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Case Shiller Home Prices Beat Expectations, Rate Of Increase Slows

Tyler Durden's picture





 

The tried strategy of "Baffle them with BS" continues today following the release of the June (two month delayed) Case Shiller data. Because whereas last week we showed that New Home Prices are plunging, and the average new home price just dropping to its 2012 lows, when it comes to the Case-Shiller index, things are looking up. In June, the Top 20 composite index rose by 0.94%, well above the expected increase of 0.45%. How much of this is due to the REO-to-Rental program in which we are now seeing actively securitization of rental properties, which in essence is converting more and more of the Residential market into commercial real estate, remains unclear. For now it is clear that those entities with access to cash are buying up properties in beaten down areas in hopes these will be filled by renters. On the other hand, the truth is that summer months always see the biggest pricing gains, and following the May data revision, which rose at a revised rate of 0.97%, one may observe that the pricing increase has now peaked even according to delayed CS data, and has begun its traditional rolling over pattern. And a pattern it is. As the second chart below shows very clearly, housing is now merely in the dead cat bounce phase of a broad housing quadruple dip, each one having been facilitated by either Fed or ECB intervention. We give this one a few more months before it too resumes the downward trendline so very well known to Japanese homeowners, and falls in line with the data reported by the Census department.

Seasonally adjusted Case Shiller data:

But even better, the NSA data, showing the distinct peaks and troughs of the quadruple housing double dip, which will in 3-4 months be a quintuple dip.

And from the report:

“Home prices gained in the second quarter,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “In this month’s report all three composites and all 20 cities improved both in June and through the entire second quarter of 2012. All 20 cities and both monthly Composites rose for the second consecutive month. It would have been a third consecutive month had we not seen home prices fall in Detroit back in April.

 

“The National Composite rose by 6.9% in the second quarter alone, and is up 1.2% from the same quarter of 2011. The 10- and 20-City Composites closely mimic these results; the 10-City was up 5.8% over the quarter and the 20-City was up 6.0%. The two Composites also entered positive territory on an annual basis, up 0.1% and 0.5%, respectively.

 

“Only two cities – Charlotte and Dallas – saw annual rates of change worsen in June. The other 18 cities and both composites saw improvement in this statistic, and 13 of these had a positive trend. There were only six cities – Atlanta, Chicago, Las Vegas, Los Angeles, New York and San Diego – where the annual rates of change were still negative. Boston’s annual rate was flat. We seem to be witnessing exactly what we needed for a sustained recovery; monthly increases coupled with improving annual rates of change. The market may have finally turned around.

 

“The regions showed positive results for June. All 20 of the cities saw average home prices rise in June over May and all were by at least 1.0%. Detroit was up the most, +6.0%, and Charlotte the least, +1.0%. The Composites showed the same increases as last month – the 10-City rose by 2.2% in June and the 20-City by 2.3%. We are aware that we are in the middle of a seasonal buying period, but the combined positive news coming from both monthly and annual rates of change in home prices bode well for the housing market.”

Ah yes, "housing has bottomed."

 


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Tue, 08/28/2012 - 09:30 | Link to Comment francis_sawyer
francis_sawyer's picture

If they're not doing so already, pretty soon the CSHI will be like the inflation (ex ~ food & energy) numbers... In this case it'll be CSHI (ex all property NOT in Manhattan)...

See? Problem solved... Bullish!

Tue, 08/28/2012 - 09:59 | Link to Comment BKbroiler
BKbroiler's picture

Great news, houses are more expensive!

Tue, 08/28/2012 - 10:25 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

Local CRE spam for your viewing pleasure...

 

Save Houston, which has seen an increase in activity over the past four (4) quarters, the remainder of the Texas major markets have slowed a bit relative to the last three (3) quarters.  Your snapshot:

 

-          For the first time since 2006-2007, we saw a drop in vacancy and positive absorption in all four (4) major markets

-          Vacancy rates dropped a non-weighted average of 0.25% since the end of Q1 and 0.93% since this quarter in 2011.  DFW is still the slowest growth with vacancy at 16.1%, a 0.3% decrease from Q1

-          Absorption, or the ‘net’ leased area, was positive over the past four (4) quarters, with San Antonio at +1.46%, DFW at 0.99%, Houston at 1.99% and the winner, of course, Austin at 2.66% (these numbers reflect the absorption as a percentage of the market inventory at the end of 2Q 2012)

-          Rental rates followed the above indicators, increasing an average of 0.5% over Q1 and 2.27% since the same quarter in 2011.  Houston was the ‘winner’ here, with 5.16% average rent hike year over year.  The least volatile was San Antonio, effectively flat over the past year.

-          As a percentage of overall inventory, 2012 construction deliveries YTD are in-line with market trends with DFW and Austin effectively flat and Houston and San Antonio ~0.4

Source: www.cresolutions.com

Tue, 08/28/2012 - 14:41 | Link to Comment rjs
rjs's picture

no they arent, at least if you're buying with borrowed money...July Freddie interest rates were down exactly 1% YoY to 3.55, which means the cost of financing w/ a 30 year fixed is down 12.8%..

