August 26, 2011 (Chris Moore)
In last month’s RPX Composite Price Index Report, Radar Logic predicted that as a result of the virtually non-existent seasonal price bump, housing prices would set new post-bust lows this fall. In this months report the storm clouds start to brew as Radar Logic explains how the abundant signs of weakness in the housing market could make that prediction come true.
Radar Logic’s RPX Composite Price Index (CPI) for June declined 4.7 percent compared to June of 2010 making this springs seasonal sales increase the smallest in the RPX Composites history.
Home sales also declined year-over-year in June with transactions 6.6 lower than June of 2010.
Radar Logic expects that trend to continue with the National Association of Realtors (NAR) reporting in its Existing Home Sales Report that monthly home sales had declined by 3.5 percent in July. It was the third time in the last four months that existing home sales had declined.
In addition, the Census Bureau reported on Monday that monthly new home sales declined 0.7 percent in July. It was the third consecutive month that new home sales had declined from the previous month.
Furthermore, as of August 12, the Mortgage Bankers Association (MBA) reported in its Weekly Mortgage Applications Survey, mortgage applications fell to a 13-month low, even though borrowing costs are at an all-time low. In this week’s report, purchase loan applications fell to a 15-year low.
The MBA also reports an increase in the mortgage delinquency rate during the second quarter of 2011 which was also confirmed by Lender Processing Service’s July “First Look” report.
Radar Logic also expects distressed property sales to increase as a percentage of total homes sold over the next six months. The ratio of distressed properties usually hits its low in June and July as seasonal inventories increase and typically increases through January during the fall seasonal trough.
As RealtyTrac reported yesterday, foreclosures and REO properties have been selling at about a 40 percent discount compared to non-foreclosed homes. When distressed properties make up a larger share of the market, they have a greater effect on home prices.
“Unfortunately, all of the signs are pointing to the negative: inventory is up, turnover is down, and delinquencies are increasing.” said Michael Feder, President and CEO of Radar Logic. “As we look at the numbers and the other indicators we follow, we see a significant bias to the downside for the remainder of this year. The worrisome question is what will happen to our economy if homeowners lose another $1.5 trillion of home equity value on top of the $6 trillion they’ve lost over the last five years.”
The CPI reports that all but one of the 25 metropolitan statistical areas (MSAs) featured in the report registered year-over-year price declines. The one MSA that posted a yearly price increase was Boston, where prices increased 2.3 percent from June of last year
The MSA that posted the largest drop in year-over-year prices was Milwaukee which posted a 14.6 percent decline.
Jacksonville posted the largest increase in year-over-year sales transactions with a 67.9 percent gain and St. Louis suffered the largest drop in sales transactions with a 53.0 percent decline.
And we haven’t even gotten into what the effects of lower loan limits and “Qualified Residential Mortgages (QRM)” may have on the housing market.
It’s almost like watching The Perfect Storm.
Tags: Radar Logic, RPX Composite Price Index, housing prices, housing sales transactions, rate of decline, seasonal price bump, declining prices, housing crisis