So Did US Housing Prices Really Go Up in 2012 and Why?

rcwhalen's picture


Change, nothin' stays the same

Unchained, and ya hit the ground runnin'

Change, ain't nothin' stays the same

Unchained, yeah ya hit the ground runnin'



"UNCHAINED" (1981)


SO did housing prices actually go up in 2012?  And if they did go up, how much, where and why?

For some time now, I have been speaking with my colleagues at Carrington about the changes occurring in the residential housing market.  One of the impressions we have and a view that is not reflected by other analysts is that the change in average home price appreciation or “HPA” in 2012 and before was the result of the steady evolution of the market, from a largely distressed marketplace to a market environment that is increasingly approximating normal.  And this is a good thing.  

Tomorrow from 7-8 AM on Bloomberg TV, I am scheduled to be on as guest host with Tom Keene, Scarlet Fu and Sarah Eisen.  We will have an opportunity to speak to Jed Kolko from Trulia (, one of the leading data aggregators and analytics providers in the residential housing space.  He told me in a note yesterday that “my sense is that the price appreciation isn’t driven by the narrowing conventional-distressed spread.” 

Jed reflects the impression of many people in and outside the housing markets; that the rise in residential home prices augers a true recovery in real estate prices and not merely a decline in distressed sales at relatively low price points.  I use the plural deliberately because we are talking about hundreds of large markets around the US when we look at the aggregate, average price indices that the Big Media uses to describe monthly price change in the American real estate market.  

If we look at some of the data from RealtyTrac (, however, and go down to the local level, the importance of the changes in spread between distressed and normal sales seemingly takes on greater importance.  For example, in Phoenix, non-distressed properties saw prices rise 22%, while REO sales prices were up 30%. Atlanta was an even better example: non-distressed properties had a 16% annual increase compared to 34% for REOs. It's not too much of a stretch to submit that the non-distressed properties might not have seen as much HPA without the REO inventory prices soaring. We can't exactly prove that yet, but it's equally hard to disprove.

If you look at the agency data in 2010-2011, the spread between sales of comparable distressed and normal homes was between 15-20%.  Much of that price spread disappeared in 2012, a year when 40% of all home sale transactions were for cash.  At the end of the year, however, institutional buyers were taking distressed and “flipped” properties near retail valuations.  Memo to Dan: Watch those net returns from late arrivals to the REIT rent trade later this year.  

But the question remains: was the apparent rise in home prices in 2012 the result of economic resurgence or the convergence between voluntary and distressed sale transactions?  Now if you worked for the largest buyer of non-performing loans in the country and also one of the largest private property managers, distressed servicers and real estate brokerage firms in the US, you could claim to have a view of the residential property market.  All of the analysts and data aggregators looking at the proverbial elephant have a valid perspective.  But with employment down and consumer income also under relentless pressure from inflation (the inflation that does not exists officially), the bull case for housing is missing a couple of essential legs.  Just go onto, play with some of the fascinating local data sets and notice the wide dispersion in how the prices for different neighborhoods in different cities and different price points have performed. 

The point, of course, is to get an accurate read on what is actually happening in the housing market, both from an investment perspective and in terms of risk management.  The fact that the market is up is great, but when you look at the traditional fundamentals in housing, the picture is unusual to say the least.  As I noted in a recent post for The National Interest, lending volumes and agency sales by banks for 1-4 family houses are falling.  Much of the refinance volume of the last several years was driven by subsidies from Washington.  Now we are headed to the new normal, something below $1 trillion in new loan originations annually.  Send you thank you notes to Chris Dodd and Barney Frank.

The new normal includes at least a temporary disappearance of seasonality from housing, something that ought to concern long time participants in this market.  We all know that double digit inflation in HPA is not a good thing for the long term recovery of the housing market.  But because of the rarefied and extraordinary times in which we still live, some markets are growing 3-4x employment and consumer income.  Indeed, the base of employed Americans continues to shrink.  One could foresee a scenario where we see a down month or two for HPA in the second half of 2013, even with the seasonal adjustment factored in. The logic of indices and averages can work against you as well.  

The only way that the Federal Open Market can claim that QE is working to boost housing is to pretend that credit is growing instead of shrinking, that tenants are becoming home buyers, and the continued, indeed rising flow of NPLs into the secondary market is all part of a normal economic recovery.  We all know that none of these things are true.  But such is the big lie coming from the confidence peddlers at the Federal Reserve Board.   (Thanks to Rick Sharga for insights on RealtyTrac data)

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ebworthen's picture

$45 Billion of FED purchases of Mortgage Backed Securities and FHA Fannie/Freddie approving 3% loans are creating another housing bubble.