Tue, 08/28/2012 - 09:30 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Waiting for the revisions.....

 

Tue, 08/28/2012 - 09:35 | Link to Comment MFLTucson
MFLTucson's picture

hahahahahaha!!!!!!!!!!!  "We seem to be witnessing exactly what we needed for a sustained recovery;...."  

How fucking stupid do they think we are??    Recovery?  Hahahahahaha!!!!!!!!! Good one!

Tue, 08/28/2012 - 09:35 | Link to Comment Lucius Corneliu...
Lucius Cornelius Sulla's picture

I'll buy when the 30 yr blows past 7% and the USG is forced out of the mortgage market.

Tue, 08/28/2012 - 09:43 | Link to Comment SilverTree
SilverTree's picture

I'll buy when I see blood in the streets until then I rent, and stack phyz.

Tue, 08/28/2012 - 09:45 | Link to Comment RationalPrepper
RationalPrepper's picture

Just curious if you plan to exchange USD for your house at that point, finance it, or use some PMs that you found at the bottom of a lake. 

Tue, 08/28/2012 - 09:53 | Link to Comment SilverTree
SilverTree's picture

Do the untimate exit and keep your PM's. Use them as collateral. 

Tue, 08/28/2012 - 10:15 | Link to Comment gregga777
gregga777's picture

I read yesterday in a ZeroHedge post that US consumers are in a forced deleveraging position while simultaneously consumer debt is within about .25% of the 2008 peak.

Having lost some $15 trillions in the real estate bust (correct me if I am in error), and facing considerably tightened loan eligibility requirements (20% down payments, real income and debt verification, e.g., no more "liar" loans), from where do "they" expect the buyers to come from? Weak handed speculatory buyers? Highly paid US government workers living in Metropolitan Washington, D. C.? Ex-pats fleeing the imminent collapse of the Eurozone? Chinese "haves" fleeing China before high food prices creates societal, ah, 'instability' amongst their 1 billion "have-nots"?

As an added thought re: China, has anyone factored in the risks due to the much greater than natural male-to-female ratio caused by abortion of female fetuses under their one child policy? Is there not a Chinese proverb that says something like, "one bachelor is a tragedy; 50,000 bachelors are a war?"

I am ROTFLMAO at the delusions of TPTB and the insanity of home builders adding to the housing inventory overhang (new houses, by the way, are excluded from the Case-Shiller indices).

Tue, 08/28/2012 - 09:37 | Link to Comment Dr. Engali
Dr. Engali's picture

It's all rainbows and Skittle shitting unicorns here in the U.s.S.A.

Tue, 08/28/2012 - 09:42 | Link to Comment tocointhephrase
tocointhephrase's picture

Ah, good ol bricks and mortar, sorry I mean timber frames, nails and cladding. LMFAO

Tue, 08/28/2012 - 09:42 | Link to Comment Yes_Questions
Yes_Questions's picture

For now it is clear that those entities with access to cash are buying up properties in beaten down areas in hopes these will be filled by renters.

 

Xactly. 

 

When home purchase data includes the actual credit data of the INDIVIDUALS (owner occupied) closing on the deals, then and only then can home prices be understood.  People are bound by their capacity to borrower.  Interest rates are only part of the story.  One needs to consider the traditional (pre-credit score underwriting) factors of income to debt ratios.

The FED compiles data on this I would bet.  Where is that report?

 

Tue, 08/28/2012 - 10:21 | Link to Comment daxtonbrown
daxtonbrown's picture

I'm a realtor in Las Vegas. The only deals being closed are cash deals (investors). Had an agent tell me they wouldn't bother with an FHA application. The market is fucked and I suspect many of these investors are in for a rude awakening in about 6 months, just like last time the bottom fell out as repos start to kick back up.

Tue, 08/28/2012 - 09:43 | Link to Comment AynRandFan
AynRandFan's picture

Mr. Blitzer went on to say that the housing market is recovering.  Of course, CNBC's website has that quote but says nothing about the statistical insignificance of the data against the backdrop of an ever-deflating housing market.

I am engaged in real estate investing in the Denver area.  There has been renewed buying activity in hot neighborhoods near downtown.  Elsewhere, there are thousands of $300k (+) homes on the market with no activity.  I could not find a single home sale in my area over $400k in the last 3 years despite the fact that the average list price is still about $350k.  Dream on.

Tue, 08/28/2012 - 09:45 | Link to Comment adr
adr's picture

When the price is based on the average selling price of all properties, it can be bullshitted to any number they want. One Albanian drug dealer buying a million dollar property can make it look like an entire town saw the value of their homes increase.

The market in some cities has shown price increases. Not because any single unit went up in price, but that most of the lowest priced property was sold.

