Monday Morning Cup of Coffee: Housing data storm ahead

Can housing shake off the winter, spring and now summer doldrums?

Monday Morning Cup of Coffee takes a look at stories across the HousingWire news desk, with more coverage to come on bigger issues.

It’s a week of key housing data and metrics releases, and Monday kicks off bright and – not early but at 10 a.m. ET – with the report on new home sales for July.

New home sales came in at a paltry annual rate of 406,000 in June while the May reading, which was extraordinarily strong, was revised 62,000 lower to 442,000. June’s 8.1% drop was the biggest% decline in almost a year and followed an 8.3% boost the month before. All regions showed declines in June with the most important region, the South because of its overwhelming size in this report, posting a 9.5% drop. The drop in sales raised supply relative to sales, to 5.8 months versus May’s 5.2 months.

Tuesday will have both the Federal Housing Finance Agency home price index and the Case-Shiller home price index for June. After their performance in May, the June numbers will likely come up a little, but we’re not holding our breath for a breakaway.

The FHFA purchase only house price index, based on data from the GSEs, rose just 0.4% in May, and the year-on-year rate slowed by 6 tenths to plus 5.5% from a revised 6.1%. This rate had been in the 7.0% range earlier in the year. The regional breakdown shows special monthly weakness in East South Central and East North Central with gains in the West South Central and Middle Atlantic.

The S&P/Case-Shiller 20-city home price index unexpectedly declined in May at a seasonally adjusted minus 0.3% and followed a 0.1% rise the month before. May’s dip was the first negative reading since January 2012. Year-on-year, both adjusted and unadjusted, home prices were at plus 9.3%, down substantially from 10.8% and 12.4% in the two prior months. Unadjusted data showed deceptive strength, at a monthly plus 1.1%. But this reflected seasonal strength in the spring months for housing and was not a sign of pricing power.

The Conference Board’s consumer confidence survey for August is also due out Tuesday, and it often serves as an indicator for housing, though not nearly as much as mainstream financial reporters make it out to be. It’s like on CNN when they turn to an online poll asking “What do you think happened to the missing flight?” – interesting to know what people are thinking, but not that informative. (Look at the NAHB builder confidence survey with its regular overconfidence as an example.)

Thursday will give the industry the pending home sales index for July. It’s an index, not a data compilation, from the National Association of Realtors, but it’s a solid metric.

The pending home sales index for existing home sales came in at a solid 102.7 in June, healthy but down a bit from a revised 103.8 in May. The monthly percentage change, at minus 1.1%, followed a monthly 6.0% spike in May. The regional breakdown showed a dip in the South but a gain for the Midwest and a fractional gain for the West.

For all of these critical monthly reports, and the weekly mortgage application and mortgage rates reports, look to HousingWire for the first and best coverage.

Here’s your video laugh for Monday morning. It’s not an ice bucket challenge, but someone needs to pour cold water on whoever authorized this story at Fox Business News. This is like looking at five inches of data to extrapolate two miles of road.

Sometimes headlines astound for their obviousness, and sometimes they do it for hitting the target and yet still missing the point. “What if the Fed created a bubble?” This is sort of like asking, what if the reason today is hot is because of the sun?”, no?

Southlake is a suburb in HousingWire’s backyard, and this story from the Fort Worth newspaper on the large lot, spacious home suburb’s decision to decline, repeatedly, the construction of a bunch of zero-lot line houses is a commendable preservation of housing diversity. Usually when people want diversity in housing, they push the same old urban chic trends of higher density, public rail orientation, and the great god called walkable design. But some people like tree-lined avenues, larger lots and more elbowroom all around. Not every community has to bow to the urban hipster designers. And in a market as big as Dallas-Fort Worth, with its dozens of suburbs and exurbs, having a few that don’t bow to trends is a change.

How have QM and ATR affected the industry? The Fannie Mae Financial & Strategic Analysis Group launched the outcomes of a current survey of senior mortgage executives designed to see how mortgage lenders or would adapt to the CFPB’s rules, and here is a preview of the results.

