House Prices End the Year Higher

February 25, 2014

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 23rd 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.

Presentation1

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.

Presentation2

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.


New Home Loans: Rate Edges Down, Purchase Price Up

January 30, 2014

Earlier today, the Federal Housing Finance Agency (FHFA) reported a slight (3 basis point) rise in mortgage interest rates for December.  However, the rise was driven entirely by loans used to purchase existing homes.  The average contract interest rate on conventional mortgages for new homes actually moved slightly in the opposite direction from 4.26 to 4.24 percent.

Eff Rate Dec13

Initial fees, which have the potential to offset a small change in the contract interest rate, edged down on mortgages for both new and existing homes.  On mortgages for new home loans, the decline in initial fees was from 1.27 to 1.22 percent.  The result was a decline in the average effective interest rate on new home loans (which amortizes initial fees over the estimated life of the loan) of 2 basis points to 4.24 percent, the lowest it’s been since August.

While the interest rate changes were very small, the average size of conventional mortgages used to purchase new homes, as well as the price of the new homes purchased with the loans, made notable gains.  The average loan size increased 3.8 percent to $313,400, which represents an all-time high.

Loan Amt Dec13

Meanwhile, the average price of a new home purchased with a conventional loan increased 1.9 percent to $409,500, also an all-time record (although it was nearly as high in April of 2013).

Price Dec13

Because the average loan amount increased by more than the average new home price, the average loan-to-ratio price also increased, from 77.4 to 78.3 percent.

This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in December.  For other details about the survey, see the technical note at the end of FHFA’s January 30 news release.


House Prices Rise, But At A More Moderate Pace

January 23, 2014

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 22nd 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.

Presentation1

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.

Presentation2


Rates on New Home Loans Join Downward Trend

December 26, 2013

On Christmas Eve, the Federal Housing Finance Agency (FHFA) reported a 10 basis point decline in mortgage interest rates for the month of November.  Data from FHFA’s Monthly Interest Rate Survey (MIRS) cover conventional single-family mortgages and distinguish whether the loans are for the purchase of new or existing homes.  In October, rates on existing home loans declined while rates on new home loans stubbornly continued to inch up.   But in November, rates on both types of loans declined.  In particular, the November data show a 6 basis point decline in the average contract interest rate on loans to purchase newly-built homes, from 4.32 to 4.26 percent.Contr Rate Nov 13Initial fees have the potential to offset a decline in the contract interest rate, but the initial fees on mortgages for new homes also declined in November, from an average of 1.30 to 1.27 percent.  (Although down from October, this is still relatively high by historical standards, as the average fee on new home loans has only been as high as 1.27 percent five times since 1996.) Fees Nov 13The combination of declines in the contract rate and initial fees took the average effective interest rate on new home loans (which amortizes initial fees over the estimated life of the loan) down 8 basis points to 4.39 percent (after two consecutive months above 4.40).

The November data on conventional new home mortgages showed relatively little change in the average size of the loans ($302,000), the average price of the homes purchased with the loans ($401,800), or the average loan-to-price ratio (77.4 percent).

The MIRS collects data on loans closed over the last five working days of the month. For other caveats and survey details, see the technical note at the end of FHFA’s December 24 MIRS release.


Interest Rates on New Home Loans Remain Stubborn

November 26, 2013

Earlier today, the Federal Housing Finance Agency (FHFA) reported a 4 basis point decline in mortgage interest rates for the month of October.  However, the decline was driven entirely by loans on existing homes.  The average contract interest rate on conventional mortgages for new homes stubbornly refused to follow suit, moving instead in the opposite direction from 4.30 to 4.32 percent.  Although this technically continues the upward trend of the previous four months, October’s 2 basis point change is small and represents a substantial leveling off from the June-September increases that averaged 22 basis points a month.Contr Rate Oct 13Initial fees have the potential to offset a small increase in the contract interest rate, but the initial fees on mortgages for new homes also increased in October, from 1.14 to 1.30 percent.  This is the fourth time fees on new home loans have hit 1.30 percent (or higher) since October of last year (following an extended period when they remained below 1.30 every month from the start of 1997 through September of 2012).  As a result, the average effective interest rate on new home loans (which amortizes initial fees over the estimated life of the loan) increased by 3 basis points to 4.47 percent, the highest it’s been since July of 2011.Init Fees Oct 13Also in October, the average size of conventional loans used to purchase new homes—as well as the price of the new homes purchased with the loans—reversed the previous month’s declines.  The average loan size increased 2.6 percent to $302,500, while the average home price increased 3.4 percent to $401,800.  This marks only the third time in its history that the average price of new homes purchased with conventional loans has been above $400,000.Price Oct 13The result of the price and loan size changes is an average loan-to-price ratio that declined for the second month in a row, from 77.5 to 77.1 percent, the lowest it’s been since March.

