Paper Economy - A US Real Estate Bubble Blog

Monday, November 30, 2009

Bounce, Crackle and Pop!: 9 Down... And Counting

The extra-seasonal, “cash for first time homedebtors” fueled housing price bounce having reached its peak in most markets in mid-summer now appears to be completely reverting for some.

The Radar Logic home price data now indicates that there are NINE regional markets that have now dropped below their March lows.

This presents an unequivocal bump in the road of the supposed “V” shaped economic recovery as a significant “housing recovery” disappointment shapes up over the next few months.

The following rollup (click for larger) shows the regions that have now completely reverted from the summer peak to break the prior lows seen in March… some even dropping to series lows, resting at levels not seen since the late 1990s.

Note that I added “value” loss for homes purchased at the summer peak and costing either $200K, $300K, $400K and $500K… all losses are well in excess of the senseless $8000 government carrot tax “credit”.

The following are Blytic charts for each of the seven popped markets.









Labels: , ,

Copyright © 2013
PaperEconomy Blog - www.papereconomy.com
All Rights Reserved

Disclaimer

Saturday, November 28, 2009

Ticking Prime Bomb!: Fannie Mae Monthly Summary October 2009

Decades from now the summer of 2008 will likely be remembered to mark the turning point where legislative blundering took an otherwise serious financial crisis and molested it into an epic financial collapse.

By fully assuming the liabilities of Fannie Mae and Freddie Mac, the two colossal and corrupt (and conduit of corruptness funneling junk Countrywide Financial loans onto the implied balance sheet of the federal government) government sponsored enterprises, the federal government, led by Treasury Secretary Paulson and Federal Reserve Chairman Ben Bernanke, has thrust taxpayers into an abyss of insolvency with one mighty shove.

Given the sheer size of these government sponsored companies, with loan guarantee obligations recently estimated by Federal Reserve Bank of St. Louis President William Poole of totaling $4.47 Trillion (That’s TRILLION with a capital T… for perspective ALL U.S. government debt held by the public totals roughly $4.87 Trillion) this legislative reversal making certain the “implied” government guarantee is reckless to say the least.

The following chart (click for larger ultra-dynamic and surf-able chart) shows what Fannie Mae terms the count of “Seriously Delinquent” loans as a percentage of all loans on their books.

It’s important to understand that Fannie Mae does NOT segregate foreclosures from delinquent loans when reporting these numbers.

Finally, the following chart (click for larger ultra-dynamic and surf-able chart) shows the relative movements of Fannie Mae’s credit and non-credit enhanced (insured and non-insured) “Seriously Delinquent” loans.

Labels: , ,

Copyright © 2013
PaperEconomy Blog - www.papereconomy.com
All Rights Reserved

Disclaimer

Friday, November 27, 2009

Two Great Bounces! - November 27 2009

The following charts provide a simple comparison between the big stock bounce that occurred in the wake of the DOW crash of 1929 and the bounce we are seeing today in the S&P 500 index.

The method of alignment was simple… take the first definitive up trading day off the bottom of the preceding bear market low and set that as the start of the series… then simply re-base both series to a value of 100 so that they can be compared side-by-side.

The lower bar chart plots the cumulative percentage change since the start of each bounce.

The S&P 500 is up over 51% in a little over 180 trading days… an historically aggressive run with an obvious note of mania to it… and wholly comparable to… even far stronger than… the price movement seen in the 1930s-era DOW rally.

At this point for the 30s-era DOW, the bull-run was over as the bear trend resumed in earnest… today though the Bull is seriously on the move… how long will this boom last?

Only time will tell… But for now, let’s continue to keep a watchful eye…


Copyright © 2013
PaperEconomy Blog - www.papereconomy.com
All Rights Reserved

Disclaimer

Wednesday, November 25, 2009

Two Great Bounces! - November 25 2009

The following charts provide a simple comparison between the big stock bounce that occurred in the wake of the DOW crash of 1929 and the bounce we are seeing today in the S&P 500 index.

The method of alignment was simple… take the first definitive up trading day off the bottom of the preceding bear market low and set that as the start of the series… then simply re-base both series to a value of 100 so that they can be compared side-by-side.

The lower bar chart plots the cumulative percentage change since the start of each bounce.

The S&P 500 is up over 53% in a little over 160 trading days… an historically aggressive run with an obvious note of mania to it… and wholly comparable to… even far stronger than… the price movement seen in the 1930s-era DOW rally.

