Find Out Where Asking Prices and Rents Are Heading, Almost In Real-Time, With the New Trulia Price Monitor and Trulia Rent Monitor
I rely on the major sales-price indexes – Case-Shiller, Federal Housing Finance Agency (FHFA) and CoreLogic – as much as the next guy (or the next housing economist, anyway). They’re essential for understanding where home prices have been going. But they come out between five and eight weeks after each month ends, and the sales prices they report are rooted in asking prices set two or three months earlier. Doing these sales-price indexes right takes time – but buyers, sellers, investors and policymakers need to know what’s happening in the housing market now.
Starting today, we’re closing this gap. The Trulia Price Monitor and the Trulia Rent Monitor show every month what’s happening to asking prices and rents almost in real-time. By focusing on asking prices and releasing each month’s Monitors just days after each month ends, we can detect price movements at least three months before the major sales-price indexes do.
What are the Trulia Price Monitor and Trulia Rent Monitor?
To create the Trulia Price Monitor and Trulia Rent Monitor, we take all the for-sale homes and rentals ever listed on Trulia.com and calculate how asking prices and rents changed month by month. Rather than simply tracking the average or median, we adjust for the changing composition of homes that are listed each month. Therefore, these Monitors reflect the price and rent trends for similar homes in similar neighborhoods over time. For the Trulia Price Monitor, we also account for the regular seasonal fluctuations in asking prices in order to reveal the underlying trend in prices.
The Trulia Price Monitor differs from the major sales-price indexes in important ways.
First, we focus on asking prices. Final asking prices lead sales prices by about two or three months, reflecting the time that homes are typically on the market. In 2011, the Trulia Price Monitor’s national month-on-month changes track the seasonally-adjusted month-on-month changes in Case-Shiller and FHFA two months later. Asking prices, however, are NOT a perfect predictor of sales prices: the final sales price for a home can be above or below asking, and some listed homes might not sell. Asking prices and sales prices each have their advantages for understanding the housing market: asking prices have the advantage of showing current market conditions and trends, but sales prices are the best guide to historical and long-term trends in the housing market.
Second, the Trulia Price Monitor uses a different statistical approach: a “hedonic” rather than “repeat-sales” method. The explanation gets technical pretty quickly, but we’ve provided all the details in our FAQs.
Here’s what to expect from us: in the first few days of each month, we will publish price and rent trends for the previous month, for the nation as a whole and for the largest metro areas (for prices, the 100 largest; for rents, most of the 100 largest). We report monthly, quarterly and yearly changes nationally, plus quarterly and yearly changes at the metro-level. Our approach lets us dig deep: in the future, we’ll look at price trends for single-family homes versus condos; homes with one, two and three or more bedrooms; downtown versus suburban trends; and more. Have some other comparison that you’d like us to make? Email us and let us know.
Madness! Asking Home Prices Moved Up in March
Let’s get to the facts. Nationally, asking prices on for-sale homes were 1.4% higher in March than one quarter ago. Prices increased month over month by 0.9% in March and 0.6% in February. What we found through the Monitor is that asking prices had been declining prior to February and reached a low in January 2012. Throughout 2011, asking prices rose slightly in several months of the year, but never more than 0.2% in a month. Asking prices in March were 0.7% below their level one year earlier.
One thing to keep in mind — because the Trulia Price Monitor is seasonally adjusted, these monthly and quarterly increases are on top of typical springtime price jumps. Without adjusting for seasonality, asking prices rose 2.4% quarter over quarter.
Asking Home Prices Are Looking Up for the Sunshine State
But all housing is local. On the up side, the Trulia Price Monitor revealed that asking prices rose year over year in all large Florida metros, and fastest in Cape Coral-Fort Myers and Miami. Asking prices also rose in Phoenix, Pittsburgh and the Detroit area. Meanwhile, local housing markets in much of the West continue to struggle. Prices fell most in Tacoma and Seattle, followed by Sacramento and Las Vegas. All large California metros saw year-over-year price declines. Just check out this metro-level map and see for yourself. Florida and Michigan are looking mighty green (which means rising prices) whereas California is in the red (which means falling prices).
Why do we see price increases in some places and price declines in others? As a general rule, prices are now rising faster in places where prices fell more during the bust and where vacancy rates are higher. In other words, many of the local price increases are bouncebacks: Cape Coral-Fort Myers, Miami and Phoenix all saw huge price drops after the bubble burst and big increases in asking prices this past year. But there are exceptions: Las Vegas prices continue to fall, even after years of steep price declines.
|Top 10 Metros With Largest Price Increases|
|#||U.S. Metro||Y-O-Y % Change in Asking Price|
|1||Cape Coral-Fort Myers, FL||14.8%|
|5||Little Rock, AR||6.7%|
|7||North Port-Bradenton-Sarasota, FL||6.2%|
|8||Palm Bay-Melbourne-Titusville, FL||6.1%|
|9||West Palm Beach, FL||5.8%|
|10||Warren-Troy-Farmington Hills, MI||5.6%|
|Top 10 Metros with Largest Price Decreases|
|#||U.S. Metro||Y-O-Y % Change in Asking Price|
|4||Las Vegas, NV||-7.7%|
Note: Rankings based on the year-over-year changes in asking price among the 100 largest U.S. metropolitan areas. Want to see the full list of price and rent changes for all 100 metros? You can download it here.