When employment and the broader economy can't support payment and the underlying deriviatives welcome 2008 part two.

sgt_doom's picture

One is tempted to respond, "Gold futures, bitchez" in jest, but ebworthen definitely nailed it --- nothing further need be said.....

Mark123's picture

Still far far far too much speculation, government subsidies (handouts), nonexistent accounting standards, speculation, etc to make any sense of the housing market.  Sure, you can say that prices are up or down and make graphs etc....but any projection out more than a few months are MEANINGLESS.


This is all one big casino, and very reminiscent of what happened in the 1930's.  This entire generation needs every last bit of speculation (using borrowed money) squeezed out of them so hard they will never try it again for the next 50 years.  If that does not happen, then I guess we end up like Zimbabwe.

sangell's picture

With the example of Cyprus it maybe that many Europeans will come to see a US property the way they used to see a offshore bank account. A place to hide wealth beyond the reach of the Troika or their own government.


GoldRetriever's picture

"A place to hide wealth beyond the reach of the Troike or their own goverment" - the Europeans might want to talk to the hundreds of thousands of Americans who've had their homes and property siezed by the likes of JPMorgan Chase, Bank of America, Wells Fargo, etc.

Just like the depositors who had money stolen from their Cyprus bank accounts - no rhyme, no reason - no rule of law.


GoldRetriever's picture

Interesting that Whalen would use lyrics from a Van Halen song that appears on the album "Fair Warning."

We are in maybe the 4th or 5th inning of the housing/foreclousre crisis. The signs - literally ("For Sale") - are all around us. The shadow inventory is huge, the banks continue to stall on foreclosing, and smart people aren't willing to take the chance of getting burned again.

I read ZH each day to get my "Fair Warning." When this farce of a fiat economy finally blows maybe Whalen will use the lyrics from Van Halen's biggest hit: "Jump."


ChanceIs's picture

Sorry...mention of song lyrics.....signs are all around.....recalls that old Jackson Browne song "Rock Me on the Water"....seems to fit the entire situation so very well...."left it for somebody other than you to be the one to care"..."lost inside your houses":

Rock Me On The Water

Oh people, look around you
The signs are everywhere
You've left it for somebody other than you
To be the one to care
You're lost inside your houses
There's no time to find you now
Your walls are burning and your towers are turning
I'm going to leave you here and try to get down to the sea somehow

The road is filled with homeless souls
Every woman, child and man
Who have no idea where they will go
But they'll help you if they can
Now everyone must have some thought
That's going to pull them through somehow
Well the fires are raging hotter and hotter
But the sisters of the sun are going to rock me on the water now

Rock me on the water
Sister will you soothe my fevered brow
Rock me on the water
I'll get down to the sea somehow

Oh people, look among you
It's there your hope must lie
There's a sea bird above you
Gliding in one place like jesus in the sky
We all must do the best we can
And then hang on to that gospel plow
When my life is over, I'm going to stand before the father
But the sisters of the sun are going to rock me on the water now

Rock me on the water
Sister will you soothe my fevered brow
Rock me on the water, maybe I'll remember
Maybe I'll remember how
Rock me on the water
The wind is with me now
So rock me on the water
I'll get down to the sea somehow

kaiserhoff's picture

Bull Shit.

The Florida market is completely blown out.

Want to buy 10,000 "homes"?  A hundred thousand?  Half a million?

Go for it.  You won't make a dent in the shit for sale.  For the eastern half of the country, Florida rules real estate, because of retirement and the snow birds.  Go for it flippers (the only buyers in size.)  We can use the entertainment.

GoldRetriever's picture

Not pertinent to this story but related to housing - some recipients of the foreclosure "settlement" checks are having problems cashing them. From American Banker:

You can't make this shit up!

adr's picture

In wealthly areas and areas with a high percentage of foreclosed and abandoned properties, prices have surged.

Tis can be expected with the wealthy segment of the population seeing a massive surge in paper wealth due to the stock market rally. The wealthy are also highly concentrated in the upper age bracket boomers. Most of them are moving out of the suburban homes, either trading up to larger show homes in famous locales, or moving to more urban centers with luxury condos. Cities with a large percentage of high dollar residents are of course seeing values rise, as there is a low supply of available property, and many suitors with cash to burn.

The low end of the spectrum is seeing values rise as more and more people see low income real estate as an investment opportunity. As with any investment "opportunity" bubbles are blown as more and more fools chase each other for percieved profit. The worst part about the low end real estate bubble is that it is driving prices out of the affordable range for the people who live there. Forcing the residents to rent homes from landlords they will never see, at rents far higher than what the mortgage on the property would have been.