At this point for the 30s-era DOW, the bull-run was over as the bear trend resumed in earnest… today though the Bull is seriously on the move… how long will this boom last?

Only time will tell… But for now, let’s continue to keep a watchful eye…


Copyright © 2013
PaperEconomy Blog - www.papereconomy.com
All Rights Reserved

Disclaimer

Reading Rates: MBA Application Survey – November 25 2009

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages, 1 year ARMs as well as application volume for both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage decreased 1 basis point since last week to 4. 82% while the purchase application volume increased 9.6% and the refinance application volume decreased 9.5% over the same period.

It’s important to recognize that despite the Federal Reserve’s “quantitative easing” measures and record low interest rates, the purchase application volume has now dropped to the lowest reading since 2000.

The following chart shows how the principle and interest cost and estimated annual income required to cover the PITI (using the 29% “rule of thumb”) on a $400,000 loan has changed since November 2006.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages over the last number of weeks (click for larger version).


The following charts show the Purchase Index, Refinance Index and Market Composite Index since November 2006 (click for larger versions).



Labels: , ,

Copyright © 2013
PaperEconomy Blog - www.papereconomy.com
All Rights Reserved

Disclaimer

New Home Sales: October 2009

Subtitle: Bounce Bounces Again!?

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for October showing the first annual increase to new home sales in 47 months clearly indicating that, as with existing home sales, "buyers" rushed to take advantage of the expiring housing tax credit sending sales volume up 5.1% compared to October 2008.

The government tax gimmick has clearly had a significant effect on demand, far more than I had originally anticipated, but the question is, how long can this artificial demand last?

Many metro markets still have typical home prices that are way out of line with typical household incomes, a large overhang in inventory and mounting defaults.

Now that home prices are back on the decline it should be clear to all that many housing markets are a long way from the bottom in prices yet "buyers" continue to jump for the government tax carrot.

As we learned from the recent Bob Toll Q&A, even 8% of Toll Brothers homes are financed through FHA... luxury homes with a typical price point in excess of $700K are selling to "buyers" using financing that was intended to give a leg up to low-income families... how long can these government shenanigans last?

The following charts show the extent of sales declines seen since 2005 as well as illustrating how the further declines in 2009 are coming on top of the 2006, 2007 and 2008 results (click for larger versions)


As I have argued recently, the level of inventory and supply and level of completed new homes are still too high for a real sustained bottom for the new home market.

The following chart (click for larger) plots the new home sales (SAAR) series along with the current inventory level (NA) and the level of homes completed (NA) since 1973.

As you can see, although the new home sales series has breached the lowest level in over 30 years, the level of completed homes still remains significantly higher than in past historic bottoms.

Look at the following summary of today’s report:

National

  • The median sales price for a new home declined .47% as compared to October 2008.
  • New home sales were up 5.1% as compared to October 2008.
  • The inventory of new homes for sale declined 37.1% as compared to October 2008.
  • The number of months’ supply of the new homes declined 39.2% as compared to October 2008 and now stands at 6.7 months.
Regional

  • In the Northeast, new home sales increased 5.1% as compared to October 2008.
  • In the Midwest, new home sales declined 11.1% as compared to October 2008.
  • In the South, new home sales increased 8.4% as compared to October 2008.
  • In the West, new home sales increased 8.1% as compared to October 2008.

Labels: ,

Copyright © 2013
PaperEconomy Blog - www.papereconomy.com
All Rights Reserved

Disclaimer

Mid-Cycle Meltdown!: Jobless Claims November 25 2009

Today, the Department of Labor released their latest read of Joblessness showing seasonally adjusted “initial” unemployment claims plunged by 35,000 to 466,000 claims from last week’s revised 501,000 claims while “continued” claims dropped 190,000 resulting in an “insured” unemployment rate of 4.1%.

Today’s results, though still significantly elevated, appears to indicate the descent to both initial and continued claims is continuing in earnest resulting in an almost textbook peak.

At this point, we are either in the "post-crisis" recovery or the "eye before the storm" of a double-dip.

Could the worst of the job-shedding be behind us? Is a major disappointment shaping up for 2010?

We will have to wait to find out.

Clearly, careful attention needs to be paid to these indices to see how they reflect the state of the job market as we move further into the end of the year and start of 2010.

***

The following chart shows the recent trend in initial non-seasonally adjusted initial jobless claims with the year-over-year percent change acting as a rough equivalent of a seasonally adjustment.

