Last week I highlighted the bullish signal that the price of newly listed homes after the first of the year were ticking up. This week I have another hint of good news. Rents.

In addition to the active housing market, Altos Research now tracks the active rental market. Our set of 750,000 – 1 million rental units a month is the largest set available anywhere. And it’s powerful.

US Rental Prices, weekly sample, single family homes and apartments for rent. Sample size is approximately 600,000 per week.

This chart illustrates rents across our Altos 20-City Composite and 10-City Composite as of January 27, 2012 so it’s a national view. This data is a blend of both single family homes and apartments on the market.  The weekly upticks in rents is one of the signs we’re using to underpin our mildly bullish home price scenario for 2012. The argument goes like this:

1. Rents are rising because mortgages are harder to get and because the conventional wisdom that “owning always wins” is diminishing.  Percent of American households who own their homes has fallen to 65%. It’ll likely keep falling to closer to 60% over the next few years. This bodes well for rents.
2. As rents rise, home prices fall, and mortgage money remains unnaturally cheap, we’ve reached the point where investors see growing returns on investment properties. There’s a well-funded investor pool who can take advantage. They’re buying.
3. As rents rise, those non-investor home buyers see more opportunity buying vs. renting. As long as they can get a mortgage, there are relative opportunities.

So rising rents help provide a floor to home prices. Keep an eye on this space for more as Q1 2012 progress.

We track hundreds of local housing market stats here, but one of my favorite (because you can’t find it anywhere else, and because it’s so insightful) is the Median Price of Newly Listed Properties.

It turns out that if you watch the prices of the properties that enter the market each week, you can get a real sense for the quality of the demand in a local market.

Also notable is that the spring housing market starts the second week of January. Like clockwork.

Realtors, it turns out, in aggregate are quite sensitive to where homes should be priced. They tend to price homes very close to where they’ll sell. When they’re sensing healthy demand, they price more aggressively. When they sense weakness, they’ll price lower so the property will move. They’re pretty clever, those Realtors. Here’s what they’re telling us today:

Median price of new listings. Single Family Properties across 20 major US metro markets. Source: Altos Research

The data-point we’re looking at is at the far right side of the red line, that’s the weekly number, for January 13, 2012. Notice every 2nd week of January we get an uptick. This year is a nice strong move above the recent trendline (that’s the green). This move, while admittedly only one data point, is the very first signal of the new year.

It’s not aggressively bullish, mind you. But it implies US home price stability through the first quarter. And that’s encouraging.

Stay tuned.

Yes, home prices are down… Back in October…

…but getting less bad because inventory is down and still declining. The foreclosure pipeline is clogged in Florida, while New York and New Jersey still have their robo-signing hangovers:

Year-over-year Ask Prices & Active Market Inventory: Altos 20-City Composite, weekly averages

The constrained supply is also keeping days-on-market in check – sellers are still able to unload their for-sale properties in a tolerable period of time:

Days-on-Market: Altos 20 City Composite, 90-day rolling average

Still don’t inventory or days-on-market matter?

Take the extreme case – what if there were only 100 homes for sale in the entire country?  Then prices would be higher regardless of how many houses are in foreclosure or how poorly consumer expectations remained.

If you want to know if new home starts are going higher, watch the active market listings.

Residential housing reported higher numbers for November today. What do homebuilders know about housing that surprised the stock market today?

Home prices are getting less bad:

Year-over-year Housing Market Ask Prices: Altos 20-City Composite

How? Inventory is down.  While the foreclosures are clogged somewhere in the pipeline, there’s just not much available for Joe & Sally Homebuyer:

Year-over-year Inventory: Altos 20-City Composite

The homebuilders see what we see – when sellers get more confident on pricing, builders pick up their new home construction.  (Data measures at a 77% correlation):

Monthly Single-Unit housing starts (July 2010 - Nov 2011): US Census, November 20, 2011

Looking at quarterly data since 2007, there’s more of the same. (Data measures at a 76% correlation):

Quarterly Single-Unit housing starts (2007-2011): US Census

Link for US Census/HUD press release.

