Interest Rate Roundup

Friday, April 23, 2010

New home sales explode 27% in March

Yesterday's existing home sales report was pretty good. Now here's what the new home market looked like ...

* New home sales exploded to the upside, soaring 26.9% in March. That's good for a seasonally adjusted annual rate of 411,000 in March, compared with an upwardly revised 324,000 in February. That was also a blow out compared with the 325,000 average forecast -- and the biggest rise in ANY month since April 1963.

* Regionally, sales surged 35.7% in the Northeast and 43.5% in the South. They also gained 4.3% in the Midwest and 5.7% in the West.

* The raw number of homes for sales fell to 228,000 from 233,000 in February. That's the lowest level going all the way back to March 1971. Compared with a year earlier, supply was down 27.2%. The months supply at current sales pace indicator of inventory plunged to 6.7 from 8.6. That's the lowest since December 2006.

* Median prices fell 3.4% to $214,000 from $221,600 a month earlier. On a year-over-year basis, prices were up 4.3%.

I was adamant a year ago that many of my housing market indicators were suggesting a turn was at hand. Not a massive recovery, but a gradual improvement in market conditions. I also argued that more than the tax credit was at work. Cheap homes, low mortgage rates, and a slow-but-steady turn in consumer confidence and employment were helping underpin housing demand.

Fast forward today and all I can say is "Wow!" The March sales figures were an absolute blow out, with sales surging by the biggest margin in 47 years. Inventory for sale declined to the lowest level in almost four decades, while pricing firmed from year-earlier levels. Sure, the tax credit goosed the figures. But again, it is much more than that. In simple terms, housing is a bargain again -- and buyers are responding. That is unambiguously good news for the market going forward.

Thursday, April 22, 2010

Existing home sales pop in March

The latest figures on existing home sales were just released by the National Association of Realtors. Here is what the numbers showed ...

* Existing home sales popped 6.8% to a seasonally adjusted annual rate of 5.35 million in March from 5.01 million in February. That was slightly better than forecasts for a sales rate of 5.29 million.

* Regionally, sales jumped across the board. They rose 6% in the Northeast, 6.6% in the West, 7.1% in the South and 7.2% in the Midwest. By property type, single family sales jumped 7.3%, while condo and coop sales gained 3.1%.

* The raw number of homes for sale inched up 1.5% to 3.584 million from 3.531 million in February. Compared with a year earlier, supply dipped 1.8%. The months supply at current sales pace indicator of inventory dropped to 8 from 8.5. Median prices gained 3.7% to $170,700 from $164,600 a month earlier. They're up 0.4% from the year-ago level of $170,000.

Home sales are on the up and up again, according to the latest figures. Sales of used homes jumped almost 7% in March, with broad-based regional gains and particular strength in the single-family market. Pricing also firmed, while the inventory picture was mixed. The renewal of the tax credit should continue to give the numbers a boost for the next month or two, though the question remains: "What's next?"

I'm fairly sanguine, frankly. While the credit expires April 30, more forces are at work here. Home prices are now reasonable in many parts of the country, and financing costs remain low. Loan standards have tightened. But a recent Fed survey found the fewest banks tightening standards further since late 2006. In other words, that's old news. Cheap home prices, an improving economy, and the highest affordability levels in a long time should keep the anemic, gradual recovery on track.

Friday, April 16, 2010

Housing starts climb to 16-month high in March

We just got the latest look at housing starts and building permits for the month of March. Here's a recap:

* Housing starts rose 1.6% to a seasonally adjusted annual rate of 626,000 from an upwardly revised 616,000 in February. That was ahead of the average forecast of 610,000 units and it leaves starts at the highest level since November 2008. Building permits jumped 7.5% to 685,000 from an upwardly revised 637,000. That was well ahead of the 625,000-unit forecast of analysts and the highest in 17 months.