No Wonder Your Landlord is Smiling
What about rentals? Nationally, rents rose by 5.0% year on year: unlike prices, rents have been moving steadily upward. During the recession, some owners lost their homes and became renters instead; also, many younger adults deferred the leap from renting to owning. Strong rental demand, combined with little new rental construction, pushed rents higher.
Asking rents rose over the past year in almost all large metro areas included in the Trulia Rent Monitor – regardless of whether asking home prices were going up or down. For example, rents rose strongly in Miami (12.1%) and Denver (9.9%), where for-sale prices also increased. Meanwhile, rental affordability declined in places where rents rose while prices fell, most notably in San Francisco (rents up 11.1%), Seattle (9.7%), San Jose (9.4%) and Boston (9.2%). As for the very largest metros, rents rose 6.2% in New York and 6.1% in Chicago, but only 0.6% in Los Angeles.
So what drives rent trends? Employment growth matters most. San Francisco, Denver, Seattle, San Jose and Austin all had high year-on-year employment growth (through February 2012, according to the Bureau of Labor Statistics) and big rent increases.
Is This Bounceback Here To Stay?
Will these price and rent increases continue? Continued job growth plus declining inventories equal more buyers chasing fewer homes – and therefore higher prices. The big wildcard for prices is the next wave of foreclosures. The robo-signing settlement will accelerate foreclosures, which will ultimately depress prices in neighborhoods where foreclosures are concentrated. Rents this year depend on both job growth and new construction: last year builders broke ground on many multi-family buildings, which should come to market later this year and dampen rent increases.
Want to be the first to know how foreclosures, construction and jobs are affecting prices and rents in April? Come back in early May, when we’ll release the April 2012 Trulia Price Monitor and Trulia Rent Monitor.0 comments
The good, the bad and the ugly on the federal government’s ReFi Plan, and where are home prices heading as of now?
This week’s big news was the plan to expand refinancing eligibility. I’m devoting this week’s post to explaining which problems this plan will and won’t solve, and which other policies being kicked around might solve the problems that easier refinancing won’t. But first, a quick look at the latest home price numbers.
Home Prices Up and Down Depending on Where You Live
Two different home price indexes reported this week that prices have fallen nationally about 4% this year up to August 2011. But prices were relatively stable over the last three months after slipping earlier this year, with Case-Shiller reporting a -0.3% drop and the Federal Housing Finance Agency (FHFA) reporting a +0.6% bump. Nationally, this is a sign that prices might finally be leveling out, which could be the cue that everyone’s been waiting for – the cue for builders to start planning to build single family homes and for banks and home sellers that it’s time to start putting more of their vacant or distressed properties on the market. As always, location matters: this past summer, prices went up the most in Detroit, followed by Chicago, Washington DC, Minneapolis and Boston. So what’s going on here? Well, Detroit’s price rise is a bounceback from the big price decline during the recession – the largest drop among big metros outside the Sunbelt. The other cities’ price increases were helped by a combinationrelatively low vacancy rates and stable job growth. In Atlanta, where jobs are disappearing, home prices fell most, followed by Phoenix, where there are still a ton of vacant homes. Sellers in those cities hoping to unload will have to wait.
The Federal Government’s Re-Fi Plan: The Good, The Bad and The Ugly
Now on to politics and policy. The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, announced an expansion in refinancing eligibility through the Home Affordable Refinance Program (HARP). The official notice is here.
So here’s what’s new: some people who are seriously underwater are now eligible to refinance their First: what does it mean for you? You might be able to refinance if your loan-to-value is more than 125% — which used to be the ceiling for eligibility – and you might be able to pay lower fees to refinance. Also, under these new rules, your lender might be more willing to refinance because it makes refinancing less risky for them. BUT, your loan must be owned or guaranteed by mortgages.
First:what does it mean for you? You might be able to refinance if your loan-to-value is more than 125% — which used to be the ceiling for eligibility – and you might be able to pay lower fees to refinance. Also, under these new rules, your lender might be more willing to refinance because it makes refinancing less risky for them. BUT: your loan must be owned or guaranteed by Fannie Mae or Freddie Mac and you need to be current on your mortgage payments, have no late payments in the last six months, and no more than one late payment in the last twelve months. That’s a big “but” and will disqualify many people who want to refinance, but those who do qualify might save a lot. A rough rule-of-thumb is that lowering your mortgage rate by a point will lower your monthly payment by around 10%, but the effect on your payment depends on the details of your loan.
