Published on: Jan 23, 2015 @ 9:42 am
US manufacturing output rose modestly in
December, slowing
from the torrid gains registered a month earlier but still
signaling that American industry is weathering the impact of
a strong dollar and weaker overseas markets. Factory output
rose 0.3% last month, the Federal Reserve said on Friday.
That marks the fourth straight month of growth although the
pace was slower than the revised 1.3% expansion in November.
The output reading is consistent with a survey of factory
manager sentiment released on Jan. 2 that pointed to a
weaker pace of growth in activity last month. Economists
polled by Reuters had forecast manufacturing output rising
0.2% in December. Mining output jumped by 2.2%, reflecting
an increase in oil and gas extraction, although a drop in
drilling and well-servicing activity tempered the gains.
The gains in manufacturing and mining were not enough to
compensate for a sharp 7.3% drop in utilities output, and
overall industrial production edged down 0.1%, its first
decline in four months. The decline in utilities was driven
be steep falls in sales of electricity and natural gas.
Zillow – owners’ equivalent rent and the housing bubble:
feature or bug?
The Bureau of Labor Statistics (BLS) released its December
2014 Consumer Price Index (CPI) data, one of the two main
data series used to measure how prices change in the United
States. CPI data are produced from the results of the BLS
Consumer Expenditure Survey (CES). The CPI data include a
number of sub-indices for particular goods, including
estimates of housing prices. For homeowners, the CPI series
on Owners’ Equivalent Rent (OER) is designed to gauge how
much homeowners’ shelter costs contribute to changing
prices. This is particularly difficult since, unlike other
goods such as groceries or cars, most homeowners’ monthly
housing costs do not change much on a month to month basis
due to the prevalence of fixed-rate mortgages. To get a
better sense of how much homeowners’ shelter costs are
changing, the CES asks homeowners the following question:
“If someone were to rent your home today, how much do you
think it would rent for monthly, unfurnished and without
utilities.” One unique feature of the OER series is that,
unlike most housing price or housing value indexes including
the Zillow Home Value Index (ZHVI), during the 2000s the OER
series did not suggest a rapid run-up in shelter costs in
advance of the Great Recession, or a steep drop in shelter
costs during the housing bust. Instead, the OER series grew
steadily from 2000 through 2009 – roughly in line with the
growth of all prices – before flattening out in 2009 and
2010. Since 2010, the OER series has resumed its pre-crisis
trend. Part of the difference between OER and most other
housing indices is the formulation of the question. The CES
question mixes purchase prices and rent prices. Since rents
grew slowly during the housing bubble but grew quickly
during the housing bust, owners may have been focusing more
on trends in their local rental market rather than trends in
their local purchase market when responding to the survey.
Regardless, the absence of an obvious housing bubble or bust
in the OER series, and its differences to most other home
price/value indices, raises questions about what exactly is
being measured.
DataQuick – Southern California home sales and median sale
price rise
CoreLogic today released its December Southern California
housing market report. The number of homes sold increased
sharply from the month of November and rose modestly from
the same time a year earlier, marking one of just two months
in 2014 to post a year-over-year gain in sales. The region’s
median sale price also increased from November and rose year
over year for the 33rd consecutive month, although that
annual gain was the lowest since the string of price
increases began in spring 2012. A total of 19,205 new and
resale houses and condos sold in Los Angeles, Riverside, San
Diego, Ventura, San Bernardino and Orange counties in
December 2014. That was up month over month 22.8% from
15,643 sales in November 2014, and up year over year 4.3%
from 18,415 sales in December 2013, according to CoreLogic
DataQuick data. Sales usually increase from November to
December. On average, Southern California sales have risen
13.1% between those two months since 1988, when CoreLogic
DataQuick data began. On a year-over-year basis, sales in
2014 fell each month except in September (+1.2%) and
December. The total number of homes sold in Southern
California in all of 2014 fell 8.7% compared with 2013.
December home sales have ranged from a low of 13,240 in 2007
to a high of 36,865 in 2003. December 2014 sales were 20.2%
below the December average of 24,067 sales since 1988. “One
month doesn’t make a trend, but December’s uptick in home
sales might indicate renewed interest in housing thanks to
lower mortgage rates and job growth in recent months,” said
Andrew LePage, data analyst for CoreLogic DataQuick. “The
gain came despite a continued decline in the share of homes
sold to investors and cash buyers. If demand continues to
build we’ll need more supply to keep up with it. One of the
big questions hanging over the housing market is whether
higher demand and home values will lead to a lot more people
listing their homes for sale, as well as more new-home
construction, which remains well below average.”
The median price paid for all new and resale houses and
condos sold in the six-county region in December 2014 was
$415,000, up 0.7% month over month from $412,000 in November
and up 5.1% year over year from $395,000 in December 2013.
