Case-Shiller national index down 5.1% YoY

This housing chart shows the year-over-year percentage change in the 20-city index, which is down 3.6% since March 2010:


The S&P/Case-Shiller national index is down 5.1% year-over-year:

U.S. home prices fell 4.2% in the first quarter, hitting their lowest levels since mid-2002 after falling 3.6% in the fourth quarter, according to the S&P Case-Shiller home-price indexes.

"This month's report is marked by the confirmation of a double-dip in home prices across much of the nation," said David Blitzer, chairman of S&P's index committee. "The National Index fell 4.2% over the first quarter alone, and is down 5.1% compared to its year-ago level. Home prices continue on their downward spiral with no relief in sight," he added. ...

Once federal home-buyer tax credits expired last year, the indexes — based on the three-month averages of home prices — started to fall again in August, increasing fears of a double dip in the home-buying market.

While other parts of the economy have started to show improvement, the housing market continues to sputter as U.S. unemployment remains high and a steady supply of foreclosures weigh on home sales and prices.

And The Wall Street Journal gives us this little reminder:

The National Association of Realtors said earlier this month that existing home sales eased 0.8% in April from March, while prices dropped 5%.

Yep, that's right, "eased," which means journalists are parroting the Realtors' spin verbatim.

Finally, here's how the Case-Shiller results compare to other indexes:

What are other price indexes showing?

The CoreLogic index, which is used by the Federal Reserve, shows that prices in March were down 7.5% in March from one year earlier. When excluding distressed sales, prices were down by 1%. A separate repeat-sales index that excludes foreclosure sales from FNC Inc. shows that prices nationally were down 6.3% in March from one year ago.

Zillow’s national home value index, which excludes foreclosures but not short sales, was down 8.2% in March from one year ago and has declined for 57 consecutive months.

Personally, I think this would all be behind us if Congress hadn't artificially propped up the market from 2009-2010.

April 2011 pending home sales declined 11.6% since March 2011, and 26.5% since April 2010

April 2011 pending home sales fell 11.6% since March 2011, and 26.5% since April 2010:

The number of people who signed contracts to buy previously occupied homes in the U.S. tumbled last month, the latest sign that the battered sector is struggling to rebound.

The National Association of Realtors’ seasonally adjusted index for pending sales of existing homes decreased 11.6% on a monthly basis to 81.9, the industry group said Friday.

March’s reading was revised down to 92.6 from an original reading of 94.1. ...

The pending sales index was 26.5% below its level in April 2010, which is when a tax subsidy for first-time home buyers expired. ...

A sale is considered pending when the contract has been signed but the transaction hasn’t closed. Pending sales typically close within one or two months of signing.

Lawrence Yun, the NAR’s chief economist, said the drop may reflect an economic soft patch in April driven by higher oil prices, severe weather and a bump in unemployment claims.

FHFA reports declining Q1 2011 home prices

I think I've said this a few times in the recent past, but just to reiterate: Home prices are still falling!

Here’s some more bad news for the housing market: U.S. home prices posted the sharpest quarterly decline in more than two years in the first three months of this year, according to a government index.

On a quarterly basis, home prices adjusted for seasonal factors were down 2.5% in the first quarter from the fourth quarter of 2010 and were down 5.5% from the same quarter a year ago, according to the Federal Housing Finance Agency’s home price index released Wednesday. It was the steepest quarterly decline since the end of 2008. ...

The FHFA’s index is calculated by using the prices of houses purchased with mortgages backed by government-controlled mortgage companies Fannie Mae and Freddie Mac.

New single-family home sales up 7.3% MoM; down 23.1% YoY

New single-family home sales are up 7.3% in April from a month earlier, but down 23.1% from April 2010:

New U.S. single-family home sales rose unexpectedly in April to notch their second straight month of gains and prices increased, according to a government report on Tuesday that offered some hope for the stagnant housing market.

The Commerce Department said sales increased 7.3 percent to a seasonally adjusted 323,000 unit annual rate, the highest level since December, from a slightly upwardly revised 301,000-unit pace in March. ...

However, compared to April last year sales were down 23.1 percent. ...

While the report cast a positive light on the housing market, it did little to change perceptions the economy remained mired in a soft patch.

Data ranging so far ranging from retail sales to industrial production have painted a picture of an economy struggling to regain momentum as the second quarter started, with employment only the bright spot.

