Mimicking March’s trend, with April’s data first and second mortgage, auto and composite default rates all reached post-recession lows. Four of the five cities we cover saw their default rates drop, with all four at post-recession lows.

As seen in the graph below, consumer default rates are close to or below their pre-crisis rates, with the first mortgage and composite rates around those last witnessed in the summer of 2007, and the second mortgage rates back to the summer of 2005 levels. Good news for the consumer and the housing market.

S&P/Experian Consumer Credit Default Indices. Sources: S&P Indices and Experian

For the complete release click here: S&P/Experian Consumer Credit Default Indice, May 2012 release

Housing starts rebounded by 2.6% to 717,000 units in April, which was much stronger than the 679,000 expected by consensus. It also comes after the prior month was upwardly revised to a 699,000 units in March (was 654,000 units). Single-family starts rose by 2.3% to 492,000 units starts, while multi-family starts rebounded by 4.3% to 217,000 in April, after falling 13.3% to 208,000 the prior month. Permits fell 7.0% m/m to 715,000 units in April, though after three consecutive monthly gains. Housing completions jumped by 10% to a 651,000 pace, the fourth consecutive month-over-month gain. The report came in better than expected, to help reduce worries that the housing recovery has faltered.

Click here to view the video segment

There remains a huge inventory of nonperforming mortgages in the U.S., but the regional variations in the speed at which servicers can clear the loans are primarily due to differences in foreclosure procedures. As of first-quarter 2012, our months-to-clear estimate in judicial states is almost 2.5x as long as nonjudicial states.

The volume of these distressed U.S. nonagency residential mortgages (which excludes loans from government sponsored entities, such as Fannie Mae and Freddie Mac) remained extremely high at $354 billion in the first quarter, but it has declined in each quarter since mid-2010. This latest number, which is based on the original balances of the loans in the shadow inventory, represents slightly less than one-third of the outstanding nonagency residential mortgage-backed securities (RMBS) market in the U.S.

Overview

Price changes across the 20 S&P/Case-Shiller cities vary both by how high prices rose and how far they fell.  The second chart compares the 20 cities in terms of both the rise (the horizontal axis) and the subsequent fall (the vertical axis).  The dashed lines show equal annual increases in prices; the outer most green line represents a 4% annual gain across the whole time frame, the red dotted line represents no net change in price.  The chart shows some interesting patterns.  New York, Washington and Los Angeles are three cities farthest to the right upper corner, the sweet spot of large gains and minimal declines.  These not only fared best but are largely “global” cities where prices are driven as much by global economics and foreign buyers as by local conditions.  In the other direction, Detroit, Atlanta and Cleveland show some of the smallest gains and substantial declines.  The Sunbelt cities — Las Vegas, Phoenix, Tampa, Miami and possibly San Diego — are cluster in the lower right with large price gains followed by large declines.  Most of the cities fall on a diagonal from the upper left to the lower right with small next gains over the last 12 years.  The chart design is due to Joseph L. Pagliari of the University of Chicago.

Price Gains and Drops Across 20 Cities

In this CreditMatters TV segment, I discuss the latest housing-related data. To view the video segment, click here.

S&P/Case-Shiller Home Price Sales Pairs. Sources: S&P Indices and Fiserv.

As we have pointed out in the past, the volatility of the lines is due to the seasonal pattern of the housing market. For both the 10- and 20-City Composites, sales volume peak around August of each year (the high points of each line, each year) and are at their lowest around February (the low points).

From 2000 until the 2006 market peak, the 10-City Composite February sales pairs ranged from about 45,000 to 70,000 and the 20-City Composite from about 70,000 to 120,000. Once the market collapsed, we saw the 2008-2012 February transaction volumes fall to about 30,000-35,000 for the 10-City Composite and 55,000-65,000 for the 20-City Composite. February 2012 reported 31,918 sales pairs for the 10-City Composite and 60,117 for the 20-City Composite, about half the pace witnessed between 2004 and 2006.

Existing home sales reported by the National Association of Realtors show the same pattern, as seen by the graph below.

U.S. Existing Home Sales. Sources: National Association of Realtors

Beginning in 2000 existing home sales rose from about 4.5 million to their late-2005 peak of 6.34 million (these data are seasonally-adjusted at annual rates). Once the market turned, sales volume fell back to a level of about 4.0 million in late 2008. From there, sales rose through 2009, largely due to the homebuyers’ tax credit. As of March 2012, existing home sales are just below 4.0 million, only marginally above their average of the prior two years. This is about the same rate seen in 1997, and far below what the housing market experienced during its 2000-2006 run-up. If you look at the full history of the data on the graph above, however, average existing home sales are only about 4.0 million, which is close to the current pace. If the height of the housing market was a true historic aberration (roughly 2003-2006), then what is the level of existing home sales that will have most market participants believe the housing market is steady? Given current market sentiment, while at the 30-year average, 4.0 million seems to be considered too low.

Looking at the magnitude of collapse in terms of percent, Las Vegas has suffered the most. Average home prices in that market grew by 135% from January 2000 until its August 2006 peak, and as of February 2012 are down an astounding 61.7% from that peak. Prices in Las Vegas are more than 10% below their January 2000 levels, back to about the same values they averaged more than 15 years ago at the end of 1996. Three other Sunbelt cities, Miami, Phoenix and Tampa, are not far behind. When they reached their peak in December 2006, Miami home prices had grown by about 180% from January 2000. As of February 2012, the market had fallen by about 50.3%. Phoenix grew by 127% through its June 2006 peak, but has fallen by about 54.2%. Tampa was up about 138% at its July 2006 peak, and is down about 48% since then.

S&P/Case-Shiller Home Price Indices. Sources: S&P Indices and Fiserv.

Los Angeles and San Diego both grew by between 150% and 175%, and have both fallen by more than 40% through February 2012. While they did not grow as much as the Sun Belt states, Detroit (down 46.0%) and San Francisco (-42.9%) both saw peak-to-February collapses in excess of 40%.

As of February 2012, 14 cities and both Composites have fallen by more than 30% from their relative peaks and these are not confined to the Sun Belt. The Mid West has seen large price declines in Chicago (-37.5%), Detroit (-46.0%) and Minneapolis (-35.6%), the North West in Portland (-30.5%), San Francisco (-42.9%) and Seattle (-32.9%), and the South East in Atlanta (-39.0%) and Washington DC (-30.0). In 2011 Washington was one of the cities that appeared to be holding up relatively well, but as of February 2012 average home prices are still down 30% from their May 2006 peak.

With February 2012 index levels below 100, Atlanta, Cleveland, Detroit and Las Vegas are the markets where average home prices are below their January 2000 levels. Home prices in those markets have lost all of the appreciation in value of the past 12+ years. Doing relatively better, at -10.9% and -13.2% respectively, Dallas and Denver are the only markets covered by our indices where the declines from peak are below 15.0%.