The above information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in October.   For other details about the survey, see the technical note at the end of FHFA’s November 26 news release.


Rates on New Home Loans: Still Rising

October 29, 2013

In September, interest rates on conventional mortgages used to purchase newly built homes increased for the fourth month in a row, according to data released today by the Federal Housing Finance Agency (FHFA).

During the month, the average contract interest rate increased by 10 basis points to 4.30 percent, while initial fees increased to 1.14 percent (from an average of 1.06 percent the previous month).  The combination drove FHFA’s key measure of the average effective interest rate on new home loans (which amortizes the initial fees and incorporates them into the rate) up by 11 basis points to 4.44 percent—the highest it’s been since July of 2011 (the month prior to a substantial 36 basis point drop).

Eff Rate Sep13The FHFA release also includes data on loan size and house prices, and the averages on both for newly built homes declined in September.  The average price of a new home purchased with a conventional mortgage declined by $11,900 to $388,500.  (The average price depends on the mix of new homes purchased with conventional loans during a particular month, in addition to anything that may be happening to house prices in general.)  The average amount of the loans showed an even more pronounced decline of $13,500, taking it down to $294,800.Loan Amt Sep13As the above numbers imply, the average loan-to-price ratio on conventional mortgages used to purchase new homes also declined in September—down to 77.5 percent, after three consecutive months during which it remained above the 78 percent mark.LTP Sep13

This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in September.  Rates and other terms on loans are usually set 30 to 45 days before the loans actually close.  For other caveats and limitations of the survey, see the technical note at the end of FHFA’s October 29 news release.


House Prices Continue To Climb

September 25, 2013

House prices continued to rise in July, contributing to the overall recovery in the housing market. According to the most recent release by the Federal Housing Finance Agency, U.S. house prices rose by 1.0% on a month-over-month seasonally adjusted basis in July. This is the 18th consecutive monthly increase for the House Price Index – Purchase Only. Since January 2012, house prices have risen by 12.5%.

Meanwhile, Standard and Poor’s also reported that house prices rose in July. According to the most recent release, the S&P/Case-Shiller House Price Index –20 City Composite grew by 12.4% over the past year. This is the 14th consecutive year-over-year increase registered by the index. Since March 2012, house prices, as measured by the S&P/Case-Shiller House Price Index, have risen by 21.2%.

Presentation1

According to the FHFA, house prices nationally are 14% above the trough reached in April 2007. However, they remain 10% away from their pre-recession peak. As Chart 2 illustrates, home prices in most areas have exhibited a sustained recovery, but have not yet returned to their pre-recession peak, a situation that keeps a portion of homeowners in a negative housing equity position.

Chart 2 also indicates that the regions of the country with the largest increases typically still have the most to rise before reaching their peak level. For example, house prices in the Pacific region have climbed by 27% from their trough, but house prices in that region are still 23% below their peak level.  The Pacific region includes Hawaii, Alaska, Washington, Oregon, and California. According to Standard and Poor’s/Case-Shiller, house prices in Los Angeles, San Diego, and San Francisco have risen by 30%, 30%, and 50% from their respective troughs, but house prices in these cities remain 25%, 25%, and 19% away from their respective peaks. House prices in Seattle have risen by 28% from their trough, but are 17% below their peak level.

In contrast, house prices in the West South Central region of the country have fully recovered their pre-recession peak level. As of July 2013, house prices in this region are 12% above their trough and, despite the recent month-over-month decline, are 7% above their pre-recession peak. The West South Central region is composed of Oklahoma, Arkansas, Texas, and Louisiana. According to Standard and Poor’s/Case-Shiller, house prices in Dallas are currently 17% above their trough and 4% above their June 2007 peak.

Presentation2

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 Rise

August 22, 2013

Nationally, house prices continued to rise in the second quarter of 2013. According to the most recent release by the Federal Housing Finance Agency, U.S. house prices rose by 2.1% on a quarter-over-quarter seasonally adjusted basis. This is the eighth consecutive quarterly increase for the House Price Index – Purchase Only. Over the past two years house prices have climbed by 8.1%.

On a month-over-month basis, the June increase in house prices were geographically widespread, increasing in every division of the country. As Chart 1 illustrates, the largest gains took place in the Pacific and Mountain divisions, regions of the country containing states, like Nevada and California, which experienced the largest price declines.