What caused (and didn't cause) the housing bubble: A look at the evidence

About a month-and-a-half ago, I gave a presentation on the housing bubble in an economics of money and banking class I was taking. I have been meaning to explore some of the parts of the presentation on this blog, but I haven't gotten around to it. Anyway, I thought I'd share the outline of the presentation with you, although it lacks my commentary. I can summarize my commentary as follows: All of the hypotheses about what caused the bubble have problems, although Ben Bernanke's "global saving glut" idea is the best so far.

You can read the outline of my housing bubble presentation here.

LinkedIn's founder got screwed; small investors, too

LinkedIn's founder just got screwed out of millions of dollars and he probably doesn't even know it:

The stock of LinkedIn opened explosively Thursday morning, rising to more than 100 percent of its IPO price.

This means the favorite clients of LinkedIn’s underwriters—Morgan Stanley, Bank of America Merrill Lynch and JPMorgan Chase—are making a fortune. They got to buy in at $45 a share—and have doubled their money instantly.

It also means that LinkedIn’s owners and investors just got swindled. ...

A 100 percent rise is evidence that LinkedIn’s shares were wildly, almost fraudulently, underpriced. The bankers either had no clue about the price people are willing to pay for the shares—or they decided to grant their best institutional investment clients a bonanza at the expense of LinkedIn.

It appears a lot of small investors may have been screwed too. Here's how it happened. LinkedIn only sold a small number of shares. This meant that small investors wanted to buy more stock than was available. If they stupidly placed market orders instead of limit orders, they bought the stock regardless of the price. Ignoring the price is stupid! Whether an investment is a good one or a bad one depends entirely on the price you pay.

Realtors: Existing home sales "eased" in April

Note that when the Realtors say "eased", they really mean "declined". From their press release:

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, eased 0.8 percent to a seasonally adjusted annual rate of 5.05 million in April from a downwardly revised 5.09 million in March, and are 12.9 percent below a 5.80 million pace in April 2010; sales surged in April and May of 2010 in response to the home buyer tax credit. ...

A parallel NAR practitioner survey shows 11 percent of Realtors® report a contract was cancelled in April from an appraisal coming in below the price negotiated between a buyer and seller, 10 percent had a contract delayed, and 14 percent said a contract was renegotiated to a lower sales price as a result of a low appraisal. ...

The national median existing-home price for all housing types was $163,700 in April, which is 5.0 percent below April 2010. Distressed homes – typically sold at a discount of about 20 percent – accounted for 37 percent of sales in April, down from 40 percent in March; they were 33 percent in April 2010. ...

Total housing inventory at the end of April increased 9.9 percent to 3.87 million existing homes available for sale, which represents a 9.2-month supply at the current sales pace, up from an 8.3-month supply in March. ...

[NAR President] Phipps added that proposals and regulations are being considered in Washington that could further constrain the housing market. “One of the most damaging proposals would effectively raise downpayment requirements to 20 percent, which would slam the brakes on the housing market,” he said. “What we need to do is simply return to the sound standards that were in place before the introduction of risky mortgage products.”

I strongly believe mandatory 20% down payments would have prevented the housing bubble, and thus the financial crisis and recession, because home buyers would have paid more attention to the price of the house rather than just the interest rate (which quite often was just a teaser rate).

Single-family home sales slipped 0.5 percent to a seasonally adjusted annual rate of 4.42 million in April from 4.44 million in March, and are 12.6 percent below the 5.06 million pace in April 2010. The median existing single-family home price was $163,200 in April, which is 5.4 percent below a year ago.

Existing condominium and co-op sales fell 3.1 percent to a seasonally adjusted annual rate of 630,000 in April from 650,000 in March, and are 15.0 percent below the 741,000-unit level one year ago. The median existing condo price5 was $167,300 in April, down 2.3 percent from April 2010.

Not a lot of good news for those hoping for an end to the real estate decline—and this is from a NAR press release!

How buyers lost money with the home buyer tax credit

SmartMoney explains how free money from the government became a money loser for home buyers:

The government's recent $8,000 cash incentive for first-time home buyers has proved even more costly for recipients than for taxpayers. ... Typical buyers have lost twice as much to price declines as they received from the program.

The median home value fell to about $170,000 in March from $185,000 a year earlier, according to Zillow.com. That means a buyer who closed on a house just before the tax-credit program expired in April 2010 collected $8,000 but has since lost $15,000 in value. Those who bought earlier in the program have done worse; the median price is down $20,000 from March 2009. ...

