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FHFA House Prices – 2013:Q2

New data from the Federal Housing Finance Agency (FHFA) showed that home prices continue to rise, although the rate of increase in Arkansas remains below the national average.   Among the various indexes published by the FHFA, the most informative is the “Expanded-Data Index,” which incorporates data from FannieMae, FreddieMac, FHFA as well as county records.  By this measure, Arkansas house prices in the second quarter were unchanged from the previous quarter, but were up 2.7% from a year ago.  Nationwide, the Expanded-Data Index showed prices up 2.4% from the previous quarter and up 7.5% from 2012:Q2.  As shown in the chart below, it is not surprising that Arkansas house price appreciation is slower than the national average:  During the nationwide home price crash, declines in Arkansas were far smaller than for the U.S. as a whole.  Compared to the peak of home prices in early 2007, prices in Arkansas are down 5.6% while the nationwide average is down 17.6%.

Source: Federal Housing Finance Agency

Data for Arkansas’ metro areas showed that the upward momentum in house prices is widespread.  According the FHFA “All-Transactions Indexes” (which include sales and refinancings), prices were flat in the Little Rock metro area but were up in all other parts of the state.  Over the past year, the largest price increases have been in the Fayetteville-Springdale-Rogers MSA — which had also experienced the largest decline from 2007-2010.  Prices have also been rising at a brisk pace in Texarkana, Hot Springs, and Jonesboro.  Over the past 5 years, prices have increased in Jonesboro and Texarkana, and have held steady in Fort Smith.

Source: Federal Housing Finance Agency; Seasonal adjustment by the Institute for Economic Advancement

The MSA house price data are broadly consistent with the CoreLogic® data that we discussed in a recent post.  Specifically, the CoreLogic data suggested that price increases in Fayetteville and Texarkana were particularly robust after excluding “distressed sales.”  The FHFA data are based on mortgages that are processed through FannyMae and FreddieMac, and are likely to under-sample distressed sales. The CoreLogic data also suggested that recent house price appreciation has been relatively slow in Fort Smith and Hot Springs.

The chart below illustrated the longer-run perspective, comparing FHFA house prices indexes for Arkansas’ MSAs from a common starting point:  2007:Q1.  Over that 6-1/2 year time span, prices have increased in all of the state’s metro areas except for Hot Springs, Memphis, and Fayetteville.  Prices in Northwest Arkansas suffered the state’s largest declines during the house price collapse — down almost 20% in early 2011.  But since that low-point, prices in the Fayetteville MSA have been showing significant recovery.  In Texarkana, the net change in house prices since 2007:Q1 has been an increase of over 10%.

Source: Federal Housing Finance Agency; Seasonal adjustment by the Institute for Economic Advancement

 

A Snapshot of Home Foreclosure Activity in Arkansas

This just in:  The data-provider CoreLogic* has released new data on home foreclosure activity in Arkansas.  The data for May show that the state’s foreclosure rate was 1.82%, up from 1.58% in May of 2012.  The U.S. average for May 2013 was 2.61%, down from 3.46% a year earlier.  These rates reflect the percentage of loans that are in some stage of the foreclosure process.

A broader indicator of homeowner financial distress–and a leading indicator of potential foreclosure activity in the future–is the 90-day delinquency rate.  At 5.34%, the delinquency rate for Arkansas was basically unchanged from a year earlier.  The U.S. rate declined over the same period, but is still slightly higher than the rate for Arkansas.

Source: CoreLogic

*More information about CoreLogic, a data and analytics company, can be found at CoreLogic.com

Arkansas Home Sales – June 2013

Late last week, the Arkansas Realtors® Association (ARA) released data for home sales in June.*  As shown in Figure 1, June sales dipped slightly from the relatively high level of the previous month, but sales in both May and June exceeded the peak months of 2011 and 2012.  June sales were 4.0% above the level of a year earlier.  For the year to date, home sales are running 8.9% higher than in 2012.

