Q4 2005, and the annual increase was the largest since a 3.12% gain in Q4 2006. 

3.  Earlier this week, leading real-estate information provider Zillow reported that U.S. home prices increased in July for the eighth consecutive month starting in December of last year, according to Zillow's Home Value Index based on 167 U.S. metro areas.  Zillow chief economist Stan Humphries reported on the Zillow blog that "Home values increased 0.5% to $151,600 from June to July, marking another month of healthy monthly appreciation. Compared to July 2011, home values are up by 1.2 percent, supported in many places by low for-sale inventory."  Home price increases in July were especially strong in Phoenix (2.2%), San Jose (1.2%), and San Francisco (1.2%).

4. According to Data Quick's weekly National Home Sales Snapshot (based on home sales in 98 of the top 100 U.S. metro areas representing two-third of U.S. home sales), national home sales over the last 30 days (218,318 transactions) were 10.4% above a year ago, and the median home sales price of $200,000 was 5.3% above the same period last year.    

5.  Census reported today that sales of new single-family homes increased to a 372,000 seasonally-adjusted annual rate in July, beating the consensus forecast of 365,000.  July new home sales were 3.6% above the previous month, and 25.3% above July sales last year. 

6. The National Association of Realtors reported yesterday that existing-home sales in July were 10.4% above last year, while the national median existing-home price of $187,300 was up by 9.4% from a year ago. 

Regional and state home sales data continue to also show signs of a solid real estate recovery:

7. Florida home sales were up by 9.8% in July, the statewide median home sales price was up by 7.8% versus last year, and pending sales for existing single-family homes were up by a whopping 42% compared to July last year, so the sales gains should continue going forward.   

8. Houston home sales are exploding. Single-family home sales soared 27% in July from last year, while the median sales price rose 6.3% from a year ago to $170,000, matching Houston's all-time record high median price in June.  (Note: Houston is not included in the Case-Shiller Home Price Indexes, so the record home prices there will not be captured by the Case-Shiller index.) 

Bottom LineAs Brian Wesbury et al. pointed out today when summarizing some of the recent housing data, "This is what a housing recovery looks like."  I agree. When you've got ongoing, sustained increases in both home sales and median home prices (for both existing-homes and new homes), often at double-digit increases especially for home sales, continuing increases in pending home sales, low housing inventory levels, and historically low mortgage rates, you've got all of the necessary ingredients in place for a real "real estate recovery." 


At 8/23/2012 2:57 PM, Anonymous Anonymous said...

It's all lies. Cuz Zerohedge says so! There is no housing recovery. The government is faking the data, and ... and ... the seasonal adjustments are all wrong, and ... and ... the price of gold went up today! And ... and ... it's just a lie!

At 8/23/2012 3:16 PM, Blogger arbitrage789 said...

Marc Faber: Odds of Global Recession Are 100%

At 8/23/2012 3:55 PM, Blogger Jon Murphy said...

What is also good news is foreclosures are slowly but surely declining.

One of the worst things that was done in the years following the recession was blocking foreclosures. That alone easily set the recovery back two to three years. Now that we are working our way through these foreclosures, the actual housing recovery can begin.

To be sure, there is still a long way for us to go in both housing starts and home sales, but these are the tentative first steps towards a full recovery. Remember, to move a mountain, you must begin by carrying small stones.

At 8/23/2012 4:01 PM, Blogger Jon Murphy said...

Marc Faber: Odds of Global Recession Are 100%

As a gambler, they are not "odds" if the probability of something is 100%. Then it's a certainty.

At 8/29/2012 8:14 AM, Anonymous Anonymous said...

Let's see - millions of homes remaining in shadow inventory (2M - 9M depending on how you define it), 1/3 of homeowners underwater, 1.5% GDP growth, 15% real unemployment, Euro zone drifting into recession, and higher-end loans very difficult to qualify for. Sounds like the perfect foundation for a housing recovery to me!

If you look at the last 2 or 3 housing booms, once they complete their cycle and inventories return to a normal level, it then takes some years before values actually start trending up. We are just now entering that "lull" period after a boom/bust cycle. And this time, economic conditions are far worse than the last "recovery" periods, so history tells us that we can expect some years of flat-line before any sort of "recovery".

I predict, by year-end, 2011-2012 YOY will be another net Shiller-20 loser. I'll bookmark this post so I can gloat on 1/1/13.


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