By: Stan Humphries | February 21st, 2012 | Category: Blog, Market Watch, Real Estate Analytics
The Case-Shiller Composite Home Price Indices for December will be released on Tuesday, Feb. 28. Zillow predicts that the 20-City Composite Home Price Index (non-seasonally adjusted [NSA]) will decline by 4.0 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will decline by 3.9 percent. The seasonally adjusted (SA) month-over-month change from November to December will be -0.5 percent and -0.6 percent for the 20 and 10-City Composite Home Price Index (SA), respectively. All forecasts are shown in the table below and are based on a model incorporating the previous data points of the Case-Shiller series and the December Zillow Home Value Index data, and national foreclosure resales.
As we mentioned last time, the Case-Shiller indices are experiencing the bulk of 2011 home price depreciation in the last quarter of the year contrary to the trend displayed by the Zillow Home Value Index (ZHVI), where the pace of depreciation has slowed since the start of this year with only December showing a significant pick-up in the depreciation rate. The December Zillow Real Estate Market Reports, released on Thursday, Feb. 9, showed monthly home value depreciation increasing to -0.6% from November to December, representing a 4.7 percent decline on a year-over-year basis. While home values are expected to fall further in 2012 with a definitive bottom probably a year away, home sales are expected to pick up pace in 2012 stabilizing home prices across the nation.
Our monthly Case-Shiller forecast is in line with the Zillow Home Price Expectations Survey administered by Pulsenomics, which surveys over 100 economists quarterly to forecast the Case-Shiller National (NSA) Home Price Index (HPI) for the next five years. The latest median expectation across all economists was for the Case-Shiller National HPI to fall by 1.97% between Q4 2010 and Q4 2011, whereas Zillow expected the index to fall by 3.5% over the period. This most recent monthly forecast completes 2011 and it seems likely that the year will close out with more price depreciation than even we had anticipated. The chart below shows the Case-Shiller 20-City Composite HPI (NSA). To give some idea of future projections, we’ve extended the 20-City HPI with the Zillow forecast for year-over-year growth in the national Case-Shiller HPI (since the 20-City and national HPIs track each other very closely).
By: Lauren Riefflin | February 2nd, 2012 | Category: Blog, Market Watch, Real Estate Analytics
This Tuesday, the S&P/Case-Shiller Home Price Indices showed that the non-seasonally adjusted November 10- and 20-City Composite declined 3.6% and 3.7% on a year-over-year basis, a sharper decline than what was anticipated in Zillow’s forecast, which we released last week. On a seasonally adjusted monthly basis, the 10- and 20-City Composites fell 0.7% from October to November. The table below shows how our forecast compared with the actual numbers.
While the Zillow Case-Shiller Forecasts have been very accurate in the past – our median average error is displayed in the table below – we ended up on the bullish side this month. Our forecasting model incorporates previous data points of the Case-Shiller series, as well as Zillow Home Value Index data and national foreclosure resales. As we had mentioned in our initial forecast blog post, the Case-Shiller indices are experiencing the bulk of 2011 home price depreciation in the last quarter of the year. Therefore, the previous data points offered little information for our forecast this month. In addition, contrary to the trend displayed by the Case-Shiller, the Zillow Home Value Index’s (ZHVI) pace of depreciation has slowed dramatically since the start of this year and was essentially flat in November. These factors contributed to a lower predicted depreciation rate for the Case-Shiller 10- and 20-City Composite indices.
“November was a bit of surprise to the downside in terms of Case-Shiller home prices, and unfortunately downside surprises haven’t been that uncommon in recent years,” said Zillow Chief Economist Dr. Stan Humphries. “Some but not all of this strong monthly depreciation can be chalked up to the fact that foreclosure re-sales, which the Case-Shiller index includes, represented a larger share of sales in November than October. But even adjusting for the impact of more foreclosures in the month, this latest price signal indicates a continued weak housing market that still hasn’t yet reached bottom.”
To see how Zillow’s forecast of the October Case-Shiller indices compared, see our blog post from last month.
By: Stan Humphries | January 24th, 2012 | Category: Blog, Market Watch, Real Estate Analytics
The Case-Shiller Composite Home Price Indices for November will be released on Tuesday, Jan. 31. Zillow predicts that the 20-City Composite Home Price Index (non-seasonally adjusted, NSA) will decline by 3.2 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will show a year-over-year decline of 2.7 percent. The seasonally adjusted (SA) month-over-month change from October to November will be -0.2 percent and -0.1 percent for the 20 and 10-City Composite Home Price Index (SA), respectively. All forecasts are shown in the table below and are based on a model incorporating the previous data points of the Case-Shiller series and the November Zillow Home Value Index data, and national foreclosure resales.
