Interest Rate Roundup

Wednesday, May 26, 2010

New home sales surge 14.8% in April

The latest figures on the new home market were released today. Here is what they looked like:

* New home sales surged another 14.8% in April after jumping 29.9% in March. That pushed the seasonally adjusted annual rate to 504,000 from an upwardly revised 439,000 in March. Analysts were looking for a sales rate of 425,000. Sales haven't been this strong since May 2008.

* Regionally, sales flat-lined in the Northeast. But they rose 10.8% in the South, jumped 21.7% in the West and surged 31.6% in the Midwest.

* The raw number of homes for sales dropped to 211,000 from 227,000 in March. That's the lowest level going all the way back to October 1968. Compared with a year earlier, inventory was off 29.7%. The months supply at current sales pace indicator of inventory dropped to 5 from 6.2. That's the tightest reading since December 2005, right after the peak of the housing bubble.

* Median prices tanked 9.7% to $198,400 from $219,600 in March. On a year-over-year basis, prices were off 9.5% to their lowest level since December 2003.

The new home market rocked and rolled again in April, driven by the looming expiration of the tax credit and cheap, cheap home prices. Sales rose to their highest level in almost two years, while the supply of homes on the market plunged to a level we haven't seen since the year before Neil Armstrong and Buzz Aldrin landed on the moon! At the same time, the median price of a new home plunged almost 10% to the lowest point in more than six years.

Clearly, government handouts have had their desired effect. They juiced home sales and helped builders clear out even more inventory. That would typically set the stage for a vigorous rebound in home construction and hiring ... except for one problem. The "used" home market is still oversupplied, and will remain that way for some time thanks to a continuing influx of distressed and foreclosed property. We're also going to see yet another "hangover" in the coming couple of months due to the tax credit's expiration, with sales rates dropping off.

Bottom line: I don't expect a vigorous rebound in housing. But I don't expect a renewed collapse, either. Instead we'll just bounce around the bottom for several quarters until all that inventory is burned off. If you want excitement, watch the Stanley Cup finals!

Monday, May 24, 2010

Existing home sales jump 7.6% in April

We just got existing home sales figures for the month of April. Here is what the numbers showed ...

* Existing home sales jumped another 7.6% to a seasonally adjusted annual rate of 5.77 million in April from 5.36 million in March. That was better than forecasts for a sales rate of 5.62 million, and comes on the heels of a 7% gain a month earlier.

* Regionally, sales generally rose. They gained 21.1% in the Northeast, 9.9% in the Midwest, and 8.6% in the South. Sales dropped 6.2% in the West. By property type, single family sales rose 7.4% while condo and coop sales surged 9.1%.

* The raw number of homes for sale rose 11.5% to 4.044 million from 3.626 million in March. Compared with a year earlier, supply inched up 2.7%. The months supply at current sales pace indicator of inventory rose to 8.4 from 8.1. Median prices rose 2.1% to $173,100 from $169,600 a month earlier. They're up 4% from the year-ago level of $166,500.

Home sales popped nicely this spring, thanks to the tax credit and rising affordability. Turnover climbed to the highest level since October, while home prices showed their best year-over-year rate of change going all the way back to May 2006. At the same time, the inventory of homes for sale rose strongly, casting a pall over the recent improvement in supply trends. Bottom line: I'd call these figures mixed. The same goes for the other data we've gotten recently -- builder optimism has improved, while purchase mortgage applications have slumped to multi year lows.

In the grand scheme of things, housing is affordable again. Lenders aren't really tightening standards any more. And the employment situation has stabilized. That's the good news. The bad? The backlog of distressed homes remains extremely high. Uncle Sam is just about the only guy making or backing home loans. And we're certainly not seeing a rip-roaring rebound in the job market. Under those conditions, we can still get an anemic recovery in housing -- but it won't be worth breaking out the champagne over.

Monday, May 17, 2010

May NAHB index pops to 33-month high

The National Association of Home Builders index popped nicely in May. It rose to 22 from 19 in April, the highest since August 2007. All three subindices rose -- present sales to 23 from 20, expectations about future sales to 28 from 25, and prospective buyer traffic to 16 from 13. Regionally speaking, the Northeast index soared to 35 from 21 while the West index surged to 20 from 13. The Midwest index rose to 17 from 15 while the South index inched up to 22 from 21.

If tax credits are the only reason why housing is doing better, then why were home builders so optimistic about business in May? That's a riddle the naysayers are going to have to answer. My take? Housing is cheap again, with both pricing and interest rates at rock-bottom levels. So even with the credit in the rear view mirror, real, underlying demand remains for housing.

We're not going back to boom-time sales rates any time soon. But I expect we'll continue to see gradual improvement in sales and a gradual stabilization in pricing as the supply of homes for sale continues to shrink. Or in plain English, the anemic recovery remains on track.

Tuesday, May 04, 2010

Pending home sales pop in March

Pending home sales figures were just released for the month of March. They popped 5.3% from February, slightly better than the 5% forecast. The gain followed a 8.3% rise in February, the biggest rise in any month since October 2001.

By region, pendings rose 1.2% in the Midwest and 1.9% in the West. They surged 12.7% in the South, but dipped 3.3% in the Northeast. At 102.9, the pending sales index is up 21% from the year-earlier level.

The latest pending home sales figures confirm that rising affordability and the home buyer tax credit are helping to underpin housing demand. Sales rose nicely in the biggest regional housing market -- the South -- with less robust gains in the Midwest and West.

The key question remains: "What happens now that the credit has expired?" I have no doubt we'll see some giveback in sales. But as I've maintained before, I don't expect some new market crash. Cheap homes and cheap financing, as well as a turn in the broader economy, argue for a continued stabilization in market conditions. Not a robust recovery, but a gradual reduction in inventory for sale, a gradual upturn in sales and construction activity and a stabilization in pricing later in the year.

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