Market Update

Market Update

July 3 -
We have been examining more details from the CoreLogic® Home Price Index Report published yesterday. This report is for the month of May 2013 and the most impressive numbers to me are the quarterly changes by state. These are stunning numbers for a wide range of states that have not been in the headlines up until now.
Specifically we see the following data reported by CoreLogic®: Rank State 3-month HPI Change - All Sales 3-month HPI Change - Excluding Distressed 1 Wyoming 10.8% 8.6% 2 California 10.0% 9.4% 3 Maine 10.0% 5.8% 4 Georgia 9.5% 7.9% 5 Nevada 8.9% 8.8% 6 Washington 8.6% 8.1% 7 Illinois 8.2% 6.9% 8 Oregon 8.0% 6.4% 9 Florida 7.5% 7.1% 10 West Virginia 7.0% 4.7% 11 Idaho 6.9% 7.2% 12 Missouri 6.9% 5.6% 13 Montana 6.8% 7.9% 14 Virginia 6.7% 6.6% 15 South Carolina 6.5% 6.7% 16 Connecticut 6.5% 5.5% 17 Ohio 6.4% 4.7% 18 Rhode Island 6.3% 7.2% 19 Arizona 6.1% 5.2% 20 North Carolina 6.0% 5.8% 21 Massachusetts 6.0% 6.0% 22 Colorado 5.9% 5.0% 23 Alaska 5.8% 6.4% 24 Tennessee 5.8% 4.3% 25 Utah 5.8% 7.4% 26 Michigan 5.8% 5.4% 27 New Hampshire 5.8% 7.0% 28 Texas 5.5% 5.4% 29 Indiana 5.5% 5.0% 30 South Dakota 5.2% 5.0% 31 Hawaii 5.1% 4.3% 32 Nebraska 5.0% 3.9% 33 Maryland 4.7% 5.2% 34 Kansas 4.7% 4.2% 35 New York 4.7% 4.6% 36 New Mexico 4.5% 5.9% 37 Louisiana 4.4% 3.3% 38 Wisconsin 4.2% 4.1% 39 Minnesota 4.1% 4.2% 40 Mississippi 4.1% 4.0% 41 Pennsylvania 4.1% 3.9% 42 Alabama 4.0% 3.7% 43 Vermont 3.6% 3.8% 44 DC 3.3% 3.3% 45 New Jersey 3.1% 3.5% 46 Arkansas 2.0% 2.6% 47 North Dakota 2.0% 1.5% 48 Kentucky 1.9% 0.8% 49 Oklahoma 1.4% 1.9% 50 Iowa 1.4% 1.2% 51 Delaware 0.2% 2.1% These numbers would have been impressive for a full year of price changes, but they occurred in just 92 days! All but six states increased at a rate equivalent to over 12% per year. The top 32 states increased at a rate of over 20% per year. Arizona only just makes it into the top 20. Note the huge increases in Wyoming, West Virginia, Montana, Maine & Idaho. I don't see how anyone can blame "institutional investors" for these states. There is something far more fundamental than investors driving these prices. The chronic shortage of homes for sale has now spread to the country as a whole. And to cap it all, CoreLogic predicted that the rate of price rises would be even higher in next month's report. July 2 - The CoreLogic® Home Price Index is actually a better tool than the more famous S&P/Case-Shiller® Home Price Index®. You might wonder why CoreLogic recently purchased the rights to the S&P/Case-Shiller® Home Price Index®. It is probably something to do with assimilating your competition being easier than defeating it. Anyway I digress. The popular theory "out there" is that institutional investors are responsible for pushing up home prices and normal homeowners are not involved. This is another urban myth just like the "shadow inventory" one. It is just not a useful or valid idea. Today's CoreLogic® report shows us that home prices in Oregon increased by 15.5% between May 2012 and May 2013. But wait - there are very few institutional investors buying anything at all in Oregon. So how can they be pushing up the prices there. They're not. Oregon's prices are going up because of the huge disparity between new home construction and new household creation. Look at our observation for June 28 - Oregon is ranked in the top 5 for this disparity. A chronic lack of new housing supply and a healthy population growth rate will do this. As my teenage daughter would say, "Demand from investors is SO not the issue". I'll finish with a quote from the President and CEO of CoreLogic®, Anand Nallathambi: "Home price appreciation, particularly in much of the western half of the US, is increasing at a torrid pace". True dat.
The Cromford Report
Michael Orr


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Phone: 623-703-7445
Dated: July 9th 2013
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