December 2010 U.S. Economic Fundamentals

[Ally]

Case-Shillher: Not just a home price index





Several months ago, Standard and Poor`s issued a recommendation to use the Case-Shiller non-seasonally adjusted Home Price Index (HPI) instead of the seasonally adjusted version of the index. Their reasoning was that seasonality in the index was no longer constant across time but, instead, seemed to be increasing in amplitude in recent years.





At the time, we (more specifically, our team member, Yeng Bun) reproduced S&P`s decomposition of HPI seasonality and compared it to that found in the Zillow Home Value Index (ZHVI). See the first figure below. Two aspects of this chart warrant attention. The first is the seasonality inherent in the Case-Shiller data (the pink line) which, of course, was the very reason behind S&P`s announcement in the first place. The second is the relative lack of seasonality in the ZHVI (the red line). This is one of the reasons that we frequently argue that the ZHVI gives you a better sense of what`s happening in the market than the Case-Shiller HPI.





Read the full article ]here.

 

[Ally]

It's going to be another long, hard winter in housing





According to the third quarter Zillow Real Estate Market Reports, home value depreciation began to accelerate again in September, fueled by lower transactional volumes and increased inventory levels. Home values dropped 0.4% from August to September and 4.3% from September 2009 (see Figure 1 below). With home values 25% below their peak and 51 consecutive months of declines, the length and severity of the current downturn is fast approaching the length and depth of the Depression-era housing declines. From the end of 1928 to the end of 1933 (60 months), nominal home values fell 25.9% according to Robert Shiller`s reconstruction of long-term home price appreciation in the United States.





Of the 145 markets tracked this quarter, home values were down from year-ago levels in 112 (77%), flat in 13 (9%) and up in only 20 markets (14%). Home values in 22 metropolitan areas became negative again in the third quarter after at least one quarter of increase. In five markets ` all in California: the San Francisco, Los Angeles, San Diego, Ventura and San Jose metros ` home values began to fall again after five consecutive quarters of increases. We warned of waning appreciation in these markets last month in the wake of the expiration of the California home-buyer tax credits.





Read the full article ]here.

 

[Ally]

No suprise: October home values decline





U.S. home values continued to tumble in October, falling 0.6% from September levels and 5.0% from levels one year ago (see Figure 1). Home values were down 25.8% from peak levels, just shy of the 25.9% that home values were estimated to have fallen during the Great Depression. October marked 52 consecutive months of declines in home values at the national level.





Foreclosure liquidations receded slightly in October with 1.14 out of every 1,000 homes in the U.S. being liquidated in the month, a likely by-product of the various moratoriums put into place in order to investigate documentation issues in the foreclosure processes in various states.





A quick overview of the factors continuing to confront the housing market can be broken down into supply- and demand-side factors.





Supply-side:





1. High supply of existing homes for sale. According to NAR, the inventory of homes for sale was 3.86 million in October, up 8.4% from October 2009. Monthly supply of inventory was 10.5 months.





2. High supply of vacant homes. We current have 9.8 million vacant homes that are for sale, for rent or held off the market for reasons other than occasional or temporary use (see Figure 3 for rates). Based on historical levels of frictional vacancy (the normal level of vacancy which exists as people move between homes, new homes are built but not occupied, etc.), we estimate that current levels of vacancy represent 1.7 million excess housing units. See Figure 4.





3. High supply of shadow inventory. LPS Applied Analytics estimates that there are more than 7 million loans delinquent or in foreclosure, and Corelogic estimates that 2.1 million of these will ultimately be liquidated (the Corelogic number actually contains REO properties not yet listed which are not included in the LPS number).





Read the full article ]here.

 

[Ally]

U.S. home values set to lose $1.7 Trillion in value during 2010





Homes in the United States are expected to lose more than $1.7 trillion in value during 2010, which is 63% more than the $1 trillion lost in 2009, according to recent analysis of the Zillow Real Estate Market Reports.





The bulk of the total value lost during 2010 was in the second half of the year. From January to June, the housing market lost $680 billion. From June to December, Zillow projects residential home value losses will top $1 trillion.