The Case-Shiller indices are experiencing the bulk of 2011 home price depreciation in the last quarter of the year. This is somewhat contrary to the trend displayed by the Zillow Home Value Index (ZHVI), where the pace of depreciation has slowed dramatically since the start of this year. The November Zillow Real Estate Market Reports, released on Tuesday, Jan. 10, showed home values remained essentially flat from October to November falling only 0.1 percent, representing a 4.6 percent decline on a year-over-year basis. Possible reasons for this difference could be the ZHVI’s exclusion of foreclosures or a larger geographic footprint. While home values are expected to fall further (another 2 to 4 percent) in 2012 with a definitive bottom probably a year away, encouraging precursors to a true stabilization of home values are falling into place as the new year begins. Home sales will show a more consistent upward trend this year, slowly reducing the amount of vacant housing inventory. This increased demand will eventually start to put a floor under home values later this year.
Our monthly Case-Shiller forecast is in line with the Zillow Home Price Expectations Survey administered by Pulsenomics, which surveys over 100 economists quarterly to forecast the Case-Shiller National (NSA) Home Price Index (HPI) for the next 5 years. In our inputs to this consensus survey, Zillow tends to be a bit more bearish in our outlook than the average of the economists surveyed. The latest median expectation across all economists was for the Case-Shiller National HPI to fall by 1.97 percent between Q4 2010 and Q4 2011, whereas Zillow expects the index to fall by 3.5 percent over the period. Moreover, we foresee another 1 percent decline in the national HPI between Q4 2011 and Q4 2012. The chart below shows the Case-Shiller 20-City Composite HPI (NSA). To give some idea of future projections, we’ve extended the 20-City HPI with the Zillow forecast for year-over-year growth in the national Case-Shiller HPI (since the 20-City and national HPIs track each other very closely).
By: Lauren Riefflin | December 27th, 2011 | Category: Blog, Market Watch
This morning, the S&P/Case-Shiller Home Price Indices showed that the not-seasonally adjusted October 10- and 20-City Composite declined -3.0% and -3.4% on a year-over-year basis, in line with Zillow’s forecast, which we released last week. On a seasonally adjusted monthly basis, the 20-City Composite fell 0.6% from September to October while the 10-City Composite fell 0.5%. The table below shows how our forecast compared with the actual numbers.
“On a seasonally adjusted basis, the pace of home price depreciation remained high in October, reflecting the continued imbalance in supply and demand despite recent stronger sales of new and existing homes,” explained Zillow Chief Economist Dr. Stan Humphries. “With foreclosure re-sales still making up about twenty percent of monthly sales in October, and another large percentage made up by short sales, we still have an environment where increased sales can put downward pressure on prices. And unfortunately, we don’t expect to see a decrease in the volume of foreclosures in the monthly sales mix in the near-term. In fact, we do expect to see higher rates of foreclosure liquidation accompanying a settlement from the states’ attorneys general in the context of the robo-signing issues with some lenders and servicers, and this may translate into a higher volume monthly foreclosure resales.”
To see how Zillow’s forecast of the September Case-Shiller indices compared, see our blog post from last month.
By: Yeng Bun | December 22nd, 2011 | Category: Briefs, Real Estate Analytics
According to analysis of recent Zillow Real Estate Market Reports, U.S. homes are expected to lose more than $681 billion in value during 2011, which is 35 percent less than the $1.1 trillion lost in 2010.
The bulk of the total value lost during 2011 was in the first half of the year. From January to June, the U.S. housing market lost $454 billion. From July to December, the pace of value declines slowed and Zillow projects residential home value losses will total a significantly lower $227 billion.
Regionally, only nine out of 128 markets showed gains in home values during 2011, with the New Orleans metropolitan statistical area (MSA) showing the largest gain of $3.5 billion. The Pittsburgh MSA was second on the list, with a gain of $2.7 billion.
Ninety-two percent of markets analyzed for this report showed home value losses this year. In terms of total dollars lost in 2011, the biggest home value losses were in the large MSAs of Los Angeles (down $75.5 billion), New York (down $44.8 billion) and Chicago (down $41.7 billion). It is important to note that the large overall losses were due to the high number of homes in these metro areas, along with decreases in median home values.