My house hasn't gone up in value, nor has my parents or any of their friends. A realtor I know says the housing market is doing great because she is selling more property than she ever has. Of course she started in 2009 and is selling on a city where you have to be in the top 10% income bracket to afford anything.

The only properties selling are in the $350k to $500k range and the $0 to $100k range. Notice how the middle is completely missing.

Tue, 08/28/2012 - 09:49 | Link to Comment insanelysane
insanelysane's picture

No fucking way!  Our newspaper publishes the local real estate transactions each week.  The volume and prices are down and keep dropping.

Tue, 08/28/2012 - 12:34 | Link to Comment localsavage
localsavage's picture

Don't worry, that paper will be bought up soon enough so that they can publish therir fixed numbers.

Tue, 08/28/2012 - 09:55 | Link to Comment dolph9
dolph9's picture

High housing prices are not a good thing...they make debt slaves out of the population.  Debt which will never be paid back, by the way, but will be monetized.

What we need in housing is for the inventory to clear at low cash prices so we can have stable, affordable prices.

Of course the Fed will resist this every step of the way. 

Tue, 08/28/2012 - 09:59 | Link to Comment Nobody For President
Nobody For President's picture

But note prices have increased the most in Detroit, from $500 to $600 for a fixer-upper.

Tue, 08/28/2012 - 10:21 | Link to Comment killallthefiat
killallthefiat's picture

Wow, 20% yoy.  I think I just found some PHYZ at the bottom of a lake and am moving to Detroit for some speculation

Tue, 08/28/2012 - 10:09 | Link to Comment Son of Loki
Son of Loki's picture

The supply of rentals is massive. Too-many-to-count rentals saturate my area and rents are pluning. My friend told his landlord he wants a 10% rent reduction...."No problem" sayeth the landlord. They know two months of an empty house kills their profit for the year...not to mention the soaring cvost of insuring a vacant house.

 

Soon, we'll see a TV show, "How to rent out that REO."

 

Tue, 08/28/2012 - 11:27 | Link to Comment DaveHanson
DaveHanson's picture

What area is that, Son of Loki?

Cheaper rentals are firming up in the Spokane and Seattle WA markets I know best.  The residential RE markets are currently mixed, but will resume their downward slide once the artificial props supporting the market are exhausted.

Tue, 08/28/2012 - 10:24 | Link to Comment Snakeeyes
Tue, 08/28/2012 - 12:15 | Link to Comment Cthonic
Cthonic's picture

In your article, was surprised to see that consumer credit outstanding has nearly reached pre-recession levels.  However, federal education loans make up the bulk of that rise from the low. Nothing like a backdoor stimulus program that lowers unemployment rolls, keeps overpriced universities and their tenured faculty flush with cash, and has an implicit bonus kicker serfdom clause for every borrower (non-dischargeable since 2005).

http://www.federalreserve.gov/releases/g19/Current/

Tue, 08/28/2012 - 10:38 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

Just be sure to factor in the possibility of rent control in your investing decisions.  As times get tougher, rent control will begin to appear where there is none currently.

Tue, 08/28/2012 - 10:59 | Link to Comment reload
reload's picture

Too true: here in the jolly old UK a huge percentage of the renters are benefit recipients. There is now a cap on `housing benefit` payments. The result; either the landlord drops his price or the local government (we call them councils) simply ships the tennant to a cheaper area. If its a few hundred miles further north, to an area with no jobs but cheaper and emptier houses the tennant has little recourse. A sort of ecconomic `ethnic cleansing`.

The flip side of that dirty coin is no cleaner. Large scale development of apartment blocks in areas that were allegedly the next hot spot have found few buyers. The early speculators who bought off plan hoping for a quick flip, now find they are reluctant landlords. Their problem is made worse because the developers, sitting on huge inventory have become landlords themselves - their tennant is the Uk government who use these developements to house immigrants. Some of these allegedly upscale `lifestyle developements` are ghetos already.

So we too have significant downward pressure on rents in the bottom quartile of the market, and more properties joining that bottom quartile all the time. 

Tue, 08/28/2012 - 11:52 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

Governments in all major northeastern US cities are licking their chops thinking about using the capital of small investors-turned-landlords to buy votes.

Tue, 08/28/2012 - 11:18 | Link to Comment dwdollar
dwdollar's picture

We are thinking about buying a house. Probably a small one (60s range) in the middle of town. We've waited years for this market to clear. We've cleaned up our finances and watched as others live free in foreclosure heaven. I don't know what to do. Living in this small apartment on the edge of a ghetto is getting old and I'd like to grow my business in a garage. Living out in the country with my family really isn't an option either. Not with my banker aunt still in control of the farm finances. Honestly, when this thing breaks, I don't see large farms being safe anyway. Uncle Scam will come for them to secure food distribution. I'm thinking the mountains are going to be a safer bet. Until then, I guess we'll keep buying guns and silver while we live the status quo (like everyone else). Since the "choice" this fall is between Obama and Obama-lite, the status quo is probably still the safest bet at this point.

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