House Prices Rise

March 26, 2014

Data released by Standard & Poor’s indicates that house prices rose over the month of January 2014. According to the release, both the S&P/Case-Shiller 10-City Index and the S&P/Case-Shiller 20-City Index rose by 0.8% on a seasonally adjusted basis over the month of January 2014. This marks the 23rd consecutive month-over-month increase in both the seasonally adjusted 10-City Index and the seasonally adjusted 20-City Index. Over this 23-month period, the 10-City Index has grown by 22.0% and the 20-City Index has risen by 22.6%.

Data from the Federal Housing Finance Agency (FHFA) confirms the monthly rise in national house prices. Over the month of January 2014, the FHFA House Price Index – Purchase Only rose by a seasonally adjusted rate of 0.5%. According to the release, this is the 23rd monthly increase in the past 24 months. Over this two-year period house prices have increased by 14.1%.

According to the figure below, 8 of the 9 Census Divisions recorded month-over-month house price increases. Only the West South Central part of the country, which includes states such as Oklahoma and Louisiana, experienced a decline. Meanwhile, monthly house price growth was led by the Middle Atlantic, New England, and West North Central areas of the country. The figure below also illustrates that despite the above average monthly gains, these 3 regions of country registered below average year-over-year increases; with the Middle Atlantic and New England regions of the country experiencing the smallest year-over-year price increases amongst the 9 Census Divisions.

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

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


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.

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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.

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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.


Young Adults Living with Parents Up Sharply

February 4, 2014

New NAHB Economics research shows that the share of young adults ages 18 to 34 living with parents or parents-in-law increased sharply in the late 2000s. According to the most recent American Community Survey (ACS), one in three young adults ages 18 to 34, or more than 24 million, lived in homes of their parents or parents-in-law in 2012. By comparison, the 1990 and 2000 Censuses reported that only one in four young adults ages 18 to 34 lived with parents at that time.

The NAHB analysis shows that the biggest shift in the preferences of young adults to live with parents happened after 2005. This is particularly true for older young adults, ages 25 to 34, whose share living with parents was fluctuating around 12 percent from 1990 through 2005 and then quickly rose to exceed 19 percent in 2012 (see figure below). The younger cohort, ages 18 to 24, was more likely to live with parents in 1990, when more than half of these adults lived with parents, than in the early 2000s. However, by 2006 this share exceeded 50 percent again and grew to more than 57 percent in 2012.

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Rising college enrollment among younger adults ages 18 to 24 helps explain their increased preferences for not leaving parental homes. The majority of adults in this age group, 52 percent, attended school or college in 2012, compared to 45 percent in 2000 and 43 percent in 1990. College attendance plays a less important role in the decision of older adults, ages 25 to 34, to stay at parents’ home. Less than 14 percent of adults in this older cohort were still in college or school in 2012, the comparable share in 1990 and 2000 was just slightly below, close to 12 percent.

For older, more experienced and better educated adults ages 25 to 34, the ability to find stable, higher-paying jobs plays an increasing role. As unemployment rates kept increasing in the late 2000s so did the shares of young adults living with parents. In 2000, the shares of unemployed in this age group were 7 percent among young adults living with parents and 4 percent among those living independently. By 2012, these shares reached 14 percent among adults living with parents and 6 percent among same age adults living independently.

The NAHB report also analyzes state unemployment rates and finds that, on average, states with larger increases in unemployment rates among young adults registered larger gains in percent of young adults living with parents. Even though unemployment rates started to decline in most states in 2011, shares of young adults living with parents remain stubbornly high and even increased in some states, suggesting that it takes longer for young adults to overcome the overall sense of economic instability, gain confidence and financial independence before leaving parents’ homes. This is particularly true for states hardest hit by the housing boom and bust, such as California and Florida, where percent of young adults living with parents continued to rise through 2012 despite improving job markets.

Young_adults

As of 2012, three Northeast states – New Jersey, Connecticut, and New York – register the nation’s highest shares of young adults ages 18 to 34 living with parents or parents-in-law – 45, 42 and 41 percent, respectively (see the map above). California and Florida – two of the states hardest hit by the housing boom and bust – follow with their shares just slightly under 40 percent. At the opposite end of the spectrum are the District of Columbia known for its relatively stable job market and North Dakota known for its oil booming economy – both registering shares under 20 percent.

Young adults ages 25 to 34 traditionally represent about half of all first-time home buyers. Their delayed willingness and ability to leave parental homes and strike out on their own undoubtedly contributed to suppressing housing demand further during the Great Recession. Declining shares of young adults living with parents in some states – Rhode Island, Montana, Wyoming, Maine, Delaware and New Mexico among others – could be one of the early signs that pent-up housing demand may finally start turning into realized housing demand.