Historically, unemployment claims both “initial” and “continued” (ongoing claims) are a good leading indicator of the unemployment rate and inevitably the overall state of the economy.

I have added a chart to the lineup which shows “population adjusted” continued claims (ratio of unemployment claims to the non-institutional population) and the unemployment rate since 1967.

Adjusting for the general increase in population tames the continued claims spike down a bit.

The following chart (click for larger version) shows “initial” and “continued” claims, averaged monthly, overlaid with U.S. recessions since 1967 and from 2000.

As you can see, acceleration to claims generally precedes recessions and vice versa.


Also, acceleration and deceleration of unemployment claims has generally preceded comparable movements to the unemployment rate by 3 – 8 months (click for larger version).


In the above charts you can see, especially for the last three post-recession periods, that there has generally been a steep decline in unemployment claims and the unemployment rate followed by a “flattening” period of employment and subsequently followed by even further declines to unemployment as growth accelerated.

This flattening period demarks the “mid-cycle slowdown” where for various reasons growth has generally slowed but then resumed with even stronger growth.

Until late 2007, one could make the case (as Fed chief Ben Bernanke did on several occasions) that we were again experiencing simply a mid-cycle slowdown but now those hopes are long gone.

Adding a little more data shows that in the early 2000s we experienced a period of economic growth unlike the past several post-recession periods.

Look at the following chart (click for larger version) showing “initial” and “continued” unemployment claims, the ratio of non-farm payrolls to non-institutional population and single family building permits since 1967.

The most notable feature of the post-“dot com” recession era that is, unlike other recent post-recession eras, job growth had been very weak, not succeeding to reach trend growth as had been minimally accomplished in the past.

Another feature is that housing was apparently buffeted by the response to the last recession, preventing it from fully correcting thus postponing the full and far more severe downturn to today.

It is now completely clear that the potential “mid-cycle” slowdown that appeared to be shaping up in late 2007, had been traded for a less severe downturn in the aftermath of the “dot-com” recession, and resulted, instead, in a mid-cycle meltdown.

Labels: ,

Copyright © 2013
PaperEconomy Blog - www.papereconomy.com
All Rights Reserved

Disclaimer

Tuesday, November 24, 2009

Crashachusetts Existing Home Sales and Prices: October 2009

This week, the Massachusetts Association of Realtors (MAR) released their Existing Home Sales Report for October showing that single family homes sales surged 17.7% on a year-over-year basis while condo sales also jumped 17.2% over the same period.

Single family median home value declined 2.6% on a year-over-year basis to $287,000 while condo median prices declined 4.0% to $240,000.

Although these results will likely be touted by MAR and the Boston Globe (… both with significant interest in promoting “good news” for housing) as an indication that the housing market has rebounded, it’s important to note that without the propping of the governments “homebuyer” tax gimmick these results would be significantly weaker.

Sales have surged as “buyers” leapt for their $8000 tax carrot but in all likelihood the simulative effects have merely shifted demand forward in time, stealing sales from the rest of this year and on into next.

Now that the feds have even stepped up their support of unaffordable housing by broadening the hosing tax gimmick to cover “move-up” buyers with higher income requirements, it will be interesting to see the effects on our housing market.

This sham government stimulation is poorly targeted and absurdly expensive but is it possible that it may soon become ineffective?.. only time will tell.

Of course, you know where the Massachusetts Association of Realtor president Gary Rogers stands on government handouts and trickery… he applauds it all the while lining his and his fellow “brokers on commission” pockets with your tax dollars:

“It is apparent from this significant jump in home sales in October, which is the biggest year-over-year gain we’ve seen since November 2004, that buyers were making sure to take advantage of the tax credit prior to its deadline, … Now that the President has extended and expanded the credit, we should see continued improvement in the market through the winter and into the spring.”


As in months past, be on the lookout for the inflation adjusted charts produced by BostonBubble.com for an even more accurate "real" view of the current home price movement.

Key Statistics from the Report:

Single Family results compared to October 2008

  • Sales: increased 17.7%
  • Median Selling Price: declined 2.6%
  • Inventory: declined 15%
  • Current Months Supply: 7.1
  • Current Days on Market: 126
Condo results compared to October 2008

  • Sales: increased 17.2%
  • Median Selling Price: decreased 4.0%
  • Inventory: declined 16%
  • Current Months supply: 7.3
  • Current Days on Market: 137

Labels: , ,

Copyright © 2013
PaperEconomy Blog - www.papereconomy.com
All Rights Reserved

Disclaimer

Bull Trip?!: GDP Report Q3 2009 (Preliminary)

Today, the Bureau of Economic Analysis (BEA) released their second installment of the Q3 2009 GDP report showing that the economy expanded Q3 with GDP increasing at an annual rate of 2.8% from Q2, a downward revision of .7% since October’s advance release.