Next:what does it mean for the economy and the housing market? Since borrowers have to be current on their payments to qualify, lots of people on the verge of losing their homeswon’t be helped. And, a lower mortgage rate doesn’t mean a lower loan principal balance right away (even though some borrowers might use the lower rates to shorten their loan and start paying down) – so really underwater borrowers will stay really underwater and still at risk of default and foreclosure. And of course easing refinancing doesn’t help people buy homes because you need to own a home already in order to refinance. So what will this plan do? Stimulate the economy – somewhat. Qualifying borrowers will have lower monthly mortgage payments and therefore more money in their pockets to spend on other things. Who pays for this? Investors in mortgages or mortgage-backed securities – which includes government agencies – who will receive reduced mortgage payments from borrowers. On balance, it’s stimulus because the borrowers will increase their spending more than the investors will decrease theirs. In short, the refinancing expansion is an economic stimulus that avoids the messy politics of trying to get Congress to approve more stimulus plans.
Since the ReFi plan leaves many problems unsolved, debate is brewing on other housing policies. No formal proposals in these areas have come out yet, so treat this as a viewer’s guide to what might be coming next from Washington on housing policy. Grab your beer and chips, and here we go:
1) Principal reductions: The most direct way to prevent future defaults and foreclosures is to reduce mortgage principal balances – in order to get underwater borrowers closer to air. These proposals typically call for the government or whoever the mortgage-holder is to absorb the cost of the reduction. But there’s no free lunch for the borrower.Economist Marty Feldstein proposed that borrowers could have principal reductions in exchange for the lender having “recourse” – which means that a borrower who defaults after a principal reduction could lose not only their house but other assets. Earlier principal reduction proposals called for borrowers who benefited to share any future increases in home value with the government or whoever absorbed the cost of the loan reduction.
2) Renting vacant, foreclosed properties: Bank and government agencies own vacant properties, which aren’t earning them any money – and vacant properties pull down neighboring home values, too. At the same time, as fewer people want to own their own homes, the demand for rentals is rising, leading to lower rental vacancies and sky-high rents. This “plan” aims to kill all birds with one stone, and give owners of vacant properties – or investors who would buy them – incentives to rent them out? Sounds great in theory. Could work in practice if the investors can spruce up these homes and manage them as rentals. The hitch is that lots of the vacant, foreclosed homes are in the outer suburbs (or what you could call, the middle of nowhere), where so much construction during the housing boom took place, but the tight rental markets tend to be in big, dense cities. If we could only figure out how to take a vacant, foreclosed single-family home in Modesto and rent it out as a one-bedroom apartment in San Francisco ….
3) The mortgage interest deduction – just about every economist wants to tackle this, but just about no politician does (can we say, election suicide?). The two hotly debated questions are (1) if the government is going to spend $100 billion annually to support homeownership, is the mortgage interest deduction, as it’s currently designed, the right way to do it? and (2) should the government spend $100 billion annually to help people buy homes in the first place? This is a big, messy question that affects tens of millions of homeowners and all taxpayers. I’ll take this on in a future week.
3) Do we need Fannie Mae and Freddie Mac? – do these institutions help keep mortgage rates low and expand homeownership, or do they deserve blame for the housing mess we’re in? Politicians will ramp up this debate as the housing market moves out of intensive care and can begin to walk on its own with less government support. This, too, I’ll take up in a future week.
How many properties had at least one price cut? When did the first reduction happen and how much was the discount?
Tomorrow morning, the latest Standard & Poor’s/Case-Shiller home price index (a measure of how a typical dollar invested in a local housing market is changing in value) will be released. Based on the most recent reports, home prices have been rising month over month since June, but they are still much lower than they were a year ago. Did this trend continue into August?
We’ll find out tomorrow, but in the meantime, here’s what happened in terms of price cuts during the last month of the summer in each of the 20 U.S. cities included in the Case-Schiller report.
Price Reduction Trends
(does not include metro)
|% of Properties w/ Price Cuts||Avg Days Before First Cut||Avg Discount During First Cut||Probability of Multiple Price Cuts|
|Las Vegas, NV||25%||60||8%||46%|
|Los Angeles, CA||27%||62||8%||39%|
|New York, NY||26%||83||6%||39%|
|San Diego, CA||26%||52||6%||47%|
|San Francisco, CA||21%||57||6%||35%|
NOTE: Price reduction trends for the 20 cities included in the Case-Shiller price index report. This data is based on live, non-foreclosure listings on Trulia.com as of Aug 1, and includes all price reductions from Aug 1, 2010 to Aug 1, 2011.