Figure 1:
Source: Arkansas Realtors® Association

The 2013 recovery of home sales from a flat pace in 2011 and 2012 is more apparent after adjusting for recurring seasonal patterns in the data.  As shown in Figure 2, seasonally-adjusted home sales surged in response to two rounds of Federal home-buyer tax credit programs in 2009 and 2010, but suffered a sharp downturn in the months immediately following those incentive programs.  For the next two years, home sales showed little if any upward momentum.  Sales have been rising since about the beginning of this year.

Figure 2:
Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement

The upturn in sales during 2013 is even more evident after smoothing out the monthly ups and downs by using quarterly sales totals, as shown in Figure 3.

Figure 3:
Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement

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*The news release from ARA noted that “All 2013 reports have been updated to reflect more accurate numbers for Clark County… January 2012 through June 2012 reports have also been updated. The remaining 2012 reports will be updated each month as the 2013 reports become available.”  A comparison of the revised reports with the previously published data showed that sales information for Johnson County for 2013 was also updated.

The partial nature of the revisions present some conceptual problems for interpreting the existing time-series data.  However, the magnitude of the Clark County revisions for the first six months of 2012 are relatively small:  With an average revision less than 6 home sales per month, the changes are quantitatively insignificant.

April Home Sales

The Arkansas Realtors® Association announced yesterday that April home sales were up 13.6% compared to the previous year.  The fact that home sales are increasing is certainly good news, but the year-over-year comparison probably overstates the magnitude of the improvement.

As shown in the figure below, home sales in April 2012 were unusually low:  Sales typically follow a rising trajectory for the first half of the year but experienced an down-tick in April of last year.  This kind of month-to-month variability is not surprising.  The sales statistics are based on the closing date of sales transactions.  It is often the case that a flurry of closings will take place at the beginning or end of a month, spilling over from one month to the next.  Monthly sales totals reflect this volatility, recommending the use of averages or totals over longer periods of time.  For example, yesterday’s report noted that year-to-date home sales were up 7.9% in April — not as impressive as the 13.6% headline, but a more realistic assessment of improvement in the residential real estate market thus far 2013.

Source: Arkansas Realtors® Association

The second figure, below, illustrates the trend in home sales after removing the prominent recurring seasonal patterns.  After seasonal adjustment, the month-to-month volatility is more noticeable, but so is the generally increasing trend in 2013.  A better illustration of the trend will be available when we have figures for the entire second quarter of the year.  With that data in hand, we will be able to assess the data after seasonal adjustment and quarterly averaging.

Source: Arkansas Realtors® Association; seasonal adjustment by the Institute for Economic Advancement

 

Arkansas Home Sales – 2013:Q1

The Arkansas Realtors® Association (ARA) announced this morning that March home sales were up 7% from the previous year.  Sales in the first two months of the year had been somewhat volatile, with year-over-year sales up 11.6% in January but down 1.6% in February.  As shown in the figure below, home sales typically start out slow in the early months of the calendar year, reaching a peak in the summertime.  The sharp ramp-up in March bodes well for the outlook for the rest of the year.  In fact, the volume of sales in March 2013 was the highest level we’ve seen for that month since 2010, when the Federal home-buyer’s tax credit was in its penultimate month.

Source: Arkansas Realtors® Association

After seasonally adjusting the data, the zero-growth trend in home sales over the past two years is evident.  But seasonally adjusted sales in March were well above the 2000 homes-per-month pace that seems to have constrained the market in 2011 and 2012.

Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement

Perhaps the most important aspect of this morning’s report is the cumulative sales total for the first quarter of the year.  The ARA statistics showed a 5.2% increase in year-to-date sales compared to 2012.  After seasonal-adjustment of the quarterly data, the figure below shows a sharp upturn in 2013:Q1.

Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement

Home sales and residential construction have been among the weakest sectors in the current economic recovery, in spite of historically low mortgage rates and relatively low home prices.  The home sales data for January through March of 2013 suggests that the long-awaited recovery in Arkansas residential real estate markets might finally be emerging.

January Home Sales Up 11.6%

The Arkansas Realtors® Association (ARA) announced yesterday that January home sales were up 11.6% from the previous year.  After several months of some slow sales growth, the January figures would seem to indicate some improvement in Arkansas residential real estate markets.  However, there are good reasons to avoid being overly enthusiastic about the report.