No banks were reported closed by the Federal Deposit Insurance Corp. for the week ending August 22, 2014.

Is the boom era for home flipping ending?

RealtyTrac: Trends return to historical normal

This is also down from 5.9% in the first quarter of 2014. But when looking at home price trends, it comes as no surprise.

According to Trulia’s home price report, for the first time in more than two years, none of the 100 largest U.S. metros had a year-over-year price increase above 15% as home price increases start to decrease in pace.

“Home flipping is settling back into a more historically normal pattern after a flurry of flipping during the recent run-up in home prices in 2012 and 2013,” said Daren Blomquist, vice president at RealtyTrac.

“Flippers no longer have the luxury of 20 to 30 percent annual price gains to pad their profits. As the market softens, successful flippers will need to focus on finding properties that they can buy at a discount and efficiently add value to,” Blomquist added.

On average, investors made a gross profit of more than $46,000 per flip on homes flipped in the second quarter of 2014, a 21% gross return on the initial investment.

This is a drop from 24% in the first quarter and down from 31% in 2013, which was the peak in percentage return on flips nationwide since RealtyTrac began tracking the flipping data in the first quarter of 2011.

(source RealtyTrac: click for larger image)

flipping

And the problem is not only with increasing home prices, with CoreLogic reporting that the foreclosure inventory across the nation continues to shrink.

While this is good news, it means less distressed properties to buy and flip.

This does not mean the days of home flipping are over though. Zillow (Z) has listed the top 10 markets where it pays the most to become the Ropers.

These are the best places where the amount an owner can charge a tenant is greater than mortgage costs.

As a whole for the month of May, there were 47,000 completed foreclosures nationally, a drop from 52,000 in 2013, a year-over-year decrease of 9.4%.

At the top were Oklahoma City, Miami, and Tulsa, where homeowners can make an average of $536, $515, and $396, respectively.

Black Knight: Home prices in June rose 5.5% YOY

Home price appreciation continues to slow

At the national level, U.S. home prices in June were up 0.8% from May, and 5.5% from this time last year, according to the data and analytics division of Black Knight Financial Services.

The yearly increases in home appreciation continue to slow – the last three monthsY/Y increases were May: 5.9%, April: 6.4% & March: 7.0%.
Once again, every one of the 20 largest states and 40 largest metros showed positive month-over-month movement.

Nevada saw the largest monthly gain among states (up 1.4% and followed by Michigan at 1.3%), while Colorado and Texas continued to hit new highs.
Speaking of Nevada: Reno home prices rose 1.9%, the most of any metropolitan area – at the same time, Las Vegas is still 42% off its May 2006 peak.

Click to enlarge.

Two of the 40 largest metros, Baltimore & Honolulu, saw negative year over year movement in June, down 0.5% and 5.1%, respectively.

On the flip side of those 40 largest metros, Miami home prices increased most Y/Y, at 11.8%, followed closely by San Francisco (11.4%).

Of the largest metros, San Jose, CA has experienced the greatest gain so far in 2014, rising nearly 10% since the start of the year (its HPI value also hit a new high of $754K this month).

July Data: Buying Is a Bargain, But Renting Remains Expensive

Buying a home remains a real bargain compared to renting in most areas nationwide, as the share of income typically needed to afford the average home is much lower today than it was in the past. But while buying a home is a great deal, for those current renters looking to buy — particularly millennials — saving up the necessary down payment can be a real challenge as rents keep rising.

Zillow’s July Real Estate Market Reports examined both mortgage affordability and rental affordability nationwide and in dozens of large markets. U.S. home buyers should currently expect to pay 15.3 percent of their incomes to a mortgage on the typical home, far less than the 22.1 percent share homeowners devoted to mortgages in the pre-bubble years between 1985 and 1999.