Less than one-fourth (31) of the 129 markets tracked by Zillow showed gains in total home values during 2010. Among those were the Boston metropolitan statistical area (MSA), which gained $10.8 billion in value, and the San Diego MSA, which gained $10.2 billion.





Total market value was calculated as the sum of all Zestimate values, using forecasting to reach a projected total for the end of December 2010. Total home value change is calculated by subtracting the value of all homes in an area in December 2010 from the total value at the start of 2010.





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[Ally]

http://http://www.thestar.com/busin...-claims-decline-signaling-job-market-strengthU.S. job claims decline, signaling job market strength





WASHINGTON ` Slightly fewer Americans applied for unemployment benefits last week, the second drop in three weeks. That`s a sign the job market is slowly healing.




The number of people seeking benefits edged down by 3,000 to a seasonally adjusted 420,000, the Labor Department said Thursday.




Weekly unemployment applications at around 425,000 signal modest job growth. But economists say applications would need to dip consistently to 375,000 or below to indicate a significant decline in unemployment. Weekly applications peaked during the recession at 651,000 in March 2009.




The four-week average, a less volatile measure, rose slightly to 426,000. The average had fallen for six straight weeks to the lowest level in more than two years.




Weekly applications are a real-time snapshot of the job market. If they continue to move down, hiring is more likely to pick up. Applications reflect the level of layoffs but can also indicate whether companies are willing to add workers.





Read the full article here.

 

[Ally]

Be careful when buying U.S. property, experts say






The Canadian dollar is virtually at par. And there`s that gloomy weather outside. That can only mean that Canadians are thinking Florida.




Experts say consumers should be even more careful than normal when purchasing down south. Buying a home in the United States just got a little riskier, after all 50 states launched an investigation into the mortgage industry this fall.




The U.S. government is looking at whether banks used possibly fraudulent paperwork to get homeowners out of foreclosed homes.




This has caused deals on foreclosed homes to stall in areas such as Arizona and Florida, where nearly half the deals done there are foreclosures.




Investigators are looking at whether banks used robotic signers to sign hundreds of affidavits a day without reviewing them properly.




`This will help foreclosed households stay in their homes rent-free for longer, but watch sales activity dry up in coming months since it was foreclosed sales that were really impacting the turnover in recent months` said economist David Rosenberg of Gluskin + Sheff & Associates.



Read the full article here.

 

[Ally]

Wrap up U.S. real estate...just don't get ripped off





The loonie is flying high and the price of real estate in many sunshine states is astonishingly low -- a perfect storm for those trying to avoid another cold Canadian winter.




But while the struggling U.S. housing market may look like a Christmas bonus to buyers, there are plenty of naive Canadians being taken to the cleaners.




"Canadians are overwhelmed by what they can get for US$150,000 or US$250,000," says Terry Ritchie, owner of Transition Financial Advisors Inc., a cross-border expert with offices in Arizona and Alberta. "But they need to think it through carefully and understand their primary objective." Snowbirds need to consider their lifestyle, their tax situation and even the impact on their estate.




The National Association of Realtors (NAR), the Washington, D.C.-based industry association, reports that foreigners bought US$33-billion worth of U.S. residential property in 2009. "Canadians are the biggest market -- they purchased 23% of that US$33-billion," says Walter Molony, a spokesman for the NAR. The most popular states for foreign buyers, in descending order, are Florida, California, Arizona, Texas, Georgia, New York and Nevada.





Read the full article here.

 

[Ally]

Home prices falling faster in major U.S. cities






NEW YORK ` Home prices are dropping in the nation`s largest cities and are expected to keep falling next year, as fewer people purchase homes and millions of foreclosures come on to the market.




The Standard & Poor`s/Case-Shiller 20-city home price index released Tuesday fell 1.3 per cent in October from September.




All cities recorded monthly price declines. The last time that happened was in Feb. 2009.




Atlanta recorded the largest decline. Prices there fell 2.9 per cent from a month earlier. Home prices in Washington dropped 0.2 per cent in October, the second monthly decline after five straight increases.




Home prices in Dallas, Portland, Ore., Charlotte, N.C., Tampa, Fla. and Denver have fallen for four straight months.