In August 2011, the United States Federal Housing Finance Agency offered its “Request for Information” (RFI) for REO Asset Disposition including a transition to a rental-based solution, soliciting ideas from the private sector, academia, and research groups on the handling of the existing REO inventory.  From the August release:

The Federal Housing Finance Agency (FHFA), in consultation with the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development, is issuing this Request for Information (RFI) to solicit ideas for sales, joint ventures, or other strategies to augment and enhance Real Estate-Owned (REO) asset disposition programs of Fannie Mae and Freddie Mac (the Enterprises) and the Federal Housing Administration (FHA). The agencies are exploring alternatives that will facilitate the current and future disposition of REO, improve loss recoveries compared to individual retail REO sales, help stabilize neighborhoods and local home values, and where feasible and appropriate, improve the supply of rental housing.

Two weeks ago, the FHFA posted a summary – FHFA REO Initiative: RFI Response Summary. A couple of the solutions offered by the respondents:

• Joint venture partnerships, outright sales, and auction methods.
• Adoption of approaches similar to the Treasury Department’s Public-Private Investment Partnership program. That program, which included risk sharing with the U.S. government, involved the use of Treasury financing, along with private equity, to purchase troubled loans from banks.
• Proposed the use of Real Estate Investment Trust (REIT) structures. REIT structures give investors unique tax advantages, support longer term investment capital, and require controls to prevent practices such as property “flipping.”

It’s always nerve-racking to hear of government involvement with private equity, REITs, or any private sector investment vehicle.  But, from the looks of it, the FHFA is taking legitimate steps to involve the private sector, which is good for taxpayers, and the process is moving quickly.  RFI submissions were due in September and the FHFA posted the initial summary document on November 29, 2011.

I’ll happily take a sip of eggnog with an optimistic toast – “Here’s hoping that we’re on the right path…”

The timing could be better for Altos Research – we’ve just launched our Rental Intel products – real-time rental market analytics and listings.  [Author acknowledges shameless plug]

You want to understand the housing market. You’ve always tracked what sold, if you hang with Altos, you know what’s for sale and all that implies. What’s missing from this picture? Forty percent of this country doesn’t own the home they live in. So tell me, What’s for rent?

Today Altos Research is announcing the next stage in our little real-time market data revolution. With the release of our new Rental Intel system We’ve added 700,000 currently for rent apartments and homes into our giant database.

If you’re a institutional investor, lender, servicer, trader and suddenly find yourself with a giant portfolio of properties (distressed loans, pre-foreclosure, REO), you need to understand all the market dynamics to make smart valuations and disposition strategies. In general, to understand a property’s value, you need to investigate three angles:

1. Recent local closed transactions (Who bought what and how much did they pay?)
2. Current local asking prices, inventory, and demand trends. (Are there a lot on the market like it? How quickly are they selling? Are asking prices above or below the handful of transactions?)
3. Current rents and rental availability. (What does an equivalent property rent for? Is there a lot of competition? How much return can an investor expect?)

Altos has always been the leader in the current for sale market. The Rental Intel is a powerful additional view for our clients. As banks and financial firms grow the number of properties they own, they need to make decisions about what to do with all these properties. Sometimes they’re difficult to sell. Sometimes you get an offer, but it seems like a low-ball. What if you can help the borrower stay in the home, how much rent should you charge? The current local rental market informs all of these decisions.

Or consider the cash-for-keys strategy. Often, it is most effective for everyone to pay the distressed borrower a compelling chunk of money to hand over the home. But how much money is compelling? One strategy is to offer several months equivalent rent. If you’re in the cash-for-keys world, you better understand rents.

We created Rental Intel to help address these needs. It’s surprisingly tough technical challenge but it fits well in the Altos market analytics platform.  Here are more details about Rental Intel:

• Weekly Tracking: 700,000 apartments and homes on the market for rent each week. (Roughly 70% of the units for rent at any given time in the US.)
• Property Details: Pricing, market time, and property characteristics (property types, square footage, beds, baths, etc)
• Analytics and Trends: Market prices, current inventories, local rent vs. own ratios. Like all our analytics, we track over 20,000 zip codes, by price range and  property type.
• Available now as part of our AltosEvaluate suite, via bulk file transfer, or via the Altos Research Market Analytics API.

