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Market Update - March 2012
- 1. 3-2012 Market Update What’s UP/Down with Housing and Lending? www.kendalltodd.com (c) KendallTodd, Inc. - 2012
- 2. Key Takeaways 1) US Economy: Continue to improve, but slowing (neutral). 2) Jobs: Continue to improve (positive). 3) Savings: Declining slightly (negative). 4) Inventory: Continue to decline (positive). 5) Valuation: Still declining (negative). 6) Future: Housing stabilizing, but prices will take longer to respond. 7) Investors: Paying cash to get bargain prices. 8) New Buyers: Mass affluent isn’t as affected by stock price appreciation, still waiting to see housing prices improve. 9) Overall: Bottom forming in housing, but still have a ways to go. 2 (c) KendallTodd, Inc. - 2012
- 3. Market UPdate 3 General Street Market Level (c) KendallTodd, Inc. - 2012
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- 5. (c) KendallTodd, Inc. - 2012 5
- 6. $163,500 Median Price (c) KendallTodd, Inc. - 2012 6
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- 8. Where Are We Now? 8 (c) KendallTodd, Inc. - 2012
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- 22. Market UPdate 22 General Street Market Level (c) KendallTodd, Inc. - 2012
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- 34. (c) KendallTodd, Inc. - 2012 34
- 35. Key Takeaways 1) US Economy: Continue to improve, but slowing (neutral). 2) Jobs: Continue to improve (positive). 3) Savings: Declining slightly (negative). 4) Inventory: Continue to decline (positive). 5) Valuation: Still declining (negative). 6) Future: Housing stabilizing, but prices will take longer to respond. 7) Investors: Paying cash to get bargain prices. 8) New Buyers: Mass affluent isn’t as affected by stock price appreciation, still waiting to see housing prices improve. 9) Overall: Bottom forming in housing, but still have a ways to go. 35 (c) KendallTodd, Inc. - 2012
Editor's Notes
- 3-2012 – Bianco Research provides this chart showing the genesis of the risk that was taken, and why…
- 3-2012 – Only two slightly positive markets last month of the Case ShillerReporting, Phoenix and .8%, and Miami at .2%, but these remains the worst areas in the US, it could be a canary in the coal mine if they start leading the market prices back.
- 3-2012 – Real Housing Prices are back to 1998 levels, we see prices heading back down, and they could still move a little lower to regress to the current trend line.
- 3-2012 – Largest Decline ever in 2006 for Real Home Price Index
- 3-2012 – According to the Commerce Department, real (inflation adjusted) per capita disposable income fell .9% in the twelve months through November 2011 to $37,000. In September 2006, real per capita disposable income was $37,060. This is the first time since World War II that this income series has declined over a five year period. That hurts savings rates.
- 3-2012 – The first graph shows aggregate consumer debt decreased slightly in Q4. Aggregate consumer debt fell slightly in the fourth quarter. At year end 2012, total consumer indebtedness was $11.53 trillion, dropping by $126 billion (1.1%) the prior quarter. Mortgage balances shown on consumer credit reports fell again ($134 billion or 1.6%) during the quarter; home equity lines of credit (HELOC) balances fell by $12 billion (1.9%).
- 3-2012 – Unemployment claims continue to drop to 358,000, as we can see prior recessions and the 4 week moving average s below 400,000 monthly, the lowest level since May of 2008.
- 3-2012 – This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS. In general, the number of job openings (yellow) has been trending up, and were up about 7% year-over-year compared to November 2010.
- 3-2012 – The purchase index decreased last week, and the 4-week average decreased slightly. This index has mostly been sideways for the last 2 years - and at about the same level as in 1997.
- 3-2012 – Total housing inventory at the end of January fell 0.4 percent to 2.31 million existing homes available for sale, which represents a 6.1-month supply at the current sales pace, down from a 6.4-month supply in December.
- 3-2012 – Although the Case-Shiller data only goes back to 1987, look at what happened following the early '90s housing bust. RI as a percent of GDP bottomed in Q1 1991, but real house prices didn't bottom until Q4 1996 - more than 5 years later!
- 3-2012:The inventory of completed homes for sale was at 57,000 units in January. The combined total of completed and under construction is at the lowest level since this series started.
- 3-2012 – The preliminary Reuters / University of Michigan consumer sentiment index for February declined to 72.5, down from the January reading of 75.0.Overall sentiment is still fairly weak, although sentiment has rebounded from the decline last summer. This was below the consensus forecast of a decline to 74.3.
- 3-2012 – 30-year fixed-rate mortgage (FRM) averaged 3.87 percent with an average 0.8 point for the week ending February 2, 2012, down from last week when it averaged 3.98 percent. Last year at this time, the 30-year FRM averaged 4.81 percent.
- 3-2012 – Still stabilizing over the last few years, improving currently.
- 3-2012 – Potential buyers are well aware that median existing home sales prices have declined substantially at the national level and appear to fluctuate. There is a lot of concern over whether it is “safe” to buy.
- 3-2012 – Inventories of homes for sale have been declining—and months of inventory are highly correlated with changes in home prices. Generally, inventories of homes for sale in the range of 6 months are consistent with stable prices; lower inventories are generally consistent with price appreciation.
- 3-2012 –The stock market has made a solid comeback in the past 3 years and is trying to re-touch the prior peak. That is good news for real estate in terms of providing funds for down payments for middle class families and the ability to buy a second home among the wealthy. While stock market wealth has steadily improved, a lack of recovery in housing wealth still remains a sore spot for many families. The vast middle-class has more of their wealth tied to housing than to the stock market. And the fastest way to get housing wealth recovery is to get the housing demand moving so that inventory gets drawn down. This process is in place with many local markets witnessing 5-year lows in inventory.
- 3-2012 – The December 2011 Realtors Confidence Index survey reports that all cash buyers are 31 percent of the residential existing home sales market. This appears to be reflective of investors starting to buy property with longer term hold in mind.
- 3-2012 – The December 2011 Realtors Confidence Index survey reports that investors continue to make up a significant share of the existing home sales. Prices in some markets are reported to have declined over the past three years to a point where investors can obtain a positive cash flow after making modest improvements. A number of Realtors® reported that investors are effectively shutting first time buyers out of the market by making all cash offers. This is creating some additional pent-up demand which may become evident later this year.
- 3-2012 – More importantly, the rent component is rising, and this component carries the biggest weight in the CPI computation. The rent index rose 0.2 percent in the past month and by 2.4 percent from 12 months ago.
- 3-2012 – Commercial Market starting to stabilize
- 3-2012 – The December 2011 Realtors Confidence Index survey reports that the overall percentage market share of distressed property continues to be in the low 30’s. There is general agreement that foreclosures and short sales had a major, negative impact on home prices. The good news is that the problem appears to have leveled off. The residential markets appear to be absorbing distressed inventory on an orderly basis—which should remove some of the previous price pressures.
- 3-2012 – Sell by May or go away.