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Real Estate News | Real Estate Statistics
Residential real estate news and coverage of how residential real estate impacts the mortgage industry and residential mortgage-backed securities.

Home Prices, Sales and Outlook Strengthen

Recent real estate market data

Dec. 26, 2012

By SAM GARCIA Mortgage Daily

portrait of Sam Garcia

Residential property prices continue to rise, and many of the nation's most noteworthy experts have a strong outlook for next year. Western states turned in the best performance, and real estate markets in the Northeast are seeing mixed activity. Among the nation's biggest cities, Chicago seems to be struggling the most.

In October, U.S. home prices were up 0.5 percent on a seasonally adjusted basis from September, according to the FHFA House Price Index.

The Pacific region had a 2.0 percent month-over-month gain, better than any of the nine regions tracked. A 1.3 percent decline was reported for the Middle Atlantic, worse than any other region.

The FHFA index is calculated by the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac. Changes reflects purchase prices on homes financed with loans owned or guaranteed by the pair of secondary lenders.

Compared to October 2011, the national FHFA index was up 5.6 percent. The best year-over-year performance was given by the Mountain region, where prices jumped 13.1 percent. New England home prices drifted 0.1 percent lower, the poorest showing of any region.

An 0.3 percent increase in residential property prices between September and October was registered for non-distressed sales in the LPS Home Price Index, leaving the average U.S. home price at $206,000. Lender Processing Services Inc. says the index is based on its property and loan-level databases used to determine repeat sales in more than 15,500 zip codes.

Compared to October 2011, the LPS index indicates that prices grew 4.3 percent. But prices are still down 22.5 percent from the June 2006 peak.

Among the five-biggest states, New York's 1.2 percent gain from September was the largest. Washington, D.C., had the biggest increase among all states at 1.4 percent, and Wisconsin's 0.4 percent decline was the worst.

With an 0.9 percent month-over-month rise, San Francisco tied New York as the best-performing market among the five-largest metropolitan statistical areas. The 1.4 percent increase in the Modesto, Calif., MSA was the greatest among all areas, while an 0.8 percent decline in Salem, Ore., turned out to be the biggest drop.

The S&P/Case-Shiller 20-City Composite Home Price Index surprised analysts who expected seasonal weakness and rose 4.3 percent in October from a year earlier.

But the index slipped 0.1 percent from September -- though the decline turned into an 0.7 percent increase when making seasonal adjustments.

"Annual rates of change in home prices are a better indicator of the performance of the housing market than the month-over-month changes because home prices tend to be lower in fall and winter than in spring and summer," David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, explained in the report.

Among the 20 cities included in the Case-Schiller index, Las Vegas had the biggest increase from the previous month: 2.8 percent. With a 1.5 percent decline, Chicago's performance was the worst.

Compared to October, 2011, Phoenix had the biggest improvement at 21.7 percent. At the other end of the scale was Chicago, where prices have fallen 1.3 percent over the past year.

A survey of 105 forecasters by Zillow Inc. determined that house prices are expected to improve 3.1 percent in 2013 after finishing this year with an expected 4.6 percent rise.

"An organic recovery in the housing market really took hold in the latter half of 2012, and this improvement is echoed in some of the most optimistic price projections we've seen in years from this group," Zillow Chief Economist Dr. Stan Humphries said in the report. "Record levels of affordability and an improving overall economic picture have really helped buoy the market and have us well positioned for continued growth, albeit slightly slower, in 2013 and beyond."

Zillow warned that the potential loss of the mortgage interest deduction would be most detrimental to high-end home prices.

The median U.S. home price was $180,600 in November, a gain of 10.1 percent from a year earlier, according to a report last week from the National Association of Realtors. It was the ninth month in a row of annual increases.

The powerful trade group noted that low inventory provided upward pressure on prices.

The NAR reported that existing home sales came in at a seasonally adjusted annual pace of 5.04 million during November, a 5.9 percent increase from October. Sales reached the highest level since November 2009.

Home sales were 14.5 percent better than the same month last year.

"Momentum continues to build in the housing market from growing jobs and a bursting out of household formation," said NAR's chief economist, Lawrence Yun, in the report. "With lower rental vacancy rates and rising rents, combined with still historically favorable affordability conditions, more people are buying homes."

Distressed sales accounted for 22 percent of November's activity, less than the 24 percent share the previous month. Last month's share reflected a 12 percent foreclosure share and a 10 percent short-sale share. 

Yun predicts that the distressed share "will fall into the teens next year based on a diminishing number of seriously delinquent mortgages."

NAR President Gary Thomas said in the report speculation that short-sales would spike in the tail end of this year due to the expiration of the Mortgage Forgiveness Debt Relief Act never came to fruition. Thomas pointed to the ongoing difficulty of closing a short sale and the slow three-month sales time.

The inventory of existing homes for sale was 2.03 million properties, a 3.8 percent decline. That works out to a 4.8-month supply -- the lowest since September 2005's 4.6 months. The inventory has fallen 22.5 percent from the same month in 2011.

"Raw unsold inventory is now at the lowest level since December 2001 when there were 1.89 million homes on the market," the NAR stated.

The NAR reported that the median time on the market fell to 70 days from 71 days a month earlier and 98 days a year earlier.

The share of first-time homebuyers has fallen to 30 percent from 35 percent in November 2011, according to the NAR.

The NAR previously reported that its Pending Home Sales Index in October rose 5.2 percent from the prior month to 104.8. The index, which stands at its best level since March 2007 aside from a few spikes from the tax credit period, was 13.2 percent higher than in October 2011.

Yun credited steady job creation and rising consumer confidence about home buying for the improvement.

Housing starts fell 3.0 percent in November to a seasonally adjusted annual rate of 861,000 units, the National Association of Home Builder reported last week. The decline followed "an above-trend rate of production in October."

The NAHB said permits for new construction totaled 899,000 units last month, a 3.6 percent increase and the strongest level in more than four years.

NAHB Chairman Barry Rutenberg said in the report that many builders have reported improving conditions in their local markets and have grown increasingly optimistic about the spring buying season.

S&P Dow Jones Indices' Blitzer stated, "Looking over this report, and considering other data on housing starts and sales, it is clear that the housing recovery is gathering strength."

Sam Garcia founded Mortgage Daily in 1998 and became its full-time publisher in 2000. Prior to his news career he worked in mortgage lending for two decades.

[email protected]

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