Market Studies

While the Case-Shiller indexes reported new lows for house prices for the end of 2011, responses from analysts are mixed when determining what the data means for home values in the long run. Experts representing Capital Economics, IHS Global Insight, and Standard and Poor’s assessed the implications of the data for the future. While Capital Economics believes the decline may come to an end after a few more months, others are expecting this trend to continue into 2012.

While the REO Rental Initiative was first supported by Capital Economics when first proposed last year, a report released by the analytics company stated that the news was disappointing upon the discovery that 85 percent of the REO properties to be sold were already occupied by tenants.

All three headline composites of the S&P/Case Shiller Index ended 2011 at new lows. The national composite fell by 3.8 percent during the fourth quarter of 2011 and was down 4.0 percent versus the fourth quarter of 2010. Both the 10- and 20-city composites fell by 1.1 percent in December over November, and posted annual returns of -3.9 percent and -4.0 percent versus December 2010, respectively. With these latest data, all three composites are at their lowest levels since the housing crisis began in mid-2006.

Real estate-related debts are on the decline, as are overall delinquencies, according to a quarterly report from the Federal Reserve Bank of New York. Debt maintained through mortgages and home equity lines of credit (HELOC) declined $146 billion during the fourth quarter of last year. Mortgages made up a majority of the decline – $134 billion – while HELOCs made up the remaining $12 billion. Also in the fourth quarter, the delinquency rate on consumer debt was reduced from 10 percent to 9.8 percent.

Real estate debt and delinquencies are on a continuing decline, according to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit. Mortgage and home equity lines of credit (HELOC) balances fell at a combined $146 billion, with $134 billion from mortgages and $12 billion from HELOC, which are, respectively, 11 percent and 11.

The pending home sales index (PHSI) rose in January to 97.0 from a downwardly revised 95.1 in December. At 97.0, the index is at its highest level since April 2011, the National Association of Realtors reported Monday. The index rose for the third time in the last four months and the January reading was 8 percent above January 2011 levels, but 26.5 percent below the April 2005 peak. The index began in January 2005. The PHSI has been trending upward, albeit modestly for most of the past two years. Despite the 20-month high, the index is relatively subdued.

Even with falling home prices, a study from the Center for Housing Policy found affordability is becoming increasingly out of reach for homeowners and renters. According to the Center's report, the share of working households paying more than half their income for housing between 2008 and 2010 went up from 21.8 percent to 23.6 percent. As home prices dropped between 2008 and 2010, working homeowners also dealt with shrinking paychecks as incomes dropped twice as much as housing costs over the two-year period.

The real estate professionals at McGeough Lamacchia Realty have been proponents of short sales for quite some time, insisting that everyone comes out ahead when a short sale is achieved as opposed to a foreclosure. Now they're sharing the facts that back up their claim: On average a home sold through short sale brings a 24 percent greater return than a foreclosed property. The firm reviewed prices for short sale and foreclosure sale properties in 2010 and 2011 in Boston, Phoenix, Tuscon, Southern California, and Southwest Florida.

Pending homes sales in California were higher for January compared to the previous month and year, and short sales rose to the highest level in three years, according to the California Association of Realtors (C.A.R.). Based on signed contracts, C.A.R.'s Pending Home Sales Index (PHSI) climbed from a revised 91 in December to 102.4 in January and was also up from last year when the PHSI was 93.1 in January 2011. Of all distressed properties sold in California, 23.8 percent were short sales, the highest level in three years since C.A.R. has kept record.

The Federal Housing Finance Agency’s (FHFA) released a report showing U.S. home prices fell slightly in the fourth quarter of 2011, but overall, 12 states plus the District of Columbia saw prices increase, according to the seasonally adjusted purchase-only house price index (HPI). The HPI was 0.1 percent lower in the fourth quarter than the previous quarter. The HPI is calculated using home sales price information from Fannie Mae and Freddie Mac mortgages. Seasonally adjusted prices also fell 2.4 percent compared to a year ago starting with the 2010 fourth quarter.