Welcome. Now that I’m getting settled in my role as Chief Economist at Trulia, I’m kicking off a series of blog posts on Trulia Insights that will sift through the week’s news and explain what really mattered. Different news matters to different people: a trader dealing in real estate investment trusts (REITs) follows every fluctuation in every market indicator, but most of us only care about our local housing market and about the trends that are here to stay. I’ll look back at the week and point to new housing market and economic data that were especially surprising or important, and put it into context. I’ll also highlight insights that are under-the-radar but say something important about housing today and in the future. I’d love your feedback on these posts and any findings you come across that you think are worth discussing.
This week, some thoughts on the latest Case-Shiller home price index and shadow inventory data, as well as new findings that caught my eye about traffic congestion and the mortgage interest deduction:
First up: the S&P Case-Shiller index, an important measure of home price changes, increased for the fourth straight month. Celebrate? Not so fast. Prices usually rise more in these months than at others times of the year. From March to July (this week’s release was the July numbers), the index went up a total of 3.7% – that’s pretty good – but the seasonally adjusted index went up only 0.2%. This means that the 3.7% increase was almost all about the spring/summer bounce that happens most years rather than the beginning of a real long-term trend. One way to take out seasonality is to compare the index to the same time last year, and by that measure home prices fell 4.1%. Not so good.
Next up is the decline in shadow inventory. When there are more homes for sale than there are buyers in a market, prices stay low. But in addition to homes actually on the market, there’s also the “shadow inventory”: homes that aren’t on the market today but probably will be because the homeowner is seriously behind on mortgage payments or the home is in foreclosure or has been taken back by the bank. A large shadow inventory, like a large listed inventory, keeps pressure on prices from rising. CoreLogic reported this week that the shadow inventory is down over 15% in July 2011 versus July 2010. But the current shadow inventory of 1.6 million is still much higher than before the housing crisis, when it was regularly under 500,000. This shadow inventory will have to shrink a lot more before prices really start moving up.
The Texas Transportation Institute published its annual report on traffic congestion. Having a short commute is a key factor in where people want to live. If you’re moving someplace new, you should know how much time you’ll spend in traffic; even if you’re not moving, trends in traffic congestion could affect your home’s value. So what happened to traffic last year? High unemployment means fewer commuters on the road and less congestion: the average commuter lost 34 hours in 2010 from being stuck in traffic, down from 39 hours in 2005. Commuters in Washington DC, Chicago and Los Angeles lost the most time due to traffic jams. Meanwhile, the folks who lost the least amount of time live in places with newer infrastructure, like Phoenix, or slower growth, like Detroit.
|Rank||Metro Area||Hours Stuck in Traffic in 2010|
|3||Los Angeles-Long Beach-Santa Ana, CA||64|
|5||New York-Newark, NY-NJ-CT||54|
|6||San Francisco-Oakland, CA||50|
|8||Dallas-Fort Worth-Arlington, TX||45|
|13||San Diego, CA||38|
But if you can’t stomach listening to the traffic report and brake lights give you road rage, move to a smaller city: commuters in my hometown of Rochester NY spend only 13 hours a year in traffic, and those in McAllen TX, Stockton CA, and Eugene OR spend fewer than 10. And for those of you who can pick and choose your driving times, work from home on Friday and stay off the roads between 5-6 pm.
As the government fights over the federal budget deficit, the mortgage interest deduction – the ability to deduct your mortgage interest payments from your taxable income if you choose to itemize — is a tempting target for politicians: it lowers annual tax revenue by roughly $100 billion, and fewer than 30% of taxpayers even itemize their deductions in the first place. So who takes this benefit? This week, new research shows how much of this tax deduction goes to people in different parts of the country. The differences are huge: in high-income places with high homeownership rates, like the suburbs of Denver, Washington DC and Minneapolis, over 40% of filers claim the deduction, but fewer than 10% in places with low income or low homeownership, like parts of rural Texas and the poorer parts of New York City. Of those who do claim the deduction, the average amount ranges from over $20,000 in coastal California, where homes are expensive, to around $6,000 in rural upstate and western New York. Do these inequities mean that the mortgage interest deduction is doomed, and you itemizers will be paying more tax? No. Because politicians represent geographic areas, the concentration of the mortgage deduction benefits in specific areas means that representatives in those areas will fight hard to preserve the deduction: the mortgage interest deduction would be in greater danger if the same overall benefits were spread evenly across the country. Ironically, the inequity of the mortgage interest deduction boosts its chances for political survival.
– S&P/Case-Shiller index, September 2011 release
– CoreLogic shadow inventory report, September 2011
– Texas Transportation Institute’s 2011 Urban Mobility Report
– “The Geographic (and Political) Distribution of Mortgage Interest Deduction Benefits”, by Ike Brannon, Andrew Hanson, and Zackary Hawley