FHFA, the oversight agency for Fannie Mae and Freddie Mac, released their monthly US Housing Price Index for April. The index shows some stabilization since January however, April is the last month of the federal tax credit for first time buyers and existing homeowners so it would be reasonable to expect declines over the next 2-3 months.
U.S. house prices rose 0.8 percent on a seasonally adjusted basis from March to April, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 0.3 percent increase in March was revised to a 0.1 percent increase. For the 12 months ending in April, U.S. prices fell 1.5 percent. The U.S. index is 12.8 percent below its April 2007 peak.
The index lags NAR’s Existing Home Sale by one month but it is a repeat sales index rather than an aggregate report. The index tracks Fannie and Freddie purchases mortgages where they acquire the paper or provide a guaranty, which dominates the mortgage business and provides the standardization that the secondary mortgage market relies on. This promotes liquidity of the US mortgage market but is limited to conforming mortgages of $417,000 in most of the country and $729,750 in designated high priced housing markets like the NYC metro area.
As a result of its data source, this repeat sales index is NOT a proxy for the US Housing market because it is skewed toward the sub-million housing market, roughly 80% of the US housing stock but is performing much better than the remainder because of the standardization provided by the former GSEs (Fannie and Freddie) and the backing of the federal government. Still, it represents the majority of the US housing market and warrants observation.
Since I am wary of seasonal adjustments my chart tracks the non-seasonally adjusted index, even though the press release relies on seasonal adjustments – the trend is the same but the month over months vary somewhat.
NAR released its May existing home sales report today. This was one of the most bizarre existing home sale reports I can recall.
First of all, the expectation of a drop in sales activity was widely expected due to the end of the federal tax credit, yet economists surveyed were anticipating an increase in sales in May? Real estate professionals were bracing themselves for a decline in sales in May.
Economists surveyed by Dow Jones Newswires expected existing-home sales to climb by 5.0%, to a rate of 6.06 million. The surprise decline followed two increases driven by a tax incentive for first-time buyers that the government enacted to spur a housing sector recovery.
I viewed the impact of the tax credit as “poaching” sales from the next 60-90 days rather than a vehicle to jump start the housing market. We really need jobs first.
But if you look closely at the data, M-O-M sales were up or flat in each of the 3 regions except the northeast, which posted an 18.3% seasonally adjusted decline.
The report headline was generally accurate “May Shows a Continued Strong Pace for Existing-Home Sales” if you remove the northeast from consideration.
Sales price showed the same pattern. While US prices were up 2.7% M-O-M, the northeast prices declined 2.2%.
My interpretation of this “Northeaster” centers around foreclosures. The south and west posted significant foreclosure activity and price declines nearly 2 years ahead of the northeast. The midwest hasn’t seen the same volatility as the other regions. Perhaps the west and south have been pummeled enough that they are actually seeing a bottom in both sales and prices trends. Foreclosure activity is flowing freely while the northeast seems to be lagging in that regard.
Ok, I’m reaching through generalizations but why the disparity by region?
Here are this month’s metrics:
I have a great conversation with Nicholas Retsinas, Director, Harvard University’s Joint Center for Housing Studies. He and his staff just released The State of the Nation’s Housing 2010, a must read overview of the challenges facing the US housing market.
Here are other resources published by JCHS.
Check out the podcast.
Tags: Harvard JCHS