If you’re interested in understanding the current US rental market, contact our Market Analytics team for samples and pricing. analytics@altosresearch.com

Affordability measures price, but Capita per Inventory measures housing demand relative to supply, and isn’t that the point? RIM’s Playbook tablet, originally priced at $499 is now selling for $200. Very affordable compared to Apple’s iPad at $499-800+.  But which tablet do you want for Christmas?

And that’s the point – affordability doesn’t mean “good” or “time to buy,” yet there’s insistence on using this measure to feign the housing market’s recovery with headlines like these.

From the National Association of Homebuilders/Wells Fargo Home Opportunity Index (HOI) report:

The least affordable state is California, as Los Angeles, San Francisco and Orange County all made the top ten least affordable cities on the big metro list. Santa Cruz, San Luis Obispo and Santa Barbara made the top ten least affordable cities on the small metro list.

Calculating Capita per Inventory for a cross-section of the 225 HOI metros shows that the “unaffordable” markets have less supply per capita. Notice how the “unaffordable” California metros (Santa Barbara, San Jose, San Francisco, Los Angeles, and Santa Cruz) have tight housing supply relative to “affordable” metros like Ocala, FL and several of the Rust Belt metros (Flint, Toledo, Lansing, Flint, and Canton).

Plot of median home prices and the number people per available home for sale ("Capita per Inventory") for 35 metros reported in the NAHB/Wells Fargo Housing Opportunity Index Q3-2011

Altos Research Capita/Inventory vs Wells Fargo Home Opportunity Index Ranking (35 Metros)

So what does this mean?

San Francisco only needs 1 out of 456 people to be able to afford a house.  San Jose only needs 1 out of 408. Heck, Honolulu only needs 1 out of 530 people to be able for afford a house to support home prices at their current level.  But Ocala, FL needs 1 out of 92 people while Portland needs 1 per 46 people.  Ouch.

The NAHB/Wells Fargo HOI uses the measure Median Household Income-to-Median Prices as the key factor in affordability.  For this 35 market sample, the correlation coefficient has a predictably high value of 0.71 for these two measures. However, the correlations for Median Price-to-Capita per Inventory and HOI Rank-to-Capita per Inventory measure at 0.57 and 0.54 respectively, also very solid.  Most importantly, Capita per Inventory captures both housing supply and can be used as a basis for demand when folding population and unemployment rates into a market’s analysis.

Now, add population changes from 2000 to 2010 (US Census Bureau) and September 2011 unemployment rates (US Bureau of Labor Statistics) to the analysis for a complete picture:

Altos Research Capita per Inventory with Population and Unemployment figures

A few things to notice:

• Honolulu looks very favorable – high Capita per Inventory, increasing population trends, and low unemployment. Let’s all get a house on the island while we still can.  They ain’t getting any cheaper.
• Markets with relatively low Capita per Inventory can be buoyed with lower unemployment rates – Austin, TX, Harrisburg, PA and Springfield, IL for example.  None of these were bubble and bust markets.
• Carson City (6th in the Wells Fargo HOI), Lakeland (9th), and Rockford (10th) all have double-digit unemployment, low Capita per Inventory, relatively low population increases (Flint’s in negative).  All are “affordable” but lack the economic fundamentals for anyone to actually buy the houses for sale.
• The Rust Belt metros all have negative population rates and unemployment rates at or above the national average. But hey they’re “affordable.”
• Ocala, FL is in big trouble – a 28% population increase AND a high unemployment rate AND a very low Capita per Inventory.  Sure, Ocala is “affordable” but there’s a bunch of people that weren’t living there 10 years ago that need a job. You think they’re going to buy a house right now? (Not to mention that Florida is still in the first inning of their recovery as a judicial state with 900+ days in their foreclosure pipeline.)
• Bridgeport is a little troubling.  Low unemployment but the Capita per Inventory is low – that could put pressure on home prices very soon.

So are all low-priced markets bad and high priced markets good? Of course not.  But using Capita per Inventory, you get an composite look at housing supply, prices, and a comparative measure for demand by utilizing basic macroeconomic measures like population rates and unemployment.

As for RIM’s playbook, the company is taking a $485 non-cash write-down.  Hmmm… Any ideas for the housing market?

(Self-aggrandizing statement alert: This isn’t the first time we’ve talked about Capita per Inventory.  Mike Simsonen blogged about this waaaaay back in 2006 and again in 2009.)