The credit wasn't great for taxpayers, either. IRS says it paid $26 billion in home buyer credits in 2009 and 2010, enough to cover the maximum $8,000 credit for more than 3 million buyers. (It says at least $513 million went for fraudulent claims. Some claimants hadn't bought houses. Some filed twice. Some were under age 18 or incarcerated.)

Spin vs. reality on the housing market

The Wall Street Journal reports:

U.S. home builders’ confidence remained stuck at an extremely low level in May as the battered housing market continues limping toward recovery.

The National Association of Home Builders trade group said Monday its closely watched housing-market index was unchanged at 16 this month as expectations for single-family sales over the next six months fell, while traffic from potential buyers and current sales inched up. The index has been at that level for six of the last seven months. Readings at 50 and above indicate a positive view of the market. (The most recent time the home builders’ confidence gauge hit positive territory—that is, 50 or better—was April 2006. The latest 16 reading must mean that builders are pretty down.)

Builders continue fretting about bargain-priced competition from foreclosures and other distressed properties, as well as proposals to scale back government support for housing. Many consumers remain on the sidelines, afraid that home prices have further to fall. Meanwhile, many would-be buyers can’t qualify for a loan.

Regarding the California housing market, they write:

Sales of single-family homes and condominiums were down last month by 3.3% from March and by 6.1% from one year ago, when sales were artificially boosted by federal tax credits, according to a report Monday from DataQuick, a real-estate research firm. Southern California had its worst April in three years.

And CNN Money reports:

New home construction tumbled in April, the government said Tuesday, as the nation's housing market remains weak.

Housing starts, the number of new homes being built, fell 10.6% in April to an annual rate of 523,000 units, down from a revised 585,000 in March, the Commerce Department said.

How did the National Association of Realtors spin the current state of the housing market?

Housing and Economic Forecast Points to Rising Activity

And:

Realtors® Urged to "Seize the Day"

Over the past five years, I have repeatedly noticed that we don't get positive spin from the home builders, just from the Realtors.

Is housing hurting the economic recovery?

At macroblog, Dave Altig asks whether housing is hurting the economic recovery. He answers with a quote from Atlanta Fed President Dennis Lockhart:

...can we have high-quality growth while the residential real estate and commercial real estate sectors continue to be so weak? Not completely, in my opinion. The recovery will progress, but it will not be robust until we work through the economy's serious imbalances, including those in the real estate sector.

As I look ahead, I think the most reasonable assumption is that improvement of the real estate sector will lag an otherwise improving economy. But I am encouraged by the fact that the economy is increasingly on firmer footing.

Here are more thoughts from Dennis Lockhart on the housing market:

The residential real estate market remains depressed. In my baseline forecast, the housing sector will contribute only modestly at best to economic growth this year and next.

The housing sector impacts economic growth in two basic ways—one direct and one indirect. The direct effect primarily comes through the construction of new homes and production of building materials and household products. Indirectly, the housing sector contributes to growth through its effect on household balance sheets, which can influence consumer spending. Another indirect effect relates to banks' balance sheets and the health of the financial system.

To assess how direct and indirect effects will play out, let me provide some perspective on the state of the residential sector.

Home sales have not shown any clear trend of improvement since the end of the recession, except for a short pick-up during the period of the federal tax credit last year. From the peak five years ago, sales of existing homes are down nearly 50 percent and are close to the 1998 level. New home sales have fallen almost 80 percent from the peak and are at levels not seen since these data were first collected in the early 1960s.

Why such weak sales? There are several explanations. Tougher underwriting standards have shrunk the pool of potential homebuyers. Entry-level homebuyers, who typically have the weakest credit histories, continue to experience the most difficulty in obtaining mortgage financing. And anecdotal information suggests this could be a longer-term issue. At the same time, many potential move-up buyers are blocked because they're either underwater in their current mortgage or don't have enough equity to meet the down payment requirements for a new mortgage. The real estate analytics firm CoreLogic estimates that about 23 percent of residential mortgages are underwater.

On the supply side, existing home inventory levels remain elevated, in part due to the great number of distressed properties on the market. These include bank-owned properties and properties where the loan is in default or the property is in the process of foreclosure. ...

Because of the factors I've discussed, I do not expect significant new residential construction nationally. Thus, it's unlikely that residential real estate will directly contribute much to GDP growth this year or next.