First, as illustrated in the chart below, January tends to be the slowest sales month of the year.  Although the January 2013 sales total of 1,448 is the highest January total since 2008, total sales in 2013 will depend far more crucially on the sales figures in the peak summer months.  Weak sales in the summer would completely swamp the sales gains from January.

Source: Arkansas Realtors® Association

A second reason to be cautious in interpreting the January sales figures is the volatile nature of month-to-month fluctuations in home sales.  The ARA had previously reported that sales in November 2012 were up 6.6% from the previous year but that December sales were down 6.2%.  The January increase should be interpreted in light of this pattern of zig-zags.  Moreover, severe weather in the final week of 2012 might have distorted the statistics for both December and January.  The ARA sales statistics refer to home-sale closings.  With much of the state paralyzed by ice and snow snow, and with many homes and businesses lacking electricity, it is quite possible that some final inspections and closings were delayed until after the start of the new year.  This would help to explain both the downturn in the December sales figures and the sharp increase in January.  If we consider the two-month period of December 2012/January 2013, total sales were up only 1.3% from the same time a year earlier.

Nevertheless, there is reason to be cautiously optimistic about the outlook for home sales in 2013. Financing rates remain at all-time lows, home prices have appear to have bottomed-out, and general economic conditions continue to improve.  Although the sales trend has been flat for the past two years, seasonally-adjusted data shown in the figure below gives some indication of a slight upturn in recent months.  The pace of sales growth in the upcoming spring months should give a better indication of whether this apparent upturn represents a lasting improvement.

Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement

 

Arkansas Home Sales in 2012 – Zero Growth

The Arkansas Realtors® Association (ARA) released new home sales data yesterday, covering the final two months of 2012.  November sales were up 6.6% from the previous year, while December sales were down 6.2%.  For the two-month average, home sales were essentially flat (+0.1%) compared to the same period in 2011.  The chart below shows that Arkansas home sales in 2012 were a repeat of the 2011 experience:  a typical seasonal pattern with no apparent change in trend.  In fact, the annual figures from the ARA show that sales in 2012 were down 1.1% for the year as a whole.

Source: Arkansas Realtors® Association

After seasonally adjusting the data to statistically remove recurring annual patterns, the flat-line for Arkansas home sales becomes even more evident.  In the figures below, seasonally-adjusted data are displayed for the monthly sales data and for quarterly totals.  Both charts illustrate the absence of any discernible trend over the past two years.

Sources: Arkansas Realtors® Association, Institute for Economic Advancement
Sources: Arkansas Realtors® Association, Institute for Economic Advancement

The release of sales data for November and December was, in some sense, anticlimactic — the final two months are typically among the slowest sales months of the year, so there was little chance of a substantial year-end surprise.  Sales during the peak summer months of 2012 had already shown that annual totals would be little-changed from the previous year.

Looking ahead to 2013, there are reasons to be cautiously optimistic:  Financing rates remain at all-time lows, home prices have appear to have bottomed-out, and general economic conditions continue to improve (albeit slowly).  Foreclosures and distressed sales will continue to be a negative factor, since foreclosures add to available inventory and tend to put downward pressure on prices.  Nevertheless, this is likely to be less of a drag on home sales over time as the pace of foreclosure activity continues to slow.  Overall, our forecast for home sales in 2013 remains a modest increase of about 6%.

Arkansas Home Prices – 2012:Q3

Yesterday’s report on home sales included data showing that average home prices were up 7.8% from October 2011 through October 2012.  On a year-to-date basis, average prices were up 10.4%.  Average sales prices are not necessarily a good measure of overall home values — they sometimes simply reflect changes in the mix of homes that are presently selling.   If higher-price home sales are strong and lower-price home sales are lagging, we would see an increase in the average sales price even if overall home values are unchanged.