As of June, home buyers in just six of the country’s 100 largest metro markets analyzed by Zillow were paying a larger portion of their incomes today than historically in order to buy their area’s median-priced home. This widespread affordability is driven largely by very low mortgage rates, which help keep overall monthly costs down for home buyers.

But mortgage rates are expected to rise in the coming year. When mortgage rates hit 5 percent, still very low by historical standards, the number of unaffordable metros for homeowners among the top 100 will more than double, to 13. At 6 percent mortgage interest rates, the number of unaffordable metros will almost double again, to 24.

Renters, meanwhile, are facing a much different environment. Rents didn’t experience the huge drop seen in home values during the recession, and instead have just kept chugging upward for much of the past decade. Plus, renters can’t take advantage of very low mortgage rates, like home buyers can. As a result, renters signing a lease today should expect to pay about 29.5 percent of their income to rent, compared to 24.9 percent in the pre-bubble period. In 88 of the nation’s 100 largest metro areas, renters should currently expect to pay a larger share of their income toward rent than they would have historically.

The disparities between homeowners and renters are magnified among the millennial generation. Because a much larger proportion of millennials rent compared to other generations such as Generation X and baby boomers, the problem of saving up for a down payment and other costs associated with homeownership is much greater among younger potential home buyers.

“The affordability of for-sale homes remains strong, which is encouraging for those buyers that can save for a down payment and capitalize on low mortgage interest rates. But the health of the for-sale market is directly tied to the rental market, where affordability is really suffering,” said Zillow Chief Economist Dr. Stan Humphries. “As rents keep rising, along with interest rates and home values, saving for a down payment and attaining homeownership becomes that much more difficult for millions of current renters, particularly millennial renters already saddled with uncertain job prospects and enormous student debt. In order to combat this phenomenon, wages need to grow more quickly than they are, particularly for renters, and growth in home values will need to slow.”

The median annual income nationwide was $53,216 as of the end of the second quarter. But according to the Census Bureau, homeowners and renters make drastically different salaries — homeowners make $65,514 per year, while the typical renter in the U.S. makes just $31,888.

Still, there are some areas where buying and renting are affordable. In a dozen markets nationwide, the share of income needed to pay either a typical mortgage or the median rent in an area is lower now than it was historically, making these markets great for any generation of home buyer or renter.

Blog_August2014_Zillow_MonthlyData_a_03

California July Home Sales

http://dqnewspressreleases.blogspot.com/2014/08/july-california-home-sale-press-release.html

August 14, 2014

An estimated 39,608 new and resale houses and condos sold statewide in July. That was up 0.9 percent from 39,254 in June, and down 8.7 percent from 43,381 sales in July 2013, according to Irvine-based CoreLogic DataQuick.

July sales have varied from a low of 30,596 in 1995 to a high of 71,186 in 2004. Last month’s sales were 14.0 percent below the average of 45,935 sales for all months of July since 1988, when CoreLogic DataQuick statistics begin. California sales haven’t been above average for any particular month in more than eight years.

The median price paid for a home in California last month was $392,000, down 0.3 percent from $393,000 in June and up 8.0 percent from $363,000 in July 2013. Last month was the 29th consecutive month in which the state’s median sale price rose year-over-year. It was the first year-over-year increase below 10 percent since June 2012, when the $274,000 median was up 8.3 percent. This cycle’s year-over-year increases peaked at 29.2 percent in July last year.

In March/April/May 2007 California’s median sale price hit an all-time peak of $484,000. The post-peak trough was $221,000 in April 2009.

Of the homes that resold last month, 5.6 percent were properties that had been foreclosed on during the past year. That was down from 5.8 percent in June and down from 8.3 percent a year earlier. Foreclosure resales peaked at 58.8 percent of the resale market in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 6.6 percent of the homes that resold last month. That was up slightly from an estimated 6.3 percent the month before and down from 12.7 percent a year earlier.

