All Signs Point to a Housing Recovery

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MORTGAGE EXPERT
11 · 27 · 12

Data from multiple sources indicate that U.S. home prices have been on an upswing for several consecutive months — with increases coming in higher than they have been since 2006. The Phoenix area is leading the revival. Home sales and housing starts are also rising, and one estimate has home equity potentially increasing by $1 trillion next year.

A 1.08 percent increase in seasonally adjusted home prices was logged by the Federal Housing Finance Agency between the second and third quarters, according to a report released Tuesday. Compared to a year ago, home prices were up 4.04 percent versus a 1.5 percent increase in the prices of other goods and services over the same period. It was the strongest year-over-year showing since the third-quarter 2006, when prices were up 4.74 percent.

FHFA, which regulates Fannie Mae and Freddie Mac, determines home prices based on purchase transactions financed by the pair of secondary lenders. The latest improvement suggests that price gains might be partially the result of a decline in the share of distressed sales.

Thirty-nine states and Washington, D.C., saw an increase. Among metropolitan statistical areas, the Phoenix MSA saw a 7.2 percent increase from the second quarter — more than any other area. The Edison-New Brunswick, N.J., MSA put in the worst performance: down 2.2 percent.

Between August and September, FHFA says prices were up 0.2 percent. It was the eighth month in a row prices were higher.

Another report from Lender Processing Services Inc. indicated that home prices were up just 0.1 percent between August and September. Compared to a year earlier, the increase was 3.6 percent.

LPS utilizes its property and loan-level databases to produce a repeat sales analysis of non-distressed home prices for each of more than 15,500 U.S. ZIP codes. The information services provider noted that prices were down 22.8 percent from their peak in June 2006.

Arizona had the biggest gain from August in LPS’ report with a 1.1 percent increase. Washington, D.C.’s, 1.1 percent rise was next, then Georgia’s 0.8 percent, Delaware’s 0.7 percent and Maryland’s 0.7 percent. At the other end of the scale was Massachusetts, where prices were down 0.7 percent.

A 1.3 percent lift in Phoenix made it the best-performing MSA, while Bridgeport, Conn.’s., 0.9 percent decline was the worst.

Another indicator of home prices, the S&P/Case-Shiller1 Home Price Indices, indicated national home prices increased 2.2 percent between the second and third quarters and were up 3.6 percent from a year earlier.

The S&P/Case-Shiller 10-city composite index, which has increased for six consecutive months, rose 0.3 percent between August and September and climbed 2.1 percent from September 2011. The 20-city composite was up 0.3 percent from a month earlier and 3.0 percent from a year earlier. Increases from the prior month were registered for 17 MSAs, and the Phoenix area topped all other areas with a 20.4 percent annual growth rate.

“We are entering the seasonally weak part of the year,” David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in a statement. “The headline figures, which are not seasonally adjusted, showed five cities with lower prices in September versus only one in August; in the seasonally adjusted data the pattern was reversed: one city fell in September versus two in August. Despite the seasons, housing continues to improve.”

The National Association of Realtors reported last week that existing home sales increased 2.1 percent from September to a seasonally adjusted annual rate of 4.79 million in October. In the same month last year, the annual rate was 4.32 million units.

The trade group’s chief economist, Lawrence Yun, said sales might have been stronger if it weren’t for Hurricane Sandy, and upcoming sales in the Northeast could be impacted. He pointed to limited inventory as a driver of the strong performance.

The NAR reported that the national median existing home price for all housing types was $178,600 last month, an 11 percent gain from a year earlier and the eighth consecutive monthly increase.

“Rising home prices have already resulted in a $760 billion growth in home equity during the past year,” Yun said in the report. “Given that each percentage point of price appreciation translates into an additional $190 billion in home equity, we could see close to a $1 trillion gain next year.”

The Realtors said foreclosures and deeply discounted short sales each accounted for 12 percent of October’s home sales, the same combined total as the prior month’s 24 percent. Distressed sales accounted for 28 percent of October 2011 activity. Foreclosed properties sold for an average discount of 20 percent last month, while short sales were discounted 14 percent.

The 2.14 million homes for sale in October worked out to a 5.4-month supply, falling from a 5.6-month supply in September. It was the lowest supply since 5.2 months in February 2006. Twelve months earlier, the supply was 7.6 months.

Housing starts climbed 3.6 percent last month to a seasonally adjusted annual rate of 894,000 units based on Commerce Department data reported by the National Association of Home Builders. Single-family housing starts accounted for 594,000 units, and multifamily production was 300,000 units.

“Permit issuance, which can be a harbinger of future building activity, fell 2.7 percent to a seasonally adjusted annual rate of 866,000 units in October,” the NAHB report stated. “The drop in permits was focused in the apartment sector as multifamily permits fell 10.6 percent from an unusually high September level to 304,000 units. Meanwhile single-family permits rose 2.2 percent to 562,000 units.”

The home builders previously reported that sales of newly built, single-family homes came in at a seasonally adjusted annual rate of 389,000 in September, an increase of 5.7 percent. It was the fastest sale pace since April 2010.

The new home inventory was 145,000 units in September — a 4.5 month supply. While three U.S. regions saw an increase in new-home sales, activity fell 37.3 percent in the Midwest.

“Combined with consistent, positive reports on housing starts, permits, prices and builder confidence in recent months, today’s data provides further confirmation that a gradual but steady housing recovery is underway across much of the nation,” NAHB Chairman Barry Rutenberg said in an Oct. 24 announcement. “Consumers who have been on the sidelines during the past few years are deciding now is the time to go forward with a new-home purchase, assuming they can qualify for a good mortgage under today’s exceedingly stringent guidelines.”

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Mortgage Daily Staff

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