While a large pool of housing supply, high negative equity, high unemployment, and low consumer confidence levels will continue to depress home values in 2012, the silver lining remains that homes have lost value at a much slower pace in the backend of 2011. We expect this trend to continue throughout next year as we coast towards an eventual bottom in late 2012 or early 2013.
An image of the U.S. annual change in total home value can be found here. Use the interactive graph below to view data by region.
A deeper look at the methodology behind this analysis can be found here.
By: Stan Humphries | December 20th, 2011 | Category: Blog, Market Watch, Real Estate Analytics
The Case-Shiller Composite Home Price Indices for October will be released on Tuesday, the 27th of December. Zillow predicts that the 20-City Composite Home Price Index (non-seasonally adjusted, NSA) will decline by 3.5 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will show a year-over-year decline of 3.2 percent. The seasonally adjusted (SA) month-over-month change from September to October will be -0.8 percent and -0.7 percent for the 20 and 10-City Composite Home Price Index (SA), respectively. All forecasts are shown in the table below and are based on a model incorporating the previous data points of the Case-Shiller series and the October Zillow Home Value Index data, which was released on Tuesday, December 13th, and national foreclosure resales.
While home values are still down on a year-over-year basis, the pace of depreciation has slowed dramatically since the start of this year. In the October ZHVI data, on a monthly basis, home values fell 0.3 percent nationally, 0.5 percent in the Composite-20 metro regions, and 0.5 percent in the Composite-10 metro regions. Existing home sales improved in October, and consumer confidence increased in November, while remaining at low levels in general. High rates of negative equity, unemployment, and a quickened pace of foreclosures, which had been kept artificially low since the rob-signing controversy, continue to put downward pressure on home values. We expect to see another 2 percent to 4 percent depreciation before reaching the bottom in late 2012, early 2013.
By: Lauren Riefflin | November 29th, 2011 | Category: Blog, Market Watch
This morning, the S&P/Case-Shiller Home Price Indices showed that the not-seasonally adjusted September 10- and 20-City Composite declined 3.3% and 3.6% on a year-over-year basis, a sharper decline than what was anticipated in Zillow’s forecast, which we released last week. On a seasonally adjusted monthly basis, the 20-City Composite fell 0.6% from August to September while the 10-City Composite fell 0.4%. The table below shows how our forecast compared with the actual numbers.
“Nobody should be surprised by further home value losses in the remaining balance of this year and into next year,” said Zillow Chief Economist Stan Humphries. “Despite record high affordability of real estate, the psychology of home buyers is still being weighted down by economic uncertainty, keeping them on the fence when it comes to buying homes. Moreover, we do expect foreclosure liquidation rates to increase in the coming months as banks try to unload their backlog of foreclosures accumulated in the post robo-signing period. This will also put downward pressure on home values. The good news is that we expect these remaining home value losses to be relatively minor in comparison to the declines from the market peak to current levels”
To see how Zillow’s forecast of the August Case-Shiller indices compared, see our blog post from last month.
By: Stan Humphries | November 22nd, 2011 | Category: Blog, Real Estate Analytics
The Case-Shiller Composite Home Price Indices for September will be released on Tuesday, the 29th of November. Zillow predicts that the 20-City Composite Home Price Index (non-seasonally adjusted, NSA) will decline by 3.2% on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will show a year-over-year decline of 2.8%. The seasonally adjusted (SA) month-over-month change from August to September will be -0.2% and 0.0% for the 20 and 10-City Composite Home Price Index (SA), respectively. All forecasts are shown in the table below and are based on a model incorporating the previous data points of the Case-Shiller series and the September Zillow data on the Zillow Home Value Index and national foreclosure resales.
This forecast is in line with the trend in the Zillow Home Value Index reported in the Q3 Zillow Real Estate Market Report. While home values are still down on a year-over-year basis, the pace of depreciation has slowed dramatically since the start of this year. In the Q3 ZHVI data, on a monthly basis, home values fell 0.1% nationally, 0.3% in the Composite-20, and 0.3% in the Composite-10. Existing home sales declined in September, however were up from their year ago levels, and increased in October. Consumer confidence has been very low these past months and has further declined in October. We expect to see continued home value depreciation as unemployment and negative equity remain high and as the pace of foreclosures, kept artificially low since the robo-signing controversy, increases again.