The typical monthly mortgage payment that California buyers committed themselves to paying last month was $1,521, down from $1,530 the month before and up from $1,449 a year earlier. Adjusted for inflation, last month’s payment was 35.6 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 47.8 percent below the current cycle’s peak in June 2006. It was 61.6 percent above the January 2012 bottom of the current cycle.

Source: DataQuick; DQNews.com

Sluggish Bay Area Home Sales in July; Prices Up – at a Slower Pace

http://dqnewspressreleases.blogspot.com/2014/08/july-bay-area-home-sale-press-release.html

August 14, 2014

Irvine, CA.—-Bay Area home sales dipped last month, the result of continued constrained supply, the decline in affordability, and a still-tight mortgage market. While still rising year-over-year, the median sale price stayed at a three-month plateau, CoreLogic DataQuick reported.

A total of 8,474 new and resale houses and condos sold in the nine-county Bay Area last month. That was up 7.1 percent from 7,915 in June and down 9.3 percent from 9,339 in July last year, according to Irvine-based CoreLogic DataQuick, a real estate information service.

Bay Area sales usually decline around 5 percent from June to July. Sales for the month of July have varied from 6,666 in 1995 to 14,258 in 2004. The average since 1988, when CoreLogic DataQuick statistics begin, is 9,333.

“The Bay Area housing market is still in transition, still dealing with the remnants of the Great Recession. That said, it’s also a market that is in the process of re-balancing itself with the region’s on-the-ground economic realities, mainly decent economic growth and job creation. There still seems to be a bit of buyer and seller reticence. Meanwhile, many analysts are still drumming their fingers on the table, waiting for the mortgage market to normalize,” said John Karevoll, CoreLogic DataQuick analyst.

The median price paid for a home in the nine-county Bay Area was $617,000 in July. That was down 0.2 percent from $618,000 in June, and up 9.8 percent from $562,000 in July last year. The May median was $617,000. Last month’s was the first single-digit year-over-year increase since May 2012, when the median rose 7.5 percent. A year ago the median jumped 33.5 percent year-over-year, the steepest part of the off-bottom bounce.

The Bay Area’s median sale price peaked at $665,000 in June and July 2007, then dropped to a low of $290,000 in March 2009. Last month’s median was 7.2 percent off the peak.

The number of homes that sold last month for less than $500,000 dropped 17.2 percent year-over-year, while the number that sold for more rose 3.2 percent.

Over the past year, a variety of market indicators have trended incrementally toward long-term norms, though they sometimes vacillate month-to-month.

Adjustable-rate mortgages (ARMs), an important indicator of mortgage availability, accounted for 25.6 percent of the Bay Area’s home purchase loans in July, down from a revised 26.6 percent in June, and up from 19.3 percent in July last year. ARMs hit a low of 3.0 percent of loans in January 2009. Since 2000, ARMs have accounted for 46.7 percent of all Bay Area purchase loans.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 56.6 percent of last month’s purchase lending, down from a revised 56.7 percent in June, and up from 49.9 percent a year ago. The June jumbo level was the highest since the credit crunch struck in August 2007. During the last housing downturn, jumbo usage dropped to as low as 17.1 percent in January 2009.

Government-insured FHA home purchase loans, a popular choice among first-time buyers, accounted for 10.9 percent of all Bay Area purchase mortgages in July, up from 10.4 percent in June and up from 9.8 percent a year earlier.

Last month foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 2.7 percent of resales, down from a revised 2.9 percent from the month before, and down from 4.6 percent a year ago. Foreclosure resales in the Bay Area peaked at 52.0 percent in February 2009, while the monthly average over the past 17 years is 9.8 percent.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 4.2 percent of Bay Area resales last month. That was down from an estimated 4.4 percent in June and down from 8.5 percent a year earlier.

Last month absentee buyers – mostly investors – accounted for 18.8 percent of all Bay Area home sales, which was the lowest absentee share of purchases since that figure was 18.5 percent in September 2010. Last month’s absentee share was down from a revised 19.1 percent the month before and down from 20.5 percent a year earlier.

