Reading Rates: MBA Application Survey – December 14 30 2011

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 as well as the volume of 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 (from FHA and conforming GSE data) declined yet again, dropping 5 basis points to 4.03% since last week while the purchase application volume declined 8.2% and the refinance application climbed 9.3% over the same period.

With rates trending ever lower, the economy seemingly near recession and the FOMC members becoming more dovish by the day, it will be interesting to see how far rates on the long end can decline.  All things being equal, falling home prices, declining purchase applications and record low long lending rates all appear to indicate a deflationary for the macro-economy.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

Conspicuous Correlation: Retail Sales November 2011

Today, the U.S. Census Bureau released its latest nominal read of retail sales showing a 0.2% increase from October and an increase of 6.7% on a year-over-year basis on an aggregate of all items including food, fuel and healthcare services.

Nominal "discretionary" retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales increased 0.34% from October and increased 3.68% above the level seen in November 2010 while, adjusting for inflation, “real” discretionary retail sales declined 0.08% over the same period.

On a “nominal” basis, there had appeared to be “rough correlation” between strong home value appreciation and strong retail spending preceding the housing bust and an even stronger correlation when home values started to decline.

The following chart shows the year-over-year change to nominal discretionary retail sales and the year-over-year change to nominal the S&P/Case-Shiller Composite home price index since 1993 and since 2000.

As you can see there is, at the very least, a coincidental change to home values and consumer spending during the boom and then the bust, but as home values have continued to decline, retail spending has remained low but has not continued to consistently contract.

Looking at the chart below (click for full-screen dynamic version), adjusted for inflation (CPI for retail sales, CPI “less shelter” for S&P/Case-Shiller Composite) the “rough correlation” between the year-over-year change to the “discretionary” retail sales series and the year-over-year S&P/Case-Shiller Composite series seems now even more significant.

Radar Watching: October 2011

As I have noted in the past, since the home price index data provided by Radar Logic is more timely, unadjusted and un-smoothed it is particularly useful for gaining deeper visibility over our housing markets.

As for the latest trends, it’s important to note that the 25-MSA Composite is continuing to show significant year-over-year declines and, after having broken well below the low set in March of 2009 (double-dipping) earlier this year and then rising throughout the spring/summer selling season, is now clearly in decline as the data moves into the period of the year with the least number of transactions.

The latest data shows that as of October, prices have declined 4.33% below the level seen in October 2010 while continuing to turn down from a seasonal peak reached in mid-June.

With the spring/summer selling season now complete and declining prices now registering with regularity, there is nowhere for prices to go but down. Look for a declining trend to continue to materialize and likely run into March or April of 2012.

Fannie Mae Delinquencies: October 2011

The latest release of the Fannie Mae Monthly Summary indicated that total serious single family delinquency went flat in October while remaining at distressed levels.

In October, 3.11% of non-credit enhanced loans went seriously delinquent while the level was 9.41% of credit enhanced loans resulting in an overall total single family delinquency of 4%.

The following charts (click for larger ultra-dynamic and surf-able chart) show what Fannie Mae terms the count of “Seriously Delinquent” loans as a percentage of all loans on their books.

It’s important to understand that Fannie Mae does NOT segregate foreclosures from delinquent loans when reporting these numbers.

Pending Home Sales: October 2011

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for October showing that home sales increased with the seasonally adjusted national index jumping a notable 10.41% since September and increasing 9.15% above the level seen in October 2010.

Meanwhile, the NARs chief economist Lawrence Yun hopes that today's numbers indicate that the buyers are coming back to the market.

"Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows and there is a pent-up demand from buyers who normally would have entered the market in recent years. We hope this is indicates more buyers are taking advantage of the excellent affordability conditions..."

The following chart shows the seasonally adjusted national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

Reading Rates: MBA Application Survey – November 30 2011

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 as well as the volume of 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 (from FHA and conforming GSE data) declined 4 basis points to 4.10% since last week while the purchase application volume declined 0.8% and the refinance application slumped 15.3% over the same period.

With rates at or near generational lows (including the 10-year T-Bill), the economy seemingly near recession and the FOMC members becoming more dovish by the day, it will be interesting to see how low rates on the long end can decline.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

S&P/Case-Shiller: September 2011

Note... be sure to bookmark the overall S&P/Case-Shiller Dashboard or the Scary Housing Dashboard of the weakest markets for a real-time view of all the markets tracked by S&P.

Today’s release of the S&P/Case-Shiller (CSI) home price indices for September reported that the non-seasonally adjusted Composite-10 price index declined 0.42% since August while the Composite-20 index declined 0.64% over the same period with both measures continuing to decline notably since last year.

The latest CSI data clearly indicates that the price trends are experiencing a declining trend into the typically less active summer and fall season and as I recently pointed out, the more timely and less distorted Radar Logic RPX data is starting to capture notable falling prices driven primarily by seasonality.

The 10-city composite index declined 3.27% as compared to August 2010 while the 20-city composite declined 3.59% over the same period.