The median hasn’t moved much since September 2014, when it
was $413,000. The median’s peak for 2014 was $420,000 in
August. The region’s median sale price has increased on a
year-over-year basis for the past 33 consecutive months, but
the 5.1% annual gain in December 2014 was the smallest since
April 2012, when the $290,000 median rose 3.6% from a year
earlier. Southern California’s December median sale price
was 17.8% below the peak median price of $505,000 reached in
March, April, May and July of 2007. Among the region’s six
counties, the December 2014 median in Orange County
($591,000) was the closest – within about 8% – to its peak
of $645,000 in June 2007. Home prices in Southern
California have been rising at different rates depending on
price segment. In December, the lowest-cost third of the
region’s housing stock experienced a 12.9% year-over-year
increase in the median price paid per square foot for resale
single-family detached houses. The annual gain was 6.3% for
the middle third of the market and 2.3% for the top,
most-expensive third. The number of homes that sold for
$500,000 or more in December 2014 rose 10.1% compared with
December 2013. Sales below $500,000 rose 3.4% year over
year, and sales below $200,000 dropped by 20.6%.
Among the other Southern California housing market
highlights from December 2014:
– Foreclosure resales represented 5.0% of the resale market
in December. That was down from a revised 5.5% in November
2014 and down from 5.8% in December 2013. In recent months
the foreclosure resale rate has been the lowest since early
2007. In the current cycle, foreclosure resales hit a high
of 56.7% in February 2009. Foreclosure resales are purchased
homes that have been previously foreclosed upon in the prior
12 months.
– Short sales made up an estimated 6.2% of resales in
December, down from a revised 6.4 in November 2014 and down
from 10.2% in December 2013. Short sales are transactions in
which the sale price fell short of what was owed on the
property.
– Absentee buyers – mostly investors – bought 23.4% of the
homes sold in December. That was down from a revised 23.8%
in November 2014 and down from 26.9% in December 2013. The
December 2014 absentee level ties the October 2014 level as
the lowest for any month since October 2010, when 22.1% of
homes were sold to absentee buyers. The peak absentee share
was 32.4% in January 2013, and the monthly average since
2000, when CoreLogic DataQuick absentee data began, is about
19%. Absentee buyers include those who purchase vacation
homes or other properties that public property records
suggest are not used as primary residences.
– Cash buyers accounted for 23.8% of December home sales,
down from a revised 24.3% in November 2014 and down from
28.8% in December 2013. The December 2014 cash level was the
lowest for any month since January 2009, when 22.0% of homes
were bought with cash. The peak was 36.9% in February 2013,
and the monthly average since 1988 is 16.7%.
– Southern California home buyers committed a total of
$4.43 billion of their own money in the form of down
payments or all-cash purchases in December. That was up from
a revised $3.47 billion in November 2014. The out-of-pocket
total peaked in May 2013 at $5.41 billion.
Jumbo loans, or mortgages above the old conforming limit of
$417,000, accounted for 31.3% of purchase lending in
December, up from a revised 30.5% in November 2014 and up
from 28.5% in December 2013. The July/August 2014 level of
32.3% was the highest since the credit crunch struck in
August 2007. Prior to August 2007, jumbo loans accounted for
around 40% of the home-loan market. The jumbo level dropped
to as low as 9.3% in January 2009.
– Adjustable-rate mortgages (ARMs) represented 12.1% of
home purchase loans in December, up from 12.0% in November
2014 and down from 13.0% in December 2013. The ARM share
dropped to as low as 1.9% of home purchase loans in May
2009. Since 2000, a monthly average of about 30% of purchase
loans have been ARMs.
– All lenders combined provided a total of $6.19 billion in
mortgage money to Southern California home buyers in
December, up from a revised $4.88 billion in November 2014
and up from $5.40 billion in December 2013.
– The typical monthly mortgage payment for Southern
California home buyers in December was $1,558, down slightly
from $1,560 in November 2014 and down from $1,594 in
December 2013. Adjusted for inflation, the December 2014
typical payment was 35.6% below the typical payment in the
spring of 1989, the peak of the prior real estate cycle. It
was also 47.3% below the current cycle’s peak in July 2007.
Oil prices slip
Brent crude oil prices fell below $50 a barrel on Monday
after the global economic outlook darkened and Iraq
announced record oil production. The world’s biggest energy
consumer, China, faces significant downward pressure on its
economy, its premier Li Keqiang was quoted by state radio as
saying on Monday. China is expected this week to report
growth slowing to 7.2% from a year ago, the weakest since
the depths of the last global economic crisis. Data from
China’s National Bureau of Statistics showed on Sunday house
prices fell for a fourth straight month. Brent crude traded
at $49.42 a barrel by 1445 GMT, down 75 cents. US crude was
down 84 cents at $47.85 a barrel. Oil prices have dropped
by more than half since last June as output around the world
soared while demand growth slowed. Although the
International Energy Agency (IEA) said last week a reversal
in the trend was possible this year, it added that prices
may fall further before rising. “There’s still more supply
than demand and that’s a situation that will not change in
just a few weeks,” said Hans van Cleef, energy economist at
ABN Amro.