Last week I entered four apartment units, for five short minutes each, and had to pick one to live in for the next year.  Aside from the great downtown location, here are the “Top 5 Reasons” I chose my 600 square foot one-bedroom apartment…

1. Natural light. I don’t need to turn on the lights until the sun goes down. From the kitchen window, two dining room windows and sliding glass door, in the bulk of the apartment, to the wall-width window in the bedroom and the neutral-white walls, the space feels larger than 600 square feet (I know because I measured!).
2. No dishwasher? No need with a double-wide, undivided sink. I can stick to delaying dish-washing duties until the deep sink fills up and then work up the motivation to wash them. Who couldn’t use a little extra motivation?
3. Peace and quiet. I was lucky to find an apartment that shares no walls, only the ceiling. With the one unit above me, there is virtually no noise.
4. Larger-than-needed parking spots! You could fit a Chevrolet Heavy Duty 2500 truck in my designated underground carport. I don’t own that truck, but if I did, I’d be able to park it there. Wishful thinking…
5. Deep closets to hide the stuff I rarely use. I need all the help I can get when storing surfboards, golf clubs, bikes, skis, a lacrosse bag, etc.  The amount of sporting equipment I have may be a little excessive  but it’s so nice to have storage space.

If you are an investor, consider these things because they matter to regular apartment-renting people like me. Lighten the paint, add a bigger sink, soundproof the walls, provide decent city-parking and add some storage options.

Happy renting!

Starting in March, Detroit’s listing prices (a.k.a “asking prices”) began rising in our weekly numbers, with a full-fledged upswing by the summer months:

Listing Prices: Detroit MSA Housing Market (January 2011 - October 2011)

As reported in DSNews about today’s Case-Shiller numbers – Detroit and Washington D.C. were the only two cities to see positive annual returns of +2.7 percent and +0.3 percent, respectively.

Just last week, our very own Jon Sterling pointed to Detroit as a top investor market based on our October National Housing Report.

If you’re not subscribed to our National Report, now would be an excellent time.  It’s free and delivered to your inbox every week. Click here to add yourself to our list of VIPs who watch what’s happening in the housing market in real-time, so you don’t have wait two months for the Case-Shiller numbers.

But beware – our the weekly number (black line above) is now moving down now because of seasonality effects.

Disclaimer: Our lawyers like to make sure we don’t have any fun (shocking, we know). We are not investment advisors, tax professionals, or legal professionals and nothing contained in this post should be considered professional investment advice. We’re just the data whisperers.

We’ve been watching the US housing market on a weekly basis for the past five years. When you run in-depth analysis with a few million data points on a regular basis, you pick up a few things.  Our Mid-Cities Report, published today, confirmed what the trends from the past few months were indicating.  We want to be very clear.

It’s a great time to invest in residential real estate.

Not after the holidays, not after the election, not after you hear it’s a good idea on the nightly news…RIGHT NOW.

There are a variety of online tools to help you understand mortgage math, and finding a local REALTOR who has experience with investment properties is valuable.  We did some number crunching using housing market metrics, rental data, and employment data to determine the top US housing markets for investors.  There are good investment opportunities in most markets right now, and we listed our top three picks below.

Our assumptions:  A median home price, median rental rate, 25% down payment, and a 30-year fixed rate loan at a 6% interest rate.  Given those assumptions, the following markets provide cash-positive investment opportunities.  Great deals can be found in any market, but we’re trying to keep it simple.

Las Vegas
Median home price: $137,930
Median rental rate: $983
Las Vegas got hammered with the housing collapse, and there are some good deals to be found there now.  There’s no state income tax and it’s a popular tourist and convention destination even in poor economic times.  Plus, you gotta love that sunshine.

Chicago
Median home price: $279,385
Median rental rate: $1681
The Windy City has a very large and diverse economy.  While the median home price is fairly high, the numbers still work.  If you can handle the winters, Chicago is a very strong market for investors.

Pittsburgh
Median home price: $157,544
Median rental rate: $915
Pittsburgh never experienced a large spike in home prices and has fared well over the past few years as the housing bubble deflated.  The city has a strong economy and also serves as a regional technology hub, providing a steady supply of renters.

Forbes 500 most expensive zips.

