From Bloomberg:
The housing market is showing progress two years after the credit crunch drove down home prices, though it’s too soon to “declare victory,” Housing and Urban Development Secretary Shaun Donovan said.
“It is too early to certainly declare victory,” Donovan said in an interview for Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. He said prices picked up over the last year and Americans added $1.1 trillion in equity to their homes.
Pending home sales rose an unexpected 5.2 percent in July, the National Association of Realtors reported yesterday. Seasonally adjusted pending sales had dropped 2.8 percent in June and almost 30 percent in May.
When President Barack Obama came into office, “what was driving the housing market was bad loans, today it’s unemployment,” Donovan said.
The administration is putting more emphasis on affordable rental housing and less on homeownership as Obama and Congress work to stabilize home prices and rebuild the U.S. mortgage- finance system, Donovan said.
“We do need to rebalance our priorities,” Donovan said. “Part of that, frankly, is that we have a president who talks about rental housing and is focused on rental housing as an important part of the equation.”
where do they come up with these numbers?
Any administration that can come up with “3-4 million jobs created or saved” can certainly come up with a $1T in equity recovered. I just don’t know how any buys the load of manure they are shoveling.
Money’s not real…
Woo-hoo!!!
Time to hit the Home ATM. I want a Hummer.
“where do they come up with these numbers?”
At least it should be easy to verify. For a first order approximation, consider average price increase percentage and multiply with an estimate of the housing unit aggregate value.
E.g. Say, there are 100 million units, Average value $150,000, and values increased by 3%. Then increase = $15 Trillion times 0.03 = $0.45 Trillion.
So, my guess is he is using a 6% increase in value (assuming my other numbers are sensible)
Is it an increase in my home’s equity when I go from -$100k to -$95k. I know I would feel ‘less unwealthy’ and sleep better.
The latest delivery of crack just in time for the Labor Day Holiday.
Joker, put the pipe down and get clean.
FAST.
Expanding on #6 – Maybe ‘they’ have an abs() in their equation somewhere? It would certainly explain some figures I’ve seen recently.
http://quickfacts.census.gov/qfd/states/00000.html
There are roughly 96 million single family attached and detached homes in the U.S.A.
1,100,000,000,000/96,000,000 = $11,458 increase per home, on average.
If they use Case’s Shill who says places like SD went up 11% in the last year (though they HAVE to be using flippers in their equation because you don’t even see +11% in Carmel Valley) then maybe the voodoo math works.
But I’m with #7.
monopoly money.
Good thought JTR on the flippers vis a vis Case.
since Case prides themselves on using sales of exact homes over time then it would lead them to include the price increase between the flipper’s purchase (i.e. foreclosure sale) to their ultimate flip at retail.
I wonder if they have a way of flagging the foreclosures and adjusting them somewhat or just put them in fully juiced.
Obviously they don’t net out the ‘cost’ the flipper expends in order to make the house worth the higher number….
Another house of cards exposed by JTR…
http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff–p-us—-
click on ‘methodology’ – I think they are picking up REO listings that are flipped that take more than 6 months, and giving them weight. Here’s an excerpt:
Page 17 – Subsequent sales by mortgage lenders of foreclosed properties are included in repeat sale pairs, because they are arms-length transactions.
Something has to be askew, because same-house sales should be on a downward trend, not up 11% in SD.
JTR,
If the original valuation was on foreclosed or REO property and it changes hands, do you think there will be a substantial increase in value JUST because it is not a foreclosure or REO anymore? If that is true, a substantial part of the equity “increase” may just be this virtual value creation. i.e. foreclosure/REO creates a negative “Goodwill” for value. I think people generally want to offer a discounted “bargain” price when a property is in distress sale. Some tax jurisdictions (at least here in Washington County, Oregon) use a multiplier to REO sale price to arrive at “true” market value for tax valuation.
JTR – didn’t bother to click/read the methodology as its more fun in this world to pontificate from a place of ignorance than facts. I consider it practice for my future job as the NAR spokesman….but I digress.
I get the “subsequent sales by mortgage lenders” being arms length. but that classification does not include the 3rd party sales at the steps. I would contest that the 3rd party steps sale is arms length, and thus is likely counted as a sale.
I’d also say that the vast majority of recent flips take 6+ months from the steps to the subsequent closing/recording anyway.
Therefore, I suspect there are a significant amount, perhaps not all, of flipper gross profits seeping into the appreciation data.
So let me get this straight, if I’m buying a house then we can’t use distressed properties as comps. But, if I need to prop up the numbers to make the market look better than it is then I can use the REO price paid minus the flip price to demonstrate equity health. Someone help me out here, I must be missing something.