The 20-city index has risen 4.4 per cent from their April 2009 bottom. But it remains 29.6 per cent below its July 2006 peak.





Read the full article here.

 

[Ally]

U.S. consumer confidence falls unexpectedly in September






Consumer confidence unexpectedly deteriorated in December, hurt by increasing worries about the jobs market, according to a private report released on Tuesday.





The Conference Board, an industry group, said its index of consumer attitudes slipped to 52.5 in December from an upwardly revised 54.3 in November.





The median of forecasts from analysts polled by Reuters was for a reading of 56.0.





The expectations index declined to 71.9 in December from 73.6 in November.





Read the full article here.

 

[Ally]

U.S. home prices plunge in October





WASHINGTON ` Prices of U.S. single-family homes fell almost double the expected pace in October, the fourth straight decline, data from a closely watched survey showed Tuesday, fresh evidence the housing market continues to struggle.




The Standard & Poor`s/Case-Shiller composite index of 20 metropolitan areas declined 1.0% in October from September on a seasonally adjusted basis, faster than the 0.6% drop expected by economists polled by Reuters.




The drop followed a seasonally adjusted decline of 1.0% in September.




S&P, which publishes the indexes, also said home prices in the 20 cities index fell 0.8% from October 2009.






Read the full article here.

 

[Ally]

Dare we say it? Economic indicators improve for commercial real estate




Ross Moore has changed his outlook for the better in these last few weeks of 2010.








As national chief economist for commercial real estate services company Colliers International, Moore follows about 100 economic indicators that keep his finger on the pulse of the economy and the commercial real estate industry. And since the beginning of the fourth quarter, that pulse has quickened.












`With the exception of housing and unemployment, most of the signals I`m seeing are positive, which does suggest pretty good growth next year,` says Moore.





In particular, the 10-year Treasury yield reversed a year-long decline. It climbed to 3.5% on Dec. 15, up more than a percentage point from the 16-month low of 2.4% on Oct. 8. The critical benchmark for commercial real estate lending has since come down slightly and stood at 3.3% on Dec. 21, but is still well up from the recent low.








To Moore, that change signals that investors are expecting stronger performance from the economy than they were just a few months ago. `I look at that rise in 10-year rates as a barometer of future economic growth,` he says. `That may lead to inflation, but I don`t see it as a direct response to investors` read on future inflation ` I`m very much in the glass-that`s-half-full camp.`





Read the full article here.

 

[Ally]

U.S. foreclosures soar, housing prices slump




The number of completed home foreclosures rose to 245,000 in the third quarter, according to a report from bank regulators that covers only two thirds of all US home mortgages, those held by national banks and savings & loan institutions.




The figure was reported in the quarterly mortgage report filed by the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision, which regulate banks and S&Ls respectively.




The overall number of foreclosures completed in the July-September period is likely well over 300,000, making it virtually certain that total foreclosures will top one million in 2010. The total number of foreclosures in process increased to 1.2 million, up 4.5 percent from the second quarter and up 10.1 percent from the third quarter of 2009.




Newly initiated foreclosures jumped to 382,000 in the third quarter, a rise of 31.2 percent compared to the second quarter and 3.7 percent above the third quarter of 2009. The larger number of initiated foreclosures compared to completed foreclosures means that the number of foreclosures can be expected to rise sharply in the coming year.




Other figures in the OCC and OTS report showed widespread distress among homeowners. Slightly more than one in eight homeowners with a mortgage was behind in payments or in foreclosure, 12.6 percent, compared to 12.8 percent one year ago. About half of these, or 5.8 percent of the total, were at least 90 days behind in payments, while 3.6 percent were actually in foreclosure.



Read the full article here.

 

[Ally]

Slide in U.S. house prices stokes recovery worries




For the beleaguered U.S. housing market, the blows just keep on coming.




Fresh signs of weakness emerged Tuesday in the long-suffering real estate sector, renewing worries that housing will act as a drag on the broader economic recovery.




Housing prices slid 1.3 per cent in October from September, according to the closely followed S&P/Case-Shiller index, surprising economists who had forecast a smaller decline. Compared with a year earlier, prices also fell back, a sign of how persistent the sector`s problems remain.



Read the full article here.