Presentation1

Chart 2 updates analysis discussed in an earlier post comparing national house prices, which began a sustained recovery in 2011, with mortgage applications for purchase, a measure of mortgage demand. This relationship is of particular interest because of the recent spike in mortgage rates. Higher mortgage rates could dampen housing demand and restrain house price growth. According to data released by the Mortgage Bankers Association, mortgage applications for home purchase increased by 0.7% over the month of June, but declined by 6.6% over the month of July. Since reaching its most recent peak in April, mortgage applications for purchase have fallen by 7.8%, possibly reflecting the 92 basis point increase in mortgage rates that took place over this same period.

As a result of the decline in mortgage applications, the 6-month moving average, which has been rising in tandem with house prices, dipped slightly in July. The 6-month moving average smoothes volatility in the month-to-month data. Holding constant all other influences, the recent decline in mortgage applications that likely stemmed from rising interest rates suggests that house price growth could decelerate in the coming months. However, other dynamics, such as pent-up housing demand and tight housing supply are expected to support house price growth. In addition, the rise of all-cash sales has diminished the role of mortgage applications for purchase as an indicator of housing demand. As a result, rising house prices and the housing recovery will continue. Nevertheless, mortgage applications for purchase, a key method of purchasing a home, will continue to be watched for clues about the direction of house prices.

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

Presentation2


House Prices Move Higher

June 25, 2013

Nationally, house prices continued to rise in April, contributing to the overall recovery in U.S. house prices. According to the most recent release by the Federal Housing Finance Agency, U.S. house prices rose by 0.7% on a month-over-month seasonally adjusted basis in April. This is the fifteenth consecutive monthly increase for the House Price Index – Purchase Only. Since January 2012, house prices have risen by 9.9%.

The April increase in house prices was geographically widespread, increasing in every division of the country. As Chart 1 illustrates, the largest gains took place in the Pacific and Mountain divisions, regions of the country containing states, like Nevada and California, that experienced the largest price declines.

Presentation1

Meanwhile, Standard and Poor’s reported that its house price index also rose in April. According to the most recent release, the S&P/Case-Shiller House Price Index – 20-City Composite grew by 12.1% on a year-over-year not seasonally adjusted basis. Following 20 consecutive months of year-over-year declines, house prices registered their eleventh consecutive year-over-year increase in April. House price growth in San Francisco, a city in the Pacific region, and in Las Vegas, a city in the Mountain region, eclipsed house price growth in Phoenix, a city in the Mountain region. However, as chart 2 illustrates, each of these cities in addition to Atlanta experienced year-over-year house price growth greater than 20.0%. April is the eighth consecutive month that Phoenix has experienced a 12-month price increase greater than 20.0%.

Presentation2

Rising house prices for existing homes, such as those counted in the FHFA and in the S&P/Case-Shiller House Price Indices, is a net positive for the housing recovery. Recovering prices will improve conditions for builders, lead to higher inventories of new construction, and motivate potential sellers of existing houses to come back into the market. Data released jointly by the US Census Bureau and the US Department of Housing and Urban Development showed that newly constructed single-family houses sold at a seasonally adjusted annual rate of 476,000 in May, 2.1% higher than level of new single-family houses sold in April. Going forward we expect house prices to continue to rise, by 9.5% overall in 2013 and by 4.5% in 2014.

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

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


Rates on New Home Loans Increase Slightly

April 26, 2013

Interest rates on loans for new homes increased slightly in March, according to data recently released by the Federal Housing Finance Agency (FHFA).  The average contract rate on conventional loans for newly built homes increased 13 basis points, to 3.50 percent.  Although initial fees and charges on the loans declined from 1.17 to 1.08 percent, that still resulted in an effective rate (amortizing the initial fees) that edged up 11 basis points, to 3.61 percent.  So far in 2013, rates on loans to purchase new homes have been drifting upward, reversing a downward trend that prevailed throughout most of 2011 and 2012.

Effect Rate Apr13

The average term on loans for new homes in March was 28.4 years, up 0.2 years from February.  Meanwhile, the average price and loan amount both increased—the average price from $387,100 to $388,400, the average loan amount from $291,200 to $295,300.   Neither is quite back up to the average dollar figures reported at the end of 2012, however.

Loan Amt Apr13

The changes in purchase price and loan amount resulted in an increase in the average loan-to-price ratio on conventional mortgages for new homes to 77.7 percent (up from 77.0 in February).

This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed from March 25 to the end of the month.   Loan terms are typically established 30 to 45 days before closing.  For other caveats and limitations of the survey data, see the technical note at the end of FHFA’s April 25 News Release.


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