The significant downward revision notwithstanding, today’s results will likely continue to boost confidence among Wall Street speculators and gamblers, a closer inspection of the data reveals that most of the growth in Q3 was simply government sponsored.

First, residential fixed investment (i.e. investment in residential properties) increased at an annual rate of 19.5% from Q2, a nearly the fastest rate of growth seen in the last 10 years. This is not likely a trend but the result of the governments first time “homebuyers” policy and associated dynamics.

Non-residential fixed investment decreased at an annual rate of only 4.1% in the same quarter that saw commercial real estate prices decline at their fastest annual rate in at least 20 years while vacancies increased and rents declined.

Durable goods increased at an annual rate of 20.1% nearly all the result of the government’s one time sham “Cash for Clunkers” program.

Without the clunker (housing and auto) stimulus policies, the supposed pop in fixed residential investment and durable goods and the strength in fixed non-residential investment today’s number GDP result would have been flat at best.

Labels: ,

Copyright © 2013
PaperEconomy Blog - www.papereconomy.com
All Rights Reserved

Disclaimer

S&P/Case-Shiller: September 2009

Today’s release of the S&P/Case-Shiller (CSI) home price indices for September 2009 showed a continued, yet considerably weaker, bounce in prices with the Composite-10 index increasing 0.41% on a month-to-month basis.

While many of the nation’s housing markets experienced extra-seasonal activity as the result of the “first time homebuyers” tax gimmick, its effects, along with the typical seasonal bounce, are continuing to wane.

It’s important to remember that the CSI data is lagged by two months and that today’s results represent an average of prices paid from home sales closed between July-September.

Now that the strongest selling months have largely been reported, look for all remaining CSI release to indicate notable price weakness coming from typical seasonal declines as well as extra-seasonal declines as a result of notably reduced demand from activity that was “stimulated” forward into the summer by the tax sham.

Also, looking at the 1990s-era comparison charts below its obvious that even after the main downward thrust has been reached, the housing markets have a long tough slog ahead with the ultimate bottom likely many years out…. Or if we are currently experiencing the Japanese model… decades out.

Further, is important to remember that the 90s housing recovery played out against the backdrop of a truly unique period of growth in the wider economy fueled primarily by novel and ubiquitous technological change (cell phones, internet, personal computers, telecommunications, etc).

The 10-city composite index declined 8.5% as compared to September 2008 while the 20-city composite declined 9.36% over the same period.

Topping the list of regional peak decliners was Las Vegas at -55.35%, Phoenix at -51.96%, Miami at -46.70%, Detroit at -42.62% and Tampa at -40.12%.

Additionally, both of the broad composite indices showed significant declines slumping -29.92% for the 10-city national index and -29.06% for the 20-city national index on a peak comparison basis.

To better visualize today’s results use Blytic.com and search for “case shiller”.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as compared to each metros respective price peak set between 2005 and 2007.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as on a year-over-year basis.

The following chart (click for larger version) shows the percent change to single family home prices given by the Case-Shiller Indices as on a month-to-month basis.

Additionally, in order to add some historical context to the perspective, I updated my “then and now” CSI charts that compare our current circumstances to the data seen during 90s housing decline.

To create the following annual charts I simply aligned the CSI data from the last month of positive year-over-year gains for both the current decline and the 90s housing bust and plotted the data with side-by-side columns (click for larger version).

What’s most interesting about this particular comparison is that it highlights both how young the current housing decline is and clearly shows that the latest bust has surpassed the prior bust in terms of intensity.

The “peak” chart compares the percentage change, comparing monthly CSI values to the peak value seen just prior to the first declining month all the way through the downturn and the full recovery of home prices.


In this way, this chart captures ALL months of the downturn from the peak to trough to peak again.

As you can see the last downturn lasted 97 months (over 8 years) peak to peak including roughly 43 months of annual price declines during the heart of the downturn.

Labels: , ,

Copyright © 2013
PaperEconomy Blog - www.papereconomy.com
All Rights Reserved

Disclaimer


 
Top Real Estate Blogs Blogarama - The Blog Directory Check Google Page Rank