* By property type, single family starts fell 0.9%, the first decline since December. The volatile multifamily starts series surged 18.8%. The permits breakdown looked pretty good, with single family permits up 5.6% and multi-family permits rising 15.4%.

* By region, starts plunged 28.4% in the Midwest and dropped 8.3% in the Northeast. They dipped 2.1% in the West, but surged 18.2% in the South. Strength in the South is good to see because it's the country's biggest home building region. Permits dropped 6.7% in the West and 19.5% in the Northeast. They jumped 17.6% in the Midwest and rose 18.4% in the South.

Last May, I said that it appeared three of the four legs of the housing stool were stabilizing. I suggested sales rates were bottoming, inventory levels were peaking, and construction activity was finding a floor. Pricing would likely dip a bit further, but not by a major amount.

The latest report on starts and permits fits with that "anemic recovery" scenario. Specifically, starts rose to their highest level since November 2008 while permits rose to their highest since October 2008. Starts were skewed higher by the volatile multifamily category. But permit activity was strong in both the single- and multi-family sides of the business.

With new home inventories running at their lowest level since 1971, it's not surprising that builders are starting to swing their hammers again. We won't see a vigorous rebound due to the overhang of distressed, "used" homes. But it will be a gradual recovery nonetheless -- welcome news when you consider starts plunged 79% from their 2006 high through April 2009.

Thursday, April 15, 2010

NAHB Index Surged in April

The National Association of Home Builders released its April sentiment index earlier this afternoon. The index surged to 19 from 15 in March. That easily topped the 16 reading that economists were expecting. It’s also the highest reading since September 2009 (tie). You have to go all the way back to April 2008 to find a better one.

Among the subindices, the one tracking present sales jumped to 20 from 15, while the one tracking expectations about future sales inched up to 25 from 24. The subindex that follows buyer traffic rose to 14 from 10. Regionally speaking, the index was flat at 22 in the Northeast. It dropped to 13 from 15 in the West, but rose to 15 from 10 in the Midwest and spiked to 21 from 17 in the South.

The housing industry is in the midst of an upsurge, if the latest figures are to be believed. We saw a broad based rise in builder sentiment in April, with current sales and buyer traffic climbing significantly. The problem? It may be tax cut related. To qualify for the credit, you must have a signed contract on the table by April 30, with closings permitted through June. That may have prompted some fence-sitters to act — and builders may be leery of a hangover. Indeed, the index that tracks expectations about future sales barely budged.

Overall, I still believe the housing recovery is on track. Lower home prices and cheap mortgage financing have conspired to drive affordability higher. The gradual improvement in the economy and job market are also helping underpin sales. But I still don’t see a vigorous rebound, just a slow-but-steady turn in a beaten-down sector.

Monday, April 05, 2010

Pending home sales surge in February

The spring home selling season is getting underway. So how are pending sales tracking? According to the National Association of Realtors ...

* Sales surged 8.2% between January and February. That was much better than the unchanged reading that economists were expecting and the single-biggest monthly rise since October 2001.

* At 97.6, the pending sales index was up 17.3% from the year-ago level of 83.2.

* By region, pendings rose across most of the country. They climbed 9% in the Northeast, 9.2% in the South and a hefty 21.8% in the Midwest. Sales slumped 4.8% in the West.

Worries about the housing market are quickly fading in the wake of the latest pending home sales data. Sales jumped by the largest margin in more than eight years, with broad-based regional strength.

Some of the big rise this month -- and the big decline a month earlier -- may be weather-related noise. But the underlying trend is clear: Cheap homes and cheap financing are gradually bringing out buyers. The slow but steady improvement in the economy -- especially the labor market -- is another supportive factor.

I don't expect a vigorous market resurgence or a sharp, new rise in home prices. Foreclosure inventory will continue to be doled out into the market over the next year or two, taking some vigor out of this recovery. But it will be a recovery nonetheless, one warmly welcomed by battered home sellers, banks, and home builders.

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