Epain Homes

Today’s release of the S&P/Case-Shiller (CSI) home price indices for August 2009 showed a continued, yet notably weaker, bounce in prices with the Composite-10 index increasing 1.28% 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 beginning 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 June-August.

Now that the strongest selling months have largely been reported, look for all remaining CSI releases for 2009 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 10.63% as compared to August 2008 while the 20-city composite declined 11.32% over the same period.

Topping the list of regional peak decliners was Las Vegas at -54.95%, Phoenix at -52.33%, Miami at -46.98%, Detroit at -43.65% and Tampa at -39.76%.

Additionally, both of the broad composite indices showed significant declines slumping -30.21% for the 10-city national index and -29.30% 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.

Who’s buying and why are they buying now???
For a while there i thought it was just me who was having one of the busiest months in the last few years. The news was still reporting increasing unemployment along with increased personal and commercial bankruptcy rates. However, as the month carried on, i realized it wasn’t just me- its everybody. My office is buzzing with activity, my friends downtown office is the same and a realtor that I refer business to on Gibsons said he expereincing more activity now than in the past year. I was also talking to a mortgage broker colleague of mine the other day and he informed me that in his industry many of them are working 12-14 hour days to keep up with the increased market activity. Below is a sample of some current rates being offered:

Fixed Rate Mortgages:

1 Year…………. 2.90%
2 Year…………. 3.05%
3 Year…………. 3.15%
4 Year…………. 3.79%
5 year…………..3.75%
7 Year…………. 5.15%
10 Year……….. 5.25%

For a $300,000 mortgage with five year fixed term at %3.75 your monthly payment would be $1536 for a 25 year amortization or $1278 for a 35 year amortization.

In my opinion this current market bounce is being driven by first time buyers attracted into the market by low rates and the opportunity to look at properties at a much slower pace than years past. This in turn has had the trickle up effect on the market. Sellers of condos are buying townhouses, sellers of townhouses buying detached homes and so on.

We’ve seen an almost across the board sweep for the bulls for April:

MOI -24% (MOM) This one caught me off guard. Just over 5 months of inventory. All those expired and cancelled listings never came back on in force. When/if that does happen and listing counts start to rise again…look out.

SALES +30% (MOM) . First time buyers getting those %3.79 rates are the driving force behind this one.

AVERAGE PRICE SFH: $815,099( +6.8% mom) AVERAGE PRICE CONDO $397,404 (+4.9% mom). I think we learned that sometimes as the market can fall quickly that it can rise just as fast. I’m not saying this will continue but man did it happen fast.

Litmus test will be the summer for sure.

I will conitinue doing the daily, weekly and monthly stats for while longer. Im going on vacation for 8 days starting on monday so nothing for next week.

Thanks for all your support. I wish everybody well and have a great summer.
Cheers to all!!
Gavin

Saw this reported here. Some snippets from the piece:

Reported incidents of mortgage fraud grew by 45 percent in the second quarter compared to the year-ago period, as borrowers misstated their financial information to maneuver around tighter lending standards, industry data released Tuesday showed.

Florida properties led the way with about one-fifth of mortgage fraud incidents reported in the second quarter, the Mortgage Asset Research Institute reported. California was second, and Illinois third, the data showed…

The largest increase in mortgage fraud in the first half of this year involved borrowers misstating their financial profile, which is not surprising as borrowers try to get around stricter lending guidelines, the report said.

Some basic examples of fraud included false bank statements made on computers and pay stubs with white correction liquid on them, said Jennifer Butts, the institute’s director of operations.

See it’s not all the big, bad lenders. Now that the election’s over perhaps some acknowledgment of fault on the part of buyer’s signing these mortgages is at hand.

FOR IMMEDIATE RELEASE:

Month-over-month housing prices retreat from record highs

VANCOUVER, B.C. – Aug 5, 2008 – As property listings continue to outpace sales, Greater Vancouver housing prices have drawn back, the last two months, from the record highs experienced in early 2008.

Since May 2008, housing prices, as calculated by the MLSLink Housing Price Index®, across each residential category have declined. Detached properties in Greater Vancouver declined 2.3 per cent through June and July 2008, while attached were down 1 per cent and apartment properties 2 per cent over the same period.

The overall benchmark price for all residential properties in Greater Vancouver has declined 2.1 per cent since the end of May 2008, from $568,411 to $556,605 in July 2008.

“We’re seeing more price reductions in properties listed on the market, which is having a levelling impact on the housing price increases experienced at the end of last year and into the first quarter of 2008,” said Real Estate Board of Greater Vancouver (REBGV) president, Dave Watt. “There was a slight decline in the total active listings on the market in July compared to June, which is a welcomed departure from recent trends.”

Residential property sales in Greater Vancouver declined 43.9 per cent in July 2008 to 2,174 from the 3,873 sales recorded in July 2007.

New listings for detached, attached and apartment properties increased 24 per cent to 6,104 in July 2008 compared to July 2007, when 4,924 new units were listed.

Sales of detached properties in July 2008 declined 44.2 per cent to 827 from the 1,483 units sold during the same period in 20070. The benchmark price for detached properties is up 5.4 per cent from July 2007 to $753,165.

Sales of apartment properties declined 42.3 per cent last month to 966, compared to 1,674 sales in July 2007. The benchmark price of an apartment property increased 4.7 per cent from July 2007 to $381,687.

Attached property sales in July 2008 decreased 46.8 per cent to 381, compared with the 716 sales in July 2007. The benchmark price of an attached unit increased 5.7 per cent between July 2007 and 2008 to $473,953.