The 2011 Forbes 500 is out!  Each year we work with our friends at Forbes to help them compile the most expensive real estate markets. Forbes likes their lists.

They come to Altos, because we can pull the data together, and Forbes has a particular way they like to run the methodology. For example, for this list we blend together condos and single family homes into one “price.” The benefit of this approach is that it gives a view of a super-high-end luxury markets that have lower-price condos that you could get into. The ski towns in particular fit this description. Because there are some cheaper condos available in Aspen, it slides down the list a bit. The downside of this approach is that if you go into Aspen with only $2.5 million to spend on your ski house and you don’t want a condo, you’re going to be disappointed with your selection.

I’m happy with how this year’s list turned out and with the reporting by Morgan Brennan over at Forbes. Check it out and see where your neighborhood lands!

See the Forbes 500 Luxury Real Estate Markets.

A shout out to Rick Sharga for working in our “Catfish Recovery” meme into his recent presentation. From HousingWire:

“We’re looking at a catfish recovery,” he [Rick] told attendees at the Asian Real Estate Association of America conference in San Francisco Friday, saying the market will bump along the bottom for some time before starting to revive.

More than a million foreclosure actions that should have taken place this year have not yet moved forward, and that delay pushes a resolution of the housing market’s problems into next year and beyond…

Indeed, it’s an inventory problem, and not because there’s too much of it. Check out our October 2011 National Housing Report:

The mass liquidation of foreclosure portfolios is best described as a trickle.  The inventory is coming on the market slowly as more loans are modified to keep homeowners in their homes.  Although the millions of properties in the shadow inventory are still looming, there is nothing that indicates a flood of foreclosures hitting the market anytime soon.

(And hey, we’re not the only ones seeing the market’s volatility – Clear Capital’s recent report talks of a “triple dip” in housing.)

October, 2011

“Oh, you liquidated her, eh? Very resourceful!”  -The Wizard Of Oz, congratulating Dorothy and crew for melting the Wicked Witch of the West

The mass liquidation of foreclosure portfolios is best described as a trickle.  The inventory is coming on the market slowly as more loans are modified to keep homeowners in their homes.  Although the millions of properties in the shadow inventory are still looming, there is nothing that indicates a flood of foreclosures hitting the market anytime soon.

Housing inventory decreased in all the composite markets this month.  This is a significant change from last month, when half reported increased inventory and half reported decreased inventory.  The decreased inventory follows a seasonal pattern seen every year around this time.

Follow the link to the complete National Housing Report.

Lots of yawns and snoozes as expected (see: CNBC Recap & Analysis: Tax Assessment, Morgtage Refis, Valuations, Conforming Loan Limits).

The upper end price tiers have been adjusting their ask prices since the early Spring in anticipation of the FHA Loan Limit changes that took place on October 1:

Chart illustrates the percentage of active listings, by price quartile, with price reductions since Jan 2011. Moving up the price tiers shows an increasing percentage of sellers taking price reductions relative to previous levels. Reductions even flattened out by August 2011, indicating sellers preceded the loan limit changes prior to the deadline.

Nothing to see here.  Move along…

The September Mid-Cities report is live and you can access a copy of it here.

There are some interesting trends in Altos mid-cities composite and the Altos national composite.  The markets in composite are telling a similar story about what’s in store for the winter.

From the Altos Research September 2011 Mid-Cities report:

“Dr. Ray Stantz: My parents left me that house. I was born there.”
“Dr. Peter Venkman: You’re not gonna lose the house, everybody has
three mortgages nowadays.” -Ghostbusters

“Three mortgages would have been extreme, even in the boom days of the 2000s. Nonetheless, over-leveraged real estate had a profound effect on today’s housing market. We’re not out of the woods yet and the market trends tell us we’re settling in for a long, cold winter.

This month prices decreased in 13 of the 20 markets, and inventory decreased in 19 of the 20 markets. The market trends indicate a further cooling of the market as we approach the fall.”  (read more)

We’re happy to provide commentary and perspectives about our market reports. Give us a call or shoot a message to jon@altosresearch.com.

Headline #1: California’s Median Home Price Hits 2011 High

The Data: Prices leveled off in early 2011 after dropping from their 2010 peaks.