House Prices Continue to Rise

January 30, 2014

Data released by Standard & Poor’s and Case-Shiller indicates that house prices continued to rise in November 2013. According to the release, both the seasonally adjusted S&P/Case-Shiller 10-City Index and the seasonally adjusted S&P/Case-Shiller 20-City Index rose by 0.9% over the month. For the past twelve months these two house price indexes, the 10-City and the 20-City, rose by 13.8% and 13.7% respectively.

The month-over-month increase in house prices nationally, according to the 20-City Index, reflected gains in each city. As Figure 1 illustrates, 9 of the 20 cities in the index saw monthly house price appreciation equal to or exceeding 1.0%. Four cities, Chicago, Los Angeles, Minneapolis, and New York experienced house price growth of 0.8%, just below the national average. Meanwhile, Phoenix house prices, which have experienced rapid growth in the immediate past, and Seattle house prices rose by 0.4%.

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


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.

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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.

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House Prices Continue to Climb

January 3, 2014

Data released by the Federal Housing Finance Agency (FHFA) indicates that house prices rose nationally in October 2013 by 0.5% on a seasonally adjusted basis from the previous month.

However, house price changes varied across regions of the country. According to the release, four of the nine Census divisions, the Mountain Division, the Pacific Division, the Middle Atlantic Division, and the South Atlantic Division experienced a monthly gain of 0.9% or more. Monthly growth was more subdued in the West South Central region, the New England Division, and the East North Central. House prices in the West North Central were unchanged while house prices East South Central region of the country fell over the month by 1%.

Over the year, house prices have risen in every region of the country. House prices in the Pacific and in the Mountain regions, which include California and Nevada respectively, have experienced year-over-year gains greater than 10%.

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Data from the S&P/Case-Shiller House Price Index – 20 City confirms the house price appreciation that is taking place in the Pacific and Mountain Census Divisions. In addition, the data indicates that while some cities located in either the Pacific or Mountain Divisions have recorded extraordinary house price appreciation over the year, house price growth is generally strong across these two regions of the country. According to the release, the 20 City HPI rose by 14% over the past twelve months ending in October 2013. Nine cities experienced year-over-year house price appreciation greater than the national rate. Five of these nine cities are located in the either the Mountain or Pacific Census Division, including the four cities experiencing the largest year-over-year growth. The three cities located in the Pacific or Mountain Census Division that experienced year-over-year changes that lagged the national average, Seattle, Portland and Denver, still experienced year-over-year house price gains of 10% or more.

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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 Price Growth Highest in 7 Years

October 31, 2013

Standard & Poor’s and Case-Shiller reported that house prices continued to rise in August. According to the release, both the S&P/Case-Shiller House Price Index 20-City Composite and the 10-City Composite rose by 12.8% on a year-over-year not seasonally adjusted basis, the largest increase in house prices since February 2006. House price gains were largest in Las Vegas, 29.2% and San Francisco, 25.4%. Meanwhile, house prices in New York saw the slowest growth, 3.6%, over the previous 12 months.

Standard & Poor’s calculates tiered house price indexes for 16 of the 20 MSAs included in the House Price Index – 20 City Composite. Tiered indexes measure changes in the value of existing single-family houses in three price tiers – low, middle, and high. Each tier represents approximately one-third of the sales transactions in each respective market. A previous post illustrated that house prices in the lowest tier tend to be more volatile than house prices in the middle and upper tiers; house prices fell further during the housing bust and have grown faster during the housing recovery.

However, this spread between growth rates among house price tiers stands in marked contrast to the historical performance of house prices. It is also a distinguishing factor between cities where house prices have recovered and areas where house prices are still recovering. As Chart 1 illustrates, while house prices across all three tiers declined following the housing bust, house prices in the bottom third of the Phoenix house price distribution fell the most and subsequently rose the most.

At the bottom of the housing bust in April 2009, the annual rate of decline in low tier house prices was 58.4%, while the annual rate of decline for house prices in the middle and upper tier was 34.9% and 27.6%, respectively. In April 2010, the annual pace of growth in the low tier was 26.3% while it was only 2.9% and 1.9% in the middle and high tiers. After leading the decline in April 2011, the annual rate of increase in the low tier has exceeded the growth rate in the middle and high tiers. As of August 2013, the spread has narrowed somewhat as the annual rate of increase in the low tier was 30.7% the annual increase in the middle and high tiers was 23.1% and 15.2% respectively.