DataQuick – Bay Area home sales and prices rise in December
2014
CoreLogic today released its December San Francisco Bay Area
housing market report. Home buying picked up steam late in
2014, with December posting strong month-over-month and
year-over-year sales gains. Price appreciation remained
lower than it had been earlier in 2014, but the median sale
price, which has moved little since late last summer, was
still nearly 10% higher than it was the same time a year
earlier. A total of 7,456 new and resale houses and condos
sold in the nine-county Bay Area in December 2014. That was
up month over month 24.2% from 6,003 in November 2014 and up
year over year 14.1% from 6,532 in December 2013, according
to CoreLogic DataQuick data. A rise in sales from November
to December is normal for the season. Bay Area sales have
risen an average of 9.6% between those two months since
1988, when CoreLogic DataQuick data began. The region’s
monthly home sales have ranged between 7,000 and 8,000 for
seven of the last nine months. Since 1988, December sales
have varied from a low of 5,065 in 2007 to a high of 12,349
in 2003, and the December 2014 sales were 12.1% below the
December average of 8,482.
The median price paid for a home in the Bay Area was
$603,000 in December 2014. That was up month over month by
0.3% from $601,000 in November 2014 and up year over year
9.9% from $548,500 in December 2013. December 2014 was the
33rd consecutive month with a year-over-year gain in the
median sale price. However, those annual increases slipped
from double-digit to single-digit in the last two months of
2014. In December 2013 the region’s $548,500 median was
23.9% higher than in December 2012. The Bay Area median
sale price peaked at $665,000 in June and July 2007 and
dropped to a post-boom low of $290,000 in March 2009. “The
Bay Area’s residential real estate market ended 2014 on a
cautiously optimistic note, with moderate year-over-year
increases in both median price and sales counts,” said John
Karevoll, CoreLogic DataQuick analyst. “Supply continues to
be constrained, and the mortgage market remains difficult.
As long-term trends, cash sales and investor purchases are
declining slowly, but they are still significant market
factors. We know that there is a significant amount of
pent-up demand lying in wait, and there is a good chance the
market could see a surge this spring and summer as more
homes are put up for sale.”
Other December 2014 Bay Area housing market highlights
include the following:
– Adjustable-rate mortgages (ARMs), an important indicator
of mortgage availability, accounted for 22.3% of the Bay
Area’s home purchase loans in December 2014, down from a
revised 23.6% in November 2014, and up from 22.2% in
December 2013. ARMs hit a low of 3.0% of purchase loans in
January 2009 and reached a post-housing-bust peak of 27.8%
in April 2014. Since 2000, ARMs have accounted for 46.2% of
all Bay Area purchase loans.
– Jumbo loans, or mortgages above the old conforming limit
of $417,000, accounted for 54.1% of purchase lending in
December 2014, down from a revised 56.4% in November 2014,
and up from 48.2% in December 2013. Jumbo usage dropped to
as low as 17.1% in January 2009. It reached 56.4% in May
2014 and has stayed close to that percentage since. Prior to
the August 2007 credit crunch, jumbo loans accounted for
more than 60% of the Bay Area’s home purchase loans.
– Foreclosure resales accounted for 3.7% of all resales in
December 2014, up from 2.8% in November 2014, and down from
4.6% in December 2013. Foreclosure resales in the Bay Area
peaked at 52.0% in February 2009, while the monthly average
over the past 17 years is 9.6%.
– Foreclosure resales are purchased homes that have been
previously foreclosed upon in the prior 12 months.
– Short sales made up an estimated 4.0% of Bay Area resales
in December 2014, up from a revised 3.9% in November 2014
and down from 7.9% in December 2013. Short sales are
transactions in which the sale price fell short of what was
owed on the property.
– Absentee buyers – mostly investors – purchased 18.3% of
all Bay Area homes in December 2014, up insignificantly from
a revised 18.2% in November 2014 and down from 22.5% in
December 2013. The November 2014 absentee level was the
lowest for any month since August 2010, when it was 17.8%.
The peak absentee share was 28.7% in February 2013, and the
monthly average since 2000, when CoreLogic DataQuick
absentee data began, is 15.7%.
– Cash buyers accounted for 19.0% of home sales in December
2014 – the lowest for any month since the cash buyer level
was 18.5% in October 2008. The December 2014 absentee level
was down slightly from a revised 19.3% in November 2014 and
down from 23.5% in December 2013. The peak was 32.3% in
February 2013, and the monthly average since 1988 is 13.7%.
– Bay Area home buyers used $2.18 billion of their own
money in the form of a down payment or as an outright cash
purchase in December 2014. They borrowed $3.06 billion in
mortgage money from lenders.
– The typical monthly mortgage payment for Bay Area home
buyers in December 2014 was $2,264. Adjusted for inflation,
that payment was 21.6% below the typical payment in spring
1989, the peak of the prior real estate cycle. It was 42.0%
below the current cycle’s peak in July 2007 and 77.1% above
the February 2012 bottom of the current cycle.