So you are left with the middle. The unreported story. Which of course does make up the vast majority of the property in the US. If the value of your home has dropped 40%, but it is not on the market because you can't sell, does that show up in the home price calculation?

Middles class suburbs are being decimated. What drove values higher in the 1980s and 90s was the desire for good schools, good neighbors, low crime rates, and open space for recreation, ie what you want when raising kids. These towns are seeing property values plummet, while cities where nobody in their right mind would raise a kid, are seeing a small percentage of high dollar properties skyrocket in value.

I see it all over the place. My town was rated as one of the top 100 places to raise a family. Great schools, low taxes, low utility rates, very low crime rates, great family amenities, and lots of parks. Property values are down 20% on average in the last six months and still falling. Would you believe you could buy a 1800sq ft 4 bedroom colonial completely updated for $125k? This home was $225k last year. My neighbors sold their 1300sq ft 3 bedroom home for $108k, bought for $142k in 2008. The community is dying because there are no jobs for the middle class, and the city isn't a low income rental candidate.

The town I grew up in is still solid middle class. Homes that sold for $175k in 1985 are now back to selling for almost that. The boomers that bought the homes are all selling, and the younger generation can't afford to live there.

Areas like Lexington and Concord in Mass are seeing values skyrocket, but previous midle clas towns like Leominster are seeing values drop through the floor.

Widowmaker's picture

Total horseshit.

Housing is anything but normal.

"Market" pumpers are so quick to spout nonsense when the only thing that is "real" is the lack of price discovery.


Mission accomplished

PD Quig's picture

Yep. Number of homes on the market in my area (an SF Bay Area city) have dropped 92%. That is perfectly normal for the spring time buying peak?

I think not.

ChanceIs's picture

Whalen presented in a two hour panel discussion last week at AEI.  Might save yourself some time looking at this rather than catching his interview tomorrow.Gotta love the man for this comment:  QE is effectively a massive tax; a wealth transfer from individual and corporate savers to debtors, constraining spending by former


Lachman slides (Europe is so totally toast):

Total conference/rebroadcast here:

Bubble bubble: Is the housing toil and trouble over?

Whalen slides are available here:

I respect and listen to Chris.  I have met him several times.  He seems to be an all around good guy.  He gets a little excited and engages in some aggressive self marketing - not that there is anything wrong with that.  He always has lots of data to back it up.

PS:  When I first met Chris about six years ago, he was publically calling for jail for banksters.

RaceToTheBottom's picture

If problems were over, they would have reinstated proper Accounting valuation.  We still have mark to wet dream accounting. Probably because of the overhang of foreclosed or soon to be foreclosed units.

This has a while to go yet. IMHO

Plus when it does end, we will have to retrain a generation of executives, mortgage holders, everyone will have to be retrained from the dastardly lie of both valuation but also rules.  We are now on par with India in terms of corruption and strategic thinking.


PS, I am glad I don't have kids

ChanceIs's picture

Another one of my favorite "rogue economists" is Catherine Austin Fitts.  From the one hour interview at bottom about 45 minutes in:

'Goldman Sachs doesn't know how to compete.  And they don't know that they don't know how to compete.'

She would agree that the current execs are dysfunctional.  Advocates going to local banking and f*&k Wall Street. (The "f&^k" are my words/interpretation.)

Catherine Austin Fitts: The Looting Of America (FULL)

Widowmaker's picture

Bingo, mark to fuck-all is the only truth in real estate.

This, of course, to perpetuate the rent-servitude society for "fraud Inc" above all else.


lasergoh's picture

Interest rates WILL NEVER RISE. Immediate insolvency of Japan and USA Inc.


Get used to low rates, until it's finally OVER.


Be grateful for the quiet time we have left during this ILLUSION.

Thinking Bulldog's picture

Last Sunday the Atlanta Journal ran a story showing that in Metro Atlanta fully 40% of all mortgagors are underwater on their loans.  There is a very well done interactive map where you can see by Zip code the raw numbers and percentages.  The numbers are staggering on the south side of town, which is much more working class in composition. In Clayton County, where the ATL airport is located and where many "beneficiaries" of the CRA live, more than 60% of mortgages are underwater in every single zip code in the county.  Even in the richest zip codes in town (30327, 30305, 30319, 30342, 30328 to name a few) you'll see 15-30% of mortgages underwater.  I'm surprised the ZH Mob hasn't picked up on the story.