Buyers who appear to have paid all cash – meaning no sign of a corresponding purchase loan was found in the public record – accounted for 20.2 percent of sales in July, down from a revised 20.8 percent in June and down from 23.5 percent a year earlier. July’s cash level was the lowest since cash buyers also purchased 20.2 percent of all homes in November 2008.

Bay Area home buyers put $2.52 billion of their own money on the table in the form of a down payment or as an outright cash purchase last month. They borrowed $3.69 billion in mortgage money from lenders last month, the most since $3.82 billion in August 2007.

The most active lenders to Bay Area home buyers in July were Wells Fargo with 13.2 percent of the purchase loan market, Bank of America with 4.7 percent and RPM Mortgage with 4.0 percent, CoreLogic DataQuick reported.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying last month was $2,394. Adjusted for inflation, last month’s payment was 17.8 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 39.2 percent below the current cycle’s peak in July 2007. It was 86.2 percent above the February 2012 bottom of the current cycle.

To view the county-by-county home sale chart, please visit DQNews.com.

Southland Home Sales Fall Yr/Yr Again; Prices Rise at Slower Pace

http://dqnewspressreleases.blogspot.com/2014/08/july-southland-home-sale-press-release.html

August 13, 2014

Irvine, CA—Southern California home sales fell to a three-year low for the month of July as supply continued to fall short of demand, some buyers struggled with higher prices, and investor activity fell. Cash deals declined to the lowest level in more than four years, while the median sale price dipped from June and rose from a year ago at the slowest pace in more than two years, a real estate information service reported.

A total of 20,369 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 1.4 percent from 20,654 sales in June, and down 12.4 percent from 23,253 sales in July 2013, according to Irvine-based CoreLogic DataQuick.

On average, sales have declined 6.3 percent between June and July since 1988, when CoreLogic DataQuick statistics begin. Southland sales have fallen on a year-over-year basis for 10 consecutive months. Sales during the month of July have ranged from a low of 16,225 in July 1995 to a high of 38,996 in July 2003. Last month’s sales were 19.4 percent below the July average of 25,269 sales.

The median price paid for all new and resale houses and condos sold in the six-county region last month was $413,000, down 0.5 percent from $415,000 in June and up 7.3 percent from $385,000 in July 2013. The June 2014 median was the highest for any month since January 2008, when it was also $415,000. The median’s 7.3 percent year-over-year gain in July was the lowest since June 2012, when the $300,000 median rose 5.3 percent.

“Prices came a long way in a couple of years, and now a lot of would-be buyers just can’t stretch their finances enough to buy in today’s more conservative lending environment. That’s not the only reason price appreciation is easing, but it’s one of the main ones. July was the first month in two years in which all but one of the six Southland counties posted a single-digit year-over-year increase in its median sale price. The more spectacular annual price gains of a year ago – over 20 percent – seem far back in the rear view mirror now. Looking ahead, such double-digit price jumps seem unlikely unless there’s a burst of pent-up demand, perhaps triggered by more robust income growth, a loosening of mortgage credit or a significant move in interest rates,” said Andrew LePage, CoreLogic DataQuick analyst.

The Southland median has risen on a year-over-year basis for 28 straight months. In June, however, the median’s 22-month streak of double-digit year-over-year gains ended. The peak annual gain during that stretch was 28.3 percent in June 2013.

Last month five counties – San Diego, Los Angeles, Ventura and Riverside – logged single-digit, year-over-year gains in their median sale prices.

The Southland’s July median stood 18.2 percent below the peak $505,000 median in spring/summer 2007.

Home prices continued to rise at different rates depending on price segment. In July, the lowest-cost third of the region’s housing stock saw a 16.7 percent year-over-year increase in the median price paid per square foot for resale houses. The annual gain was 8.3 percent for the middle third of the market and 7.1 percent for the top, most-expensive third.

