Talking about the latest on home prices from Case-Shiller, foreclosures and the Fed cutting back more on Quantitative Easing…
Lots of big news for real estate to cover with everything from several reports on foreclosures to home prices and what may turn out to be the biggest…more tapering of Quantitative Easing by the Federal Reserve. Let’s jump right in!
Case Shiller Home Price Index
Yesterday, one of the big boys in tracking US home prices was released: the S&P/Case-Shiller Home Price Indices for November 2013 (“November” is a 3 month average of September, October and November prices). They have 2 numbers I watch, their 10 and 20 cities composite indices.
- The 10-City Composite increased 13.8% year-over-year
- The 20-City Composite increased 13.7% year-over-year
- For the month of November , the two Composites declined 0.1%
- After 9 consecutive months of gains, this is the first decrease since November 2012
David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices said
November was a good month for home prices. Despite the slight decline, the 10-City and 20-City Composites showed their best November performance since 2005. Prices typically weaken as we move closer to the winter.
Home prices continue to rise despite last May’s jump in mortgage interest rates. Mortgage applications for purchase were up in recent weeks confirming home builders’ optimism shown by the NAHB survey. Combined with low inflation (1.5% in 2013) home owners are enjoying real appreciation and rising equity values. While housing will make further contributions to the economy in 2014, the pace of price gains is likely to slow during the year.
Now check out the charts for home prices according to Case Shiller:
S&P Case Shiller 20 City Home Price Index
S&P Case Shiller 10 City Home Price Index
Overall, I would say this is great news for real estate. Especially their prediction that the rapid pace of increasing home prices should slow down.
I sometimes fear house prices have been increasing too fast. However, since home prices are back to the mid-2004 level according to Case Shiller, I guess I shouldn’t be too worried.
Speaking of Confidence
I guess I am not alone in feeling a little worried about the economy. Why?
Check out some of the latest reports about how people are feeling:
- Gallup reported that Economic Confidence fell
- The Thomson Reuters and the University of Michigan Consumer Sentiment Index fell
But I must point out that the latest Consumer Confidence Index from the Conference Board increased . So which one is right?
I could point out that the latest NAR REALTOR® Confidence Index was well…subdued. Not really bad just not full of the hope and optimism you would expect.
Understandable if you consider the latest data on…
You can see why people are feeling uneasy. Sure the latest numbers from the BLS did show improvements in 39 states. And yes the unemployment rate did drop to 6.7% in December. However…
You need to look at the Labor Participation Rate. This is more accurate in tracking how many people are working. Check out the chart:
Labor Force Participation Rate
Don’t get me wrong. There is a Sunny Side to the Unemployment Report
Looking locally at the latest numbers for Anderson County, the unemployment rate was 5.5% in December 2013. This is much better than the 8% reported in December 2012.
Ah the magic word that gets buyers excited. Well let me fill you in on the latest news about foreclosures from Realtytrac, CoreLogic and Black Knight Financial Services (used to be LPS).
- 16% of Residential Sales in 2013 were Foreclosures and Short Sales
- This is UP from 14.5% in 2012
- 9.3% of Sales in December 2013 were Foreclosures
- 42.1% of all sales in December 2013 were ALL CASH
Daren Blomquist, vice president at RealtyTrac said:
It may surprise some to see distressed sales rising in 2013 given that foreclosure starts dropped to a seven-year low for the year. And while short sales did trend lower in the second half of the year, there are still more than 1.2 million properties in the foreclosure process or bank-owned, providing a sizable pool of inventory that the housing market is in the process of absorbing. Meanwhile, non-distressed sellers have not listed their homes for sale in droves, helping to keep the distressed share of sales at a stubbornly high level.
- 2013 completed foreclosures are down 24% from the 2012 level
- December 2013 completed foreclosures were down 14% YOY
- The Rate of Serious Delinquency is at the Lowest Level Since November 2008
- 2013 Completed Foreclosures at the Lowest Level Since 2007
LPS or Black Knight Said:
- Total U.S. loan delinquency rate for December 2013 is 6.47%
- December 2013 delinquency rate is down 9.85% YOY
- December 2013 foreclosure pre-sale inventory is down 27.9% YOY
I would say this point towards some improvements in the economy and real estate. With CoreLogic and Black Knight both reporting some decreases, it does appear we may see fewer foreclosures in 2014. Not sure why RealtyTrac’s numbers are different than from the others.
Let me end this much too long post with the latest news about Quantitative Easing from the Federal Reserve. Earlier today, the FOMC or Federal Open Market Committee meeting minutes were released.
We found out that the Federal Reserve is cutting back or tapering Quantitative Easing more. They said:
Beginning in February, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $30 billion per month rather than $35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $35 billion per month rather than $40 billion per month.
Not really what this will do to mortgage rates. Also I am not sure what the FOMC is smoking behind those closed doors since they said US economic growth has “picked up”.
The first time the Fed mentioned tapering, mortgage rates spiked. But when they actually started tapering, rates did NOT go through the roof. And this time is no different since Wall Street was expecting another cut to QE.
I read that mortgage rates increased slightly after the Fed’s announcement. A slight increase is better than a rapid and dramatic increase. The last thing we need at this point in time is for mortgage rates to skyrocket.