It's worth signing up for the free trial just to tinker with the interactive map.

Dollar Bill Hiccup's picture

Tomorrow, tomorrow, I love you, tomorrow, you're only a day away!

The glass is half full!

Whistle while you work!

Who needs "E pluribus unum" on the coin of the realm.

Any of the above would be far more appropriate.

fonzannoon's picture

Hey Chris, you need to know this. You sold out. You were very happy yankin Bob Doll's crank the other day on CNBC and pitching the standard msm meme regarding gold and the economy. You are now another empty can. A sellout. I feel bad for you.

Son of Loki's picture

I bought my first house in 1988...the mortgage was 16% from the previous owner and I was able to knock it down to a reasonable 12.8%. The zero down, near zero mortgage interest rate now is unrealistic. Only older folks  seem to understand this.


When rates revert to the mean, house prices will sink another 30-40%. Hard to beat historic market forces and the reasons behind them.

ChanceIs's picture

Thank you for writing that.

As much as I respect Sen Elizabeth Warren for trying to get drug money laundering banksters thrown in jail, she continues to advocate people refinancing their mortgages and/or not engaging in coordinated strategic default.  Those people will all get hammered when rates go back up.  And the lower the rates have been, the more dramatic the price drop.  The time to buy a house is when rates are at nosebleed levels and the prices are down.   Then when rates drop, you refi into a lower monthly payment and watch your house price rise.

The government has assumed the role of investment advisor.  The government should never be advocating any sort of investment.  They should not be grinning and saying look how much we have done for you by dropping rates.  They never say look at how little yield you will get on your bonds - if you have any - or how much they will crash when rates go back up.  The government is not qualified by ignorance, and conflict of interest.

If anything the government should be saying...'if you are a new homebuyer, stay in your rental for a few years until the housing collapse we have been preventing gets finished.'  To the older people near retirement they should say...'sell your house now and rent because the price will collapse and if you have been counting on that nest egg of your home equity - it won't be there.'  OBTW...CALPERS, Social Security, and most pensions aren't earning any interest at all of fixed income so those funds you are counting on won't be there either.

neutrinoman's picture

Warren is an ignorant boob. She peddles bad social "science" that misinforms people about the nature of bankruptcy in the US and fully defends the massive student debt bubble and ensuing debt serfdom of a whole generation (as long as they vote "progressive"!) -- she's from Harvard Law School, after all, one of the country's most expensive.

There's no way any of the "banksters" can get prosecuted under current political conditions -- it starts with her own party, that is, Robert Rubin, Timothy Geithner, Jon Corzine, etc. The origins of this in the 1990s starts with the fact that these gentlemen are all FOBs -- Clinton cronies. All of them played key roles, along with Greenspan and the NY Fed, in creating the giant securitization-cheap credit machine that the political class wanted so badly, to promote home ownership and put everyone in college. Wall Street and the GSEs emerged as the middle man, implementing policy while making a lot of money in the process, pushing the risk on to someone else.

Hiding the nature of these risky credit adventures, and encouraging everyone to look away -- that was policy, dude.

tu-ne-cede-malis's picture

Great piece, Chris. 


As an aside, isn't it "augur" and not "auger"?

neutrinoman's picture

Indeed -- this augurs badly for Chris' future success in speling :)

BTW, yes, a great piece -- matches my experience with local RE market looking at houses to buy.

new game's picture

what we have is a convergenge of price discovery fueled by unrealistic 10 year bond prices.

wait til all that printed money no longer runs to bonds, then what?

this is far from over. banks will own 50 percent of r.e. and zero buyers.

as 20 year r.e. broker all i can say i where do i sign for that 1 year lease.

put equity in gold and start living the life owning a home never allowed you to enjoy...

disabledvet's picture

Massive increase in leverage. Move along...

eatthebanksters's picture

There is a lot of cash out there, domestic and foreign, looking for a safe haven.  The stock market and bond market both appear to be way overbought.  PM's don't provide yield.  Real Estate has been near all time lows. You tell me where the money will flow.  One thing the Trulia is dead wrong about is that we are returning to a normal market.  SInce when has a normal market consisted of 30% of the buyers being all cash and another large percentage going in with very low down payments (subsudized by the governement again).  This market is everything but normal. Trulia wants it to be normal to boost the stock of their company, which by the way has a market cap of over a billion and they have never been profitable in 8 years...go figure.

Boris Alatovkrap's picture

Print fiat paper like wild banshee, price of everything is go up... surprise, surprise, surprise!

derek_vineyard's picture

fear of stocks and bonds at these levels drove money to real need for analysis