In this case, however, the realtors’ sales price data is corroborated by the latest information on home values from the Federal Housing Finance Agency (FHFA).  The FHFA “Purchase-Only Index” for Arkansas shows home prices up 1.6% in the third quarter, and up 7.1% from a year earlier.  For the nation as a whole, home prices were up 2.0% in the third quarter — 3.3% higher than the previous year.  As information accumulates, it is becoming increasingly apparent that home prices have bottomed out and are are now showing at least modest rates of appreciation.

Source: Federal Housing Finance Agency

The FHFA home price indexes are constructed using sales price information from all mortgages processed by FannieMae and FreddieMac.  In order to expand the coverage to include other mortgages, the FHFA has recently introduced an “Expanded Index” that also includes information from county recorder offices.  The latest information from this data series also shows a turnaround in home prices.  In the third quarter, the expanded index data shows prices up 1.2% in Arkansas and up 1.0% for the U.S.  Compared to the third quarter of 2011, prices were up 5.4% in Arkansas and 3.4% nationwide.

Source: Federal Housing Finance Agency

In order to accumulate enough sales-price data to provide reliable indicators for metro-area home prices, the FHFA also constructs a set of “All Transactions” indexes that include information from actual home sales as well as appraisals associated with refinancing.  Recent data for this set of statistics show smaller home price increases — perhaps because appraisers have recently been providing relatively conservative estimates of home values.  Nevertheless, the overall pattern is similar, with prices appearing to have reached a trough, if not yet a clear upturn.

Source: Federal Housing Finance Agency

The all-transactions data shown above also includes price data for the state’s largest metro areas, Little Rock and Fayetteville.  The distinctiveness of local market conditions is evident in this comparison.  Prices in Northwest Arkansas have followed a pattern similar to the national average, while those in Little Rock have shown relatively small changes over time.  As shown in the table below, home prices in the state’s other metro areas have shown differing patterns.  In the third quarter, the all-transactions indexes rose in all metro areas except Little Rock (which was essentially unchanged).  Compared to a year earlier, prices are higher in five metro areas, and are down only for Hot Springs, Little Rock, and Memphis.

 

Arkansas Home Sales – October 2012

A new report from the Arkansas Realtors Association shows October home sales up 5.9% from the previous year. Home sales typically trend downward during the autumn months of the year, but the pace of the decline can differ from year to year.  As shown in the chart below, sales dropped off sharply from September to October 2011, but dropped only a little from this year’s September sales total.  Hence, today’s report showing a year-over-year increase cannot be viewed in isolation from last month’s report that showed September sales down sharply from the previous year.  Combining this month’s report with last month’s report, sales for the September-October 2012 were down 0.6% from the same period in 2011.

Source: Arkansas Realtors® Association

After removing the pronounced seasonal component of the home sales data, the trend during 2012 has been flat — with sales down just slightly from the previous year.  In fact, today’s report showed that year-to-date home sales were down 2.4% from the 2011 pace.  November and December are usually two of the slower months of the year, so it is unlikely that sales during the remainder of 2012 will have much of an impact on annual totals.  When all the data are in, we continue to expect that 2012 home sales will be down slightly from the previous year.

Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement

Arkansas Home Sales – September 2012

On Monday–just one day before the Arkansas Economic Forecast Conference–the Arkansas Realtors® Association (ARA) released home sales data for September.  Total sales for the month, 1971, differed from the projection embedded in the Arkansas forecast by only 18 homes.  Consequently, the new data required no real adjustment to the forecasts.  As shown in the two figures below, home sales have shown little growth this year compared to 2011.  For the first 9 months of the year, ARA reports that total sales are down 0.5%.

The peak summer sales season has passed, so home sales over the remainder of the year are unlikely to have any substantial impact on this year-to-year comparison.  The forecast presented on Tuesday anticipates that home sales will end the year essentially unchanged (-0.1%) from the 2011 totals.  With record-low mortgage rates, home prices starting to show some upward momentum, and employment steadily improving, some rebound in home sales is expected in 2013.  The forecast anticipates growth of 5.9%.

Source: Arkansas Realtors® Association
Source: Arkansas Realtors® Association; Seasonally adjusted by the Institute for Economic Advancement