The number of homes that sold for $500,000 or more last month was almost even with a year earlier, declining 0.9 percent from July 2013. But sales below $500,000 fell 17.2 percent year-over-year. Sales below $200,000 plunged 37.1 percent. Sales in the lower price ranges are hampered by, among other things, the drop in affordability over the last year, a fussy mortgage market and a relatively thin inventory of homes for sale.

In July, 37.2 percent of all Southland home sales were for $500,000 or more, down a tad from a revised 38.0 percent in June, which had the highest level since $500,000-plus deals made up 38.3 percent of sales in December 2007. In July last year 33.2 percent of sales were above the $500,000 threshold.

Distressed property sales continued to recede last month.

Foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 5.2 percent of the Southland resale market last month. That was down from a revised 5.3 percent the prior month and down from 7.7 percent a year earlier. In recent months the foreclosure resale rate has been the lowest since early 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 5.9 percent of Southland resales last month. That was down from a revised 6.0 percent the prior month and down from 12.7 percent a year earlier.

Absentee buyers – mostly investors and some second-home purchasers – bought 23.6 percent of the Southland homes sold last month. That was the lowest share since December 2010, when 23.4 percent of homes sold to absentee buyers. Last month’s 23.6 percent absentee share was down from a revised 23.9 percent in June and down from 27.4 percent a year earlier. The peak was 32.4 percent in January 2013, while the monthly average since 2000, when the CoreLogic DataQuick absentee data begin, is about 19 percent.

Cash purchases dropped to the lowest level in more than four years last month. Buyers paying cash accounted for 24.5 percent of July home sales, down from a revised 25.6 percent the month before and down from 30.0 percent in July last year. The last time cash purchases were lower than last month was in June 2010, when 24.2 percent of Southland homes were bought with cash. The peak was 36.9 percent in February 2013, and since 1988 the monthly average is 16.6 percent.

In July, Southern California home buyers forked over a total of $4.51 billion of their own money in the form of down payments or cash purchases. That was down from a revised $4.77 billion in June. The out-of-pocket total peaked in May 2013 at $5.41 billion.

Although credit conditions overall remain relatively tight, the use of larger “jumbo” home loans and adjustable-rate mortgages has trended higher this year, toward more normal levels.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 32.3 percent of last month’s Southland purchase lending – the highest jumbo level for any month since the credit crunch struck in August 2007. Last month’s figure was up a hair from 32.2 percent in June and up from 27.9 percent a year earlier. Prior to August 2007 jumbos accounted for around 40 percent of the home loan market. The jumbo level dropped to as low as 9.3 percent in January 2009.

In July, 13.6 percent of Southland home purchase loans were adjustable-rate mortgages (ARMs), down slightly from 13.9 percent in June and up from 10.9 percent a year ago. ARM use dropped to as low as 1.9 percent of all purchase loans in May 2009. Since 2000, a monthly average of about 31 percent of Southland purchase loans have been ARMs.

All lenders combined provided a total of $6.44 billion in mortgage money to Southern California home buyers in July, up from a revised $6.35 billion in June and down from $6.54 billion in July last year.

The most active lenders to Southern California home buyers last month were Wells Fargo with 6.9 percent of the total home purchase loan market, Bank of America with 2.8 percent and New America Funding with 2.5 percent.

Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 18.8 percent of all purchase mortgages last month. That was the same as the month before and down from 19.0 percent a year earlier. In recent months the FHA share has been the lowest since early 2008, mainly because of tighter FHA qualifying standards and the difficulties first-time buyers have competing with investors and cash buyers.

The typical monthly mortgage payment Southland buyers committed themselves to paying last month was $1,602, down from a revised $1,616 the month before and up from $1,537 a year earlier. Adjusted for inflation, last month’s typical payment was 34.4 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 46.3 percent below the current cycle’s peak in July 2007.

To view the county-by-county home sale chart, please visit DQNews.com.