State of California and Los Angeles, San Francisco MSA & Riverside Metros: Year-over-Year Home Prices since August 2010

Headline #2: Existing-Home Sales Jump Nearly 19% From Last Year

The Data: Using “Listings Absorbed” as a proxy for transaction counts (measured as homes that exiting the market for any reason)

California Year-over-Year Home Prices, 7-day weekly observations

And More Data: Absorptions are up and relistings are down – positive indicators for the California housing market.

California Housing Market: Year-over-Year Listings Absorbed & Percentage of Relisted Properties for sale

Since a peak in early July, we’ve seen week over week cooling of the housing market. The spring price and inventory bumps are over and we’re settling in for a long, cold winter.

Prices decreased in seventeen markets this month (seven markets reported a decrease in prices last month). In the markets that experienced increases in prices, the increases were small. The weekly-sampled prices are still trending downward and the 90-day prices have begun their descent (illustrated in Figure 1). The 90-day prices were flattening last month. The declining curve will become more pronounced as the market continues to cool.

The loss of momentum from the summer market activity is unmistakable. Transaction statistics published by S&P/Case-Shiller will show the same loss of momentum in a few months.

WHAT: Scott Sambucci of Altos Research and Laurie Moore-Moore of The Institute for Luxury Home Marketing will talk about the latest luxury market data and the word on the street from luxury real estate agents around the country. 

WHEN: Thursday, September 1, 2011, 12:00-1:00PM CDT.

HOW: https://www2.gotomeeting.com/register/959382282

The luxury home market has some surprises, considering the gloom and doom housing news being reported elsewhere. Join us to find out what’s happening in the luxury market and what you should do about it.

Do you have some friends who would like to join us? Invite them too. We promise to play nice.

The August 2011 Altos Research Mid-Cities Report is now available.

(Our Mid-Cities Report provides a glimpse into real estate market trends for mid-sized US markets not commonly reported in the media. Click here for more background on this composite.)

As we analyze mid-sized cities like Pittsburgh and Memphis, differences continue to emerge as compared to the S&P/Case-Shiller 20-city composite.

“Price of New Listings” and “Percent Price Decreased” are two of our most leading indicators of future transaction prices and volume.

Price of New Listings are up slightly while this indicator remains in negative territory for the Case-Shiller markets:

Year-over-Year Price of New Listings: Altos Research Mid-Cities Composite vs. Case-Shiller 20-City Composite

Price Reductions – measured as the number of active listings with at least one price reduction in the most recent 90-day period – are lower in the Mid-Cities Composite, inching into negative ground in the last two months (a good thing – fewer price reductions usually means stronger demand on a relative basis):

Year-over-Year Price Reductions: Altos Research Mid-Cities Composite vs. Case-Shiller 20-City Composite

The component metros of the Mid-Cities composite typically avoided the big sub-prime boom and bust – there’s been considerably lower volatility in these markets. While at an absolute level, the differences between these two composites are slight, they are distinctive and important to watch as the housing market continues its uneven recovery (See: Catfish Recovery: The Future of US Housing).

Bad in the short-run, but a necessary market-clearing step… (see: REO & Foreclosure Investors – Scavengers or Saviors?)

From yesterday’s Baltimore Post:

One of every 10 city homes sold during the first half of the year — about 275 in all — fell in that price range. Twice as many sold for under $20,000.

Often foreclosures, these properties are usually in bad shape but seem like deals to real estate investors and the occasional hopeful owner-occupier — such as Wells.

“I don’t have to worry about trying to get a loan,” said Wells, 40, a bill-processing technician who works in Annapolis. “That was the purpose of me searching in that price range…”

… Still, both the city and suburbs have areas where sales are down sharply since the federal tax credit of up to $8,000 for first-time homebuyers expired last summer.

By clearing the market, these low-end/investor sales are pushing Baltimore’s minimum asking prices higher towards 2009-10 tax credit levels. Absolute sales are down, but adjusting for inventory changes, the Baltimore’s absorption rates are moving back to tax credit levels:

City of Baltimore: Minimum Asking Prices (black line, left axis) vs. the Altos Research Market Action Index (orange line, right axis) for single-family homes

While the absorption rate trend for condos is sustaining higher trough values since mid-2009:

City of Baltimore: Minimum Asking Prices (black line, left axis) vs. the Altos Research Market Action Index (orange line, right axis) for condos