Topping the list of regional peak decliners was Las Vegas at -60.05%, Phoenix at -55.93%, Miami at -50.22%, Tampa at -46.50% and Detroit at -42.41%.

Additionally, both of the broad composite indices show significant peak declines slumping -31.18% for the 10-city national index and -31.26% for the 20-city national index on a peak comparison basis.

To better visualize today’s results use Blytic.com to view the full release.

The following charts (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 as well as annual and monthly changes.

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 and normalized 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 side-by-side (click for larger version).

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.

More Pain, Less Gain: S&P/Case-Shiller Preview for September 2011

As I demonstrated in prior posts, given their strong correlation, the home price indices provided daily by Radar Logic, averaged monthly, can effectively be used as a preview of the monthly S&P/Case-Shiller home price indices.

The current Radar Logic 25 MSA Composite data reported on residential real estate transactions (condos, multi and single family homes) that settled as late as September 26 and averaged for the month indicates that with the slowing summer/fall transactions has come a notable decline of prices (the typical trend) with the national index declining 1.43% since August and falling 4.80% below the level seen in September 2010.

The Radar Logic index will likely be capturing an decline in prices from now until early 2012 as transactions continue to trend down.

Look for tomorrow's S&P/Case-Shiller home price report to reflect this declining trend though to a lesser degree due to its three month rolling-average nature with prices moderately higher.

New Home Sales: October 2011

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for October showing a monthly increase with sales climbing 1.3% since September and increase 8.87% above the level seen in October of 2010 and remaining at an epically low level of 307K SAAR units.

It's important to recognize that the inventory of new homes has now fallen to a new series low at 162K units, lowest level seen in in at least 47 years while the median number of months for sale declined to 7.4.

The monthly supply remained declined to 6.3 months while the median selling price increased 0.04% and the average selling price declined 0.05% from the year ago level.

The following chart show the extent of sales decline to date (click for full-larger version).

Existing Home Sales Report: October 2011

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for October showing an increase in sales with total home sales climbing 1.4% since September and 13.5% above the level seen in October 2010.

Single family home sales increased 1.6% from September and rose 13.8% above the level seen in October 2010 while the median selling price declined 5.8% below the level seen in October 2010.

Inventory of single family homes declined 0.5% from September dropping 12.2% below the level seen in October 2010 which, combined with the relatively slow pace of sales, resulted in an still elevated monthly supply of 7.8 months.

The following charts (click for full-screen dynamic version) shows national existing single family home sales, median home prices, inventory and months of supply since 2005.

New Residential Construction Report: October 2011

Today’s New Residential Construction Report showed that in October, both single family permits and starts increased from September with both measures continuing to show tepid results when compared on a year-over-year basis.

Single family housing permits, the most leading of indicators, increased 5.1% from last month to 434K single family units (SAAR), increasing 6.6% above the level seen in October 2010 but remaining an astonishing 75.86% below the peak in September 2005.

Single family housing starts increased 3.9% to 430K units (SAAR), but dropped 0.9% below the level seen in October 2010 and a stunning 76.41% below the peak set in early 2006.

With the substantial headwinds of elevated unemployment, epic levels of foreclosure and delinquency, mounting bankruptcies, contracting consumer credit, and falling real wages, an overhang of inventory and still falling home prices, the environment for “organic” home sales remains weak and likely very fragile.

Homebuilder Blues: NAHB/Wells Fargo Home Builder Ratings November 2011

Today, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing that all measures increased in November with the composite HMI index climbing to 20 while the "buyer traffic" index remained near record lows as home builders continue to plod through the weakest activity seen in generations.

While all indicators made notable increases in November, it's important to note that conditions still remain at epically distressed levels.

The new home market will likely not resume any significant form of healthy function until the considerable overhang of inventory is cleared.

Fannie Mae Delinquencies: September 2011

The latest release of the Fannie Mae Monthly Summary indicated that total serious single family delinquency declined slightly while still remaining at distressed levels.

In September, 3.10% of non-credit enhanced loans went seriously delinquent while the level was 9.43% of credit enhanced loans resulting in an overall total single family delinquency of 4%.

The following charts (click for larger ultra-dynamic and surf-able chart) show what Fannie Mae terms the count of “Seriously Delinquent” loans as a percentage of all loans on their books.

It’s important to understand that Fannie Mae does NOT segregate foreclosures from delinquent loans when reporting these numbers.

Constuction Spending: September 2011

Today, the U.S. Census Bureau released their latest read of construction spending showing near-cycle low levels of spending in September for residential construction while indicating a slight improvement for both single family residential and total non-residential spending.

On a month-to-month basis, total residential spending increased 0.9% rising 0.1% above the level seen in September 2010 while remaining a whopping 66.25% below the peak level seen in 2006.

Single family construction spending increased 0.5% since August but fell 0.1% since September 2010 and whopping 77.22% below it's peak in 2006.

Non-residential construction spending increased 0.28% since August climbing 5.91% since September 2010 remaining a whopping 35.84% below the peak level reached in October 2008.

The following charts (click for larger dynamic 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, month-to-month and peak percent change to each since 1994 and 2000 – 2005.