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In contrast, house prices across all three tiers in Denver have changed at more similar rates. According to Standard and Poor’s/Case-Shiller, Denver house prices set a new record high in August 2013. As Chart 2 illustrates, although house prices in the low tier fell more than house prices in the middle and high tiers over the housing bust, the difference in the year-over-year rate of decline was not as wide as the spread in Phoenix.

At its depth in March 2008, the annual rate of decline in the low tier was 10.8%, while the annual pace of decline in the middle and high tiers was 5.2% and 3.5% respectively. At their post-boom peak, the annual rate of increase in the low tier reached 17.6% while the annual increase for the middle and high tier was 10.5% and 7.8% respectively. In August 2013, the annual rate of growth in the low tier was 12.9%, while it was 10.9% and 8.7% in the middle and high tiers.

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Chart 3 shows the spread in the growth rate between the high tier and the low tier for 3 cities where the house price decline and recent house price growth have been most pronounced, and for Denver, where house prices recently set a record high. According to this chart, the relative parity of house price growth across tiers before the housing boom and the disparity during the bust (widening of the spread) suggests that one indicator of normalization of house prices in a market would be a return to parity in growth rates across the tiers and a narrowing of the high-low spread. As Chart 3 illustrates, the 2012-2013 inter-tier price movements significantly widened the spread, especially in Phoenix, Las Vegas, and San Francisco, indicating that the high and low tier growth rates were diverging. The recent 2013 narrowing of the spread (except for San Francisco) indicates the high and low tier growth rates are converging.

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

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House Prices Continue Their Ascent, Contributing to Broader Economic Recovery

October 24, 2013

According to the Federal Housing Finance Agency (FHFA), house prices rose in August, albeit at a slower month-over-month pace than in July. In August, house prices climbed by a seasonally adjusted rate of 0.3%, 0.5 percentage points slower than then 0.8% increase that took place in July. Over the past twelve months house prices have risen by 8.5%.

Month-to-month growth in U.S. house prices reflected increases in 7 of the 9 Census Divisions. The largest monthly increases took place in the Mountain division (1.3%), which includes Nevada, the West North Central division (1.2%), which includes North Dakota, and the Pacific division (0.8%), which includes California. Gains in these 7 areas of the country were partially offset by declines in the East North Central division (-0.3%), which includes Michigan, and the South Atlantic division (-0.5%), which ranges from Delaware to Florida.

Despite a deceleration in house price growth, August marks the 19th consecutive month-over-month increase in house prices. Over this period, January 2012 to August 2013, house prices have risen by 12.7% and have returned to a level last seen in April 2005, surpassing their pre-boom level. The recovery in house prices is confirmed by the NAHB/First American Leading Markets Index (LMI). This index uses house prices, permits, and employment to track the economic and housing recovery in the US. The index shows that while the U.S. is recovering from the worst of the housing bust and resulting recession, economic activity nationwide has not fully recovered. According to the LMI, the U.S. currently has a score of .85, .15 points from reaching 1.0, a full recovery. With a component score 1.18, house prices have recovered nationwide. However permit activity and employment, with component scores of .43 and .94 respectively, have yet to reach a full recovery.

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


New Home Loans: Rates & House Prices Both Up

September 27, 2013

In August, interest rates on conventional mortgages used to purchase newly built homes increased for the third month in a row, according to data released yesterday by the Federal Housing Finance Agency (FHFA).  After rising by roughly 1 tenth of a percentage point in June and roughly 4 tenths in July, the average contract interest rate on conventional loans for newly built homes increased by another 26 basis points in August, to 4.20 percent.Rate C Aug13The average initial fee on the new home loans dipped slightly, from 1.11 to 1.06 percent.  That was  not nearly enough to offset the increase in the contract rate, so the effective rate on the loans (after amortizing the initial fees) also increased by 26 basis points, to 4.33 percent.  Meanwhile, the average term on conventional new home loans continues to hover around 28 and half years (28.6 years in August).

Rate E Aug13After the August increases, both the contract and effective rates on new home loans were higher than they’ve been at any time since September of 2011.

The FHFA release also includes data on loan size and house prices. After two months of declines, the average size of new home loans and price of the homes purchased with the loans both increased in July.  The loan amount increased for the second month in a row, to $308,300, while the loan-to-price ratio remained relatively constant at 78.7 percent.  As implied by those numbers, the average price of new homes purchased with conventional loans increased by $6,000, to $400,400—marking only the second time in 2013 that the price has been as high as $400,000.  This is generally consistent with the upward price trend in the Census Bureau’s series on New Home Sales.Price Aug13The information in this post is based on FHFA’s Monthly Interest Rate Survey of  loans closed during the last five working days in each month.   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 September 27 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%.

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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.

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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.


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