By: Svenja Gudell | November 9th, 2011 | Category: Blog, Real Estate Analytics
On October 1st of this year, new conforming loan limits went into effect in 250 counties across the United States. These 250 counties are “high cost” areas, such as Manhattan, where housing is considerably more expensive than in other counties around the country. While most counties have enjoyed conforming loan limits of $417,000 since 2006, the Economic Stimulus Act of 2008 created higher limits for these 250 high-priced counties – up to $729,750. These higher limits were always intended to be temporary but have been repeatedly extended. That is until this year, when the higher limits in the 250 high-priced counties were reduced, effective October 1st. As of now, the maximum loan size qualifying as a conforming mortgage is $625,500.
The now lower limits have caused quite the stir (even today, see here) among those who believe that the housing market will be significantly and negatively affected by this change. But will it really? Consider the following facts:
1. In a previous analysis, Zillow found that only 0.75% of all homes in the continental United States, or 2.5% of all homes in these 250 high cost counties (Zillow actually covers 154 of these counties that are within the continental United States), could be potentially affected by this. And The Wall Street Journal notes that “only 1.3% of all loans done by Fannie, Freddie and the Federal Housing Administration would be affected by the change.”
2. Across these affected counties, the loan limits declined 10.3% on average (from their level set in 2008), but the average decline in home values in these markets since January of 2008 has been 24.1%. This indicates that more homes are now eligible to be purchased in these counties with expanded conforming mortgages under the new lower limits, than would have been under the prior, higher limits in 2008.
3. Last but not least, consider the actual rates that home buyers are getting for buying properties that are above the new limits but below the old limits, meaning the newly minted jumbo loan applicants. The figure below shows the average rate applicants have been quoted in the Zillow Mortgage Marketplace for purchases on primary residences with a 30-year fixed mortgage and a down payment ranging from 15 to 25 percent. The yellow line, which shows the average rate quoted to consumer buying a house (minus the down payment) valued below the old limit but above the new limit – for which they used to be able to apply for an expanded conforming loan, but are now having to apply for a jumbo loan – started moving away from the red line, which is the expanded conforming rate average, in September as lenders prepared for the new limits to take effect in October. Now the yellow line tracks the blue line, which represents the average rate for jumbo loans. Currently, the spread between expanded conforming and jumbo loans is holding steady at around 60 basis points.
In conclusion, while some areas, such as Manhattan, might be harder hit than others by the lower conforming loan limits, the impact overall is limited by the fact that relatively few homes nationwide will be affected and affected borrowers will still have access to mortgage credit, just at somewhat higher rates. Since these lower limits are not an issue for the overall health of the real estate market, it becomes difficult to see the public policy benefits of subsidizing mortgage rates for mortgages as expensive as $729,750.
By: Svenja Gudell | November 1st, 2011 | Category: Blog, Market Watch
I was just reading Daniel Indiviglio’s chart of the day article on stagnating disposable income covering the past six years and was wondering what the trajectory of disposable income looks like over a longer period of time. Current disposable income being at the same level as 2006 sounds rather gloomy, however how much of an historical anomaly is it really? With this in mind, I downloaded the full time series from the BEA website. Figure 1 below shows the trend in inflation-adjusted per capita disposable personal income since 1959 (blue line). The red line shows the annual change in disposable income which averages out to 2.2% per year over the full time period.
The green line shows the five-year growth rate, indicating how much disposable personal income increased relative to five years ago. The average five-year growth rate is roughly 12%. The lowest five-year growth rate before the collapse of the housing market was in February of 1994, when real per capita disposable personal income only grew by 3% over the preceding five years. Then the boom years of the late 90s and early 2000s came with 5-year growth rates of up to 17%. Disposable personal income peaked in May of 2008, after which it fell sharply, recovered slightly and then remained relatively stagnant until today. These unprecedented monthly decreases in disposable personal income come in the middle of the latest economic recession that started in December of 2007 and officially ended in June of 2009.
The five-year growth rate turned negative in December of 2009 – the worst growth rate in the history of the series – and currently stands at zero percent in September of 2011, the second worst growth rate value. Compared to last year, income is down 0.5%. Disposable personal income hit a record low in terms of a year-over-year drop at -5.3% in May of 2009. For comparison, in the later part of 1974 disposable personal income fell close to 4% on a year-over-year basis, however the five year rate held up much better in that time period because it came on the heels of very high growth rates in the early 1970s. This wasn’t the case this time around, as high annualized rates during the great recession came on the heels of relatively modest income growth prior to the recession. That means inflation adjusted per capita disposable personal income is currently at roughly the same level it was in September 2006, marking the longest period of stagnation in the history of this series. A rather gloomy picture, indeed!
