Epain Homes

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 45% 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…

As a logical consequence of the prolonged economic downturn it appears that participation in the federal food stamp program is on the rise.

In fact, household participation has been climbing so steadily that it has far surpassed the last peak set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture shows that, on a year-over-year basis, household participation has increased a whopping 25.25% while individual participation, as a ratio of the overall population, has increased 22.83%.

The August results confirm that participation is continuing to climb dramatically, likely as a result of the recent jump in total unemployment, driving the nominal benefit costs up an astounding 62.61% on a year-over-year basis to $4,853,114,719 for the month.

Looking at the last chart that plots the total unemployment rate (unemployment rate of all traditionally unemployed workers plus all marginally attached and part time workers) and the population adjusted individual program participation rate normalized since 2005, one can plainly see that program participation would be expected to continue its surge.

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 7 basis points since last week to 4.97% while the purchase application volume decreased 1.8% and the refinance application volume increased 14.5% compared to last week’s results.

It’s important to recognize that while the Federal Reserve’s “quantitative easing” measures have worked to push down fixed rates and resulting in two separate booms of refinance activity earlier in the year and what appears to be a third one shaping up now, purchase activity still appears to have been only lightly effected.

Even with historically low lending rates both refinance and purchase application volume appears lackluster and possibly even still in an overall declining trend.

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).

The “extra-seasonal” housing price rally brought on by the governments tremendously expensive and poorly targeted housing tax credit gimmick is now thoroughly and completely over.

How many “homebuyers” have jumped at that $8000 carrot only to now find that Uncle Sam was dangling it over an abyss of deflation?

I suppose someone had to buy all those homes but to use a “credit” as the bait… too cruel! … You actually got credit (a nice government-issued pat on the wallet) for making a poor financial decision.

Only in America!

I can’t stress enough the importance of following the housing price data published by Radar Logic.

Not only did the RPX series very clearly capture this season’s exceptional bounce across the majority of metro markets, it captured the top and now, the turn-down.

Better yet, the data is published daily for all of you (and me!) housing junkies that need that continuous flow of new information.

So, looking at the 25-MSA composite’s 28 day aggregate series (click on the Blytic chart below) it’s clear that prices “bottomed-out” between March and April and then climbed about 6.5% to top in mid August.

No small feat…

But since then prices have come down by 1%… ever so slight… but as you can see from a selection of other regional price charts below, they ain’t a comin’ back this season!

Las Vegas, Phoenix and Miami are obviously trending down.

Boston and Cleveland too…

Detroit is setting new series lows backing home prices down to likely somewhere not seen since the early 1990s.

Even Washington DC is turning lower while the New York area appears likely topped out from its snappy late season bounce.

San Francisco, Seattle, Denver, Chicago, Sacramento… everywhere you look, residential real estate is under serious pricing pressure.

Today, the U.S. Census Bureau released their September read of construction spending showing a continuation of the government’s tax-carrot fueled bounce in residential construction spending while indicating an acceleration in weakness to non-residential construction spending.

Even with the governments tax-credit gimmick residential construction spending is still 26.96% below the level seen last year and a whopping 62.16% below the peak set in March 2006.

Worse off though was private single family residential construction spending which declined 34.99% as compared to September 2008 and a truly grotesque 76.39% from the peak set in February 2006.

Non-residential construction spending, currently accounting for just under half of all private construction spending, posted another significant year-over-year decline of 15.42%.

The following charts (click for larger versions) show private residential construction spending, private residential single family construction spending and private non-residential construction spending broken out and plotted since 1993 along with the year-over-year and peak percent change to each since 1994 and 2000 – 2005.