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Home Values Start The Year Strong

Wednesday, May 2nd, 2012

HPI 2007-2012

Home prices started the year on an upswing. 

Accord­ing to the Fed­eral Home Finance Agency’s Home Price Index, home prices rose by a seasonally-adjusted 0.3 per­cent between Jan­u­ary and Feb­ru­ary 2012. The index is up 0.4% over the past year, offer­ing a counter-story to the Case-Shiller Index’s asser­tion that home val­ues are sinking.

Last week, Stan­dard & Poor’s Case-Shiller Index said home val­ues had dropped more than 3 per­cent in the prior 12 months. 

As a home buyer or seller , data show­ing “ris­ing home val­ues” or “falling home val­ues” may be of inter­est to you, but we can’t for­get that most home val­u­a­tion track­ers — includ­ing both the government’s Home Price Index and the pri­vate sec­tor Case-Shiller Index — have a severe, built-in flaw.

Both used “aged” data. Today, the cal­en­dar reads May. Yet, we’re still dis­cussing February’s hous­ing data.

Data that is two-plus months old is of lit­tle value to every­day buy­ers and sell­ers want­ing to know the “right now” of hous­ing. And, even then, char­ac­ter­iz­ing the data as “two-plus months old” may be a stretch. This is because the home val­ues used in the Home Price index and the Case-Shiller Index are col­lected from actual trans­ac­tions, but at the time of closing.

Con­sid­er­ing that most pur­chases require 45–60 days to close, we can know that when we look at the Home Price Index and Case-Shiller Index reports for Feb­ru­ary, what we’re really see­ing is a snap­shot of the hous­ing mar­ket as it existed two-plus month plus 60 days ago.

Data that’s 5 months old is of lit­tle rel­e­vance to today’s buy­ers and sellers. Today’s mar­ket is dri­ven by today’s economics.

The Home Price Index is a use­ful gauge for econ­o­mists and law-makers. It high­lights long-term trends in hous­ing which can be help­ful in allo­cat­ing resources to a par­tic­u­lar project or pol­icy. For home buy­ers and seller , though, it’s much less use­ful. Real-time data is what mat­ters to you.

For that, talk to a real estate professional.

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Pending Home Sales Index Crosses The 100 Barrier

Friday, April 27th, 2012

Pending Home Sales 2010-2012

After a series of worse-than-expected data last month, the hous­ing mar­ket appears to be back on track.

The Pend­ing Home Sales Index posted 101.4 in March, a four per­cent gain from the month prior and the index’s high­est read­ing since April 2010 — the last month of that year’s fed­eral home buyer tax credit.

A “pend­ing home” is a home under con­tract to sell, but not yet closed. The Pend­ing Home Sales Index is tracked and pub­lished by the National Asso­ci­a­tion of REALTORS® monthly.

The March report marks the index’s first 100-plus read­ing in nearly two years.

To home buy­ers and sell­ers , this is sta­tis­ti­cally sig­nif­i­cant because the Pend­ing Home Sales Index is nor­mal­ized to 100, a value cor­re­spond­ing to the aver­age home con­tract activ­ity in 2001, the index’s first year of exis­tence. 2001 was an historically-strong year for the hous­ing market.

The March 2012 Pend­ing Home Sales Index, there­fore, puts cur­rent mar­ket activ­ity on par with mar­ket activ­ity from 2001.

You wouldn’t know it from read­ing this week’s papers, though. There have been sto­ries about how the Case-Shiller Index put home val­ues at new loans; and how the Exist­ing Home Sales fig­ures unex­pect­edly dropped off; and how the New Home Sales report was a laggard.

But this is why the Pend­ing Home Sales Index can be so important.

What makes the Pend­ing Home Sales Index dif­fer­ent from those other data points is that the Pend­ing Home Sales Index is a “forward-looking” hous­ing mar­ket indicator.

Unlike most data which aims to tell us how the hous­ing mar­ket per­formed at some point in the past, the Pend­ing Home Sales Index attempts to tell us how the hous­ing mar­ket will per­form at some point in the future. 

80% of homes under con­tract close within 2 months. Many more close within months 3–4. There­fore, on the strength of the March Pend­ing Home Sales Index, we should expect a strong April and May nationwide

If you’re shop­ping for homes right now, con­sider tak­ing advan­tage while the mar­ket remains some­what soft. Mort­gage rates are low and home prices are, too. It can make for a good home-buying conditions.

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New Home Sales Revised Higher In February; Slip 7% In March

Wednesday, April 25th, 2012

New Home Sales 2011-2012Sales of new homes ticked lower in March, unexpectedly.

Based on Cen­sus Bureau data, the num­ber of new, single-family homes sold in March slipped 7 per­cent from Feb­ru­ary — the largest one-month drop in more than a year. 

On a seasonally-adjusted, annu­al­ized basis, buy­ers nation­wide pur­chased 328,000 newly-built homes last month. The decrease in sales from Feb­ru­ary to March can be attrib­uted, in part, though, to a mas­sive upward revi­sion in February’s figures.

Last month, the Cen­sus Bureau had reported 313,000 new home sales in Feb­ru­ary on a seasonally-adjusted, annu­al­ized basis. This month, those sales were re-measured to be 353,000 — an increase of 13 percent.

January’s sales were revised higher, too.

The long-term trend in the mar­ket for new homes remains “up”. This is no more appar­ent than when we look at the avail­able new home inventory.

At the close of March, just 144,000 new homes were avail­able for pur­chase, down 2,000 from the month prior and rep­re­sent­ing the most sparse new home hous­ing sup­ply since at least 1993, the year that the Cen­sus Bureau start­ing track­ing such data. 

At the cur­rent pace of sales, the new home hous­ing stock would be sold out in 5.3 months. A six-month sup­ply is believed to rep­re­sent a mar­ket in balance.

For new home buy­ers , March’s New Home Sales report does not rep­re­sent a hous­ing mar­ket pull-back. It may rep­re­sent oppor­tu­nity, however.

From Octo­ber 2011 to Feb­ru­ary 2012, hous­ing data was uni­formly strong. Home sales were higher, home sup­plies were lower, and con­fi­dence was ris­ing. In March, it was the reverse. This is nor­mal because growth is rarely linear. 

In any mar­ket, it’s a few steps for­ward and a sin­gle step back, and hous­ing is likely show­ing a sim­i­lar pat­tern. With mort­gage rates still low and builder con­fi­dence down, it’s a ter­rific time to shop new construction.

There are deals to be found for buy­ers who seek them out. 

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